Expert opinion on current trends or market issues

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Paul Russell

Dr Paul Russell is Experian's Head of Analytics, with over 20 years experience in the credit industry. Connect with Paul>>>


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Are you still making the right lending decisions?

Do you need a check-up – a scorecard check-up that is? Has it been a while since you last dusted off your scorecards and explored whether you had the right data in the mix? Then now – as the UK economy shows signs of returning to growth – is the perfect time to do it.

What's keeping you awake at night?

  1. I need to lend more but find it difficult to identify which customers to lend to. 
  2. Should I reduce credit or increase it?  Who should I offer further credit to and on what terms?
  3. Are we losing customers because we don’t have the appropriate credit offering?
  4. I don’t have a clear picture of customer income and affordability.  I don’t know which customers are experiencing financial problems now or are likely to in the future.
  5. I would like to understand how each customer uses our product(s) and our share of their wallet with our business, benchmarked against our competitors.
  6. I want to improve our level of collections by better targeting of customers for debt recovery. Who is most likely to repay? 

Effect of economic changes and lending patterns

During the past five years as the recession has raged, the use of data and analytics to increase lending approvals may not have been your top priority.  In this climate, the fact that your lending approvals dropped may not have been such an issue.    

Yet, as the UK starts to return to growth and you see signs of economic recovery, you may find yourself increasingly on the back foot as your competitors make growth their number-one priority and take advantage of new data sources and analytics to make smarter lending decisions.  So, what’s holding you back?

When was the last time you checked your scorecards?

If you recognise the pressure points and questions mentioned above, then it's important to acknowledge that scorecard performance deteriorates over time.  Scorecards can become less effective if they’re not regularly reviewed and updated.  As a result, a review of your scorecards may be long overdue.  You could be missing out on enhanced levels of discrimination through updated Delphi scores, and new data – and even predictions of which individuals are most likely to move home in the future.  These could really enhance the effectiveness of your scorecards. 

Focusing on the quality of customer and potential customer data rather than volume, combined with better use of analytics, will help you manage your existing customers and new business relationships more profitably and responsibly.  However, taking your scorecards to the next level may not be easy. 

For a start, the choice of data can be overwhelming and it can be difficult to know where to focus your efforts when you’re under pressure on all fronts. 

Focus your efforts

The key is to focus on working towards a more structured roadmap to improvement.  These improvements can be made in stages, but step one is always to identify your specific problems.  That way, you can see where the gaps are and understand exactly where and how new data and analytics could help.   

That’s where Experian can help you to understand first and foremost what you are dealing with and help you to weigh up the potential benefits against the investment required. 

So, has the time come for your check-up?

As an example of the benefits of a scorecard check-up, one client recently incorporated the latest Delphi score and some new data to improve their business decisions, which resulted in a 6% increase in loan approvals.  This was delivered without any impact on bad debt levels. 

What’s next?

That’s over to you. 

When considering whether you could benefit from better decision making, ask yourself this – how long can you afford to wait on the sidelines while your competitors target a share of your customers’ wallets?  A check-up may give you the insight you need. 

Paul Russell in

Dr Paul Russell

Paul is Director of Analytics for Experian UK&I, responsible for credit risk, marketing and fraud. He has more than 20 years' experience within the credit industry, during which time he has designed and delivered complex, integrated risk management solutions across the credit life cycle.


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