Oct 27, 2020 MicroBilt News
COVID-19 has transformed the financial world in a few (very) long months. Early in 2020, Coronavirus was hardly a blip on the radar of the average American. Even in March when the unprecedented act of shutting the country down for 15 days to “flatten the curve,” many Americans had no idea of the complete financial devastation this virus would bring – along with more than 200,000 deaths. And counting.
The sad truth is that 60 percent of the business closures due to pandemic has turned out to be permanent. Small businesses have been hardest hit by the pandemic though even large businesses are feeling the bite. When you consider that 99.7 percent of businesses in America are small businesses, the unemployment picture is grim. This is why it is so important for lenders to use current income verification tools to help them identify acceptable credit risks in a COVID world.
Why Lenders Need to Be Vigilant About Verifying Income
There are actually several reasons it is important for businesses to be additionally cautious when it comes to verifying income in a COVID-19 economy. Each reason is particularly valuable for lenders of every type as the risks for lenders has increased exponentially since early 2020. These are a few quick reasons why caution is necessary for the current economy, throughout the economic recovery, and beyond.
Millions of People are Recently Unemployed
COVID-19 hasn’t only affected low-income wage earners, though they are the ones hardest hit by the pandemic, economically speaking. Some 20.6 million people have lost their jobs (15 percent of American workers) as a result of Coronavirus closures and shutdowns. These job losses have occurred in every sector of the economy and include people who had nearly perfect credit scores going into the pandemic. Plus, these numbers are prior to the announcement of massive airline industry layoffs on the horizon.
With many restrictions on credit reporting during this crucial time, credit scores may no longer by the accurate representation of a person’s likelihood or ability to repay debts. Some credit scores may not accurately reflect a person’s actual credit records for several months, leaving lenders to seek other methods to determine a person’s ability to pay.
Income verification tools, like Instant Bank Verification, can be vital for helping lenders get an actual picture of actual, current, debt-to-income ratios rather than relying on the honesty of applicants to accurately reflect their current incomes.
Credit Card Fraud is on the Rise
Early in the pandemic, credit card fraud rose by an astonishing 35 percent over the same period in 2019. Desperate people resort to desperate measures to stay afloat when the future is uncertain. People were suddenly thrust into a world of uncertainty as 15 days turned into a month, then two. For some American states, massive shutdowns continue as they have been reluctant to reopen among concerns of renewed outbreaks.
Further, Forbes reported, in September of 2020 that Americans lost more than $106 million as a result of COVID-19 fraud and the Federal Trade Commission received in excess of 187,000 fraud reports (the year still has three months to go).
With that in mind, it is increasingly important for lenders and creditors to verify the identities and incomes of those applying for credit. Not only does income verification help you ensure that the person is able to repay new debts during these trying times but it also makes it possible for lenders to add another layer of verification for businesses to utilize in your efforts to verify that you are extending credit to the correct person.
Identity Theft is an Increasing Concern
The Forbes article mentioned above went on to detail how identity theft, while never fully off the radar, has reached pandemic proportions in its own right as the COVID-19 pandemic rages on nationwide and around the world.
Part of the driving force behind this growth in identity theft has been the government’s additional unemployment benefits of $600 per week. Reports indicate that in states, like Washington, millions of dollars have been sent to bank accounts created by crooks looking to cash in on unemployment benefits while making false claims of being state and establishing fraudulent bank accounts.
While Instant Bank Verification won’t eliminate all false claims and instances of fraud, it can be quite helpful in ruling out fraudulent bank accounts and helping to identify identity theft.
People are Relying on Credit Cards to Fund COVID-19 Expenses
Perhaps one of the most telling numbers to rise out of the COVID-19 pandemic involves the number of people who are relying on credit cards to help them make ends meet. While many fully expect to return to work when the pandemic ends, it will still be a struggle to make ends meet once they must begin repaying their debts.
That is why it is so important to verify income with information that is as accurate and up-to-date as possible. With Instant Bank Verification, you get real-time bank account information so you know when income is coming in and how much income is coming in each month. It makes the credit decisioning process much simpler for lenders.
MicroBilt wants you to have access to the latest tools and technology to help you make sound decisions when it comes to extending credit. We understand that these are trying times for all Americans, especially small and mid-sized businesses. That is why we offer a suite of tools to assist you in all your credit decisioning, bank verification, and identity verification needs.