Your personal information is valuable.
When I liquidated vehicles for Capital One, we typically examined over 14,000 variables before lending out our money to a customer.
Any customer. A credit card. An automobile. A commercial loan. It didn’t matter. We needed to get to know the economics of you first.
All of the low rates and big profits were dependent on buying your personal information, and then crafting decision models and metrics to determine your personal risk.
Our success in auto finance generated low rates for our customers and low delinquencies for our investors. But they both could have been far lower.
There is a line of demarcation between what is private, and what is public.
Your payment history? Public for the most part. There are those landlords, small money lenders and car lots that don’t report your credit history. But most utilities, credit cards, mortgage companies, and auto finance companies do so on a regular basis.
It’s a trade. You get money. They get the opportunity for a profit. Along with the right to buy and sell the resources needed to make sound future decisions.
Even the low tech version of a customer’s credit history work fairly well. Pay stubs, utility bills, bank statements, references, and recent housing information are typically used by car dealers to determine your eligibility.
So are criminal histories. In certain areas of this country you can type in a person’s name , state of residence, and the word “mugshot” or “arrested”. Or even access a state information database that records prison histories.
Lo and behold, you may see a familiar face staring right back at you.
All of these things are publicly available. But what about a few of the private things? Should they be fair game too?
If you were financing a car to a complete stranger, wouldn’t you want to know their recent accident history? Or the number of times over the last few years that their insurance was dropped due to non-payment of their premium?
I had three customers who wrecked their cars so far this year. Thankfully, they all kept paying on their full coverage insurance with a $500 deductible. That alone made a $13,000 difference to my bottom line.
A credit union that had the means to examine this behavior could make a lot of better decisions for their members.
A lot of insurance companies these days levy their premiums based, in part, on a customer’s age.
I am not convinced if that is always a fair way to measure risk.
That rare young adult who has managed to find a stable good paying job. Or that student who has earned a free ride to school and kept their GPA on the high end. I think they are far more responsible and creditworthy than that fifty year old who has consistently wrecked cars and dropped their insurance.
So where should that line be?
Should certain resources that are now publicly available become private?
Should other things that are only available upon a special request, become just as accessible as your credit report?
It’s a tough question. Ponder it.