The American Dream used to be universally understood. Get a good job, buy a nice house and raise a family. But, times are changing and the American Dream is going through an evolution.
Not everyone wants the house. Not everyone gets out of school and runs out to buy a car. Not everyone takes out a credit card to help finance their dreams. Because not everyone fits into one narrow definition of how life should be lived, the traditional credit measures employed by the big three credit bureaus don’t always tell a complete story.
What if someone hasn’t bought a car, but they’ve paid all their other bills on time for the past two years? They’d still probably be a pretty good risk.
With these types of customers in mind, companies such as Factor Trust and Lexis Nexis have developed tools to provide credit scores to people who have non-traditional payment histories. Both companies use a variety of public records to track things such as short-term and installment lenders, rent-to-own or point-of-sale finance sources.
New systems are coming to make this information easily accessible to auto dealers. Dealers who specialize in subprime credit, particularly at the Buy Here/Pay Here dealerships, often lose deals because they can’t get a non-traditional credit type of customer approved for a loan. Applying the score based on payment history from non-traditional lending sources can make the difference between making a sale and sending away a disappointed prospect. These new systems will make it easier for dealers to access the information they need to make smart lending decisions when dealing with thin credit file consumers.
Access to this information can help determine if a non-traditional credit customer is still worthy of a loan. It can help qualify more customers and boost conversion rates.
It also can provide a second source of data that can help limit credit losses. The FactorTrust and LexisNexis data contains tax lien and court record data that is going to be removed from big three credit bureaus later this summer. Providing access to this information will help identify customers who have inflated credit scores based on traditional scoring models.
Either way, access to information on non-traditional customers is an important resource for dealers today. Customer versions of the American Dream continue to evolve. It’s important that credit-scoring sources evolve, as well.
Ken Hill – Managing Director For 700Credit
