BY LORRIE WOHLFEIL
Is your credit union staff using your best resources to diagnose the direction of borrowing customers’ credit scores? While it might sound counter-intuitive, looking to the past is your best means of predicting the future. Here’s why and how studying historical activity can prevent you from selling your members and your CU short.
In last month’s article, I discussed how critical it is to have a strong loan-to-share ratio as well as a lucrative loan yield.As prefaced last month, our upcoming articles will discuss strategies on how to successfully build your “C,”“D” and “E” loan portfolio.One of the key philosophies we teach at Lending Solutions Consulting, Inc. (LSCI) is to “catch them on their way up” and “protect the credit union on the way down.”This month’s article specifically teaches your staff how to use your best resources to diagnose the direction of the score.This ability will ultimately provide your staff with guidance on how much risk makes sense.
How often do we think“We’re one loan too late?Could we have done a better job?Found the problem earlier?Afforded to take more risk?” In this month’s article, we are going to discuss how to utilize the past to help determine the future.
The best prediction of future behavior is studying the past.This is why we believe in and use the coveted report card in decision making, the credit report.But…are we really using it to its advantage?In my experiences of helping credit unions identify why some loans perform and some don’t, I have discovered they oftentimes don’t truly study the past on their member. At best, they merely scratch the surface by looking at what the current credit report may be telling them on how their member pays, but in actuality they are “stopping short.”The credit union relationship is given the same credence as if this were its first experience with the member.What does this do?It causes the credit union to either make a loan it shouldn’t or perhaps not recognize where things may have improved.
Listed below is a sample tracking chart of what your staff should be analyzing any time they have the benefit of a true past with the member.I’ll discuss why each of these criteria is vital as we address the significance of the bulleted numbers.