TransUnion credit bureau recently introduced a new method for evaluating your credit risk and calculating your credit score, using a broader range of data to obtain a more holistic view of your credit behaviour.
TransUnion says its CreditVision credit scoring system will revolutionise how lenders offer credit to South African consumers, while providing a more accurate picture of consumers’ credit behaviour than is possible with traditional scoring models.
Traditional models provide a limited view of a consumer at a specific point in time, TransUnion says. CreditVision risk scores, according to TransUnion’s website, “are the only scores in the industry that incorporate consumer payment behaviour, directional changes and longitudinal trended credit views”.
According to the website, these scores incorporate 24 months of account history “to provide a new perspective that not only considers the ‘right now’, but also ‘how did a consumer get here?’ Lenders benefit from understanding how a consumer is using credit and paying against balances owed [such as making minimum payments or paying more than required on instalment credit agreements].”
Lee Naik, the chief executive of TransUnion Africa, says: “This information allows lenders to better tailor their products to consumer performance, which builds better loan relationships and helps everyone in the long run.”
CreditVision has already seen success in the United States, Canada, India and Colombia. “We now have the opportunity to unlock this type of potential locally, and drive financial inclusion and growth in the South African financial services sector,” Naik says.
In South Africa, Naik says, TransUnion has seen as much as a 56% increase in risk predictability with the CreditVision model. “In addition, we have seen as much as a 20% improvement in approval rates and a 29% decrease in bad debt amounts.”
The system can also recognise consumers deemed “unscorable” by traditional methods – in other words, those whose credit history is insufficient to provide a record on which to base a score.
The website says lenders that have turned away unscorable consumers can use CreditVision scores “to confidently assess and potentially approve these consumers.
“Due to insufficient data on credit files, this segment of the market has often been overlooked or denied by lenders. Utilising CreditVision risk scores, 10% more of Canadian consumers previously deemed unscorable by traditional risk models can now be effectively scored due to the power of trended credit data.”
A survey by TransUnion of 1 000 South Africans found that consumers would support this approach, with about 63% of respondents indicating they would approve of financial institutions understanding more about them with the knowledge that it could provide a more comprehensive view of their credit health. This could lead to improved interest rates and more access to credit for them.
“We feel that TransUnion’s CreditVision can play a key role by allowing people to access the credit they need at a cost that reflects their true risk profile and ability to repay,” Naik says.