New Features to Help Lenders Manage Through Macroeconomic Cycles and Take Action to Mitigate Potential Losses

This week VantageScore released Phase II of RiskRatio, which includes a variety of new features to help lenders manage portfolios during economically volatile conditions. New enhancements include:

EARLY WARNING INDICATOR:

RiskRatio now features 30+, 60+, 120+ days past due as well as Charge-Off + Bankruptcy, and Bankruptcy delinquency categories in addition to 90+ DPD to help sort data across specific delinquency bands.

Additional granularity helps lenders and financial institutions identify borrowers who may be in different stages of financial distress.

Similarly, the new 30+ and 60+ days past due categories serve as early warning signs of potential credit issues. For example, missed payments of only 30 days past due may be more representative of borrowers experiencing temporary financial difficulties. Identifying these borrowers can help lenders intervene early and work with borrowers to prevent their delinquency from escalating to more severe levels.

The new data categorization also offers lenders the opportunity for risk segmentation. By categorizing delinquencies, lenders can segment their portfolio into different risk groups. This segmentation is valuable for risk management and portfolio analysis. It allows lenders to allocate resources more efficiently, set appropriate reserves, and make informed decisions about lending policies.

GETTING AHEAD OF THE TRENDS:

Additional Performance Windows Allow Lenders to Spot New Trends

RiskRatio’s Phase II enhancement now also allows for two additional performance windows: 6 Months and 12 Months.

The benefit of categorizing data according to these additional performance windows is to allow for shorter time horizons. Identifying more recent delinquencies can help lenders and financial institutions spot new trends or recent changes in delinquency rates. These short time horizons are especially relevant for lenders looking to assess the immediate impact of recent events or policy changes on delinquency rates. Examples of such events include the COVID-19 pandemic or the resumption of student loan payments.

These shorter time horizons also have the added benefit of being more sensitive to short-term fluctuations in delinquencies. Sorting data along these shorter time horizons can help identify and capture temporary spikes or dips in delinquency rates that may be less evident in longer time windows.

Benefits to Lenders and Financial Institutions

In an increasingly volatile consumer credit market, it is imperative that lending institutions have tools to assess the relative risk of default for consumers, how the risk associated with a score shifts in light of macroeconomic influences, and how consumers handle various types of credit products.

The new and improved RiskRatio tool provides lenders and those in the capital markets the ability to refresh the relationship between credit scores and default levels at different points in time, both for originations as well as existing accounts.

To explore VantageScore’s Risk Ratio Phase II enhancements, please visit: RiskRatio Powered By VantageScore.

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