Tag: loan applications

Investing in a strong customer acquisition strategy is critical to attracting leads and converting them into high-value customers. In this blog post, we’ll be focusing on one of the first stages of the customer acquisition process: the application stage. Challenges with online customer application processes When it comes to the customer application stage, speed, ease, and convenience are no longer nice-to-haves — they are musts. But various challenges exist for lenders and consumers in terms of online credit or account application processes, including: Limited digital capabilities. Consumers have grown more reliant on digital channels, with 52% preferring to use digital banking options over banking at branches. That said, financial institutions should prioritize the digital customer experience or risk falling behind the competition. The length of applications. Whether it’s a physical or digital application, requiring consumers to provide a substantial amount of information about themselves and their past can be frustrating. In fact, 67% of consumers will abandon an application if they experience complications. Potential human error. Because longer, drawn-out applications require various steps and data inputs, consumers may leave fields blank or make errors along the way. This can create more friction and delays as consumers may potentially be driven offline and into branches to get their applications sorted out. Improve the speed and accuracy of online credit applications Given that consumers are more likely to abandon their applications if their experience is friction-filled, financial institutions will need an automated, data-driven solution to simplify and streamline the online form completion process. Some of the benefits of leveraging an automated solution include: Improved customer experiences. Shortening time-to-value starts with faster decisioning. By using accurate consumer data and automation to prefill parts of the online credit application, you can reduce the amount of information applicants are required to enter, leading to lower abandonment rates, less potential for manual error, and enhanced user experiences. Fraud prevention. Safeguarding consumer information throughout the credit application process is crucial. By leveraging intelligent identity verification solutions, you can securely and compliantly identify consumer identities while ensuring data isn’t released in risky situations. Then by using identity management solutions, you can gain a connected, validated customer view, resulting in minimized end-user friction. Faster approvals. With automated data prefill and identity verification, you can process applications more efficiently, leading to faster approvals and increased conversions. Choosing the right partner Experian can help optimize your customer application process, making it faster, more efficient, and less error prone. This way, you can win more customers and improve digital experiences. Learn more about Experian’s customer acquisition solutions.

Credit scores hold the key to many aspects of our financial lives. Whether qualifying for a mortgage, insurance, or a smartphone plan, financial institutions rely on credit reports — a document detailing how responsibly a person has used credit accounts in the past — to decide if they should approve your financing application. However, here's the problem: because today's scoring system leans heavily on a person’s credit history to generate a credit score, it leaves out large segments of the United States population from accessing credit. According to a recent Oliver Wyman report, an estimated 28 million U.S. consumers are considered ”credit invisible," while another 21 million are deemed "unscorable," meaning they don’t have the types of accounts that have been traditionally used to generate a credit score. Using the traditional credit-scoring formula, certain populations, such as communities of color and low-income consumers, are left behind. Now, times are changing. A modern approach to credit scoring can significantly improve the financial inclusion of millions of U.S. consumers and correct past and present inequities. ­Tapping into advanced technologies that leverage expanded data assets can produce powerful results. A cycle of exclusion: The limitations of conventional credit scoring A big part of the problem lies with how credit scores are calculated. Between payment history and length of accounts held, a consumer’s credit history accounts for 50 percent of a FICO credit score — the credit score used by 90 percent of top lenders for credit decisions. In other words, the credit system rewards people who already have (or can get) credit and penalizes those that cannot or don't yet have credit. For those who do not have credit, their financial behaviors ­— such as timely rental and utility payments, bank account data and payday loan installment payments — may not get reported to credit bureaus. As a result, consumers without a credit history may appear as credit invisible or unscorable because they don't have enough tradelines to generate a score. But they also can’t get credit to improve their score. It creates a cycle of exclusion that’s hard to break. Who gets left behind? According to the latest research, the limitations on the traditional credit scoring system disproportionately impact certain communities: Low-income: 30 percent of those in low-income neighborhoods are credit invisible, and 16 percent are considered unscorable, compared with just 4 percent and 5 percent, respectively, in upper-income neighborhoods.1 Communities of color: 27 percent of Black and 26 percent of Hispanic consumers are either credit invisible or unscorable, while only 16 percent of white consumers are.1 Immigrants: People who have recently arrived in the United