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Why APIs are essential to your consumer lending operations

Mar 17, 2021 Walt Wojciechowski

Why APIs are essential to your consumer lending operations

If you’re a loan officer for your consumer lending operation, you know that the software that supports your business can only do so much. It is often inadequate for providing all the information you need when making lending decisions.

For example. You may have one application that contains credit decisioning data within the borrower profiles. However, you must also rely on a different underwriting system to calculate your risks. When this occurs, it is an API (application programming interface) that allows the DU to send those risk assessments to your loan approval software.

The simple explanation of an API is that it is a series of protocols and routines that allow two different applications to share or exchange data. Developers create APIs so that software with limited capabilities can call on the function of other systems. In the world of consumer lending, APIs provide access to the data you need to safely engage with potential borrowers. The bottom line is that APIs help lenders make better lending decisions.

Where do APIs Fit Within the Modern Consumer Lending Framework?

It’s not always the quantity of information at the disposal of lenders. It is often about the quality of the information you have access to that matters most. However, the more quality information you have, the greater your edge over the competition. Of course, you need a cost-effective process for obtaining this additional quality information so that you are better positioned to write low-risk loans than other lenders without information to the same amount and quality of information.

For instance, consumer credit reports may contain inaccuracies about the person in question. In some cases, credit bureaus may list inaccurate locations, phone numbers, judgments, liens, etc. If two people have the same name a credit agency may make a mistake that lists this information on the wrong report.

Alternative credit reports help lenders validate data contained within the credit report because they contain personally identifiable information about other things, such as:

  • Property ownership information.
  • Bankruptcies.
  • Phone numbers.
  • Address histories.
  • Social Security numbers.

APIs, in these instances, are useful tools for taking all this data from the different agencies in order to validate the information and other details.

As of October of 2020, open banking APIs were making big waves for banking operations as well as other financial services providers by allowing them to more efficiently share financial data between them. Doing so has created new and innovative levels of convenience for lenders and greatly improved customer relationships along the way.

MicroBilt understands the challenges lenders face when making credit decisions based on limited or incomplete data. That is why we offer a variety of tools to help you with your credit scoring and decisioning needs. Contact us today to learn more.