Civil judgements and tax liens… three major credit bureaus are no longer using this information in credit reports. Lenders now have less information available for scoring borrowers. For dealers, this means a pool of more eligible applicants; however, it could also create a need for current or added dealership lenders to utilize newer or better resources that can quickly turnaround approvals.
Part of this transition is the need for additional, alternative data. Alternative data goes beyond traditional risk scores to paint a holistic, 360-view of a consumer’s creditworthiness – especially great for thin-file applicants and invisibles. This includes analysis of cell phone bills, checking and debit account management, club subscriptions, and more! To get an accurate report with a quick turnaround, dealers are going to need their lenders to have the best scoring systems in place.
Hannah Lutz of Automotive News Access F&I says, “Dealers play an indirect role in advancing the use of alternative data by seeking out lenders that approve loan applications quickly and offer a competitive rate. That pressures lenders to adopt tools that allow them to approve more consumers more safely.”
If more data is needed to build a consumer’s credit profile, it is more likely to help prove their creditworthiness for automotive financing. It creates a larger pool of buyers; however, the backfire then falls into lender approvals. As always, every lender has different qualifications that they are looking for which makes having a diverse portfolio of lenders at any dealership a must.