New Credit Score Will Help Borrowers with Thin Files
The new PowerView Score from Equifax and LexisNexis will use additional information to create a more accurate credit score for borrowers applying for new and used car loans.
Credit Score Accuracy
Some of the most difficult borrowers to judge are those consumers with little or no information showing when their credit history is pulled. Lenders describe these people that have a limited credit history as having a “thin credit file.”
Consumers with a “thin file” often can’t be assigned a credit score due to a lack of information in their credit file, despite the fact that, based on other information, many of them could qualify for a loan – specifically, an auto loan.
This is because most existing credit scoring tools, such as FICO, require a fairly extensive credit history in order to assure accuracy. Consumers who cannot be scored – due to age (too young) or other circumstances (cash buyers with no established credit history) – are said to be “underserved” under the current credit system.
For many of these “thin file” borrowers, the latest news from LexisNexis Risk Solutions and Equifax Inc. could provide a solution to this problem.
It’s called PowerView Score and, according to LexisNexis and Equifax, it’s “a new, three-digit credit score tailored specifically for use in the automotive industry.” The new scoring system works by combining “alternative data sources, including telecommunications and utility payment history from Equifax and public records information from LexisNexis, to help automotive lenders identify creditworthy car shoppers.”
For consumers with little or no information in their credit files, this new score could further help lenders determine if they qualify for a car loan. In addition, rather than requiring lenders to replace their existing scoring models, PowerView Score is designed to add to the information they already have.
According to LexisNexis and Equifax, “Combining this data to construct the PowerView Score has demonstrated a strong ability to be highly predictive and allows for improved risk models that can be used to support credit analysis of applicants from prime through subprime.”
Good News for “Thin File” Borrowers
According to Ankush Tewari, senior director at LexisNexis, “New credit scoring offerings like PowerView Score help more precisely underwrite traditional customers, while also supporting financial inclusion for millions of people who could not be scored using traditional data alone. Preliminary analysis shows that using PowerView Score can result not only in a measurable lift in predictive accuracy for consumers with full credit histories, but also effectively evaluate the creditworthiness of millions of consumers with little or no credit history.”
Here’s what we think:
The new PowerView Score will help lenders more accurately assess consumers with limited credit and spotty payment histories. This means that many borrowers who are currently turned down due to “thin credit” or “no credit” will have a better chance for a car loan approval.
Speaking of chances, if you have credit issues we want you to know that Auto Credit Express can help you find a dealer for your best opportunity for a car loan approval.
So, if you’re ready to establish your credit, you can begin now by filling out our online car loan application.