Using Blended Business Owner Data in Credit Decision Making
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The document discusses the concept of blended decision making in credit assessment, particularly for small businesses that evolve from consumer-only to blended and commercial credit needs. It highlights the advantages of using blended scorecards for consistent underwriting, risk assessment, and identifying growth opportunities in businesses. Additionally, it outlines the essential data needed for effective blended data analysis and offers insights on leveraging this data for portfolio management and credit-related decisions.
Using Blended Business Owner Data in Credit Decision Making
- 1. 1 © Experian 02/10/2019 Sip and Solve Blended Decision Making Featuring: Emily Garrett Analytics Consultant Experian Business Information
- 2. 2 © Experian 02/10/2019 Sip and Solve – Blending Decision Making Source: https://digital.com/blog/small-business-statistics/ Small businesses employ ~50% of U.S. workers
- 3. 3 © Experian Jane starts a business with a partner funded by their savings. The business grows and needs more capital, they may borrow from friends and family, apply for startup funding. More growth means they now need access to more reliable capital – start applying for credit. Business is hiring workers and becoming more complex, need additional forms of capital for short and long term needs. Jane now has 75 employees and business is generating significant cash flow to fund operations, but she may need to consider a loan for capital expenses for a new building to house the growing business. Consumer Credit Commercial Credit Consumer + Commercial Credit 02/10/2019 Sip and Solve – Blending Decision Making It can be difficult to know when a business has transitioned from consumer-only to blended to commercial-only, but blended will cover all the bases! Lending and risk assessment depends on the size and maturity of a business
- 4. 4 © Experian 02/10/2019 Sip and Solve – Blending Decision Making • Majority of consumer and business credit profiles will reflect similar risk • Where consumer and business credit risk are not similar, blended views can provide significant lift in assessing risk Data reflects low and low- med business risk Blended scorecards can show a more complete picture of small business risk Data reflects consumer credit scores 750+
- 5. 5 © Experian 02/10/2019 Sip and Solve – Blending Decision Making What are some reasons you might not be using a blended scorecard currently? “We manually underwrite all of our loans.” • A blended scorecard helps improve consistency in underwriting decisions • Automatic decisions allow underwriters to spend more time on complex decisions “We don’t have the right data to develop a blended scorecard.” • Experian can match and append archive data to your historical applications • Experian’s experienced analysts and data scientists can help you build custom models • Ascend Analytical Sandbox
- 6. 6 © Experian 02/10/2019 Sip and Solve – Blending Decision Making Application Received Business Bureau Found? Consumer Scorecard Blended Scorecard No Yes Route App Depending on Score Auto Decision (Appr/Decl) Manual Review (Rec Appr/Decl) Most lenders prefer using a blended scorecard if a business bureau is available for an applicant
- 7. 7 © Experian 02/10/2019 Sip and Solve – Blending Decision Making What types of data should you focus on? • Business revenue • Household income • Consumer Debt-to-Income • Utilization • Beneficial owner information • Identifying information Application • Generic risk scores such as Vantage score • Number of recent inquiries • Derogatory information such as past bankruptcies and collections • Delinquent trades Consumer Bureau • Generic risk scores such as Intelliscore Plus v2 and Financial Stability Risk score • Industry • Number of recent inquiries • Derogatory information such as past bankruptcies and collections • Delinquent trades • Months in business Business Bureau
- 8. 8 © Experian 02/10/2019 Sip and Solve – Blending Decision Making What does blended data for analysis look like?
- 9. 9 © Experian 02/10/2019 Sip and Solve – Blending Decision Making What does blended data for analysis look like?
- 10. 10 © Experian 02/10/2019 Sip and Solve – Blending Decision Making Digging in to blended data
- 11. 11 © Experian Portfolio management uses for blended data: • Renewal decisions • Credit line increases • Credit line decreases • Identifying cross-sell opportunities • Early warning signs 02/10/2019 Sip and Solve – Blending Decision Making How can I use blended data outside of originations?
- 12. 12 © Experian Next steps include answering the following questions: • Where are you in the process right now and are there gaps? • Do you currently have the right analytics or could you benefit from some assistance? • What might you need from a data and infrastructure perspective? • Are you currently collecting the right information on your applications? – Non-bureau data for your scorecard (income, revenue, etc.) – Information required for bureau matching: • For the business: Name, Tax ID, Address • For the consumer(s): Name, Address, SSN, birth date, permission 02/10/2019 Sip and Solve – Blending Decision Making This is all great, now what?
- 13. 13 © Experian 02/10/2019 Thank you! Have questions or want to learn more about blended data? • Chat with us: bit.ly/sip-solve-chat Next Sip and Solve: • Tuesday, February 19th – Visualizing Portfolio Data • Register here: bit.ly/sip-and-solve