Lending Trends Crissy Wallace Lead Analytics Consultant 1 Experian Agenda Macroeconomic Trends Auto Trends Mortgage Trends Personal Loan Trends Student Loan Trends Alternative Data 2 Experian 1
Since the recessions, the economy has come back 3 Experian U.S. Auto Credit Trends 4 Experian 2
Auto origination dollars higher than ever Dollars of Lines Originated (Billions) US Overall 2Q18: $183.9 BN +15.1% YoY $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $- 4Q11 4Q13 4Q15 4Q17 Dollars of Lines Originated Billions) US Credit Unions 2Q18: $45.8 BN +4.7% YoY $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $- 4Q11 4Q13 4Q15 4Q17 5 Experian Percent of auto trades originating from credit unions up over the last 10 years 29% 27% 25% 23% 21% 22.0% 25.5% 24.8% 19% 19.0% 17% 15% Percent of US Auto Trades that are Credit Union Percent of TX Auto Trades that are Credit Union 6 Experian 3
VantageScore 3.0 Model overview The score used as primary comparison for traditional bureau performance Predicts risk of borrower Likelihood of future serious delinquencies (90 days later or greater) Any type of account 24-month performance Score range of 300 850 Higher scores represent a lower likelihood of risk Lower scores are higher risk A = Super-prime 781 850 B = Prime 661 780 C =Near prime 601 660 D = Sub-prime 500 600 F = Deep sub-prime 300 499 7 Experian VantageScore for auto originations up US Overall US Credit Unions 800 800 70% 60% 678 679 681 690 700 70% 60% 686 688 693 705 700 50% 40% 600 50% 40% 600 30% 500 30% 500 20% 10% 400 20% 10% 400 0% 2Q15 2Q16 2Q17 2Q18 300 0% 2Q15 2Q16 2Q17 2Q18 300 8 Experian 4
Late stage auto delinquencies trending downward 0.7% % Existing Balances DQ 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% US Overall 2Q18 Data: 90-180: 0.25% US Credit Unions 2Q18 Data: 90-180: 0.20% US Overall 90-180 DPD US Credit Unions 90-180 DPD 9 Experian U.S. Mortgage Credit Trends 10 Experian 5
Mortgage origination dollars also up across U.S. US Overall 2Q18: $634 BN +18% YoY US Credit Unions 1Q18: $24.5 BN -2.4% YoY Dollars of Lines Originated (Billions) 700 600 500 400 300 200 Dollars of Lines Originated Billions) 40 35 30 25 20 15 10 100 0 4Q11 4Q13 4Q15 4Q17 5 0 4Q11 4Q13 4Q15 4Q17 11 Experian 1Q18 for CU data, due to data issue VantageScore for mortgage originations stable, small variance down US Overall US Credit Unions 70% 728 727 725 723 800 70% 744 742 740 733 800 60% 700 60% 700 50% 50% 600 600 40% 40% 30% 500 30% 500 20% 10% 400 20% 10% 400 0% 2Q15 2Q16 2Q17 2Q18 300 0% 2Q15 2Q16 2Q17 2Q18 300 12 Experian 6
Mortgage late stage delinquency rates still falling Percentage of balances delinquent 3.5% 3.0% 2.5% 2.0% 1.5% US Overall 2Q18 Data: 90-180: 0.47% US Credit Unions 2Q18 Data: 90-180: 0.12% 1.0% 0.5% 0.0% U.S. 90-180 DPD Credit Union 90-180 DPD Source: Experian IntelliView SM 13 Experian Generations breakouts based on date of birth Gen Z Gen Y Gen X Boomer Silent Age 18-21 Younger: Age 22-28 Older: Age 29-35 Age 36-50 Age 51-71 Age 72 or older 14 Experian 7
Younger people are beginning to originate mortgages Percent of new dollars originated 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Dollars of newly originated mortgages 0.2% 23% 38% 34% Gen Z Gen Y Gen X Boomer Silent 4Q14 4Q15 4Q16 4Q17 Gen X originating the most, but younger people are coming into the market 23% of new dollars originated in mortgage were tied to Millennials 5% Gen X Age 36-50 15 Experian Consumer mortgage balances are increasing across all generations $12 Mortgage balances Change 2011-2017 Billions $10 $8 $6 $4 Gen Z +48% Gen Y +2% Gen X -4% Boomer +11% Silent +56% Since 2014 $2 $- 4Q11 4Q14 4Q17 Gen Z Gen Y Gen X Boomer Silent 16 Experian 8
