A recent TransUnion study found that more than 23 million U.S. consumers would be classified as Super Prime, the highest-rated consumer credit risk group, when evaluated by TransUnion’s CreditVision® risk score. Compared to the use of a traditional risk score, the use of CreditVision would increase the percentage of consumers in the Super Prime risk category from 12% to 21%. Consumers in this risk group are typically eligible for better rates and terms on credit products, enabling the savings of thousands of dollars over the course of a loan.
The study also showed that approximately 26.5 million consumers, who previously could not be scored, can be effectively scored using CreditVision. Nearly 3 million of those previously unscored consumers would be placed into the Prime or Super Prime risk tiers.
“The majority of lenders rely heavily on credit risk scoring to determine the best products and pricing for applicants, and TransUnion is leading the charge in making sure consumers get the credit they earned,” said Charlie Wise, vice president in TransUnion’s Innovative Solutions Group. “CreditVision scoring means millions of previously unscored consumers, who typically have difficulty accessing credit, may now have significantly expanded borrowing opportunities. It also means that millions more consumers may be offered lower interest rates resulting in reduced payments on credit cards, mortgages, insurance policies and auto loans.”
TransUnion’s CreditVision scores enhance lending decisions by leveraging an expanded view of credit data on each consumer that includes up to 30 months of historical information on each loan account. CreditVision scores include the addition of actual payment amounts, a field that is new to the credit report and not included in any other traditional risk scores today.
This expanded view of data can reveal trends and behaviors, such as consumers making on-time payments, paying more than the minimum amount due, reducing total amounts borrowed or decreasing utilization over time. For the first time, many consumers will benefit from insights into payment behaviors like whether consumers are paying card balances in full vs. making minimum payments.
“CreditVision’s inclusion of both current and historical payment information allows lenders to identify specific credit trends and payment behaviors that allow them to make more precise lending decisions,” said Tony Terrazas, senior vice president in TransUnion’s Innovative Solutions Group. “These added insights will help our clients confidently engage new credit-worthy and credit-seeking populations. The result: more consumers will gain access to credit.”
TransUnion launched CreditVision in January 2013, and a number of top financial services and insurance companies have adopted or are currently evaluating CreditVision data to identify ways to better assess credit risk.
“Since CreditVision launched two years ago, almost every customer has told us that the availability of current and historical payment information are important drivers to the added lift in credit performance,” Terrazas said. “As more lenders adopt CreditVision data and risk scores in their lending decisions, we anticipate both consumers and lenders will be the big winners. Consumers will gain greater access to loans and lower interest rates on their mortgages, auto loans and credit cards while lenders will confidently build positive relationships with attractive populations.”
For more detailed information about the TransUnion CreditVision study, please visit http://transunioninsights.com/CreditVisionStudy.
TransUnion Study Background
TransUnion’s study examined whether CreditVision data and scores may help lenders make more precise lending decisions with greater understanding of a consumer’s historical performance. TransUnion looked at roughly 10 million U.S. consumers in their consumer credit database as of December 2013. Each consumer was scored using a traditional risk score and assigned into the appropriate risk tier — Super Prime, Prime, Non-Prime, and Unscored. The same consumer population was also scored using the CreditVision New Account risk score, and again assigned to appropriate risk tiers. The resulting distribution was analyzed to determine impact of CreditVision data.