You can’t always get what you want, But if you try sometimes you just might find, You get what you need ~ Rolling Stones

As a kid, I loved the Magic 8 Ball and believed, if you held it just the right way, it had all the answers. As adults, we have all stewed over a purchase wondering whether we should buy it, can we afford it, and what are the consequences of nonpayment? Often, the wrong answer to these practical questions can put individuals into debt, plummet their credit ratings, and impact all future financial opportunities. So, forget the unreliable Magic 8 Ball, what if we had an accurate forecast or measurement tool for assessing consumer risks for purchases based on the scientific analysis of thousands of personal, financial data points?

Preventing debt through educational insights before it happens, now that would be one heck of a crystal ball. Imagine evaluating a consumer’s financial wellness using an expansive and in-depth scientific process that benefits the consumer as well as the lender. Adding a more inclusive method than the old fashioned, often inaccurate credit score would paint a more holistic financial landscape using all the colors rather than just black and white. More information means more loans would be approved, purchasers would understand why they were denied, and most importantly, recognize how to make improvements for future purchases. It’s a win-win for consumers and lenders!

An example of financial evaluations that might be limited in scope and depth is the Housing Affordability Index (HAI). According to the National Association of Realtors, HAI measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data. A March survey by GoBankingRates revealed that over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent. Homeowners alone are estimated to owe almost $90 billion in missed payments. Perhaps the mortgage/renter calculation is not comprehensive enough resulting in faulty judgments for such important consumer and lender outcomes.

Data analytics company, RIBBIT.ai, has developed an affordability index for credit products and payment velocity, scrutinizing thousands of consumer attributes that reveals ability to afford and intent to pay. Specifically, RIBBIT.ai examines the behavior around financial transactions that reflects the way consumers manage their bank accounts resulting in a current, correct, and credible picture of their financial footprint. Carefully curated transactional bank data can more accurately predict what loan amount a consumer can tolerate and remain financially stable. Understanding a person’s banking history combined with affordability recommendations not only helps more people gain access to credit, but it also lifts consumers up from financial despair.

RIBBIT.ai’s Chief Data Scientist, Steven Thompson, comments, “We set out to not just describe historical transaction statistics, but to recommend levels of affordability for consumers who need access to credit products. The result is an easy-to-understand set of affordability recommendations with supporting statistics about spending behaviors.”

Stay tuned . . .