Lending is a credit union's primary profit driver. Yes, investments also produce noninterest income, which is a big revenue source, but lending is where the rubber meets the road when it comes to people helping people.
As a lending executive, you know this is a big responsibility – stewarding your cooperative's assets to produce strong revenue, while maintaining safety and soundness. That's why it's crucial to build and maintain your loan portfolio using the very best analytical research and tracking methods available.
It's no wonder in this age of Big Data that analytics have become a critical tool for credit unions to drive portfolio growth.
Fintechs have leveraged Big Data in new and inventive ways. Thinking beyond traditional loan origination guidelines and risk attributes, such as credit score and job history, fintech financing companies are creating and defining new risk attributes and turning to social media, utility and cell phone data as the new risk predictors. From loan performance to transactional data, if done right, credit unions can leverage this data for proprietary data analytics and multi-decade insight that newbie startups would salivate over.
Through our Lending Insights loan portfolio management system, we've compiled a series of best practices to help credit unions get the most out of their data to build the very best loan portfolio possible. Here are five key tips that can put credit unions on the fast track to profitability.
1. Pricing
Too many credit unions still use a "follow the market approach" when it comes to pricing loan products. This can lead to areas in your portfolio that are unprofitable and drag down your yield. It is crucial that credit unions use a loan portfolio management system/analytics that can segment loans by credit score, rate, term and other components and track the profitability of each segment.
One credit union shared this insight: "We use this information to adjust our pricing to ensure larger margins, while at the same time staying competitive in the marketplace." The proof is in the data: Credit unions that have been on the Lending Insights platform for two or more years earn, on average, 58 basis points more in overall net yield.
2. Underwriting
Are you leaving money on the table? Using the right analytics tools can help determine if your underwriting criteria are too conservative. One of our credit union partners discovered that after lowering its auto loan approval cut off from a credit score of 700 down to 660, loans with scores from 660 to 699 performed almost identically to those with scores of 700 and above.
This discovery, coupled with other underwriting changes by the credit union, resulted in more approved loans, faster approval times for members and absolutely no additional risk to the portfolio. These underwriting tweaks fueled an annualized 3% growth in loans!
3. Dealer Management
Which auto dealers are driving the best performing loans to your institution? Our credit unions regularly monitor dealer performance, ranking them by profitability. One credit union, which monitors dealers quarterly, uses the information to spot opportunities to deepen relationships and increase incentives for good performers, while monitoring dealers that aren't contributing to the health of the credit union.
4. Marketing
While it's important to monitor current borrowers' credit scores for negative movement, you should also look for improvements and determine if those members qualify for additional loan products. You'll find members building or repairing credit, and others that have paid off loans. Either way, these members will soon be in the market for a new car, home or credit line. Having the right data platform will give credit unions the ability to perform a drill-through function to create lists of potential borrowers for marketing campaigns.
This strategy works. Over the last four years, credit unions using Lending Insights have achieved increased penetration rates of 4.4% to 6.2% compared to the average credit union.
5. Product Development
As fields of membership grow and change, your product lineup should also change accordingly. Those products shouldn't be developed on a hunch or opinion. Instead, data should lead the way.
Relying on the right dynamic analytics solutions helps credit unions to first effectively analyze loan originations by age group, and then divide them further by loan type, term and origination amount. As a result, credit unions better understand who their customers are and what they are buying, and can ensure they have products that are meeting their ever-changing needs.
Implementing strong data platforms and employing innovative tools – such as Lending Insights' loan portfolio management system – to deliver continuous value to their members will put credit unions at the forefront of an ever-evolving and growing competitive landscape. Every credit union holds the key to valuable data at its fingertips, and effectively harnessing that data to minimize risk and uncover new opportunities will be the difference maker.
Courtney Collier is Manager, Analytics Products for CU Direct. He can be reached at [email protected].
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
