Study: Credit card payment history can predict future delinquencies

Predict Credit Delinquency

Having the right decisioning software can help financial institutions make good decisions when it comes to choosing strong borrowers. However, recent research shows that there are numerous tools that can pinpoint the customers who might become delinquent in the future.

According to a recent TransUnion study, consumers who can pay more than the minimum amount on their credit cards had lower delinquencies on those accounts, along with their auto loans and mortgages.

Ezra Becker, co-author of the study and vice president of research and consulting in TransUnion’s financial services business unit, said in a company press release that the study shows that not all borrowers are equal. While the research showed that consumers who pay off their balances each month are a better risk than those who only pay a portion, those who can make more than the minimum payment are also a better investment for lenders.

“Our findings are good news for consumers, particularly those who only pay off portions of their credit cards each month,” he said. “Even if they can’t pay the full balance, they may now find that lenders view them in a more positive light depending on the amount they do pay.”

Becker added that lenders can also take away important findings from the research. The results show that numerous tools – more than just a standard credit check – can be used to evaluate consumer risk.

Financial institutions and other lenders need to remain diligent in finding quality borrowers. Along with tracking payment histories, investing in decisioning and risk management software can be greatly beneficial. That way, organizations can find creditworthy customers and then ensure that they log on-time payments throughout their partnership with the company.

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