Using Credit Data to Improve Marketing Performance

We’ve all received them—those credit card offers shouting: You’re “Pre-Approved” for this fabulous, low-interest card! Or, how about those mailings from your local auto dealership telling you to come on in and walk out with the new car that you’re “pre-qualified” for?

Now, how did they know that your current auto lease was just about to expire? Or, that you were searching for a new credit card to transfer balances from your old card—the card that was charging you an arm and a leg in interest?

It’s pretty simple, actually. Financial services marketers have the ability to access consumer credit reports, and present marketing offers to the people they believe will most need them.

Just think about the information on your own credit report. It lists the various loans you have along with any associated balances on the accounts. It also contains the types of credit cards you carry. It reports on when you took a car loan, and which company you used for financing. Your mortgage (and monthly payments) are known. Whether you’ve had late payments or even if there’s a bankruptcy on file is included on your credit report.

Idea 8: Consider Testing Credit Pre-screen Services

The wealth of credit information is critical to marketers. You can understand if a consumer needs your product/service. Further, you’ll know (based on other commitments and payment history) if they’ll be inclined to pay you. And, there are literally hundreds of credit attributes available to be mined and maximized in your targeting efforts.

The use of credit data can lessen the risk that your firm takes on in direct marketing campaigns. If you utilize it today, you know it makes your CFO happy that you are effectively managing the risk of your customer portfolio as you continue to bring on new clients.

As marketers, we want to reach as many people as possible; we want high response rates. However, it’s key to keep approval rates high, too. The secret is finding that appropriate middle ground – where you are taking on some risk but still building your overall profitability.

So, what’s the catch? Why aren’t all direct marketers using this valuable source of data?

The answer: Most marketers are regulated against using credit data. There’s an act called the Fair Credit Reporting Act (FCRA) that limits marketers’ access to consumer credit data. While the following provides an overview of legal requirements, for complete information, we urge you to visit the Federal Trade Commission’s website: www.ftc.gov/credit.

FCRA: An Overview

Here’s the biggest requirement: Users of credit data must have a “Permissable Purpose”. For marketing programs, this means that the marketer must extend a valid (called “firm”) offer of credit to the consumer. In other words, if you are using consumer credit data to understand if you should make an offer to a specific individual, you then have to move forward and extend that offer. The marketer/lender is obligated to make good on its offer of a loan, credit card or other financial product, once they have been privy to an individual’s credit information.

 

We’ve just scratched the surface of how to use consumer credit data in your marketing efforts. But, if you’re a financial marketer of consumer products, you definitely should explore working with consumer credit data. Yes, the legislation is complicated, and yes, the contracts process is grueling. However, the data is valuable. You can target your market with pinpoint precision, reaching those consumers most in need of your specific product or service.

Prior Test-and-Learn articles:

Idea 1: Evaluate Testing Strategies for New Customer Acquisition Programs

Idea 2: Get Your Analytical House in Order

Idea 3: Integrate Your Data to Understand Your Customer Relationships

Idea 4: Grow Your Customer Relationships

Idea 5: Evaluate Your Retention Program

Idea 6: Test New Channels to Reach Your Customer Base

Idea 7: Test to See if Generational Attributes Impact Results