The card issuer wanted to find a better way to identify credit-worthy households. The firm wanted to gain insight on households with thin files or no credit history. At the same time, the firm wanted to differentiate risk levels among prospects with similar credit scores.

Solution

The credit card issuer incorporated IXI ’s Spending and Income Measures into their model. These measures helped the firm:

Better assess the risk of households seeking credit, even those with limited credit history
Fine-tune the prospect qualification process
Differentiate among households with similar credit scores
Improve the segmentation of its existing customer base

The firm chose IXI’s Spending and Income Measures based on their ability to add insight to a household’s ability to pay off balances as well as achieve significant charge volume. The measures allow card issuers to prioritize and rank households based on their true income (up to $2.0 million per household), spending capacity, and discretionary spending amounts (up to $1.2 million per household).

Results

IXI’s Spending and Income Measures proved to be highly predictive of risk levels associated with prospects:

When ranked by IXI’s household spending measures, delinquency rates were 400% higher for those with the lowest spending capacity, compared to those with the highest spending capacity
Consumers with the highest spending capacity had purchase amounts almost 700% higher than those with the lowest spending capacity
At the same time, those with the highest spending capacity had balance pay-down rates 55% higher than those with the lowest spending capacity
Applicants whose self reported income was high, but who had low spending capacity based on IXI's spending measures were 6 times more likely to be delinquent

As a result of the analysis, the card issuer altered its decisioning process in order to achieve an optimal balance of risk and growth.