Lenders: Is Your Picture of Credit Risk Incomplete?
Verifying the Hard Way? Make it Easy with The Work Number® from Equifax®
While some consumers are still battling the financial impacts of COVID-19 (Coronavirus), credit scores remain stable. This can be attributed, in part, to various relief efforts. The various relief efforts include government assistance, expanded unemployment benefits, and loan repayment accommodations.
Unfortunately for lenders, these relief efforts may temporarily delay delinquencies among consumers applying for loans. There can be a lag between when a major macroeconomic event occurs and when a consumer’s credit score reflects that event’s true impact. Why? It generally takes a few months for the accompanying financial strain to show up in credit reports, in the form of new accounts and delayed or missed payments.
Data Beyond a Traditional Credit Score can Improve Underwriting
Quality and current data are essential during rapidly changing credit times. However, collecting proof of income and employment can be a hassle. Employment verification can require multiple phone calls or emails to employers, cumbersome paper-intensive processes, or even requests for private banking credentials from consumers. Making major life decisions such as purchasing a car or a home can be stressful enough for individuals. Placing the verification burden on them can negatively impact customer satisfaction.
Real-Time Employment and Income Data is Key for Loan Decisioning
Lenders who want to evaluate a consumer’s creditworthiness typically use a credit report to identify historical trends, often seen as a consumer’s likelihood to repay a loan. Employment and income verification can help gauge a consumer’s ability to repay a loan based on their current employment and income information. However, COVID-19 has created a unique business atmosphere. Lenders must stay on top of rapidly changing circumstances to help make sound credit decisions.
Here’s How to Gain a More Holistic Picture of a Consumer’s Current Ability to Repay Loans:
- Leverage the combination of a traditional credit score and employment data, to better understand a consumer’s financial health.
- Embrace new technologies with integration capabilities. Lenders who adjust archaic verification processes and adopt digital, frictionless solutions are better armed to combat variable economic conditions.
- Regularly review an applicants’ employment and income status for complete, updated information as they continue to navigate a post-pandemic environment. Ultimately, it comes down to lenders better knowing and understanding their consumers.
Equifax has delivered verifications of employment and income through The Work Number® database for over 25 years. Credentialed verifiers can access over 114 million records with several data points (e.g., employment status, tenure, pay rate) through tailored reports to fit their business needs. In conjunction with standard credit scores, data provided directly from employers helps lenders gain a clearer picture of a consumer’s ability to pay. When traditional point in time scores are not available, employment and income data can still aid in decisioning.
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