The events of the past two years have led to considerable financial upheaval, but recent economic data suggests that consumers have, for the most part, weathered the storm. While government responses to the pandemic – including stimulus checks and eviction moratoriums – helped during mandatory shutdowns, they also created an unexpected problem for consumers now trying to secure financing.
Lenders that are evaluating the last two years of financial data are often left with a distorted view of a consumer’s track record – in many instances, it is unclear whether the consumer is truly qualified for a loan. Many of the policies, while delivering short-term relief for consumers, have created a gap in their financial history. Further complicating matters, the world is now headed towards record levels of inflation and interest rates that layer on another level of volatility. And because of this, lenders cannot accurately determine whether the consumer is creditworthy.
At Trust Science, they have the solution for lenders who need access to better decision-making data. Trust Science gathers thousands of traditional and non-traditional data points in real time, providing a more complete risk picture to lenders. In a post-pandemic world and with rising inflation, actionable and legally-compliant decision support is more valuable than ever before.
As CEO Evan Chrapko explains, the lenders struggle in the current economic climate to accurately forecast risk. And for consumers, that means less favorable loan terms.
“During COVID, we had government support and lender forbearance, and going forward there are already different economic pressures hitting consumers with fuel and food prices, so lenders have old models that haven’t been built for upcoming conditions and can’t be built using distortive COVID lockdown conditions,” Chrapko says. “The problem for lenders is compounded if there is a lack of ultra-current data about the consumer that they can look at to determine if someone will be able to pay them back.”
With limited valuable information and “lagging indicator” scorecards, lenders are finding it increasingly difficult to gain accurate insights into a consumer’s creditworthiness. While a subprime FICO score of 600 would typically mean a person is at a certain risk of default, the exact same score today might, in fact, be misleading.
“Lenders are now going to be seeing applications from formerly prime people who are actually slipping down the credit quality ladder,” Chrapko says. “With our dynamic model, informed by near real-time data, we’re at least giving them a chance to make a better approve/decline decision. . That is a key piece to how we can help lenders caught in all this volatility and in turn get the credit-worthy individuals the money that they need.”
In addition to the up-to-the-minute data that Trust Science can assemble to run through its models, its machine learning technology is able to continuously improve – allowing lenders to finally abandon the myth that models are “one size fits all” or that they have some magical “stability” when the world is in economic disarray. This is one of the key differences that sets Trust Science apart in the industry. Its dynamic models allow lenders to actually harness market disruptions and generate highly predictive scores as a result. Decreased risk for the lender, increased opportunity for the consumer.
“We are able to handle data points and see how things are in today’s context as opposed to a context from a model that was built one or two years ago, mid-pandemic, in a world that no longer exists,” Chrapko says. “That is really where things start changing. We are able to derive accurate decision support in volatile times because our models are learning as the world turns, and we can harness real-time data about the consumer to feed into those models .”
Trust Science believes that giving lenders better information – and more valuable insights – will help every person in the credit industry. Because when lenders can more effectively assess risk, they are not the only ones to win. Consumers win, too.
“If we are able to arm lenders with better direct marketing leads and/or superior loan application adjudication, they don’t have to dramatically raise interest rates and consumers get a loan that they might not otherwise have been able to qualify for,” Chrapko says. “We help lenders with their ROA, which for the lender is a competitive advantage, and from the consumer perspective, it is an obvious benefit to be better assessed if their alternative is to be declined by virtue of old methods and ‘Slow Data’.”
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