Understanding & Managing Through COVID-19

The recent economic shift has greatly affected the lending industry as we know it. Luckily, this unforeseen situation has started to stabilize, and we’re beginning to understand more about where the alternative finance market stands and next steps we should take to help lenders mitigate risk.

Unemployment claims have exceeded 36 million in the US, and consumers have needed to drastically change their borrowing habits to protect their future. To assist our lenders during these unprecedented times, we’ve been measuring and documenting market trends and developing tools that can help you detect and navigate consumer behavioral and performance changes quickly.

Below are a few key trends we’ve seen in both the alternative financial services (AFS) space and traditional lending:

Recent AFS Lending Trends We’ve Seen:

• Consumer application activity has increased 14% compared to a month ago.
• Most states show an increase in loan originations month over month.
• For the first time since the end of March, there was a decrease in the number of trades reported as affected by a natural or declared disaster.

Observations in Traditional Lending Over the Last Couple of Months:  

• Reduction in recent inquiries
• Noticeable increase in the number of student loan deferrals
• An increase in the average VantageScore compared to 2019

Additionally, we’ve been measuring loan performance in the Clarity database. Here’s a preview of the results: 

• The percentage of inquiries having a consumer never before seen at Clarity remained just above 6% last week.
• The overall distribution of Clear Credit Risk scores last week was similar to the previous week.
• For the week ending June 13th, average state Clear Credit Risk scores ranged from 507 to 545, with the overall national average at 521.

In order to better understand these trends, we’ve been monitoring both first payment default and overall default rates at a more granular level and with increased frequency, including performance by Clear Credit Risk score band. Tracking the Clear Credit Risk score distribution helps us determine population shifts and identify drivers of the change.

We are also monitoring our inquiries and tradelines to look for changes that may impact attribute calculations, and tracking activity around the reporting of accounts that have been adversely affected by a natural or declared disaster.

Experian’s Clarity Services is committed to keeping clients up to date during unprecedented times and periods of economic stress. Our growing database of over 60 million unique consumer identities helps lenders better serve the non-prime market and mitigate risk. Download our mini report to discover even more trends that we’ve seen in the market, learn the top five key attribute concepts when evaluating consumers and what else we’re doing to help you understand and manage the impacts of COVID-19.

Link for landing page to download report: https://www.clarityservices.com/understanding-and-managing-through-covid-19/