States can lack a credit history here, even if they may have had one in their home country. Meanwhile, undocumented immigrants, who don’t have a Social Security number, can find it difficult to get a credit card or use other financial services. Young adults: 40 percent of credit invisibles in the U.S. are under the age of 25,1 with 65 percent of 18- to 19-year-olds lacking a credit score. Being labeled unscorable or credit invisible can hinder participation in the financial system and prevent populations from accessing the socioeconomic opportunities that go with it. Why are certain individuals and communities excluded? There are often complex — and valid — reasons for why many consumers are deemed unscorable or credit invisible. For example, newcomers may appear to be credit invisible because haven’t yet generated a credit history in the U.S., although they may have a solid score in their home country. Young consumers are also a common category of unscorable or credit invisible people, largely because they haven't acquired credit yet. Only 35 percent of 18- to 19-year-olds have a credit score, while 91 percent of 25- to 29-year-olds do. However, those who can quickly get a credit history typically come from wealthier households, where they can rely on a creditworthy guarantor to help them establish credit. Finally, some consumers have had negative experiences with the financial system. For instance, a prior default can make it difficult to access credit in the future, which can result in an extended period without credit, eventually leading to being labelled unscorable. Others may distrust the mainstream financial system and choose not to participate. Underpinning all this are racial disparities, with Black and Hispanic consumers being classified as unscorable and credit invisible at significantly higher rates than white and Asian consumers. According to the Consumer Financial Protection Bureau (CFPB), Black and Hispanic people, as well as low-income consumers, are more likely to have “scant or non-existent” credit histories. Financial inclusion is an equity issue Traditional credit scoring places big barriers on certain communities. Without access to credit, marginalized communities will continue to face challenges. They will lack the ability to purchase property, secure business and/or personal loans and deal with financial emergencies, further widening the wealth gap. Since credit scores are used to decide loan eligibility and what interest rate to offer, those with low or no credit rating tend to pay higher interest rates or are denied desired loans, which compounds financial difficulty. The impact is profound: a significant percentage of the population struggles to access basic financial services as well as life opportunities, such as financing an education or buying a home. Without the ability to generate a credit score, unscorable or credit invisible consumers often turn to less-regulated financial products (such as payday loans or buy now pay later agreements) and pay more for these, often locking them in a vicious cycle. Consumers who are credit invisible or unscorable often end up paying more for everyday transactions. They may be required to put up hefty deposits for housings and utilities. Auto and homeowners insurance, which use credit score as a factor in setting rates, may be more expensive too. Consider how much this could impede someone’s ability to save and build generational wealth. Financial inclusion seeks to bring more consumers into the financial system and enable access to safe, affordable financial services and products. With the right technology on your side, there are solutions that make it easier to do so. Tap into technology Banks, credit unions and other lending institutions are well positioned to move the needle on financial inclusion by embracing expanded definitions of creditworthiness. By seeking out expanded FCRA-regulated data with wider sources of financial information, financial institutions can find a vast untapped pool of creditworthy consumers to bring into the fold. Technology makes achieving this goal easier than ever. New credit scoring tools, like Lift Premium™, can give lenders a more complete view of the consumer to use for credit decisioning. It combines traditional credit data with expanded FCRA-regulated data sources, helping lenders uncover more creditworthy consumers. Lift Premium can score 96 percent of U.S. consumers, compared to just 81 percent that conventional scoring systems do now. By applying machine learning to expanded data sets, Lift Premium can build a fuller and more accurate view of consumer behaviors. Moreover, the 6 million consumers whose scores are now considered subprime could be upgraded to prime or near-prime by analyzing the expanded data that Lift Premium uses. The opportunity presented by financial inclusion is significant. Imagine being able to expand your portfolio of creditworthy borrowers by almost 20 percent. The last word With a renewed focus on social justice, it’s no surprise that regulators and activists alike are turning their attention to financial inclusion. A credit-scoring system that allows lenders to better evaluate more consumers can give more people access to transparent, cheaper and safer financial products and the socioeconomic benefits that go along with them. New models and data assets offer additional data points into the credit scoring system and make it possible for lenders to expand credit to a greater number of consumers, in the process creating a fairer system than exists today. Early adopter lenders who embrace financial inclusion now can gain a first-mover advantage and build a loyal customer base in a competitive market. Learn more Download white paper 1Oliver Wyman white paper, “Financial Inclusion and Access to Credit,” January 12, 2022. 

