Three major credit bureaus (Equifax, Experian and TransUnion) are widening the types of personal data they can provide banks, in an effort to strengthen financial firms’ ability to properly assess loan candidates.

The dubious marketing and underwriting processes of the past decade largely overlooked borrowers’ capacity to pay and their capital – two of the textbook “three C’s of credit.” Traditionally, credit reports and scores only reflected the third C: character.

Today, with lenders’ renewed focus on conservative underwriting and desire to resume more robust marketing efforts, especially of credit cards, the bureaus are revamping their data offerings. Equifax Inc., Experian PLC and TransUnion LLC, along with score provider Fair Isaac Corp., are creating services that give lenders a more holistic view of the customer, including how much money a consumer makes and how much he or she is worth.

Though income and asset data are useful in a variety of applications, from underwriting to collections, lenders are particularly interested in using such information in the marketing process.  With the economy improving, there is a greater desire among lenders, especially credit card providers, to identify new clients, said Fair Isaac’s chief executive, Mark Greene. “Acquisition spending is up, and acquisition campaigns are rolling out as we speak,” he said. “The question is to whom should those new marketing initiatives be sent?”  Opportunities exist in the high and low ends of the credit score spectrum, Greene said. The challenge is distinguishing which borrowers in each segment can take on more credit. “Two individuals with the same score might have a different capacity to take on more debt,” he said.

Last summer, Fair Isaac introduced its Credit Capacity Index, a proprietary model that uses Equifax credit data to help lenders better predict which borrowers would be able to take on more debt and still pay their bills on time. “It says that not only is this a high-creditworthy individual, but here’s how much credit they can absorb without changing their credit score,” Greene said.

Equifax has spent about $1.6 billion over the past three years, mostly through acquisitions, to augment its data.  In May 2007, the company bought Talx Corp., a St. Louis provider of employment verification and payroll services, in a deal valued at $1.4 billion.  And in October of last year, Equifax purchased IXI Corp. for $124 million in cash. The acquisition of the McLean, Va., company, gave Equifax a database of consumer investment and asset information from more than 95 banks, brokerages and other financial firms, representing more than 42% of all consumer invested assets in the U.S.

Currently, about 100 of the largest banks and brokerages submit anonymous wealth information to the IXI database, Equifax said. That data is aggregated by ZIP code to give lenders a picture of average household wealth in a particular area.  “No longer can they just carpet bomb … households,” said Dan Adams, the president of Equifax’s consumer information solutions business. “They need better segmentation tools.”

To read the full story click on the link:  American Banker

BIIA Newsletter April II – 2010 Issue