Tag Archives: Credit Capacity

Risk & Compliance UK Cardholders Have “Just” £41 billion in Unused Credit Lines


Our analysis of UK credit cards shows that the average cardholder had 32.46% of unused exposure in February 2014, compared to 33.38% at the same time the previous year. This slight decrease puts unused exposure at around £41 billion.

This slight change masks a larger fall since 2008, when the average unused exposure was 38.89%. This fall can be attributed to the limit decrease campaigns on never-active accounts, long-term inactives and accounts with low utilization.

The new numbers show there is scope for issuers to decrease limits further, in order to gain further benefit from a reduction in capital requirements. More targeted initial limit allocation could also influence this. Ongoing offers should be based on data indicating the likelihood of take-up on any extra credit, as well as risk and profit metrics. The new FCA regulations will help to ensure any line increase offers take affordability into consideration and decreases will manage the existing limits.

FICO’s consultants also looked at the new data by vintage. Perhaps surprisingly, it is...

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Customer Engagement Join Us For FICO World 2014


Attracting, serving and protecting customers is getting tougher, so how are companies using predictive analytics to out-maneuver competitors and win customer loyalty? Join us at FICO World 2014 to discover answers from experts and network with your peers. Registration is now open for the conference, which will be held November 11-14 in San Diego, California.

FICO World has become the leading global conference on analytics-powered customer engagement strategies. This year’s theme, “The New Customer Imperative,” stems from the convergence of social, mobile and cloud, which is evolving customer behaviors and expectations, revolutionizing business and society, disrupting old business models, and creating new leaders. We’ll explore this theme through a number of sessions, speakers and events, including:

100+ presentations on analytic innovation, credit scoring, customer growth and retention, customer originations, debt management, fraud and security, mortgage lending, regulatory compliance, and small business lending.

Keynote presenters Theresa Payton,...

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Risk & Compliance Consumer Re-Leveraging Raises Delinquency Concerns


Our latest quarterly survey of bank risk officers in North America always seems to offer a few interesting nuggets. Two results in this quarter’s survey that caught my attention were: Expectations for delinquencies on auto loans hitting their highest level since Q4 2012; 34% of respondents expected delinquencies on auto loans to grow in the next six months. Expectations for delinquencies on credit cards hitting their highest level in two years; 28% expected delinquencies on credit cards to increase.   Despite those expectations, our survey found the re-leveraging trend showing no signs of slowing. In the survey, 58% of bankers expected average balances on credit cards to increase over the next six months, with only 9% expecting balances to go down. In addition, 44% expected the amount of credit extended to consumers to increase, while just 14% expected this to decrease.   These survey results are consistent with recently released government data. The U.S. Commerce Department found consumer spending rose steadily throughout 2013,...

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Risk & Compliance Ranking UK Consumers’ Credit Capacity


As the UK economy continues to improve, lenders are increasing lending again — in a survey that FICO will announce next week, 100% of UK risk managers who responded said that lending more to consumers was a priority for 2014, and 27% said it was a top priority. At the same time, lenders are cautious about taking on additional risk. This is what makes the FICO® Credit Capacity Index™ so attractive. This score rank-orders consumers by their ability to handle additional credit, which could be fundamental in helping UK lenders improve profitable lending growth. Our latest validations show the strength of the FICO Credit Capacity Index, built on Equifax’s market-leading risk score, Risk Navigator 4 (RN4). We applied CCI to 275,000 UK consumer credit applications for credit line increases, current accounts, credit cards and personal loans. The performance of these accounts a year later, as well as the estimated performance for consumers who were declined, showed that CCI used with RN4 strongly rank-ordered borrowers. For borrowers who applied for a current...

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Risk & Compliance Are Consumers Ready to Spend More? And Borrow More?


