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Why use credit scores for DDA

As reported in American Banker [“In Cash Glut, Banks Try to Discourage New Deposits”] banks are drowning in deposits, which has a negative impact on earnings.
 
Rather than turning away deposits, another option to even out the balance sheet is to take on more risk by tying credit instruments to deposits. This strategy has the added benefit of deepening the deposit relationship with consumers.

As banks look to convert deposits into credit instruments—such as deposit advances, sweep accounts, overdraft protection, and micro loans attached to DDA—they find that credit scores are useful tools to manage levels of risk, an important consideration given the economic climate. Bankers are increasingly turning to FICO® credit scores as a proven technology used extensively in the lending side of the business. Of course, the greater the predictive accuracy of the score, the better the results, which our clients are discovering as they migrate to the more predictive FICO® 8 Score.

Cross-sell strategies to extend credit to deposit accounts improve customer loyalty and satisfaction.  Offering competitive pricing on both deposits and loans can be achieved through the use of credit scores, and will be better received by consumers when done proactively and appropriately, rather than a broad “one size fits all” approach. It’s the first step in building a trusting relationship.

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