auto decisioning

Published on 3/2/2023

Do you believe in second chances? How auto decisioning might let good loans fall through the cracks

Faster! Cheaper! Streamlined! Everyone is looking for more efficient ways to lend money to qualified borrowers. This is why automated decisioning has taken the lending world by storm, however, it also leaves many loan worthy borrowers in the dust. Adding Instant Account Verification to your workflow certainly speeds things up, as does integrating IAV into your web application. You get digital bank statements in seconds and can move the borrower into underwriting immediately after checking a handful of data points. At DecisionLogic, call those the “keep it moving” flags – the data points in the transaction history, Income Stability scoring or Summary Analytics that tell you they have what you need to confidently move the application forward. (We all love those flags, obviously)!
But what happens to the rest? Many lenders write their own rules or use auto decisioning platforms to filter out the financially undesirable. We understand the logic, but should that really be the end of the road for those applications? In addition to the “keep it moving” flags, we also provide “keep digging” flags. They check the same data points, but if the details are not there for a borrower, instead of immediately discounting and discarding the application, consider a deeper dive. 
Alternatively, you can decline per your standard process to keep your workflow ripple free but give the borrower an option to request a “second look” as part of your decline process.  The borrower is already invested and will more than likely want to keep the application alive. We recommend making one of your qualifiers “additional income documentation”. This allows the borrower the opportunity to submit supplemental income documents from things like investments, rental property, and tip income that may otherwise be overlooked, however consistent the stream of funds. 
With the rise of “Gig Economy”, the “side hustle” and home businesses since the work-from-home boom, there are countless alternative income sources to consider in the credit worthiness of a potential borrower. Also keep in mind jobs like realtors who will commonly have a substantial but inconsistent income. They may be a great candidate for a loan if you see their complete financial health outside of standard payroll deposits. They take a little more time, but you just saved a bunch of it with your shiny new automation so you can spare a little to make sure you aren’t leaving money on the table.
Even if this results in a handful of additional loans a year, those are a handful of loans your competitors are not scooping out from under you. And this builds customer relationships, potentially creating a return borrower. A single customer has the value of their single loan, a customer for life has exponential value from their return business and the possible referrals that come from the relationship. It all adds up to the bottom line. The question is, do you want that added to your bottom line, or your competitor’s?