Equifax Now Reporting On How Rejected Loans Perform
Credit Unions will now be able to follow up with applicants who were unable to procure loans, and see if they pursued credit at other institutions, thanks to a new service from Equifax.
The new Lost Sales Analysis tool is designed to show credit unions which borrowers received loans from other institutions, and how they performed. Although no personal or identifying information is said to be divulged, it is detailed enough for financial institutions to identify whether the loan in question should have been approved or if it was indeed a risk that they were wise to avoid.
While the product is ostensibly pitched as a way to give credit unions a deeper look at their lending business, the implication seems to be “look at all the loans you didn’t make that could have been profitable – no matter how dreadful the credit score or the terms of the loan.
More by Derek Kreindler
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If this is an honest and not PC study, I'll guess the answer will be "not well." Don't we have a case study on this already, called the 2005-08 housing market?
Equifax - they're insurance investigators aren't they? I know they intimidate for the insurance industry.
This would be valuable in identifying trends about why people default. People tend to look at a credit score as a final answer, but it takes more critical thinking than that. For instance, the housing crisis lead to a huge number of defaults and short sales that negatively impacted credit ratings, but if one has an otherwise clean credit report, their score may not accurately reflect their true risk. As a landlord, I look beyond the immediate score to identify people who have played it safe with car loans, credit cards, other bills, and only have a SS/foreclosure on their record because those people tend to be ideal renters. A similar analysis might be done with medical bankruptcies, or divorces. These are traumatic events that often hugely impact credit scores, but again might not accurately reflect risk of default on a car loan.
I know how the b&b feel about credit (especially sub-prime) and that its good business sense to to write in a way that the readership will find favorable. However, if the b&b are right, what this scheme will actually do is tell credit lenders "look at how good your loan officers are and how much money they saved you." Credit unions are already tighter with their money because they serve their customers instead of themselves. If these people really are ticking time bombs then that's what the data will show, and if they're not then maybe it means the way credit scores are calculated are slightly askew. The one thing I dont see happening, though, is for credit unions to take any more undo risks that they already do. My car loan with a greater than 750 credit score is with a credit union that made sure every t was crossed and every i dotted. And, again, it's because they serve their customers (me included) above any other interest. Maybe a big bank or manufacturers lending arm may make bad deals with that kind of data, but credit unions will need proof that the info they get passed in this manner actually means something.