Credit conditions are tightening. Borrower risk signals are shifting, and vulnerabilities hidden during stimulus years are surfacing. As delinquencies rise, banks that proactively reassess credit risk and portfolio strategy before losses accelerate will navigate this downturn successfully.
We help banks reevaluate their credit risk posture with fresh eyes. This means reassessing loss forecasting assumptions, borrower segmentation models, underwriting thresholds, and exposure concentration through the lens of today's realities.
Why This Matters Now
Traditional risk models aren't built for current conditions. In the past year, we've seen three structural shifts in consumer credit visibility significantly impacting portfolio performance:
- Medical Debt Reappears: After years of regulatory pushback, medical debt is returning to credit reports (for now). This situation remains fluid due to ongoing legal challenges and policy debates; banks must be prepared to adapt. For financially fragile households, medical expenses are a top driver of distress. Banks must recalibrate models relying on credit bureau scores to avoid over or underestimating true risk or overreacting to sudden score changes.
- Student Loan Collections Resume: After a five-year pause, federal student loan collections have resumed. Millions of borrowers face renewed monthly obligations, creating a step-function change in household Debt-to-Income (DTI). This particularly impacts younger and lower-income borrowers and will reverberate across unsecured portfolios. Credit risk models, especially for installment products, must adjust.
- Shadow Debt Gaining Visibility: Buy Now, Pay Later (BNPL) loans are increasingly reported to credit bureaus, further complicating consumer-level capacity assessments. These changes aren't reflected in legacy underwriting logic and must be incorporated into forward-looking portfolio strategy.
What We Build Together: Key Components of a Risk Readiness Plan
We collaborate with your risk, finance, and credit policy teams to build a comprehensive Credit Risk & Portfolio Strategy plan that includes:
- Portfolio Diagnostics & Segmentation:
- Analyzing current portfolio exposure by product, credit tier, geography, and demographic.
- Identifying vulnerable segments (e.g., subprime auto, lower-income cardholders, gig-economy earners).
- Evaluating DTI trends, recency of hardship, and early-stage delinquency behavior.
- Model Review & Adjustment:
- Stress-testing credit risk models using updated inputs (e.g., student loan payments, BNPL visibility).
- Revalidating scorecard weights, risk tier thresholds, and segmentation logic.
- Recalibrating loss forecasting models (e.g., CECL, roll rates, vintage curves) based on current and projected borrower behavior.
- Risk-Based Lending Adjustments:
- Reviewing pricing tiers, approval criteria, and Credit Line Increase/Decrease (CLIP) strategies.
- Implementing programmatic credit tightening in higher-risk segments.
- Designing "guardrail" exceptions for relationship-based or CRA-eligible lending programs.
- Portfolio Steering and Exposure Management:
- Rebalancing portfolio composition through targeted acquisition or runoff strategies.
- Creating heatmaps of concentration risk and recommending tactical shifts.
- Modeling recession scenarios and linking them to capital and liquidity planning.
What We Deliver Together
We work closely with your team to create a comprehensive Credit Risk & Portfolio Strategy that includes:
- A refreshed risk segmentation and exposure map.
- Recession-adjusted loss forecasts by product and risk tier.
- Recommended underwriting, pricing, and exposure policy changes.
- Updated dashboards to track early warning indicators and credit deterioration signals.
- Governance support for presenting changes to ALCO, credit committees, or board stakeholders.
How We Work With You
We don't just run a model and hand you a report. We collaborate directly with your risk, credit, and strategy teams to align assumptions, test changes in real-time, and tailor outputs to your institution’s needs. Our team works alongside yours to ensure credit strategy changes are feasible, well-governed, and execution-ready.
Why Partner With Us
We've built and managed credit risk models at regional banks, fintech lenders, and top-10 institutions. Our team has experience navigating risk inflection points during COVID, the Great Recession, and the post-stimulus era. We understand the nuance of balancing risk mitigation with continued lending growth—and we bring that expertise directly to your team.
