The Power of Data in Near-Prime Auto Lending



By John Flynn, CEO, Open Lending


We dabble in the prime; we dabble in the nonprime, but the real opportunity for auto lenders is that in between. We’ve been focused on this from day one of our organization, and we continue to be. We call this the profit zone. There’s a real void out there in serving this clientele, and we built Open Lending’s Lenders Protection to fill that gap and mitigate the risk.

We use FICO scores, but that’s just one piece. We recognize that borrowers – human beings – are more than that snapshot in time, so we marry that with LexisNexis scores to obtain a more complete picture. These data comprise education records, phone records, utility bills and more. One of the many discoveries we’ve made with this data is the strong correlation between how long someone has lived in their home is a good indicator of their ability to repay their car loan.


Harnessing the power of LexisNexis data, we might consider a 580 FICO score with a positive LexisNexis score more favorably than a 620 FICO borrower with a lower LexisNexis score and price accordingly. Even a 0 FICO score may be viewed positively with a strong LexisNexis score.


Click here to learn more about what Open Lending can do for your auto loan portfolio.


Over our 17 years in business, we’ve developed layer upon layer of data that help strengthen our underwriting, so lenders can feel confident in the performance of the loans they run through Lenders Protection and everyone wins – consumers, banks and credit unions, and, yes, Open Lending. We’ve learned we don’t like to go too far out with the terms of our loans, for example. The average term of our loans is about 66 months. The weighted average life over our portfolio is about 32 months, which has been consistent for the last five years.

Open Lending has been successful and grown, because we listen to what the data and trends are telling us. We’re constantly tweaking our algorithms and adding data to ensure the program’s stability, soundness and profitability for all stakeholders. Some other data we’ve merged into our algorithm include:




Loan-to-value – The chance of

default increases when the borrower

has less skin in the game.




Geographic location – Remember

the so-called Sand States during

the Great Recession? We’re regularly

re-evaluating different regions.




Vehicle depreciation – Different

makes and models depreciate

faster or slower, which we take into consideration in pricing a loan for

the future value of the collateral.




Payment-to-Income – This ratio

is often more predictive than

debt-to-income.






Open Lending uses all of this data and more, which we’ve cultivated into our LP, or Lenders Protection, score. Then we use that to target your credit union or bank’s chosen ROA and cost of funds. Mitigating your risk and increasing your interest income is what we do.


Let the Open Lending team know how we can help your financial institution flourish.

901 S. Mopac Expy, Bldg. 1 Ste. 510

Austin, Texas 78746

support@openlending.com

512.892.0400