Leveraging the Four-Month Credit Window for Sustainable Growth

A credit report changes in real time

When you look at the credit score of a consumer in good standing while underwriting a credit application, you’re viewing that consumer at a point in time. Once you’ve approved the credit card or set up the loan account, you conclude the process — but the consumer doesn't stop building their credit history.

Although loan applications are recorded on a consumer’s credit profile, an inquiry with Bank A today might be followed by another with FinTech B tomorrow and Lender C the day after. An applicant with an acceptable credit profile could be approved by all three. And there’s no way for these competing lenders to know whether any others approved a loan until the following month’s traditional batched reporting.

At any time, a consumer can take actions that influence their risk profile outside your financial ecosystem without your knowledge. This lack of insight into customer and competitor activity adds uncertainty to underwriting. Moreover, a consumer is unlikely to refuse a second loan offer or return their first credit card in the current economic climate. Knowing such information can help define smarter lending strategies and better-informed decisions.

Delinquency impact

For customers with limited credit experience, picking up additional debt within four months can lead to payment delinquency and credit score deterioration that can damage the structural risk profile of the portfolio. Because maintaining the second loan often precedes the original facility, knowledge of such debt obligations and repayment behaviors would likely impact the original loan disbursal, structure, interest rate and risk management strategy.

Just as there’s no way to prevent a customer from applying for credit elsewhere, no portfolio will ever exist without delinquencies. However, ensuring access to all the data you need at the right time can make a material difference to profitable decisioning.

Are you missing opportunities?

If, as the data suggests, you have customers actively looking for — and accepting — extra credit and loan facilities, what can you do to capture those opportunities, help control exposures and mitigate associated risks?

This is where always-on, constantly updated, trended credit data with filtered alerts can help trigger rapid responses, personalized engagements, and tactical campaigns to protect the share of wallet, prevent uptake of competitor products, provide extra credit if and where affordable, or begin predelinquency proceedings.
 

In closing

Effective management of credit score dynamics requires a structured approach to subscribing to or otherwise accessing credit activity information. This begins by ensuring information about material changes is available for rapid, strategic responses at critical times. You’ll need up-to-date contact information and affordability insights for whatever campaigns you respond with.

Contact your TransUnion representative to see how we can help you access critical, unseen changes in credit dynamics at any point along a customer’s evolving credit journey.