Demand for high-definition credit permeating lender landscape

Burned by loose credit standards prevalent in the pre-recession economic environment, banks today are more likely to carefully scrutinize credit applications. However, many are now looking for ways to drive new applications and increase credit availability without exposing their operations to greater levels of risk.

High-definition credit factors may be the solution many of these executives desire, and sophisticated credit risk monitoring software can be the tool needed to develop better risk management systems.

An August report from Bloomberg BusinessWeek publicized this trend, reporting efforts from firms such as FICO and CoreLogic to develop credit scorecard models that consider nontraditional factors when assessing an applicant’s credit profile. These factors may include data regarding rent payments, used car loan payments and a diverse array of payment history information.

Factors are also considered over longer time periods so that lenders can track behavioral trends that might help them deduce creditworthiness, according to the report.

Ultimately, these expanded credit scorecards are designed to offer lenders a more complete picture of applicants’ potential risk, allowing them to lend with more care and confidence. On the other hand, a major challenge to lenders’ ability to implement such strategies is their use of traditionally rigid scorecard models that rely on strict and unyielding data sets.

That is why it may make sense to invest in a risk management framework that offers businesses the ability to develop and design their own credit scorecard models using alternative data from multiple sources. Software that provides customizable business rules engine capabilities is more flexible than standard products, and with this toolkit lenders can begin to develop modern risk management strategies that more accurately reflect the credit profiles of consumers in today’s dynamic economy.

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