Subprime Consumer Trends Worth Noting

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This piece expresses the views of its author(s), separate from those of the Inside Credit Conference.


For many non-prime consumers, securing traditional credit can be challenging. Maybe they have no prior loan experience or they’re looking for a way to increase their current credit score. In either scenario, alternative credit data can help align these consumers with the right credit products.


Alternative credit data also provides lenders with more precise risk assessment. Additionally, understanding trends in the marketplace offers greater insight into consumer behavior, how it’s evolving and why. If you want to learn more about recent trends we’ve seen, keep reading.


What’s Trending?

Clarity Services is the largest sub-prime credit reporting agency in the US and has information on more than 60 million non-prime consumers. It’s safe to say we take researching this marketplace seriously. We offer these insights to lenders so they can reach the right consumers and better navigate the market.


Here’s some recent trends we’ve seen:

  • A significant increase in installment loans and competition for subprime consumers

  • Greater diversification of product offerings, marketing channels and application sources

  • The structure of loan products require stronger credit risk management tools

  • A substantial increase in the use of prescreen direct mail and organic channels

  • A higher demand for tools that can be used across all acquisition channels

  • Advancement in analytical techniques and tools for developing underwriting strategies

“Data, Data, Data.”

You’ve heard it before. Data is extremely powerful and can give you a better view of your consumers. However, if you aren’t looking at the right data, accurately managing risk can be challenging.


Here’s what you need to consider when choosing a risk model:

  • Underlying population

  • Dependent variable (FPD, ever 90+ DPD, charge off)

  • Input variables

  • Loan product (secured/unsecured)

  • Is it for standalone use or in combination with other scores?

How Loan Stacking Stacks Up

With the ease of securing a loan comes the negative: taking advantage and securing multiple loans. This trends, called loan stacking, has seen a steady uptick since the 2008 recession. As more lenders start to prospect to the non-prime consumer base, it becomes critical that you identify if a consumer has secured a loan elsewhere. Knowing this helps you determine if the consumer has the ability to pay back their loan or if they are too strapped. So it’s time to ask yourself: Is loan stacking a trend I should be paying more attention to? Our short answer is, ‘yes’.


Now that you understand non-prime trends, you’re ready to navigate the marketplace! Wondering what’s on the horizon? Here’s what we expect to see in the future:

  • Industry-optimized credit risk scores built to predict longer-term performance

  • Continued identification and escalation of fraud patterns/rings

  • Tools to improve conversion and response rates for alternative financial services loans

Want an even deeper look into non-prime consumer behavior? Our 2019 Alternative Financial Services Lending Trends Report is packed with five years of Clarity data and enhanced with additional insights from Experian’s national credit bureau. To view the full report, visit: clarityservices.com/insights/reports/2019-alternative-lending-trends-report.


Also, stay tuned for our 2020 report, which will be released early Spring.


About Experian’s Clarity Services

Experian’s Clarity Services specializes in alternative financial services data and solutions. Clarity’s suite of FCRA-regulated reports and scores give lenders visibility into critical subprime consumer information, including the thin-file and no-file consumer segments. Clarity is dedicated to making alternative financing services more accessible, trusted and effective for the clients and consumers it serves.



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