Data is at the heart of everything Experian does and, over the last 30 years, it has developed expertise in the interpretation and use of credit bureau and clients’ customer data for every aspect of the client relationship.
Analytics turns this data into information, which enables organisations to predict how applicants and customers will behave in the future. Experian builds market-leading credit bureau and custom scores to help clients make better, faster decisions and deliver their promise to their customers and their shareholders.
Express Gifts use an automated decisioning system with credit scorecards for applicants applying for a credit account. This creates an accurate risk assessment to decide whether to accept or reject an applicant and to set an appropriate initial credit limit. With the changes in the market, Express Gifts recognised that its suite of scorecards were showing signs of deteriorating predictiveness and a redevelopment would provide more accurate decisioning for the organisation.
Experian has worked closely with Express Gifts over the past five years, providing hosted application processing, credit bureau data and scorecards. Express Gifts were confident that Experian’s knowledge of its business, as well as over twenty years of experience in building risk models on a combination of bureau and application data, made it the best choice to build the new suite of scorecards.
Andy Bragg, Head of Credit at Express Gifts said, “The scorecards developed by Experian have enabled us to make more reliable risk-based decisions on new applicants and have had a highly beneficial impact in reducing bad debt levels of new customers.”
“The partnership approach taken by Experian while building the scorecards ensured that our business needs were met, that the scorecards are truly representative of our applicant population and that they fit perfectly into our business process."
"Additionally, Experian continues to provide support to ensure the scorecards are performing as expected, giving us confidence that we are continuing to make the correct risk decisions on all applicants."
The paper starts by examining recent trends in indebtedness and provides an overview of the main factors driving the responsible lending debate in the UK. It then describes how an automated responsible lending solution can be delivered using a new generic mechanism for estimating disposable income and assessing consumer affordability. Illustrations of how this new responsible lending mechanism works are provided for both mortgage lending and unsecured lending in the prime sector.
Although this paper describes a UK-based responsible lending approach, the lessons learned from the UK have implications for many other developed - and developing - consumer credit markets.
Responsible lending in the unsecured non-prime sector is also discussed. The ability to deliver truly automated responsible lending decisions has implications for all consumer credit markets and some recommendations are given for how this approach could be applied outside the UK.
This paper outlines the impact of this increase in individual insolvencies, the research undertaken by Experian and the solutions derived from the research, which are now being adopted by UK lenders to identify and reduce losses from personal bankruptcies.
High levels of consumer indebtedness and the new provisions around personal bankruptcy contained in the Enterprise Act of 2002 have resulted in significant increases in the number of individual bankrupts in the UK.
The issue has become a high-profile topic in the press and is seen as a growing problem for the UK economy. Prompted by this increase and the growing concerns of UK lenders about the bad debt caused by bankruptcy, Experian has carried out extensive research into the issue.
The research focused on the differences between bankrupts and other delinquent customers and considered how credit bureau data could be utilised to better identify customers who will become bankrupt in the future.
The paper outlines the indebtedness issue in the UK and details the results of the research, which has led to the development of a number of initiatives from Experian to support the responsible lending practices that are now being pursued by many UK lenders.
The last few years have seen an unprecedented increase in the demand and take up of consumer credit in the UK. Whilst this consumer credit boom has, on the whole, been very positive for the UK economy, there is now increasing concern regarding overall levels of consumer indebtedness.
This has been fueled by a number of high-profile debt cases reported by the mainstream media. In response to these concerns, the UK Government has set up an interdepartmental Advisory Group to tackle the over indebtedness issue and to encourage consumer lending to be more ‘responsible’.
As the UK’s leading Credit Bureau, Experian, and its Decision Analytics business, has invested heavily in research and development in this area, specifically looking into ways of enabling lending organisations to extend appropriate levels of credit that ensure benefits to both the lender and the borrower.
It is clear in undertaking this research that the depth of consumer data is key to developing the powerful indicators of indebtedness and affordability needed, and that full data sharing, where the Credit Bureaux hold all available consumer credit data, is highly instrumental in this process.