For credit unions, having the right income and employment verification tools in place helps to create an application process that is easy and low friction for both new and existing members. Digital first is member first The digital evolution created an expectation for online experiences that are simple, fast, and convenient. Attracting and building trusted, loyal relationships and paving the way for new revenue-generating opportunities now hinges on a lender's ability to provide experiences that meet those expectations. At the same time, market volatility and economic uncertainty are driving catalysts behind the need for credit unions to gain a more holistic view of a member’s financial stability. To gain a competitive advantage in today’s lending environment, credit unions need income and employment verification solutions that balance two often polarizing business drivers: member experience and risk management. While verified income and employment data is key to understanding stability, it’s equally important to streamline the verification process and make it as frictionless as possible for borrowers. With these things in mind, here are three considerations to help credit unions ensure their income and employment verification process creates a favorable member experience. The more payroll records, the better Eliminate friction for members by tapping into a network of millions of unique employer payroll records. Gaining instant access into a database of this scale helps enable decisions in real-time, eliminates the cost and complexity of many existing verification processes, and allows members to skip cumbersome steps like producing paystubs. Create a process with high configuration and flexibility Verification is not a one-size-fits-all process. In some cases, it might be advantageous to tailor a verification process. Make sure your program is flexible, scalable and highly configurable to meet your evolving business needs. It should also have seamless integration options to plug and play into your current operations with ease. The details are in the data When it comes to income and employment verification, make sure that you are leveraging the most comprehensive source of consumer information. It’s important that your program is powered by quality data from a wealth of datasets that extend beyond traditional commercial businesses to ensure you are getting the most comprehensive view. Additionally, look to leverage a network of exclusive employer payroll records. With both assets, make sure you understand how frequently the data is refreshed to be certain your decisioning process is using the freshest and highest-quality data possible. Implementing the right solution By including a real-time income and employment verification solution in your credit union’s application process, you can improve the member experience, minimize cost and risk, and make better and faster decisions. To learn more about Experian’s income and employment verification solutions, or for a complimentary demo, feel free to contact an expert today. Learn more Contact us

When running a credit report on a new applicant, you must ensure Fair Credit Reporting Act (FCRA) compliance before accessing, using and sharing the collected data. The Coronavirus Aid, Relief, and Economic Security (CARES) Act has impacted credit reporting under the FCRA, as has new guidance from the Consumer Financial Protection Bureau (CFPB). Recent updates include: The CARES Act amended the FCRA to require furnishers who agree to an “accommodation,”1 to report the account as current, although it is permitted to continue to report the account as delinquent if the account was delinquent before the accommodation was made. Although not legally obligated, data furnishers should continue furnishing information to the credit reporting agencies (CRAs) during the COVID-19 crisis, and make sure that information reported is complete and accurate. Below is a brief FCRA-related compliance overview2 covering various FCRA requirements3 when requesting and using consumer credit reports for an extension of credit permissible purpose. For more information regarding your responsibilities under the FCRA as a user of consumer reports, please consult your Legal Counsel and the Notice to Users of Consumer Reports: Obligations of Users Under the FCRA handbook located on our website. Before obtaining a consumer report you have…  Reviewed your federal and state regulations and laws related to consumer reports, scores, decisions, etc.  Made sure you have a valid permissible purpose for pulling the consumer report.  Certified compliance to the CRA from which you are getting the consumer report. You have certified that you complied with all the federal and state requirements. After you take an adverse action based on a consumer report you… Provide the consumer with an oral, written or electronic notice of the adverse action. Provide written or electronic disclosure of the numerical credit score used to take the adverse action, or when providing a “risk-based pricing” notice. Provide the consumer with an oral, written or electronic notice, which includes the below information:  Name, address and telephone number of CRA that supplied the report, if nationwide. A statement that the CRA did not make the adverse decision and therefore can’t explain why the decision was made.  Notice of the consumer’s right to a free copy of their report from the CRA, if requested within 60 days.  