Better underwriting methods may be needed for short term lenders
Dec 03, 2012 Walt Wojciechowski
Professionals in the lending and credit industries understand the significance of establishing reliable and accurate consumer credit data. In order to develop efficient risk management strategies, creditors must be able to weigh the potential financial losses against the returns on any given investment. Increasingly, companies are attempting to gain clients that have been seen as "risky" to traditional means of rating credit. Lenders are willing to take on some risk so that services may be provided to clients who are not served by larger financial institutions. In some cases, consumer credit reports may tell an incomplete picture about the borrower. Alternative credit data may be used in some cases to shore up potential financees, but lenders large and small must have effective underwriting practices in place. Underwriting
Loan underwriters can be seen as a kind of guardian throughout the loan process. These professionals evaluate the means of the individual compared to credit worthiness and the likelihood of repayment. The amount of credit needed may vary according the cost of the desired loan. These individuals play a significant role to lenders negotiating with various financial entities may provide a sense of confidence for the lender. If better methods of data collection are available to underwriters, more sound financial decisions can be made. Increased lending opportunities and a fuller profile of the borrower may be established in some cases by using alternative credit scores. Alternative credit scores
Traditional means of tracking and scoring credit have been controlled by the big three credit rating industries: Experian, TransUnion and Equifax. These reports track unpaid balances, debts, available and used lines for credit, bankruptcy findings and other negative financial information. Some consumers may lack a high rating because of these methods, but alternative credit scores may increase loan options should data such as public utility payments, prepaid credit cards and monthly rental receipts be employed. Responsible underwriting practices should be instilled for all lenders to ensure that investments are returned with growth. Lender confidence is important to the growth of the industry, and with increased attention to best underwriting practices, more well considered decisions can be made when it comes to loan approvals. It is of increased significance that small short term lenders instill sound practices that are informed by both profitability and federal and state regulations.
Loan underwriters can be seen as a kind of guardian throughout the loan process. These professionals evaluate the means of the individual compared to credit worthiness and the likelihood of repayment. The amount of credit needed may vary according the cost of the desired loan. These individuals play a significant role to lenders negotiating with various financial entities may provide a sense of confidence for the lender. If better methods of data collection are available to underwriters, more sound financial decisions can be made. Increased lending opportunities and a fuller profile of the borrower may be established in some cases by using alternative credit scores. Alternative credit scores
Traditional means of tracking and scoring credit have been controlled by the big three credit rating industries: Experian, TransUnion and Equifax. These reports track unpaid balances, debts, available and used lines for credit, bankruptcy findings and other negative financial information. Some consumers may lack a high rating because of these methods, but alternative credit scores may increase loan options should data such as public utility payments, prepaid credit cards and monthly rental receipts be employed. Responsible underwriting practices should be instilled for all lenders to ensure that investments are returned with growth. Lender confidence is important to the growth of the industry, and with increased attention to best underwriting practices, more well considered decisions can be made when it comes to loan approvals. It is of increased significance that small short term lenders instill sound practices that are informed by both profitability and federal and state regulations.
