VantageScore engages on social media

Dear Colleague,

How we communicate matters just as much as what we communicate. That’s why we’ve recently launched an aggressive digital and social media program that harnesses all of our rich content and targets the information to those who need it most.

With last month’s launch of our new branding and the VantageScore 3.0 model, we‘ve also expanded our social media presence. Now and in the future you will see our information disseminating out of these platforms:

  • Twitter: We’ve been tweeting @VantageScore for several months now, but we’ve stepped up our level of activity. We’ll be live-tweeting at events, directing you to the most timely information coming out of VantageScore Solutions, and pointing you to news and information we think is important on a daily basis. Follow us to get up-to-the minute updates.
  • YouTube: We’ve also launched a YouTube channel, where you can subscribe to separate playlists of videos for lenders, consumers or anything new. Visit the lender section now to see videos featuring me and Sarah Davies, senior vice president of Product Management and Research, explaining the VantageScore 3.0 model to the lender and regulator communities. And in the consumer area, you’ll find videos from Senior Digital Manager Jim Akin, who has posted tips to help consumers understand their credit scores better. Down the road, we’ll also use the YouTube channel to address issues as they arise. For example, check out what Sarah had to say in response to a question about paid collections accounts and the VantageScore 3.0 model.
  • LinkedIn: Follow VantageScore Solutions on LinkedIn to receive industry-oriented updates on our latest news and content. You’ll also find relevant third-party industry news and analysis.
  • Facebook: Follow our new Facebook page for helpful facts, tips, videos, infographics and other easy-to-follow, consumer-oriented information. We want to make it as easy as possible for everyone to improve management of their personal credit accounts, and we see our Facebook page evolving into an important resource.

We’ve devoted much of this issue of The Score to digital technology, including stories about how lenders are using social media. Specifically, we surveyed lenders to better understand how they use social media in their day-to-day operations. We’ve also included an article about how mobile devices are changing the relationship between consumers and their lenders.

And our “Five Questions” with interviewee this issue is Katie Sacksteder, vice president of TRU, a marketing and brand research agency that specializes in reaching the Millennial generation of consumers. She was a keynote presenter at the Consumer Bankers Association’s annual conference in March. You won’t want to miss her insights.

For consumers, our “Did You Know” column answers a question we’re often asked: How many credit accounts do I need to have a good score? Our answer might surprise you. We’ve also included an article that answers the question “Is a low credit score better than no score at all?”

All the best,

Barrett Burns

Unlike their employees, financial institutions warm slowly to social media

Banks and other financial institutions are slow to harness social media and digital technologies, even though their employees regularly apply these tools in their work lives, a recent VantageScore Solutions survey revealed.

The survey, commissioned by VantageScore Solutions and conducted by SourceMedia Research in conjunction with the monthly Index of Banking Activity, encompassed more than 250 professionals in a wide range of job titles and departmental functions at institutions including commercial and regional banks, credit unions and merchant banks.

Among the findings on social media:

  • More than 75 percent of respondents reported that both their institutions, and they themselves as individuals, had used the four major social media platforms, LinkedIn, Facebook, Twitter, and YouTube, in some connection with their work.
  • LinkedIn, the professional networking service, is the most widely used platform, having been tried by 86 percent of institutions and 90 percent of individual respondents.
  • Asked to rate each of the four platforms as “important,” “neutral” or “not important” to both their institutions and themselves individually, respondents rated only LinkedIn as “important” overall. Forty-seven percent of individual respondents, as well as 46 percent of respondents whose institutions use it, deemed the service “important.”
  • Fewer than 25 percent reported that their institutions have tasked one or more employees with posting content in an official capacity to Twitter, YouTube or LinkedIn. Thirty-eight percent of respondents said they have someone assigned to post to Facebook, and nearly as many, 37 percent, said they have no one assigned to post to social media.
  • Consistent with widely recognized best practices for social media, more institutions may be getting started by listening in, to “read the conversation,” before they start posting. Forty-nine percent of institutions track Facebook, 38 percent monitor LinkedIn and 30 percent follow Twitter. Twenty-eight percent say they don’t monitor any social channels.

The survey also revealed that traditional downloadable and streaming digital content was much more widespread, as more than 95 percent of respondents reported visiting websites for mainstream and industry-specific news outlets, professional organizations, and agency or regulator sites.

In terms of content types, more than 87 percent rated webinars and streaming video as “important” for work-related content; 80 percent rated survey and market-trend data as “important” data they seek online; 75 percent identified white papers and journal articles as “important,” and 60 percent rated presentation slides and decks as important.

