Gain a Competitive Advantage with Portfolio Reviews
The world has changed quite considerably in a short amount of time. The COVID-19 pandemic has significantly altered the consumer credit picture — and the value of vehicle collateral overall. These are two key components affecting the health and viability of every lender’s portfolio. For lenders, it is important to conduct regular overall portfolio reviews no matter the prevailing economic climate. Having the right resources, data and insights can make all the difference in managing a portfolio’s risk and maximizing its profit potential.
How Credit & Collateral Have Been Altered
The picture of consumer credit has certainly changed drastically. Millions of workers have recently and suddenly found themselves unemployed. According to a recent report from the Federal Bank of New York, and as mentioned in Forbes, total household debt increased $155 billion, or 1.1%, in the first quarter this year. While this number is significant, it doesn’t illustrate the complete impact the pandemic will have on consumer credit.
While consumer debt is increasing, collateral values have taken a drastic dip since the start of the pandemic. According to Black Book’s May Vehicle Retention Index report, the month of April saw its largest single monthly decline (-6.1%) since it began tracking this data back in 2005. This time period includes the great recession years. Its April mark of 106.7 is the lowest level since May of 2010.
Efficiently & Thoroughly Review Lender Portfolios
Given this volatility, it is imperative that auto lenders have insights to the overall impact to their portfolios. Equifax’s Customer Portfolio Review provides the updated, expanded view lenders need to better understand their customers’ past and present financial behavior. This view helps them make more informed and confident account management decisions. With flexible criteria and robust, exclusive add-on options, it’s easily configured to provide tailored, highly-specific details that can help assess consumer credit behaviors during fast-changing market conditions.
- Assess risk and opportunity with access to more than 500 consumer credit attributes from the top three credit bureaus.
- Understand the future trajectory of accounts with trended data that shows an individual customer’s credit behavior over a 24-month period.
Lenders also have the option to leverage key trends. These may indicate a consumer’s likelihood to be delinquent or default on their debt obligations. This helps inform credit line management, loan or payment modification, contact prioritization, and credit reissue decisioning.
Finding a More Meaningful View of the Customer
A regular review of a portfolio allows lenders to create a more relevant and meaningful view of customers. With enriched information specific to their account management needs, lenders can proactively identify risk and opportunity at key stages of the account lifecycle. They can confidently make decisions that help maximize profitability and ROI, while helping minimize losses.
In doing so, lenders can accomplish several critical items that will help their bottom line:
- Reduce losses and risk exposure by monitoring the creditworthiness of existing accounts
- Determine the proper level of funding for debt reserves and portfolio credit mix
- Quickly determine creditworthiness for credit line
Deeper Levels of Portfolio Review Through Verifications
As the unemployment rate in the U.S. continues to rise, a growing number of lenders are leveraging critical, real-time databases from leading providers such as The Work NumberⓇ for income and employment verifications. With over 105 million active employment records, The Work Number helps verifiers to effectively and efficiently review a portfolio of consumer accounts. Additionally, The Work Number can help lenders monitor crucial changes in employment and rate of pay as this data is reported by employers, helping lenders proactively communicate with their customers.
It is important for lenders to conduct regular overall portfolio reviews, regardless of the state of the economy and automotive industry. This activity can help lenders mitigate risk in their portfolio and identify potential opportunities for growth. Equifax has advanced technologies that can help lenders gain better insight and understanding of each customer. This can help in developing proactive customer account management strategies.