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CREDIT RISK CASE STUDY
AUTO FINANCE
PROBLEM
• A national non-prime auto finance company extending billions in loans was
looking for a better way of avoiding bad loans that were deeply cutting into
their bottom line.
• T
heir costs for each of these bad loans was averaging around $2,500 based
on diminished value and repossession.
• T
o enable dealers to sell more cars, they needed a deeper dive into the subprime candidate pool without creating adverse business conditions and
remaining FCRA compliant.
SOLUTION
• The company reached out to FactorTrust, a FCRA regulated credit reporting
agency, with over 17 million non-prime consumers in a database that is
growing by hundreds of thousands each month and is highly predictive of
their payment performance.
• Unlike the Big 3 Credit Bureaus, FactorTrust provides key consumer
information on loans not reported to the Big 3 and includes unique data
such as Employment Data, Stability Data, Loan Performance and Bank
Payment Data.
THE TEST
• This national non-prime auto finance company conducted an extensive
retro analysis of accounts that had been underwritten using traditional
credit bureau data and other alternative data sources.
• Once they began utilizing FactorTrust, they found the data qualified
consumers positively, and equally important, it identified loans they should
not approve.
• When they compared their internal custom scorecard, the FICO score and
the FactorTrust Non-Prime Auto Score, they determined the FactorTrust
data outperformed FICO when consumers were within the proprietary
database.
• The company also found the FactorTrust data and Non-Prime Auto Score
not only provided the ability to drastically reduce the number of bad loans
but also provided insights for swap-in strategies.
T H E R E S U LT S
• The company experienced a 50 percent
reduction in First Payment Default within six
months of incorporating FactorTrust attributes
and scores into their decisioning.
• Based on the test, the expected FactorTrust
“hit rate” was approximately 30 percent.
Consumers present in the FactorTrust
database were 50 percent more likely to default
on auto payments compared to consumers not
in the database.
• In processing 100,000 applications monthly,
this company realized a monthly cost savings
of more than $200,000 which included the data
acquisition costs by avoiding bad loans and
the associated costs.
A B O U T FACTO RT R U S T N O N - P R I M E
D AT A A N D A U T O S C O R E S
FactorTrust is the leading non-prime credit bureau
providing consumer and credit history information
not reported to the Big 3 credit bureaus. Data is
obtained from our lender contributors in realtime or daily. The result is unique and proprietary
data and auto finance risk scores on non-prime
consumers including loan, employment, income,
consumer stability and ACH performance data in
addition to about 400 data attributes in real-time.
Note: The information shared in this case study is real
and the results were provided by an actual FactorTrust
customer. While FactorTrust believes and has observed
this case study is consistent with results of other
FactorTrust customers, there is no guarantee these
results will be found for your specific application.
FactorTrust, The Alternative Credit Bureau, helps lenders give underbanked consumers the credit they
deserve by providing the most comprehensive source of alternative credit information not available
from the Big 3 bureaus.
WS.FACTORTRUST.COM/BANKLOGIC | 844.205.4111 | [email protected]
The Alternative Credit Bureau