VantageScore Solutions will continue to track usage of social and digital media within the lending community, to help shape our offerings for the professionals we serve. As appropriate, we will also share our findings with readers of The Score and subscribers to our social media channels.

Index of Banking Activity rebounds to all-time high

Growth in commercial loan activity helped propel the American Banker Index of Banking Activity (IBA) Composite Index to a new high of 56.3 in February, following a dip to 53.4 in January. Respondents to the monthly IBA Survey, administered by American Banker in partnership with VantageScore Solutions, reported an increase in commercial-loan application volume of 7.3 percent and an increase in commercial loan approvals of 8.5 percent. Significant increases were also reported in the IBA component indexes that track commercial- and consumer-loan delinquencies. Those component indexes, which increase as the number of delinquencies decrease, rose 6.5 percent for commercial delinquencies and 10.7 percent for consumer delinquencies.

IBA Composite Index Jun 2012 - Feb 2013

Source: American Banker and VantageScore Solutions, LLC

Compiled from surveys of executives at hundreds of financial institutions across the U.S., the index is an industry bellwether that tracks 16 distinct business indicators, such as volume of deposits, loan applications and loan delinquencies, and how they change month over month. Measurements of each of these components are combined into a single Composite Index, in which readings above 50 indicate business expansion, and those below 50 signify contraction. Find more information about the Index and its component measurements at

Financial institutions try to capture new accounts with tablet technology

By Mary Wisniewski, Royal Media Group

Adapted from an article published in the Winter 2013 issue of TradeLines.

When USAA’s iPhone-app customers synced devices with their new iPads, consumers instinctively began to deposit physical checks remotely using the tablets’ cameras. There was just one problem: The functionality was not yet built for USAA’s tablet app, and the San Antonio, Texas-based bank wasn’t prepared to handle the quirks, like the difference in aspect ratios between iPad and iPhone images. In turn, USAA was forced to make fast technology tweaks to accommodate consumer behavior.

“Customers will use you whichever way they want to use you,” said Neff Hudson, USAA’s assistant vice president of emerging channels. “There are big challenges.” That customer power is meaningful to banks like USAA, whose tablet-banking users slant toward a wealthier audience, which Hudson attributes to the tablets’ high price tags. Plus, the majority of users fall under the aging Baby Boomer category, so products and services important to them hinge on retirement and research related to financial topics, said Hudson.

USAA’s internal data is in line with what Forrester Research Inc. found in data it published last year. The global research firm reported that tablet early adopters boast higher-than-average incomes — at least $120,000 annually — and advanced education, attributes that make them more likely to utilize numerous offers of financial services.

Hudson predicts that in the next year many new mobile and tablet banking functionalities will emerge from within the industry.

“More complicated products will be sold through more immersive media devices,” he said, adding that “Underwriting is one of those areas that should get simpler from the customer standpoint and more accurate from the institution standpoint.”

Beyond underwriting on the go, tablets will play a role in changing the way in which products are sold. Kevin Travis, partner at financial services consultancy firm Novantas LLC, has noticed murmurs of banks sending sales forces into the marketplace armed with tablets to simplify the loan-origination process.

Take small-business lending, for example. As loan origination requires a deluge of paperwork, tablets and smartphones could save busy business owners the hassle of coming into physical branches three or four times. “It’s a huge increase in productivity,” said Travis.

Even smaller banks are getting into the tablet game through their vendors’ debuts. Intuit Financial Services, an online-banking vendor to nearly 1,500 U.S. banks and credit unions, is looking to add account-opening functionality into its smartphone and tablet bank offerings. Though the vendor has standard functionality in place to do things like check account balances, Intuit Mobile Solutions senior product manager Deepti Sahi said she “sees a need to meet both mobile registration and account opening functionality.”

Currently, Intuit is working to ensure that consumers can open accounts within three to four clicks, a necessary feat as “the attention span on mobile and tablet is shorter,” said Sahi.

“That’s a challenge,” she said. “How much risk does an FI [financial institution] take on and what is the bare number of steps to take on to create a new membership? …We haven’t figured out the answers. We’ll collaborate with the risk appetite of our partners.”

Beyond tablet trajectories, FIs are ultimately striving for the holy grail of deploying universal applications so that their customers can start interactions that begin in one channel (e.g., a tablet) and finish in another (e.g., a PC).