Mortgage delinquencies are low for young people, mortgages are not yet widespread US As of 4Q170.94% Gen Z* 0.00% Gen YY 0.47% Gen OY 0.62% Gen X 1.03% Boomer 0.93% Silent 1.18% 6% 5% 4% 3% 2% 1% 0% Percent of balances 90-180 DPD *Removed Gen Z due to sample size Gen YY Gen OY Gen X Boomer Silent US Avg 17 Experian Millennials are entering the mortgage market Gen OY w/ mortgage Only 15% of Millennials have a mortgage on the credit file, vs. 25% overall 13% Gen YY no mortgage Gen OY no mortgage 50% 35% Gen YY w/ mortgage 2% 18 Experian 9
Millennials with mortgages are heaviest in South and West regions Millennials by region South 23% 4% West 19% 3% Midwest 15% 4% Mid Atlantic 13% 2% Southwest 11% 2% New England 4% 1% 0% 5% 10% 15% 20% 25% 30% No Mortgage Mortgage on File 19 Experian There is a significant difference between Millennials with a mortgage and those without X Average metrics Age VantageScore Total number of trades Total debt Income No mortgage 28 623 8 $19k $33k 11% DTI Have mortgage 31 716 16 $225k $64k 37% 20 Experian 10
U.S. Student Loan Credit Trends 21 Experian Student loan balance outstanding have grown over the last 10 years Billions $1,600 $1,400 $1,392 $1,200 $1,000 $800 $731 $600 $559 $400 $200 $0 2007 2009 2017 22 Experian 11
Trended average student loans and total student loan balances Average student loans per consumer 4.0 3.5 3.0 2.4 2.5 2.0 1.5 1.0 0.5 0.0 2.8 3.7 2007 2009 2017 Total balance per consumer $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 21,023 23,869 $34,144 2007 2009 2017 23 Experian Average student loans and average balance breaking out by generation 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 Average student loans per consumer 4.4 3.5 2.8 2.6 1.9 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 Average balance per consumer $39,802 $36,246 $33,579 $11,830 $26,341 0.5 $5,000 0.0 Gen Z Gen Y Gen X Boomer Silent $0 Gen Z Gen Y Gen X Boomer Silent 24 Experian 12
Student loan delinquency Percent of consumers with 1+ Student Loan 90-180 DPD 10.0% 9.8% 9.6% 9.4% 9.2% 9.0% 8.8% 8.6% 8.4% 9.2% 9.9% 8.9% 2007 2009 2017 Percent of by generation with delinquency student loan 30% 25% 20% 15% 10% 5% 0% 21.2% 9.7% 9.1% 6.5% 4.0% Gen Z Gen Y Gen X Boomer Silent 25 Experian Characteristics of consumers with a student loan 13.4% of US consumers have 1 or more student loans on their credit file with an average balance of $34k. Consumers with 1+ Student Loan Percent of consumers with a SL 13.4% Average VantageScore for those with a SL 650 Average number of Student Loans 3.7 Total Student Loan debt on average $34,144 Average student balance (per loan) $14,872 Percent of consumers deferred on all SL 23% Percent of consumers repayment on all SL 66% Percent of consumers w/ SL in deferment and in repayment 11% Total debt (mortgage auto, student etc). $101,595 Percent consumers 90-180 DPD on 1+ SLin repayment 8.9% 26 Experian 13
Alternative Data 27 Experian The Riddle of Alternative Credit Data 59% Thick 5 or more trades 321 Million U.S. Population over 77% 18 years under 23% 18 years Deeper View of Your Consumer 25% Thin 7% No Hit 9% Invisible 1-4 trades Data other than trades No record of credit Primary Credit Report Data Sources Tradelines Inquires Public Records > Bankruptcy Mainstream Finance How do we effectively score 100% of consumers? 28 Experian 14
