SEATTLE–Among the big challenges in serving the underserved is the population largely lacks traditional credit scores to help credit unions in making decisions.
But one company that has partnered with a credit union to address that challenge reports it has developed a track record and experience in serving underserved members. Credit unions were given insights into the company’s alternative credit score model during CUNA’s America’s Credit Union Conference here.
Ankush Tewari, senior director-market planning with LexisNexis Risk Solutions, said the company’s RiskView alternative credit risk management tool is an effective and insightful means of reaching 40-million of the approximately 53 million Americans who are thin credit scores or who have no traditional credit score at all. It is FCRA and ECOA compliant, according to Tewari.
The RiskView alternative score is a key component of the loan program at the Nix Neighborhood Lending Centers, which are a CUSO of Kinecta Credit Union. The score is available to consumers for free at any time.
What is “alternative data?” According to Tewari, it includes information around stability (address changes, home ownership, economic stability), ability to replay (property value, occupational licenses, education history), and willingness to repay (criminal records, bankruptcies/liens/judgments, and evictions and foreclosures).
Addressing stability can become very important, said Tewari. There is debate around whether rent payments should be an indicator of creditworthiness, with Tewari agreeing that gathering that data is difficult. To address that, LexisNexis has been able to determine if a person is renting and for how long they have been at a certain address to speak to the issue of stability.
In the case of the Kinecta/Nix Payday Payoff Loan program, LexisNexis began its partnership with the CU in 2014 as it worked to evaluate transactional loan portfolio and, with Kinecta/Nix’s 2013 launch of a PAL program, to develop score cutoffs. It implemented LexisNexis XML and online tools to build the “pre-qualified” underwriting model.
In 2015, it monitored score distributions of booked and unbooked loans and conducted portfolio analysis to help Nix asses loan quality.
As a result, Tewari said Kinecta/Nix is the first credit union/payday loan stores to use a “Big Data” underwriting strategy with Risk View. LexisNexis is also working with the Filene Research Institute to help other CUs interested in launching a similar program.