Are you ever better off without a credit score?

by John Ulzheimer

Discussion of credit scores is what the media call a “lightning rod” topic, which means it always elicits strong opinions. Normally those opinions are unfairly critical of credit scores. But, would we be better off without credit scores?

Some consumers actually live the reality of not having credit scores. Their credit files do not contain enough data for scoring systems to work their magic and calculate a reliable prediction of how likely they are to pay their bills in the future. This is referred to as “minimum scoring criteria,” and it means credit files must meet some minimum standards in order to qualify for a score. If you don’t have a credit score, then you can’t enjoy its benefits.

Benefits of Credit Scoring

Do you remember the days when getting a loan took months? Those days were before today’s environment of “instant credit.” The tool that helps to facilitate instant credit is, in fact, the credit score.

A credit score is a simple 3-digit interpretation of the information on your credit reports. The higher the number, the better your credit risk and the more attractive you become to lenders. Not having a credit score means you cannot be “processed” by a lender’s automated application systems and you must be decisioned manually.

Manual underwriting isn’t the end of the world, but it’s certainly much more time consuming. You’re asking a human being to review your credit report, which contains too little information to yield a score, and to render a judgment about what kind of credit risk you pose to his or her bank. That’s a tall task to ask of anyone, even for the most seasoned underwriter or risk manager.

Having a credit score gives you access to more competitively priced financial services and products. For example, I just opened a new checking account with a credit union. The credit union has a policy of checking the credit score of every prospective member, so it pulled my credit report and credit score. Because of my good credit score I was able to open the account.

Now with this account I can cash checks, write checks, and build wealth in such a way that my deposit is likely to be entirely insured by the federal government. I also get overdraft protection, whereby the credit union automatically lends me the money to cover checks or card transactions that exceed my available balance. (Overdrawing an account is something no one should do, so I don’t ever plan to use that service, but it is included with the account.)

The alternative to a mainstream checking account? Using check-cashing stores, prepaid debit cards and hoarding cash in your home. These options are more expensive and, frankly, dangerous. They do nothing to help you build wealth.

Positives and Negatives

Credit scores also remove the human element from the risk assessment process and provide for a more fair and empirical evaluation of your credit reports. This is important because what you consider to be risky in a consumer may not be risky at all, empirically.

Case in point: Is a credit report that is devoid of derogatory information reflective of good credit risk or poor credit risk? I believe any reasonably prudent person would say the lack of negative information means the consumer is a good credit risk, and they might be correct. However, the absence of derogatory information is only worth about one-third of the points in your credit score. The remaining two-thirds have nothing to do with whether or not you pay your bills on time. Debt measurements, inquiries, the age of your credit report, and the diversity of your account history all tell a very important story about your credit risk yet they’re difficult to properly interpret without the help of a credit scoring model.

Did You Know:
How many credit accounts you need to have a good credit score?

A question consumers frequently and understandably ask is how many accounts—mortgages, auto loans, credit cards—are sufficient in order to have a good credit score. VantageScore Solutions’ analysts examined how many accounts consumers with prime credit scores typically have in their credit file.

These consumers, who generally qualify for loans, have on average 13 loans in their credit files, and typically the oldest loan is more than 15 years old.

So does this mean consumers need 13 loans? Certainly not. What’s important is that consumers properly manage the credit accounts they currently have, and only apply for new loans when necessary.

Consumers should not take out loans and expect their credit scores to magically improve. Having the right mix of accounts, such as having a credit card, auto loan and personal loan, managing those accounts properly, and always paying on time, will have a positive impact.

Five Questions with Katie Sacksteder of TRU-Insights

One of the most important and difficult-to-reach population segments for lenders is the “Millennial Generation.” While there is no universally accepted definition of a “Millennial,” most experts consider anyone born between 1982 and the end of the early 2000s to be part of that generation. What’s not up for debate is that they have grown up with technology and it has shaped their financial habits.

TRU-Insights is a leading market research firm that focuses on “tweens, teens & twenty somethings.” The Score caught up with Katie Sacksteder, vice president of TRU-Insights, to discuss lending and the Millennials after her keynote address on that subject at the Consumer Bankers Association conference in March.

Why should lenders care about the Millennial Generation of consumers?

Bankers, lenders and marketers should care about the Millennial Generation for three significant reasons. First, and most obviously, is their size. Millennials are the largest living generation in America, with 74 million members.

