Trended credit data: a game-changer that will impact lenders and their decisioning.

Author:Holmes, Greg
Position::SERVICING
 
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WHEN MAKING A DECISION, it's always better to be making an informed one. Whether you are buying a new appliance, planning a job change or lending money to a prospective homeowner, the more information you gather, the more confidence you'll have in your ultimate decision. [paragraph] Sometimes the way you arrive at a decision can become a matter of habit. But what if when making a decision, your habitual thought process and data-gathering techniques could be enhanced with even more and better information--a deeper dive, so to speak--which could paint a clearer, or entirely different, picture that might result in a different decision?

Consider the way professional baseball players' performance was traditionally evaluated and how the Oakland A's front office significantly improved on that methodology by using more analytical gauges, as was detailed in the Michael Lewis' 2003 book, Moneyball: The Art of Winning an Unfair Came. In 2015, the book became a popular major motion picture that further showcased Oakland's unique and winning approach.

Essentially the book and movie demonstrated that by using a more rigorous statistical analysis, the A's determined that on-base percentage and slugging percentage were better indicators of offensive success than were the traditionally valued qualities of contact and speed. Furthermore, these qualities could be obtained for less money.

The statistics that had been used and relied upon for the last century, such as batting average, runs batted in and stolen bases, were outdated--even flawed. So, by using more analytical assessments of player performance, the Oakland A's were able to field a team that could more effectively compete against teams with much deeper pockets, such as the New York Yankees. Oakland essentially created a system that identified value in undervalued players. And it proved itself successful as the A's made it to the playoffs in both 2002 and 2003.

Fast-forward to 2016, and switch industries from Major League Baseball to credit. A very similar evolution is taking place in the evaluation methodology used to approve or deny individuals applying for mortgage loans. Trended credit data has entered the scene, and it promises to shake up the way lenders assess applicants, ultimately impacting their decisioning.

The new analytics

The traditional credit reports that have been used for decades captured just a snapshot of a person's accounts at a precise moment in time. However, this new trended...

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