Notice of the consumer’s right to dispute with the CRA the accuracy or completeness of any information in a consumer report provided by the CRA. Provide the consumer with a “risk-based pricing” notice if credit was granted but on less favorable terms based on information in their consumer report. We understand how challenging it is to understand and meet all your obligations as a data furnisher – we’re here to make it a little easier. Click below to speak with a representative and gain more insight on how the CARES Act impacts FCRA reporting. Download overview Speak with a representative 1An “accommodation” is defined as “an agreement to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief” granted to a consumer affected by COVID-19 during the covered period. 2This FCRA overview is not legal guidance and does not enumerate all your requirements under the FCRA as a user of consumer reports. Additionally, this FCRA Overview is not intended to provide legal advice or counsel you regarding your obligations under the FCRA or any other federal or state law or regulation. Should you have any questions about your institution’s specific obligations under the FCRA or any other federal or state law or regulation, you should consult with your Legal Counsel. 3This FCRA overview is intended to be used solely by financial service providers when extending credit to consumers and does not include all FCRA regulatory obligations. You are responsible for regulatory compliance when requesting and using consumer reports, which includes adhering to all applicable federal and state statutes and regulations and ensuring that you have the correct policies and procedures in place.

As net interest margins tighten and commercial real estate concentrations begin to slowly creep back to 2008 levels, financial institutions should consider looking to their branch networks to drive earnings. Why wouldn’t you, right? The good news is branch networks can embrace that challenge by simply using some of the tools they already have access to – most notably the credit report. Credit reports are generally seen as a tool to assist financial institutions in assessing credit risk. However, if used properly, credit reports can provide a wealth of insight on selling opportunities as well. Typically when a customer’s credit report is pulled, the personal banker or customer service representative is primarily focused on whether or not a loan application is approved based on the institution’s approval parameters. Instead, what if a lender elected to view this customer interaction as an opportunity to deepen the relationship? So, here are three ways to utilize credit reports to generate earnings through retail loan growth: 1. Opportunities to Consolidate Debt  Looking for debt consolidation opportunities is probably the simplest way to mine for opportunities. For example: Personal Banker: “It looks like you also have a card credit with XYZ and ABC Bank. Based on your application, we can consolidate both of those balances into one and give you a lower interest rate.” Be specific. Tell the customer exactly how much money per month they would be able to save and the benefits of consolidation. Not to mention, debt consolidation often reduces a lender’s credit risk and enhances customer loyalty, so this is a win for the institution as well. 2. Opportunities to Provide Additional Credit  Another method would be to “soft pull” a segment of your portfolio to identify customers who qualify for larger credit card balances or refinance opportunities. This strategy is best executed at the portfolio management level, as insight is needed on the bank risk appetite and concentration levels. Layering on a basic prescreen helps qualify and segment your prospect list according to your unique credit criteria. You can also expand the universe with an Experian extract list, identifying new consumers who might be open to new offers. 3. Find Hidden Opportunities Credit scoring models are not perfect. There are times when a person’s credit score does not reflect an applicant’s true risk profile. For example, a person who was temporarily out of work may have missed two to three payments during that period. A deeper scan of the credit report during underwriting may reveal an opportunity to lend to a person rebounding from financial difficulties not yet reflected by their credit score. For example, this individual may have missed two credit card payments but hasn’t missed a mortgage or car payment in 20 years. A score is just one dimension to the story, but trended insights can shine a light on who best to lend to in the future. Conclusion: With the proper tools and training, your retail team can get more out of the basic credit report and find additional opportunities to deepen customer relationships while maintaining your desired risk profile. The credit report can be a workhorse for your team, so why not leverage it for more business. Note: The information above outlines several uses for a credit report.  Separate credit reports are required for each use with the intended permissible purpose. Ancin Cooley is principal with Synergy Bank Consulting, a national credit risk management and strategic planning firm. Synergy provides a rangeof risk management services to financial institutions, which include loan reviews, IT audits, internal audits, and regulatory compliance reviews. As principal, Ancin manages a growing portfolio of clients throughout the United States.