Leveraging Insights to Connect with Borrowers with Bad Credit

According to recent statistics, around 20% of people in the UK have a poor credit score, which equates to around 13.5 million people. This is a huge amount of people and provides a large opportunity for lenders who offer loan options specifically targeted towards people with these poor credit scores.

When you’re operating in the credit market and have created services that perfectly match a certain subset of customers, the next important step is to actually find these customers, connect with them, and market your products. But, how do you get yourself into the forefront of these customers’ minds? Insights and analytics! If you want to find out how you can leverage insights to connect with borrowers with bad credit, keep on reading.

The Current Landscape of Bad Credit Borrowing

If you want to win over consumers, you need to have a full understanding of the bad credit market and the consumers who find themselves here.

There are many reasons why someone may find themselves with a bad credit score, including:

• Choosing the wrong credit card
• Declaring bankruptcy
• Having no credit history
• Only paying the minimum amount on their credit card every month
• Not paying off their credit card at all
• Not meeting the terms of a credit agreement

As you would expect, there are varying degrees of ‘bad credit’ which is reflected in your credit score. A bad credit score suggests to potential lenders that you are not the most trustworthy when repaying your debts, which often leads to being offered poorer interest rates, and only being approved for a limited amount of funds.

The first step to appealing to bad credit borrowers is to understand that there is a wide range of consumer groups within this industry. For example, there are some borrowers that have a bad credit rating through no fault of their own, like being the victim of identity theft, or may be unable to work and facing temporary financial hardship. Then there is another group of borrowers who have had longstanding debt issues and have not made any effort to improve their credit score.

Both of these large consumer groups have very different characteristics, and for that reason require different solutions from lenders. When you are able to identify these differences – through the use of powerful analytics – you will much easier to find the best products and services to serve different consumer needs.

How to Use Insights to Connect With Borrowers

In the modern world, data is most definitely king. We live in a time where we have more access than ever before to the smallest details of everyone’s lives, which is especially important for businesses and marketing teams who strive to provide the best and most advanced products. As consumers become far more demanding over time, it’s become more of a necessity for businesses to step up and meet the demands.

If you want to use insights to target borrowers with bad credit, here are 3 important tactics that you will find useful.

→ 1. Harness The Power of Predictive Analytics

Predictive analytics uses trends and patterns to predict what a customer is going to do next. In the case of bad credit loans, predictive analytics can be used to determine the likelihood of a customer defaulting on their next payment, or paying it off in full.

84% of marketing leaders are thought to use predictive analytics when making decisions, proving that this is not just a trend but a valuable resource to help marketers get into the minds of their customers and offer the best solution.

Lenders of bad credit loans can also use this information to guide customers through the process of building up their credit scores. Through personalised incentives and analysing how certain financial decisions could impact credit scores, lenders can provide much more meaningful help to customers who need a bit more of a push to improve their financial position.

→ 2. Utilise Personalised Communication Channels

When you have bad credit, it can often feel like you have no chance of being approved for a loan or having the freedom to make larger financial decisions. It’s a sensitive topic and one that will cause many sleepless nights for your customers, which is why it’s important to communicate in a way that is empathetic and supportive – rather than instilling a feeling of guilt in people who are already anxious about their position.

Someone who is having a temporary financial blip will require a very different communication approach than someone who repeatedly chooses to not pay off their loans. Once you use insights to segment the different customer types, you will be able to create communications that reach them at the right time, in the right place, and with the right information.

→ 3. Look For Alternative Data Sets

When it comes to determining whether someone needs a loan and how likely they are to pay it back, the traditional data source to look at would be their credit history.

However, there is a large benefit to going beyond these traditional data sets and looking for other sources of information that could provide beneficial analysis. For example, looking at purchasing history, rental payments, or even activity on social media, can all be used to paint a full picture of the creditworthiness of an individual.

Just because someone has a bad credit history doesn’t always mean that there’s no chance of them ever paying off a loan, so tapping into these alternative data sets can help lenders make fairer decisions for the benefit of customers.

Insights provide opportunities for bad credit loans

Like in most other industries, access to powerful analytics and data is changing the way that businesses interact with their customers.

As we’ve seen in the bad credit loan industry, insights are allowing businesses to better connect with potential customers, create personalised offerings, and make the process of applying for bad credit loans fairer for everyone. If you want to better connect with potential customers with bad credit, insights and analytics is important place to start.

Finance