Credit Risk Assessment and Management

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Improve Credit Decisions With an Expanded View of Risk

Every lender is different, but many struggle with similar challenges: How — and when — to extend more competitive offers and approve a wider range of credit applicants while managing risk exposure. Traditional methods of credit risk decisioning can leave valuable pieces of the picture out of view. It’s time to rethink the data and insights your lending organization uses to assess creditworthiness.  

By augmenting existing credit risk assessment strategies with powerful, predictive and proven alternative data insights, your lending team can gain a better understanding of customer credit risk to:

  • Expand the addressable lending market
  • Assess thin- and no-file applicants
  • Segment risk among prime and near-prime applicants 
  • Inform more competitive offers
  • Say yes with more confidence
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65% of lenders use some form of alternative data when making loan decisions.1

1. Aite Group Q4 2020 and Q1 2021 North American Consumer Lending Survey

Start approving more customers
while managing risk tolerance thresholds
with alternative credit solutions.

Shifting Dynamics Introduce New Blind Spots

Like many industries, your lending and financing business has been navigating economic volatility and uncertainty like never before.
This makes it ever more crucial to evaluate new strategies for consumer and small business credit risk assessment.
It feels like an impossible task — especially given the increasing pressure for growth, declining tolerance
for financial losses and mounting regulatory scrutiny.

Many Dynamics Cloud the View of Opportunity and Risk:

Financial irregularity throughout 2020-2021 —combined with widespread adoption of temporary government support programs — has exacerbated the gaps lenders face in assessing an applicant’s current economic trajectory and ability to pay.
Consumers and small businesses are no longer limited to choosing between bank lenders. From online lenders to alternative finance options, many customers are taking advantage of the diverse options available to shop for the best deals.

  • Lending accounted for the largest area of growth — 25% — among fintech platforms from 2020 to 2021.2
  • Fintech small business quarterly loan originations rose from approximately $121 million (2013) to $2 billion (2018).3
The FDIC estimates that 12.9% of U.S. households have unmet demand for bank small-dollar credit. Of these, over 75% were current on bills over the last year, suggesting these households might be creditworthy.4
Relying solely on traditional data sources leaves you with decisioning blind spots and stalled growth. It’s time to improve your vantage point to strike the perfect balance between opportunity and risk.

2 McKinsey & Company, “How U.S. customers’ attitudes to fintech are shifting during the pandemic,” December 17, 2020
3 Federal Reserve Bank of Cleveland, The Rise of Fintech Lending to Small Businesses: Businesses Perspectives on Borrowing, March 2021
4 Congressional Research Service, Financial Inclusion and Credit Access Policy, Updated October 24, 2019
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Alternative Data Insights Shed Light on What Traditional Credit Data May Miss

Creditworthiness is shaped by many factors that push a consumer’s financial trajectory upward or downward. These range from lifestyle patterns over time to short-term recoverable events. Alternative data models add meaningful dimensions to this financial view — making note of behavioral predicators such as education history, address stability, professional licenses, asset ownership and more. These kinds of insights increase the reliability of customer credit risk assessment because they allow you to see shifts that impact creditworthiness sooner. Identify promising credit-invisible applicants — while also getting a heads up on prime applicants who are struggling.

Unlock Portfolio Growth While Managing Risk Tolerance Thresholds

By combining alternative credit inquiries and non-credit events with traditional credit data, lenders can see a more expansive view of a consumer or small business. 

The Ability To Better Decipher Between Likely Profitable and Risky Consumers
Is Pivotal. But the Differences May Be Nuanced and Require a Wider Scope
Than Just Repayment History, Bankcard Utilization or 30-Day Delinquencies.

Credit Risk Assessment With a Competitive Edge

New innovations in credit and lending — think challenger banks and fintechs — give consumers and small businesses more choices and reasons to shop for the best rate. With alternative data in your toolbox, you have insight that can help you win those customers over. Not only by crafting highly competitive offers — but also attracting those potentially creditworthy customers other lenders may ignore. 

See opportunity where others see risk

Colleagues on iPad

Differentiate the “red carpet” prospects from those warranting less-optimal terms

Family moving in

Initiate more predictive risk assessment by pinpointing positive or negative events sooner

People working

Approve more applicants while managing risk tolerance thresholds

Build Competitive Offers Across the
Consumer Credit Spectrum

Enhance your ability to provide competitive terms that boost performance
of customer credit risk decisions. Maximize approval rates,
manage risk tolerance thresholds. 

Boost Profitability in Small Business Lending
with Stronger Risk Assessment

Overcome the unknowns about a business by linking insights on the entity
and business owner and/or authorized representative. Better understand the health
of the business with an economic view of those leading it.

We Pioneered the Field of Alternative Credit Data: A Critical Path to Financial Inclusion

An estimated 53 million U.S. adults have little to no credit history, making them potentially unscorable with traditional credit reporting methods. Add to that lenders’ lack of confidence in the predictability of credit underwriting data for small business lending5 — especially since the majority of firms have had to rely on the owners’ personal funds to address financial challenges.6 It can be difficult to correlate these enmeshed financial pictures.

Using alternative data solutions, you can surface these critical insights to drive more effective financial inclusion strategies. These are the tools that tear down barriers to economic access. Close the gaps of data and opportunity. Maintain rigor, yet champion wider access to credit. Everybody wins.

5. FinRegLab, The Use of Cash-Flow Data in Underwriting Credit, July 2019
6. Federal Reserve Banks, Small Business Credit Survey: 2021 Report on Nonemployer Firms
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LexisNexis® Risk Solutions Provides Fresh Insights on 90%
of Thin-File and No-File Consumers.

Data Sources Differ in Quality. Grow Your Business on Best-In-Class Credit Risk Solutions

LexisNexis® Risk Solutions helps you know more and lend better to consumers and small businesses.
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We leverage best-in-class linking technology

Proprietary platform + linking technology resolve data points to unique identities with 99.9% precision
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Bringing together vast data sources

84B+ public and proprietary records from more than 10K data sources, maintained to exacting standards
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To create a single picture of a consumer or business and the analytics insights to guide you

Assessing that picture with powerful analytics guided by expansive industry expertise and a compliance-first mindset

A Commitment to Innovation

In 2020, we advanced our consumer credit risk assessment capabilities with the acquisition of ID Analytics, LLC., a leader in alternative credit scoring
with patented analytics, proven expertise, and near real-time insight into consumer behavior.

Credit Risk Assessment Solutions

From consumer to small business lending, choose the alternative credit risk solution that can help you score more thin- and no-file applicants, improve lending decisions on the margin, and responsibly issue the improved offers to prime consumers that needed to win their business.

Consumer Credit Risk Assessment

Get a better understanding of consumer creditworthiness in the context
of life changes that shape their economic trajectory.

Small and Mid-Sized Business Credit Risk Assessment

Uncover hidden connections between entities and key individuals to get
an enhanced picture of a business and a more informative
view of its financial health. 

Let’s Talk About Refining Your Credit Assessment Strategies

Request a conversation to learn how we can help you sharpen your consumer and small business credit risk
assessment — and unlock more lending opportunities with alternative data.

Contact Us to Learn How We Can Help You

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We believe in the power of data and analytics
to manage risk & uncover opportunity.

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