Time Series Data: Capture Trends to Boost Your Business
Trended, historical, longitudinal or time series data is an invaluable tool for businesses looking to mitigate risk and improve profitability. It can help provide key insights into consumer behavior. In fact, it is often imperative to utilize some level of time series forecasting when creating risk models.
How does it work?
Simply put, it works by measuring a sequence of data points at successive points in time spaced over uniform time intervals. This longitudinal information is then collected to reveal likely trends. Analyzing the data creates the opportunity to extract meaningful statistics and help predict future values based on previously observed values. When measuring trended data within a consumer credit profile, analysis on direction, velocity, tipping points and magnitude of changes within the profile can help provide valuable insight into consumer credit behavior.
Time series data does two main things for your business: It helps detect a customer’s current transaction patterns — interactions, transactions, and outcomes based on past trends — as well as helps determine what the next actions are likely to be.
Businesses that gather trending data, compile it and then extract meaningful components of that data can often better predict future outcomes simply by looking for patterns. Although the process is complex, it can yield key information that aids companies in making wise risk and marketing decisions.
With trended data solutions such as Equifax Dimensions, businesses gain better insight into borrower behavior, especially in areas of pre-origination, post-termination and prepayment. In the area of credit risk, time series information can help you gather information on likely future actions of the potential customer, including risk for delinquencies, defaults and loss severities. For marketing purposes, the insights derived from trended data can help improve profitability by better targeting high spending consumers, and balance transfer and credit line increase candidates.
Time series data is a key component in your search for determining the trajectory of any potential customer. By utilizing the tools necessary for gathering this data, you can review and evaluate credit risks and marketing opportunities associated with your borrowers and co-borrowers effectively.
Equifax Dimensions is a product that must be used in accordance with the Fair Credit Reporting Act (FCRA).
Image source: Flickr
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