COSTA MESA, Calif. and NEW YORK — To more precisely target consumers' specific needs and attitudes toward certain financial products, Experian Group Ltd. and First Manhattan Consulting Group have launched a new credit scoring system.
The "Financial Personalities" segmentation and scoring system looks at several types of financial services including credit card, home equity and mortgage. Along with a Financial Personality score for each consumer, a framework reveals critical aspects such as the importance of rates and fees, discipline with finances, perceived financial security and their use of financial products, according to both companies.
Financial Personality scores are based on consumers' needs, attitudes and actual behaviors through data gathered from direct consumer market research combined with credit and demographic data. Scores are available for credit card, home equity and mortgage, and additional categories will be available in 2007, the companies said.
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"Faced with ever-increasing competition, financial services companies need to market smartly and make sure every offer sent is targeted to that consumer's needs," said Kerry Williams, president, Experian Information Solutions Group. "Financial Personalities are a great combination of consumer-driven insights, technology and data that help both identify the best prospects and align the products and messages that resonate with those prospects."
For illustration, within the Home Equity Financial Personality framework, a consumer identified as a "Home Equity Enthusiast" considers home equity products as a smart way to finance a variety of purchases such as making home improvements or paying down credit card debt. This is in contrast to another consumer identified as a "Home Equity Averse Skeptic" who avoids home equity debt, is disciplined with finances and tends to not use credit. In addition to targeting, marketers can use these insights to tailor their offers and then execute what has proven to be high-performing marketing campaigns, the companies said.
"Financial Personalities were developed to address the absence of category-specific market segment scoring systems that could meaningfully inform initiatives ranging from line of business strategies to direct marketing campaigns," said David Tetenbaum, managing vice president, FMCG. "Each Financial Personality framework is built at the category level because consumers' needs, attitudes and behaviors vary across categories."
Financial Personalities is among the latest scoring system to hit the market. In March, Experian, Equifax and TransUnion rolled out VantageScore, a credit scoring model that looks at scores between 501 to 990 and assigns a grade of A to F. The widely-known FICO score from Fair Isaac Corp. looks at scores between 300 and 850. VantageScore tallies traditional areas used to determine its score such as payment history, balances, depth of credit, available credit and current use of credit. Thirty-two percent of the score is determine by how consistently someone has paid their accounts on time while only 7% is devoted to the total amount of current, accessible credit.
Critics of VantageScore say it's similar to FICO, is too burdensome and expensive to set up and lenders aren't so eager to change to another scoring system. VantageScore Solutions CEO Barrett Burns told Credit Union Times in an earlier interview that the new scoring system "neutralizes confusion" among the three credit reporting bureaus. In October, Fair Isaac filed an antitrust lawsuit against Equifax Inc., Experian Plc, and TransUnion over the development of the bureaus' VantageScore citing "false and misleading claims" in getting lenders to use the new scoring system. –[email protected]
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