This article was updated on March 11, 2024.
As a lender, it’s important to understand a consumer’s credit behavior and whether it’s improving or deteriorating over time.
Sure, you can pull a credit score at any moment, but it’s merely a snapshot. Knowing a consumer’s credit information at a single point in time only tells part of the story. Two consumers can have the same credit score, but one consumer’s score could be moving up while another’s score could be moving down. To understand the whole story, lenders need the ability to leverage trended data to assess a consumer’s credit behavior over time.
What to know about trended data
Trended data provides key balance and payment data for the previous 24 months. By analyzing historical payment information, lenders can determine if a consumer is consistently paying more than the minimum payment, has a demonstrated ability to pay, and shows no signs of payment stress. It can conversely identify if a consumer is making only minimum payments and has increasing payment stress.
Experian’s Trended Data is comprised of five fields of historical payment information over a 24-month period. It includes:
- Balance Amount
- Original Loan / Limit Amount
- Scheduled Payment Amount
- Actual Payment Amount
- Last Payment Date
Knowing how a consumer uses credit, or pays back debt over time, can help lenders offer the right products and terms to increase response rates, determine up-sell and cross-sell opportunities, and limit loss exposure. Using a consumer’s historical payment information also provides a more accurate assessment of future behavior, helping lenders effectively manage changes in risk, predict balance transfer activity, and prevent attrition.
The challenge
For lenders to extract the benefits of trended data, they need to analyze an enormous amount of data. Five fields of data across 24 months on every trade is huge and can be difficult for lenders with limited analytical resources to manage. For example, a single consumer with 10 trades on file would have upwards of 1,200 data points to analyze. Multiply that by a file of 100,000 consumers and you are now dealing with over 120,000,000 data points. Additionally, if lenders utilize the trended data in their underwriting processing and intend to use it to decline consumers, they need to create their own adverse action reason codes to communicate to the consumer. Not all lenders are equipped to take on this level of effort.
Still, there are trended data solutions to assist lenders with managing and unlocking the power of trended data.
How Experian can help
Experian’s pre-calculated solutions allow even the smallest lenders to quickly and effectively action on the benefits of trended data, minus the hassles of analyzing it.
Trended data, and the solutions built from it, allow lenders to effectively predict where a consumer is going based on where they’ve been. And really, that can make all the difference when it comes to smart lending decisions.
