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  • Building Lending Opportunities through ITIN

    Posted by on November 12, 2018

    A credit union’s income is largely driven by its loan portfolio, and there is a unique opportunity for even greater loan growth available to institutions willing to go the extra mile in serving immigrant populations.

    Individual Taxpayer Identification Number Application

    Not everyone who works in the U.S. is considered a citizen, yet all are required to pay taxes on their earnings. Workers who don’t qualify for Social Security numbers must satisfy their debt to the IRS by registering for Individual Tax Identification Numbers, better known as ITINs.

    More credit unions are starting to use ITINs to qualify borrowers for loans and other services, a move beneficial both to members and their institutions.

    This is especially true for credit unions serving Hispanic and other underserved markets, but it should be noted that ITINs are not only for Hispanics and recent immigrants. Many workers from Canada, India and other countries pay their U.S. taxes through their ITIN accounts. Done correctly, loans using ITINs as proof of income can open a new world of borrowers for participating institutions.

    This past month Coopera, in partnership with our sister company PolicyWorks, the Filene Research Institute and inclusiv (formerly the National Federation of Community Development Credit Unions) released the Implementation Guide: Individual Taxpayer Identification Number (ITIN) Lending. The 67-page publication, free to credit unions, offers a comprehensive, legally compliant approach to ITIN lending.

    The guide consolidates best practices, tools and resources for credit unions wanting to reach this largely untapped market of immigrant workers who need the ability to more fully participate in the economic growth and development necessary to make their lives financially secure.

    The guide evolved using testing results from the Filene Institute’s Reaching Minority Households Incubator, which measures products and service strategies for reaching financially underserved consumers. Coopera was a major collaborator in both the research study and implementation guide creation.

    This guide couldn’t have come at a better time. There is a very strong business case for providing personal and automobile loans to what is an often-overlooked population segment. As with other financial products provided to the Hispanic community, the word is likely to spread among its members, resulting in an increase in member applications along with the resulting loan growth.

    There also is an equally strong philosophical platform for ITIN lending. Providing members of this group greater financial stability and more active participation in the U.S. economy serves not only their needs but helps create a level of increased financial security that serves to further strengthen their community and society at large.

    Credit unions are committed to serving the underserved, and this may well be the most underserved community of all.

    Please feel free to contact any of us at Coopera for more information on ITIN lending and a copy of the guide. We are here to help.

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    An Unscoreable Consumer Could Become Your Next Great Member

    Posted by on March 6, 2018

    Somewhere between 50 and 80 million U.S. consumers have little or no credit history. That’s somewhere in the range of 15 to 25 percent of the U.S. population. What this means is that a massive number of people in America are “unscoreable” by most traditional models.

    At the same time, acquiring new members is becoming increasingly difficult for credit unions. Competition and financial consumer expectations have never been more complex and fast-moving.

    What if there was a way for credit unions to avoid turning away “unscoreable” consumers for loans and other services? What if there was a way to welcome them without increasing a cooperative’s risk profile?

    No Credit Does Not Mean Bad Credit

    Just because a consumer is unscoreable by most traditional credit scoring models doesn’t mean he or she won’t be able to pay back a loan. Several alternative models available today can help a lender evaluate a consumer’s ability to repay. Below are some examples, along with the types of data they incorporate into their models:

    eCredable – Bills, such as rent, utilities, mobile phone, cable/satellite TV and insurance

    Cignifi – Mobile phone behavior data

    First Access – Prepaid mobile-phone payment histories

    TrustingSocial – Social, web and mobile data

    Kabbage – e-commerce histories from sites like Amazon

    Experian’s Emerging Credit Score – Internet and direct-marketing purchases, property and asset records and telecommunications and utility data

    TransUnion CreditVision Link – Property tax records and checking/debit account records

    LexisNexis RiskView – Residential stability, asset ownership, derogatory status, life-stage analysis

    One thing all these companies have in common: They’re using big data to create better outcomes for consumers and meaningful value for lenders. And credit unions have the opportunity to do so, as well.

    Alternative sources of consumer data, such as utility records, cell phone payments, medical payments, insurance payments, remittance receipts, direct deposit histories and more, can be used to build better risk models. Armed with this information – and with the proper programs in place to ensure compliance with regulatory requirements and privacy laws – credit unions can continue making responsible lending decisions while better serving the underserved.

    How One Organization Successfully Uses Alternative Credit Scoring

    Kinecta Federal Credit Union uses an alternative data score from LexisNexis known as Riskview to assess creditworthiness for traditionally unscoreable borrowers. The model factors in data from sources like utility bills, public records, address and employment stability, among many others alternative data elements. The result is a Fair Credit Reporting Act (FCRA) regulated score.

    By using nontraditional credit verification methods, Kinecta is able to approve more than 60 percent of the applications it receives. Since 2014, Kinecta has made about 20,000 loans for more than $30 million.”

    How Alternative Credit Scoring Fits the Credit Union Philosophy

    Credit unions exist to help people, not make a profit. Their goal is to serve all members well, including those of modest means – the very people most likely to be unscoreable by traditional credit scoring models. Many of these consumers fall into one or more of the following segments:

    • Unbanked/underbanked
    • First-generation immigrants
    • Millennials
    • Rural consumers

    Alternative credit scoring provides credit access to consumers who may otherwise be turned down for a loan or forced to turn to a predatory lender. Using payment history and other data sources to evaluate a consumer’s creditworthiness is an excellent example of “people helping people” – one that benefits both consumers and credit unions alike.

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    Keeping Lending Products Accessible for Hispanic Borrowers

    Posted by on August 7, 2017

    By making a few key adjustments to your traditional lending products, you can make inroads with an entire segment of Hispanic borrowers looking for your services.

    It’s no surprise that the Hispanic segment of the U.S. population is growing, increasing from 17 percent of the population in 2015 to an expected 29 percent in 2020 (according to U.S. Census figures). With that increase comes a growing demand for culturally-appropriate lending services, which is an exciting opportunity for credit unions looking to grow Hispanic memberships.

    Access to credit is a key stepping stone for many Hispanic families, opening the door to greater financial and economic stability. Small-dollar loans also are a necessity for many Hispanic individuals, particularly those looking for financial help in completing the immigration and naturalization process. Without assistance, the application and processing fees associated with filing for U.S. permanent residency or U.S. citizenship can be out of reach for many immigrants.

    By keeping a few key factors in mind when designing lending products, credit unions can expand the reach of their offerings to connect with Hispanic members and create lasting relationships.

    Affordable products

    Product affordability is key for many Hispanic members. Keeping application fees low (or non-existent) and capping interest rates to keep monthly payments affordable will make lending products more appealing to multiple segments within the larger Hispanic community.

    Redefine creditworthiness

    Hispanic immigrants and other non-U.S. citizens may not always fit the traditional “borrower” profile. Yet, members of this segment can become loyal, profitable members. Instead of turning to traditional tools like a FICO score, consider looking at things like rent or telephone payment histories. Available through services like LexisNexis or Clarity, these alternative credit indicators can provide your lending team a view of a potential borrower’s ability to meet financial obligations.

    Cultural competence

    Some Hispanic segments prefer to speak in their native language when discussing complex and personal things like finances. Having bilingual staff and materials is key to helping your Hispanic members, particularly those new to the cooperative, understand the associated fees and requirements for lending products, and to feel more confident in their financial decisions.

    By adjusting a few elements of your traditional lending process and products, you can better connect with Hispanic borrowers and create mutually beneficial and long-term relationships that drive growth. If you’d like more information on how Coopera’s staff can help you do that, please let us know.

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