Second, as a cohort, they are entering their prime consuming years. Their lifestage is full of firsts: first job, first new automobile, first home, first time going on vacation on their own dime. At TRU, we say this early adult lifestage is a time where their lives are under construction. They are moving toward independence and starting to get settled by setting up their lives—including career, personal life, home, kids, etc. Most importantly, this is a time where they are starting to make their own brand decisions, with a self-sufficient point of view on anything and everything from laundry detergent to luxury brands to lenders.

Third, generally and historically, young people have always been incredibly influential. On pop culture and across categories, youth has always been on the leading edge of trends and change. This is especially true for tech-savvy, socially connected Millennials.

Therefore, as brands and marketers think about future opportunities, it’s important that they create connections with this cohort during this key lifestage.

What are Millennials’ attitudes toward credit?

From the TRU Study, two-thirds of Millennials in their twenties (age 20-29) are concerned about credit card debt. That is a number that has stayed steady for the past couple of years. Their average monthly credit card debt is, on average, just over $2,900. That number, however, has significantly decreased since 2009, when the average monthly credit card debt was just over $4,000. So, while Millennials are worried about credit card debt, they are also doing something about it.

We have also heard from many in this generation how important it is to live within their means. Many have learned lessons from watching their parents’ financial struggles through the recession. These young people, who’ve generally been included in discussions about family finances to a greater degree than were previous cohorts, frequently expound the importance of not buying (or wanting to buy) anything unless they have the money for it. That doesn’t mean that Millennials don’t use plastic for purchases. But it does demonstrate a shift in attitudes among Millennials about the role of credit and the importance of paying off debt versus previous generations.

How do Millennials want their financial services delivered and what tools do they look for?

Virtually. Virtual banking is simply easier and preferred for this digitally native generation. When it comes to virtual banking tools, Millennials we spoke to seek tools to simplify and enable two aspects of their financial activity: easy transactions and aggregating finances. 

First, many discussed the inconvenience of carrying cash and expressed added worry about losing cash if they do carry it. A lost card can be replaced and funds reimbursed; lost cash is gone forever. Since many do not carry or want to carry cash, paying with plastic and virtual transactions are the preferred methods for payments or transferring money. When it comes to tools, on-the-go is a key element for Millennials: 37 percent* of 20-somethings downloaded a free mobile money-management app for their phone within the past 12 months.

Second, Millennials discussed the desire for financial tools that can aggregate all financial activity into one central “place.” With busy lives, a central hub that aids in their management of money coming in—direct pay—and money going out—payments, student loans and credit cards—is helpful.  

  *Source: the 2013 TRU Study

What mistakes do lenders make when providing products or services to these consumers?

At TRU, we have a macro-theme we’ve observed when it comes to Millennials called The Next Easier Thing. Ease may trump innovation for a generation weaned on Google and touch screens. Today’s young consumers expect massive choice, overlaid by an easy interface. We urge brands and marketers to focus on tools that make interactions easier, rather than just introducing novelty for novelty’s sake. 

Banks may also be worried that they lack a personal relationship with this young consumer.  However, Millennials’ busy, on-the-go lives require virtual tools and services that allow for instantaneous interactions. Virtual is real for them. This real-time relationship has the potential to create a more immediate, intimate connection and conversation with brands than the in-person, outdated relationships valued by parents. 

What’s next? Are new technologies emerging that Millennials are beginning to use?

Mobile tools. We’ve heard from Millennials that one reason plastic is preferred over cash is that it’s so much easier—just swipe your card and go. Mobile tools take easier one step further… with fewer items to manage, mobile eliminates the need to keep track of plastic. 

Much has been written lately about how major credit card companies are innovating around mobile wallets. We think this mobile payment innovation is spot-on for Millennials, providing an opportunity for them to streamline to just their phone. Lost or forgotten cards would no longer be a concern, eliminating the hassle, for example, of going back to the bar to retrieve your forgotten credit card!

Current mobile tools sparked interest and enthusiasm among the Millennials we spoke to as well. Chase’s QuickPay was an exciting new tool some were using, a perfect fit for their busy, social lives.  Many discussed the tools benefits as now, anytime they are out with friends or participating in any type of group activity, they can easily QuickPay one another rather than worrying about how and when to pay someone back.

Similarly, providing check deposits via mobile phones is also an innovation around “easier banking” that caught Millennials’ attention. Rather than hunt down an ATM, Millennials were excited to simply snap a photo to make a deposit.

Millennials want banking tools that allow them to bank on their terms—whenever, wherever, however they want!

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