Apr 21, 2021
Getting a car hasn’t gotten any easier for many Americans. Many people have a less-than ideal credit score or none at all, and the global pandemic didn’t help those who wanted to build up their credit. At the same time, those same people may want or need to buy a car, but they can’t because of their credit situation.
There is still hope for these potential car buyers, thanks to Open Lending and our many community bank and credit union partners. Financial institutions can use alternative data and other unique programs to help make more loans to more people, while boosting the institution’s auto loan portfolio and allowing more consumers to afford a car. Here are a few ways your bank or credit union can aid those with credit struggles looking to make a car purchase:
Those with lower credit scores can’t qualify for prime loans, but a significant portion of the nonprime market has remained relatively stable as lending criteria tightened at many banks and credit unions. According to an Experian study reported by The Credit Union Times, nonprime lending borrowers remained steady at 18% at the end of 2020. Offering fairly priced, nonprime loans may be just the type of loan certain borrowers need and can feasibly handle.
Younger borrowers with no credit history and those who have struggled with bad credit are going to struggle to get a car loan through conventional means. To help remedy this, financial institutions can offer a credit-builder program. The borrower takes out a fairly small loan, and while making regular payments on that loan, the proceeds made on that loan are set aside in a savings account. The end result is that a borrower has an improved credit score and money saved away to make down payment on a car!
Alternative data, which is non-traditional financial data like rent payments, utilities, and even social media stats, are powerful tools to help your bank or credit union establish borrower’s ability to pay back their car loan. Our experience has been that incorporating additional data for a more comprehensive picture of the auto loan applicant gives a significant minority of borrowers a credit score boost. Don’t be afraid to check these other credit data sources. They will give you a 360-degree view of the applicant, providing insights beyond their conventional credit score alone.
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