Auto Forecast Indicates Opportunity Ahead

Data-driven lending strategies can help credit unions get the results they want.


Last year, many credit unions saw an impressive increase in membership despite the uncertain economic environment. Loan growth continues to be a challenge, but there are some positive signs that additional opportunities will open up in the year ahead.

In December, TransUnion released forecasts that indicated both mortgage and credit card delinquencies would decline in 2012. That same month, TransUnion also released its auto loan delinquency forecast, which was nearly as positive.

Auto Loan Delinquency Forecast – Inside the Numbers

Auto loan delinquency rates (the ratio of borrowers 60 or more days past due) will remain the same between the end of 2011 and 2012. Sixty-day auto loan delinquencies are expected to decrease in the first two quarters of 2012 before rising back to 0.51% at the end of the year, finishing at the same percentage as year-end 2011. This is good news because auto loan delinquencies are already near record-low levels. 

Auto loan delinquencies have decreased markedly since peaking during the recession at 0.86% in the fourth quarter of 2008. Since that time, 60-day auto loan delinquencies have dropped on a year-over-year basis from 0.81% in 4Q 2009, to 0.59% in 4Q 2010, and 0.51% in 2011. 

Twenty-one states are expected to see auto loan delinquencies drop by the end of 2012, while 29 states should experience increases. The largest yearly percentage auto delinquency declines are expected in Michigan (-14.54%), Rhode Island (-14.22%) and North Carolina (-14.54%). The largest percentage increases are expected in North Dakota (72.47%), Alabama (25.43%) and Iowa (21.06%). Despite the large percentage increase in North Dakota’s auto delinquency rate, the state is still expected to have the lowest level in the nation at 0.16%.

Utilizing This Data to Benefit You and Your Members

As consumer delinquencies decline, the competitive landscape will increase. Credit unions should continue to educate consumers, especially as many bank-weary individuals consider other alternatives. Credit unions should continue to market their advantages as not-for-profit and member-owned, and emphasize their superior service, better rates, lower fees and dividends to their members. Providing financial literacy through fiscal education can demonstrate a credit union’s commitment to serving its members in addition to opening up possible lending opportunities.

Going forward, credit unions should understand their member relationships in total. There are data and analytical tools available to help profile the credit conditions and wallet share of members, and identify where opportunities exist to grow relationships and increase retention.

Analytics continue to play an important role assisting credit unions in making informed strategic decisions.  Examples include:

  • Conducting a retrospective credit analysis to validate existing score cut-offs (or to adjust them) based on more recent market conditions
  • Testing other scores and data that may provide additional lift in reducing risk, better segmentation for more competitive pricing, or faster and improved lending decisions
  • Conducting a lost loan analysis to determine why approved loans were not funded and what type of loan the member may have obtained from another lender

Utilizing pre-qualified credit campaigns to target the right existing and prospective members can also help maximize marketing dollars. These programs can be further augmented with additional data sources, such as home values or other alternative data to help capture more prospects and better qualify them for your offers.

Some examples of the most successful marketing programs for credit unions include auto refinance and mortgage refinance offers to new and existing members, which help generate new loans while saving your members money.

With ongoing changes in economic and consumer credit conditions, credit unions must also understand the impact and risk to their members in order to better serve them, not just to meet regulatory obligations. It’s not enough to think you know your members. Credit unions should conduct frequent reviews of their portfolios and members’ credit status.

They should also monitor for trends and changes to proactively manage performance at the account-level. Risk mitigation strategies should continually be adapted based on these portfolio insights, but identifying positive changes and responding with increases in credit lines or up-sell offers can improve member relationships.

To learn more about TransUnion 2012 forecasts and solutions, contact David Dodson, Vice President of Credit Unions at or 312-985-3037.



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