Having access to their own credit information is empowering consumers. It helps them understand how certain actions could affect their credit profile so they can make better informed decisions about their finances. The availability and use of these consumer self-monitoring platforms has increased significantly in the last few years according to a TransUnion analysis, with some 12% of consumers in Canada subscribing to at least two credit information services platforms1.
These platforms can also help financial institutions engage with consumers more effectively, for example, introducing them to the products they’re looking for or presenting them with suitable offers at the right time. But first, they have to understand who’s using these platforms, and why. Iain Page, Business Consultant on TransUnion Canada’s Analytics team, walks through how this surge in credit self-monitoring presents new opportunities for lenders.
Upswing in credit self-monitoring
Consumers looking for information on their credit files have a considerable range of options compared with just a few years ago. They have the option of signing up with credit self-monitoring services companies or, as we’re seeing more frequently, accessing a credit self-monitoring platform indirectly through a financial institution. Several organizations now offer these services as part of their customer education and engagement programs.
Between November 2016 and April 2018, there was a 1,100% increase in the volume of self-monitoring inquiries from consumers using credit self-monitoring services powered by TransUnion2. As more institutions partner with credit bureaus to offer these services, we can expect to see even greater adoption and use over the coming years.
Who is using credit information platforms … and why?
The way consumers interact with information on these platforms says a lot about their credit needs. To get a deeper understanding of these behaviours and signals, we conducted a study that covered 1.2 million consumers who monitored their credit either directly with a TransUnion-related company (they were subscribed to TransUnion Interactive) or indirectly (they used the services of third party partners). We observed activities over six months, starting from the time of subscription (when the consumer first signed up to use the platform). The study ran from December 2016 to November 2017.
The findings: Overall, we found that self-monitoring consumers appear to generally be younger and riskier than the average credit-active Canadian population, although some were more high-risk than others. There were also some differences in the average profile of consumers on direct and indirect channels, as you can see below. Consumers who subscribed to indirect channels appear to be lower-risk, younger, and had higher non-mortgage balances than those who signed up directly with TransUnion Interactive.
That said, the study noted an ample volume of activity on these platforms from consumers in all risk segments, including super-prime. Self-monitoring also appeared to be beneficial for consumers across the entire risk spectrum.
What can motivate consumers to monitor their credit
Consumers across the risk spectrum had different motivations for self-monitoring and most of them benefitted from doing so, albeit in different ways. We identified three broad categories of consumers, based on credit behaviour over the six months following their initial subscription to a self-monitoring platform: credit improvers (28%), credit seekers (26%) and credit managers (46%).
Higher-risk: credit improvers
Credit improvers appear to want to increase their credit scores by gradually increasing and maintaining their credit balance. For the purposes of this study, these consumers were considered subprime at the time of subscribing to the self-monitoring platform. Over the six-month observation period, the average credit balance for this group increased, although not to the same level as before. However, it did remain stable.
Just over 60% of consumers in this group saw an improvement in their credit scores:
- 48% improved by 1 to 60 points
- 13% improved by 61 points or more
Lower-risk: credit seekers and credit managers
Lower-risk consumers (considered better than subprime) were split into two categories: credit seekers and credit managers. Credit seekers and credit managers in the studied group were more than twice as likely to open an account during the observation period than those in the control group:
- Credit seekers were defined for the study as those preparing to take on new credit and want to access the best deals when doing so. In our review, we further defined this group as consumers who either grew their balances by 25% or more or opened at least two accounts in the six months studied. Consumers in this group were also three times more likely to open a new account than the control group, with 68% of them doing so within six months of subscribing.
- Credit managers have longer-term goals. We defined this group as consumers who grew their balances by less than 25% or opened fewer than two accounts during the period. They may not need as much credit in the short term as credit seekers, but they do want to maintain a healthy profile and guard against potential fraud.
Lower-risk consumers who self-monitor appear to be more likely to be in the market for new credit products. The greatest uplift we saw here was from credit seekers, with credit managers consolidating their positions.
What consumers are telling you
With deeper insight into the motivation behind self-monitoring, lenders can engage with consumers more effectively. Institutions looking to meet customer needs with relevant offers at the appropriate time have an opportunity to listen to what consumers are saying through their use of credit information services. With more people signing up to view and manage their credit, there may be potential for lenders to engage with consumers from the start of their self-monitoring journey.
Using bureau models with additional data and analytics can help in identifying different consumer segments. Contact us to find out how we can help you identify credit seekers in your customer base, or increase customer engagement by offering self-monitoring services to your customers.