Credit & Risk

How Do You Compare? Top Three 2020 Credit Model Findings

Ken Garcia

October 28, 2020

Every year, lenders revamp their lending target strategies for the year to come. With no end in sight for the global pandemic and continued economic uncertainty, this year’s policy and planning process are more important than ever. Part of this process entails researching new trends and reading up on important industry benchmarks. Knowing where you stand against competitors and how others are planning to navigate the new normal are useful to help prioritize process and technology investments for 2021.

Top Findings: Lack of Confidence in Current Models; Urgent Need for Speed

The first-ever benchmarking study on credit modeling from Cornerstone Advisors revealed the lending industry is in the calm before the storm. New market conditions, lack of confidence in current models, and new competitive dynamics are forcing a shift to speed and efficiency, prompting demand to accelerate model deployment and consider new ways to assess applicant’s creditworthiness

The WSJ article, Coronavirus Tanked the Economy. Then Credit Scores Went Up, echoed the need for change:

“During the last downturn, loan delinquencies rose along with unemployment, and credit reports reflected missed payments in short order. That hasn’t happened this time, yet millions of Americans are still out of work and surviving on unemployment benefits. The disconnect has scrambled lenders’ underwriting models and sent them in search of new ways to evaluate applicants’ creditworthiness.”

With traditional credit scores scrambled and the coming wave of defaults, how do you brace for the impact and continue to lend? Once the realization that you have to update your models more often and factor in more variables sets in, how do you get there? Michael Rempel at Cornerstone Advisors tackled this question and the role machine learning can play in making financial institutions more resilient during his presentation: 2020 State of Credit Modeling.

While the infographic below provides a highlight of key industry benchmarks, check out the on-demand webinar to get a detailed understanding of process and technology investments you need to make to gain more operational agility and make better lending decisions in a risky environment.

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