Making predictive analytics work for you

by 28 Mar 2017

You wrote earlier about predictive analytics and its role in producing leads. I have received credit alerts when someone in my database applies for a loan, but what is predictive analytics and how does that differ? I have not had much luck with credit alerts because typically the client has made up their mind when I follow up.

--Several loan officers asked about this concept

This is a good question and the easiest way of explaining the difference is via the use of two words: proactive and reactive. A credit alert is good information, but as you noted it is an alert that they have already applied for a loan. More often than not, they have made up their mind. Similarly, when a real estate agent gets a listing alert, it is too late for them to garner a listing. These types of alerts are reactive.

Predictive analytics takes the data to another level. It mines data in such a way so that you can better predict a particular action by a prospect or previous client. In this way, the analysis is proactive because the action has not been taken. Keep in mind that that predictive analytics will not be 100% accurate because it is predicting the future, but if you can predict an action 30% of the time, your marketing can be that much more effective.

In today's world, predictive analytics is being used for more than just marketing. For example, if you peruse the FICO website, it gives some popular uses of the technology. One example is a credit card issuer assigning more accurate credit limits to their new consumers. Another example is in the health field, where the government and insurers are more accurately rooting out fraudulent claims.

Of course, the question is--what potential could predictive analysis mean for our industry? We will address this topic next week.  

--Dave Hershman

 

Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at dave@hershmangroup.com.

Poll

Is TILA-RESPA a good or bad thing long term?