Changes in Attitude, and in Credit Score Latitude
Evolving Customer Relationships with Credit Cards
This week’s news highlights a shift in how your customers interact with their credit card attitudes for purchases. Additionally, a greater number of them may qualify for credit than previously assumed.
Shifts in Credit Scoring Models
According to an article on Yahoo Finance, in some credit scoring models recent credit contribution carried the most weight…accounting for 30% of a credit score while payment history determined 28%. Now those portions are 5% and 40%, respectively.
This is according to Sarah Davies, Senior Vice President of VantageScore Solutions, who also says “we live in a post-recessionary environment and the way consumers behave and the data that is most predictive has shifted.. there was a laser-light focus on recent credit versus a consumers entire credit history, which in the current environment is much more predictive of future default. More granular data takes these shifts into account and a model that leverages this data provides significantly increased predictiveness.”
New Perspectives on Credit-Worthiness
In other words, by looking at overall patterns and behavior, and not just the fallout from what the article calls “The Great Recession,” it turns out that many of those previously unscoreable consumers may in fact be very credit-worthy.
Implications for Consumers and Credit Cards
All of which means, more of your customers may be eligible for better credit, and better cards, than they realize.
Confusion About Credit Card Rewards
But when they get those cards, as our second article from TheStreet.com has it, a large number of card holders remain confused about their rewards and terms.
Besides the uncertainty surrounding interest rates and late payment fees, a significant number of customers express confusion about their credit card rewards. Over the past year, there’s been a decline in customer comprehension regarding the earning and redeeming of credit card rewards. Presently, 59% of customers claim a complete understanding of reward acquisition, a drop from 66% last year.
The Importance of Clarity in Rewards Programs
The convergence of these findings offers unique opportunities for astute merchants. By clarifying your rewards programs, you can encourage customers to use their credit or prepaid cards with your business. The more straightforward and transparent your program is to your customers, the more likely they are to participate and engage with it.
Opportunities for Merchants
Given the insights from the first article, you may encounter an increase in customers with newly issued credit cards, now deemed more creditworthy. Be prepared for this influx by ensuring your payment plans are secure and offering a broad spectrum of payment options to accommodate them.
AVPS: Supporting Your Payment Plans
If you need any help in any of these matters, don’t hesitate to contact your AVPS rep today! Wed like to think that’s a reward unto itself!
