Modeling, alternative data, AI help lenders in pandemic

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Investing in alternative data is part of Westlake Financial Services’ strategy, said Kyle Dietrich, senior vice president of originations. The lender’s $11.5 billion auto portfolio is heavy in subprime loans, a group for which additional data is needed to lend with confidence, said Dietrich.

“This business is beyond the FICO,” he said. “Our alternative data spend is significant — in excess of $5 to $6 million a year — on data analysis outside of what the bureau does.”

Arivo Acceptance, a small auto lender, relies on trended credit data it gets through a partnership with credit bureau TransUnion. The tool, CreditVision, is a subscription-based service that provides consumer credit data that goes back farther than a traditional credit pull. Since signing up with the bureau’s service in June 2018, the lender has experienced a 40 percent capture rate increase without dropping the average interest rate on loans. The company also experienced a 30 percent decrease in decisioning turnaround.

Landon Starr, chief risk officer for Arivo, said using the tool to see a borrower’s credit history across several months shows patterns that help the company make quicker, more confident decisions on auto loans. A customer with a higher credit score, for example, could be more of a risk if there were negative trends in their credit background that a simple credit pull wouldn’t reveal.


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