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Credit & Decisioning

Jul 10, 2017 Walt Wojciechowski

Credit & Decisioning

Extending credit to customers is a regular aspect of business operations and vital to expanding operations. However, extending credit has its risks. Accepting payment at a later date means a business has less money on hand to finance its own operations. What's more, if the customer does not have the funds or files bankruptcy, the loaner has few options to recover its money.

How do businesses decide to extend credit?

The U.S. Small Business Administration lists best practices to help businesses make smart credit loan decisions. The second step - the credit check - is arguably most important. This process uses a credit scoring system to determine whether or not an applicant qualifies as a good candidate for a loan. 

Who needs to be careful when extending credit?

Essentially, any company that extends credit through invoices or personal checks needs to carefully manage risk. As American Banker detailed, lending leaves little margin for error. A few miscalculations can drive you into financial ruin, while strong credit offers allow you to remain afloat or even thrive.

Close up of financial records with writing tools, a calculator and glasses placed on top.Businesses need as many details as possible when deciding to extend a loan.

How do businesses assess an applicant's creditworthiness?

The three major credit scoring systems - Experian, TransUnion and Equifax - are the primary resources businesses use to assess the likelihood of recouping a loan. With MicroBilt, you have the option to view these reports in their original form or use our customized format, which aligns data from each bureau and makes it easier to compare specific data points.

"Approximately 26 million Americans have no traditional history."

However, these reports rely on traditional credit history, so they only provide enough details on a portion of the population. According to the Consumer Financial Protection Bureau, approximately 26 million Americans have no such history with a nationwide reporting agency. In addition, 19 million have limited credit histories. In each of these cases, the data found by traditional credit scoring systems is often too old or not detailed enough to help businesses make an informed lending decision. Unfortunately, these two categories are dominated by consumers in specific populations: Hispanics, African-Americans, immigrants, widows, divorcees and young people starting out on their own.

Thankfully, MicroBilt provides two alternative credit reporting solutions - the PRBC Consumer Report and the iPredict - allowing businesses to make smart loan decisions for all of their applicants. These tools supplement data from the three major industries by looking at consumer behavior toward other financial responsibilities such as rent, utilities and short-term loans. They also look at an applicant's bank information, including transaction history and account closures.

That said, time is money, and the credit assessment process takes much of both. With this in mind, MicroBilt offers automated solutions for more efficient decision-making and communication. All you need to do is create custom risk limitations. When applicants apply for a loan, their credit data is compared against these predetermined credentials, and a decision is made automatically. What's more, MicroBilt's adverse action notification tool sends an automated message via email or traditional post if the applicant is denied. This keeps the you compliant with the Fair Credit Reporting Act and the Equal Credit Opportunity Act. MicroBilt also has the means to automatically determine if a customer is covered by regulations established in the Military Lending Act, allowing you to further prioritize compliance. We also provide National Automobile Dealer Association reports to help businesses you the value of a specific vehicle.

MicroBilt's credit and decisioning tools help businesses in each of these areas. We compile the information necessary to make and execute educated loan decisions as efficiently as possible.

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