Do traditional credit scores really give lenders an accurate understanding of consumers’ abilities to repay debt and their behaviors as borrowers? TransUnion didn’t think so when it launched its updated consumer creditworthiness predictor, CreditVision, in October 2013. And perhaps it was right, as new data shows CreditVision provides a clearer picture of consumers’ borrowing habits and behavior, leading to better borrowing rates.
CreditVision Delivers Credit Data for 26.5 Million Consumers Without Credit Scores
In the year and a half since the launch of CreditVision, TransUnion reports that 23 million consumers are considered super-prime using CreditVision, meaning they have the top tier of credit scores. That puts 21 percent of scored consumers in the super-prime credit range, almost double the 12 percent with traditional credit scoring.
CreditVision’s expanded data also makes it easier to provide credit score data on consumers that were previously not scored, totaling roughly 26.5 million consumers. And it’s not just consumers with poor credit or risky borrowing behaviors who are in this group, as just over 11 percent of those newly scored consumers would qualify as prime or super-prime borrowers.
In total, upwards of 230 million U.S. consumers can be scored using TransUnion’s CreditVision data sets.
3 Ways CreditVision Will Affect Consumers
In a statement on its study, TransUnion said CreditVision gives tens of millions of consumers more affordable and ready access to loans and credit.
“CreditVision scoring means millions of previously unscored consumers, who typically have difficulty accessing credit, may now have significantly expanded borrowing opportunities,” said Charlie Wise, vice president in TransUnion’s Innovative Solutions Group, in a press release from TransUnion. “It also means that millions more consumers may be offered lower interest rates resulting in reduced payments on credit cards, mortgages, insurance policies and auto loans.”
1. Super-Prime Consumers Will Save on Interest Payments
In an interview with GOBankingRates, Wise said that CreditVision has been shown to have a positive impact across products and loan types, though it has been particularly valuable in credit card and auto lending, by giving clearer insights into borrowing behavior.
Particularly for customers who receive a better credit rating with CreditVision, borrowing from a lender that uses this product to evaluate creditworthiness will lead to “better rates and terms on credit products, enabling the savings of thousands of dollars over the course of a loan,” according to the TransUnion press release.
2. Previously Unscored Consumers Can Access Credit
For the 26.5 million consumers who can now be effectively scored with CreditVision, they can gain access to credit for which they might previously have been rejected, not for lack of ability to pay but simply because they lacked credit histories on which lenders could base risk. With CreditVision, many of these consumers will gain access to consumer-friendly products and avoid predatory credit, like payday loans.
“CreditVision’s inclusion of both current and historical payment information allows lenders to identify specific credit trends and payment behaviors that allow them to make more precise lending decisions,” said Tony Terrazas, senior vice president in TransUnion’s Innovative Solutions Group, in the TransUnion press release. “These added insights will help our clients confidently engage new credit-worthy and credit-seeking populations. The result: more consumers will gain access to credit.”
3. CreditVision Won’t Lead Consumers to Over-Borrow
Wise said that TransUnion has not seen CreditVision cause consumers to be over-leveraged by giving them greater access to credit they can’t afford or shouldn’t be taking on. Rather, lenders and consumers can better assess repayment ability, benefiting both parties.
CreditVision Scoring Accessible to Most
Hundreds of banks, credit unions, lenders, insurers and other institutions are assessing new customers’ creditworthiness with CreditVision, and Wise estimates that at least the majority of U.S. consumers have access to a lender that uses CreditVision.
Beyond the traditional factors considered to form a credit score, like credit utilization or making payments on time, CreditVision also pulls in more expansive data. Consumers who know this can get a more favorable score by focusing on their payments.
Wise said that CreditVision takes consumers’ payment habits into consideration, including if consumers pay down debts over time, make payments above the minimum requirement, or put large amounts of money toward paying down balances. Consumers can pay more than their minimum payments and focus on paying down high balances, responsible behaviors that will not only help eliminate debt but will also lead to more favorable CreditVision assessments.