The NAFCU Journal September-October 2019 - 42

INDUSTRY PERSPECTIVES

one, often with student loan debt. Many
institutions are unwilling to lend to these
new borrowers, making them an underserved market. First-time borrowers are
punished for having no credit, but they
can't get credit without an institution
willing to take on the added risk. These
are the people credit unions exist to help.
The use of alternative data provides a
more comprehensive view of potential
borrowers than FICO scores alone.
Using this alternative data, credit unions
can lend to first-time borrowers while
generating sound loans and greater
profitability. This keeps millennials from
the pitfalls of ludicrous interest rates and
buy-here-pay-here shops, while earning
their trust and loyalty as a member.
LexisNexis possesses copious consumer
data that can be used to supplement the
usual credit score, including: residential
stability, education, utility bills, asset
ownership, derogatory status and lifestage analysis. If a borrower has a zero
FICO score, lenders can look at this
data to identify patterns that indicate
whether the potential borrower is a
good risk. One of the many discoveries
Open Lending has made is the strong
positive correlation between how long
someone has lived in their home and
their ability to repay their loan.
Loan-to-value is an important data
point that lenders consider; the chance
of default increases when the borrower
has less skin in the game. However, that
statistic is not as predictive as payment-to-income ratio. Borrowers generally default because of a difficult life
event, like a job loss or divorce. Because
borrowers need their cars to get to work
and pay their bills, they don't walk away
from their car loans simply because they
lack a certain amount of equity.
Geography is another matter to keep in
mind. Do you recall the "Sand States"
42

during the Great Recession? Credit
unions should be regularly evaluating
geographical regions for economic, lending and default patterns.
When it comes to car loans, a borrower
typically wants a particular make and
model that fits their lifestyle and budget. Additionally, many first-time buyers
want a car that makes them look "cool,"
which is something to look out for. Since
vehicles depreciate at a variety of rates, it
is important information to have when
considering the loan amount, terms and
collateral. For example, a Chevy doesn't
hold its value as well as a Toyota, so a Toyota may earn a longer-term loan - which
will lower the payments for a first-time
borrower - than another type of car.

A credit union's average member
age is 48. As these members move
beyond their peak borrowing years,
we need to replenish our member numbers with younger borrowers. With
the addition of new competitors in
the marketplace that provide the
seamless, digital experience that
young members expect, credit unions
need to up their game in digital
channels. We also must find creative
yet safe ways to make more loans that
help members in need. Millennials
are beginning to open up to life's
possibilities and to forge plans for the
future. We need to be a part of helping
them bring these dreams to life.
John Flynn is CEO of Open Lending.

THE NAFCU JOURNAL  SEPTEMBER-OCTOBER 2019



The NAFCU Journal September-October 2019

Table of Contents for the Digital Edition of The NAFCU Journal September-October 2019

The NAFCU Journal September-October 2019
Contents
Conferences
From the Chair
Washington and Industry Briefs
The Bottom Line
Access to Money
The Best Indirect Growth Strategy
Big Moments, Bigger Wallet Share
Executive Spotlight
Management Insight
Compliance Central
Inside NAFCU Services
Industry Perspectives
From the President’s Desk
The NAFCU Journal September-October 2019 - The NAFCU Journal September-October 2019
The NAFCU Journal September-October 2019 - Cover2
The NAFCU Journal September-October 2019 - Contents
The NAFCU Journal September-October 2019 - 2
The NAFCU Journal September-October 2019 - Conferences
The NAFCU Journal September-October 2019 - From the Chair
The NAFCU Journal September-October 2019 - 5
The NAFCU Journal September-October 2019 - Washington and Industry Briefs
The NAFCU Journal September-October 2019 - 7
The NAFCU Journal September-October 2019 - The Bottom Line
The NAFCU Journal September-October 2019 - 9
The NAFCU Journal September-October 2019 - Access to Money
The NAFCU Journal September-October 2019 - 11
The NAFCU Journal September-October 2019 - 12
The NAFCU Journal September-October 2019 - 13
The NAFCU Journal September-October 2019 - 14
The NAFCU Journal September-October 2019 - 15
The NAFCU Journal September-October 2019 - The Best Indirect Growth Strategy
The NAFCU Journal September-October 2019 - 17
The NAFCU Journal September-October 2019 - 18
The NAFCU Journal September-October 2019 - 19
The NAFCU Journal September-October 2019 - 20
The NAFCU Journal September-October 2019 - 21
The NAFCU Journal September-October 2019 - 22
The NAFCU Journal September-October 2019 - 23
The NAFCU Journal September-October 2019 - Big Moments, Bigger Wallet Share
The NAFCU Journal September-October 2019 - 25
The NAFCU Journal September-October 2019 - 26
The NAFCU Journal September-October 2019 - 27
The NAFCU Journal September-October 2019 - 28
The NAFCU Journal September-October 2019 - 29
The NAFCU Journal September-October 2019 - Executive Spotlight
The NAFCU Journal September-October 2019 - 31
The NAFCU Journal September-October 2019 - Management Insight
The NAFCU Journal September-October 2019 - 33
The NAFCU Journal September-October 2019 - Compliance Central
The NAFCU Journal September-October 2019 - 35
The NAFCU Journal September-October 2019 - Inside NAFCU Services
The NAFCU Journal September-October 2019 - 37
The NAFCU Journal September-October 2019 - 38
The NAFCU Journal September-October 2019 - 39
The NAFCU Journal September-October 2019 - Industry Perspectives
The NAFCU Journal September-October 2019 - 41
The NAFCU Journal September-October 2019 - 42
The NAFCU Journal September-October 2019 - 43
The NAFCU Journal September-October 2019 - From the President’s Desk
The NAFCU Journal September-October 2019 - Cover3
The NAFCU Journal September-October 2019 - Cover4
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