If you’re a banker, that’s what your colleagues think. Our latest quarterly survey of US and Canadian bank risk professionals finds that they expect consumers to spend more and borrow more over the next six months. Our survey results are always fascinating to me because the consensus thinking of bankers usually comes through loud and clear. This quarter was no exception. Among the professionals we polled, 46% expect the amount of new credit requested by consumers to increase, while just 16% expect it to decrease. Similarly, 46% of bankers expect requests for credit line increases to go up, while just 8% expect such requests to go down. Moreover, we found that 53% of lenders polled expect credit card balances to increase over the next six months, while just 7% expect balances to decrease. The consumer appetite for spending, and a willingness to take on debt to support that spending, appears to be gaining strength. Evidence of this trend can also be seen in Commerce Department data – consumer spending rose .3% in August after rising .2% in July. In this...


Risk & Compliance Making Ability to Pay Compliance Work for You


The ability to pay provision continues to be one of the biggest compliance hurdles of the Credit CARD Act. Many lenders have approached this as a purely “check-the-box” task, hoping to comply with minimal impact to existing processes. Instead, is it possible to not only comply, but also gain value in the process? We’ve been working with clients to do just that—in other words, to avoid added compliance costs that don’t produce a return. Here are some recommended best practices. Tailor your strategy to credit lifecycle. Use lifecycle as a guide to make compliance investments where supported by a strong return. At origination, for instance, lenders can easily request consumer income directly, whether on an application, at retail point of sale or through a customer-initiated credit line increase. This cost-effective tactic is fully aligned with the spirit of the regulation. By contrast, account management decisions, such as automated line increases, present the largest challenge and require the most design. I’ll share few ideas for how to tackle this...

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Risk & Compliance UK Cards Data Suggests Action Items for Issuers


Today we released new data on UK card trends, and if you read between the lines you can see some opportunities for card issuers. As with the data last week on static delinquencies, this reporting comes from the team of consultants that works with UK card issuers using FICO TRIAD Customer Manager, the world’s leading credit account management system. Looking at November 2012 data, we find that 33% of credit limits are unused. The unused credit is slightly lower than 2011, when the figure stood at 34%. In 2008, before issuers began reducing open credit limits to reduce risk exposure, the figure stood at 39%. That’s still a lot of open-to-buy credit — more than £50 billion — that card issuers are holding capital reserves against. Every issuer should examine whether it’s the right amount on a customer-level basis. And some of this available credit may be due to inactive cardholders — do you need this credit to be there? At the very least, make sure you have the right address for these cardholders before sending them a reissued card, to reduce your...

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Risk & Compliance Has Deleveraging in the US Come to an End?


After five years of nearly uninterrupted deleveraging, are American consumers (with a little help from lenders) ready to reverse course and begin taking on more debt? According to our latest quarterly survey of US bank risk professionals, the answer seems to be yes. A large majority (61%) of the 251 bankers polled expect consumers will be applying for more new credit and trying to bump up the limits on existing credit accounts over the next six months. These are the highest figures we’ve seen during the 11 quarters we’ve been conducting this survey. In addition, 59% of respondents expect credit card balances to increase. That's the second-highest figure we’ve seen in our survey. If these expectations prove correct, then 2013 could be the first year in which Americans increase their reliance on credit and debt since the Great Recession of 2008-09. Of course, consumers’ desire to borrow more is only half of the equation. The other half is whether sufficient credit will be available to satisfy consumer appetite. And according to our survey, the answer...

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Customer Engagement Join Us For FICO World 2013


How are companies using Big Data analytics to understand and collaborate with today’s connected consumer? Join us at FICO World 2013 to discover answers from experts and network with your banking peers. Registration is now open for the conference, which will be held April 30-May 3 in Miami. FICO World has become the leading international conference on analytic strategies. This year, we have a packed agenda with more than 80 presentations from 70 banks and retailers on fraud management, analytic innovation, risk management, collections and improving the customer experience (view a list of sessions). Attendees will also hear from keynote presenter Kenneth Cukier, data editor for The Economist and co-author of a new book on Big Data. Learn more or register for FICO World 2013.

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