What is Alternative Credit Data? Traditional Credit Data Alternative Credit Data Tradelines Credit card Auto loan Mortgage Credit inquiry Internal records Bankruptcy Alternative financial service data Rental payments Asset ownership Utility payments Full file public records Consumer permissioned data ALL INFORMATION THAT IS FCRA-COMPLIANT Displayable. Disputable. Correctable. 29 Experian How alternative data sources relates to consumer credit worthiness The traditional credit profile data was developed to assess a consumers credit worthiness Rental data Address history Expanded Internal records Stability Ability to repay AFS data Bill payment Subscription data Willingness to repay Rental data AFS data Cash flow Expanded Internal records Education data 30 Experian 15
Experian s Alternative Credit Data Clear Data Platform Increases ability to predict consumers capacity and willingness to repay Not historically or consistently reported to national credit bureaus Can be effectively and compliantly operationalized and scaled Key Experian milestones Rental history Full-file public records Consumer permissioned Alternative financial services Acquired RentBureau Launched Extended View SM Score Partnered with Finicity Acquired Clarity Services 31 Experian Alternative data is unique & additive National Credit Bureau 1 open auto loan 2 credit cards Thin credit file gives little insight into credit risk. Clarity Specialty Bureau 2 open trades 5 closed trades paid in full 3 inquiries in 90 days 2 bank accounts last 12 months 1 move in last 2 years Adding Clarity data provides significant positive information on performance on alternative finance trades not available on traditional credit file. Extended View Score 750 EVS score Attended 4 year college Profession: registered nurse Extended View Score indicates low risk with supplemental information on education and profession. RentBureau 1 open and current rent trade No derogatory rental history RentBureaushows one open and current rental trade with no derogatory information. Finicity Verified income: $ 5,127 Verified assets: $16,944 Finicity confirms income and assets with consumer permission. 32 Experian 16
Who is utilizing alternative finance? Alternative finance consumers Boomer Silent Missing Gen Z Gen YY Missing 1% Gen Z 1% Gen YY 14% Gen OY 19% Gen X 36% Boomer 26% Silent 3% 34% Gen OY Gen X Average age US: 52 Clarity: 42 33 Experian Hit rate analysis methodology Credit Union Auto newly opened trades Full Clarity consumer file Hit Rate Analysis (consumers with Clarity hit) 34 Experian 17
Credit Union auto trade hit rate 15% of consumers with a new Credit Union auto trade matched to Clarity alternative finance data No Alt Finance 85% Alt Finance 15% Overall Hit Rates: Percent of consumers in each score band that have alternative finance data 42% 53% 706 Average VantageScore 717 26% 642 10% 12% 3% Overall Hit No Hit Super Prime Prime Near Prime Subprime Deep Subprime Exclusion 35 Experian Credit union auto consumers with alt finance presence are 300%more likely to be 90+ in the first 12 months 16% 14% 12% 10% 300% more likely CU Auto 90+ Rate 8% 6% 4% 4% 2% 1% 36 0% Total Super Prime Prime Near Prime Subprime Deep Subprime Exclusion Alt Finance No Alt Finance 36 Experian 18
Consumers with alt finance presence are more likely to be 90+ in the first 12 months 90+ Rate by product 30% 25% +567% +400% +300% +300% +300% +267% +220% +178% +140% 20% 15% 10% 5% 37 0% Mortgage Auto Bankcard CU Auto CU Retail Rev Personal Personal Loan Loan Alt Finance No Alt Finance Student Loan OML PL 37 Experian There are several applications of alternative data Suppression Criteria Clear Early Risk Score 38 Experian 19
Utilizing Clarity data to refine acquisition and account management strategies Line strategies Collection strategies Improve cross-sell Trigger new inquiries Offer education Custom modeling Loss Forecasting 39 Experian Executive Summary Auto Trends Mortgage Trends Student Loan Trends Alternative Data 40 Experian 20
For more information: Crissy.Wallace@Experian.com CrissyWallaceMyler CrissyMyler 21