Credit unions tend to take a very conservative approach to credit card lending. While this approach serves them well when it comes to the delinquency and charge off in their card portfolios it can also have a high opportunity cost. The problem arises when a member wants a card but doesn’t have a credit history. Typically these members either get turned down or are granted a small line that makes the card nearly unusable. Understandably, if your credit union can’t predict risk at some level, they are only willing to take a small chance on this member. If you can find a way to approve this member with a usable limit and save them from going to a big national issuer, you could build a valuable relationship for years to come.
What if you could use an extension of a credit score you are already comfortable with to make this decision? The result would be that you can approve more cards at higher limits without raising your delinquency. Higher limits not only increase your interest income, but also bolster your non interest interchange income by allowing your members to transact more in a billing period. Furthermore, this member will now build a credit history that will qualify them for a car loan and a mortgage down the road.
LexisNexis Risk Solutions has partnered with Equifax and FICO to create a scoring solution that rank orders risk just like a FICO 9 score for consumers that weren’t previously scorable. By introducing alternative data into the model, FICO was able to score 70% of consumers that aren’t scorable with credit bureau data alone. This gives you a familiar solution to confidently expand your card approvals and build member loyalty that will pay dividends in years to come.
Check out our e-book, “Capitalize on Credit Card Growth” to learn how the FICO XD score can help you get a card in the wallet of your new-to-credit member.