Auto Credit Express Blog
March 24, 2008
Finance Managers - “Underbanked” – a new financial term
There is a newly defined group of borrowers out there that banks are trying to wrap their arms around, but the subprime crises may hold many of them back…
What is underbanked?
Here at Auto Credit Express, we want you to become familiar with a recently-defined group of borrowers. For many years, they were mixed-in with the group of subprime borrowers – unable to get credit because of the way they have always made major purchasers.
Because they buy cars from tote the note lots and purchase televisions from rent-to-own stores, this buying segment never accumulated a credit history. Change is in the works, but the current state of the economy could certainly slow the process.
Who is compiling credit files on them?
As I mentioned in an earlier article, Fair Isaac has created a new scoring system called the FICO Expansion Score. In addition to Fair Isaac, LexisNexis risk management, based in Minneapolis, Minnesota, has developed RiskView, a database of public records and non-traditional data designed to be used by businesses to pinpoint this market.
In a new development, Experian announced a partnership with eBureau in launching Emerging Credit Score, another tool to be used in evaluating both unbanked and underbanked customers.
The right product at the wrong time
Despite the promise of these new credit scoring models, banks will have a hard sell to their shareholders and the press, since both the unbanked and underbanked populations overlap with subprime customers and the s-word is not finding any favor in the financial markets right now.
The Bottom Line
While these new scoring models appear to have some promise, it may be some time before any regular or subprime lenders have an opportunity to use them. Here at Auto Credit Express, we will try and keep you updated on their implementation.
