ATLANTA (9/19/13)--Card issuers have seen as much as a 90% decrease in credit line increase (CLI)-eligible card accounts since regulatory changes introduced by the CARD Act in 2010. A new white paper from Equifax advises card issuers how to restore credit line increases with a diversified data strategy.
Card issuers face a conundrum: how to overcome regulatory hurdles to restore the credit line increases that consumers and card issuers want, said the report, "Recapturing CLIs: How a Diversified Data Strategy Can Help Card Issuers Restore Credit Line Increases--and Boost Revenue."
In the past, card issuers used in-house data, credit bureau data and analysis to determine a cardholder's ability to pay. Those who met the criteria received an automatic CLI. Cardholders who received a 10% to 30% CLI boosted their balance by about 3% within one year, while consumers who received no increase cut spending by about 4% during the same period, said the paper. With consumers paying down their debt during the period studied, the results would be more compelling today, said the Atlanta-based Equifax.
The credit information company offered these tips to assessing consumers' ability to pay:
Create an internal income hub of information by consolidating income data across all portfolios the card issuer has access, such as mortgage records, auto loans student loans, personal lines of credit and data from other credit cards.
Institute a consumer outreach program to consumers whose credit profiles make them likely candidates for CLI increases and invite them to apply for a CLI.
Leverage annualized income data via the Big Data approach with companies that provide data that are instantly accessible and viable and verify income data that indicate a person's ability to pay.
Extend the shelf life of the consumer's stated income. Many card issuers avoid presenting regulators with information older than 12 months, but some Big Data statistics can demonstrate accuracy and stability of stated income over time, said Equifax's paper. Equifax noted that if card issuers could extend the viability of stated income to 18 months and use it for automatic CLIs, their CLI recapture rate could increase from 18% to as much as 27%.
For the full report, use the link.