In July, credit scoring and reporting firm Equifax unveiled a new approach in the way banks, credit unions and other card issuers can target customers with an offer of new credit. If the program works, it can’t help but be a boon to retailers.
True In-Market Propensity (TIP) Scores promise to identify the most promising credit prospects. Equifax leverages data on more than 500 million consumers and 81 million businesses worldwide to provide predictive analytics that give card issuers the ability to tailor their pitches to customers in the market for new credit or those likely to act affirmatively.
“These are marketing scores that tell bank card issuers which consumers have a higher propensity to open an account,” says April Biebel, director of Equifax’s Consumer Risk Product Management Group.
‘Slow but steady’
After a slowdown in credit markets following the recession, Equifax’s monthly National Consumer Credit Trends Report issued in August 2012 showed that total credit growth today “is consistent with the overall improvement in the economy — slow, but steady.”
In response, credit issuers are starting to ramp up their direct marketing efforts to consumers for new credit. The Equifax report shows that issuers originated more than 9 million new bankcards from January-March 2012, an increase of 27 percent over the same period in 2010. New credit overall increased 13 percent year-over-year to $348 billion in May 2012.
Additionally, 60-day-plus delinquency rates are down 35 percent for vehicle loans, 23 percent for consumer finance and 21 percent for bank credit cards, Equifax reports.
Targeting new credit-seeking customers via TIP Scores allows issuers to grow account acquisition with more certainty than the typical “shotgun” approach. Biebel says TIP Scores differ from traditional credit scoring in that they use marketing intelligence combined with a consumer’s credit history to prescreen for offers, rather than focusing solely on what the credit report reveals.
“This helps issuers find consumers who want the [credit] products they have to offer,” she says.
A key component of TIP Scores’ predictive approach is that it identifies consumers most likely to be successful with new credit and not likely to be delinquent on the account within the first 12 months, Biebel says. “Once [consumers] get on the books, they have a higher likelihood of performing from a risk perspective.”
TIP Scores use pre-determined identifiers that measure borrowing behavior and delinquency at any given time. For instance, identifiers might show that a consumer recently moved to a new address in a new city or became a homeowner. Such markers might demonstrate that the consumer is in the market for new home furnishings.
The identifiers then assign consumers a digitized score. Higher TIP Scores indicate a borrower’s increased likelihood to both accept an offer and open an account, according to Equifax.
While consumers do not have access to TIP Scores as they do their general credit scores and histories, the approach will benefit consumers because offers will be more relevant and timely, Biebel says.
“We want [consumers] to say, ‘This is great timing. This is what I have been thinking of. How did they find me?’”