The Federal Reserve's recent consumer credit report showed that Americans are taking on more debt. This is good news for both consumers in need of cash and financial institutions that profit from lending. However, the increase in consumer debt raises questions about whether the credit risk management policies in place at banks and other lenders are adequate.
According to the Associated Press, the total amount of consumer debt grew by more than $16 billion, reaching a total of $3 trillion during February, even though the amount of credit card borrowing was seen to decrease. The increase in student and auto loans outweighed the drop in credit card debt to drive up the total .
In a piece on the subject, the Wall Street Journal quoted Randy Hopper of the Navy Federal Credit Union on the practices that borrowers have been using which may have led to these kinds of improvements.
"They are more considerate of the debt that they are putting on," he said. "They're managing their budgets a little more rigorously." The source noted that Hopper attributes some of this rebound to a seasonal decline observed this winter.
With consumers taking on more debt overall, lenders will need to use case management software to assess credit risk when evaluating specific applications for loans of all kinds. This software can be helpful in evaluating the viability of specific transactions, even when recent trends indicate that consumers may be managing debt more carefully.
Taking in all of the different factors that might make a candidate more or less able to repay a loan can be a challenge, but the solutions provided by GDS Link draw on alternative data sources to give lenders a comprehensive view of each applicant's creditworthiness.