The Ultimate Tool for Credit Underwriting – Verification Dashboard
Credit underwriting is a fundamental aspect of responsible lending that helps financial institutions make well-informed decisions, manage risks, and contribute to the stability and growth of their portfolio. In simple terms, credit underwriting is a key factor in determining whether a loan application should be approved or declined. It allows lenders to make informed decisions based on the borrower's ability and willingness to repay the loan. It is a risk assessment process of appraising the creditworthiness of someone applying for a loan.
To assess the credibility of the borrower, their background information like their sources of income, age, employment, repayment capacity, past and existing loans/policies, overall financial health, and other assets are taken into account. By analyzing the borrower's credit history, financial situation, and repayment capacity, lenders can estimate the likelihood of default. This information is essential for managing and mitigating or pricing credit risk.
To ensure a comprehensive and accurate assessment, various verification rules and processes are typically followed.
The Verification Dashboard available in the LendFoundry Backoffice is an excellent tool to that end. It has already been used by many industry leaders for many years and therefore is a mature and dynamic instrument. It is structured in the way an input will get processed with an outcome, but at the same time provides the lender, the flexibility to design the dashboard to meet their specific needs. It is an intrinsic component of the Backoffice and is often considered the brain of the system.
While the intake serves as the entry point for consumers' application journeys, the Verification Dashboard is where the real action takes place. Equipped with various tools, it assesses the credibility and creditworthiness of borrowers, providing underwriters with the ability to view and act upon all verifications conducted for each applicant.
Types of Verifications
The different types of checks available on the dashboard make it very user-friendly and flexible to meet the requirements of the underwriter. Types of verifications could be:
- Verifications based on Application and Enriched Data
- Verifications based on Submitted Documents
- Verification based on Checklists
Verifications based on Applicant-Submitted and Enriched Data
There can be multiple sources of information(data) regarding a potential consumer.
- Application Data - Data that is filled out by the applicant or an affiliate at the time of applying for a loan.
- Enriched data - This typically involves getting the applicant's data from external sources like credit bureaus, rating agencies, etc. The data can be from a soft pull inquiry (inquiries that don’t affect the borrower’s credit score) or from hard pull inquiries (that may have an impact on the borrower’s credit score for a period of time).
For example, using applicant data if an applicant is under the age of 18, their application will be rejected. Or, using enriched data from a soft credit bureau inquiry, the rule could be that if the applicant's credit bureau score is between 620 to 680 then their application needs to be looked at by an underwriter who can decide whether it can move forward or get declined.
As is evident from the examples above, verifications can be run on this data manually or using pre-defined rules.
- Rule- Based Verifications
Rule-based verifications involve writing a rule in the backend that is run when the input data points are provided. No manual intervention is needed in such verifications. Rules are written with the parameters and the resulting behavior is defined.
A combination of rules can also be written, for example, if the service provider may offer only a few products in certain states. So a rule can be configured using both these conditions.
Rules are managed by the lenders using the LendFoundry Commander portal.
- Manual Verifications
No matter how advanced technology gets, there is still no substitute for the discerning human eye. Some verifications require manual intervention. This could be by design that the underwriter has some offline sources of data and needs to make a judgment based on a combination of data points available to them offline as well as via the platform. In the case of manual third-party verification, a credit underwriter may want to see the third-party report themselves, make a judgment call, and then pass or fail the verification.
In such cases, screens can be provided for the underwriter to key in some data points or some comments, certain fields can be pulled from third parties, and some calculations can be done on the backend and displayed. All in all, it is a combination of data points that gives the underwriter a 360-degree view of the borrower’s creditworthiness, and based on this they can determine the course of the application.
Sometimes, an application comes for manual verification after it has failed the rule-based verification. This may result in the underwriter giving a second look at the data provided or may request additional information from the applicant, based on which they can decide on the application.
Verifications based on Submitted Documents
This verification is used to verify documents provided by the applicant. The documents can be uploaded using the portal by the applicant themselves or they can be shared with a Backoffice user to upload on their behalf.
Document Based Verifications require the applicant to share a document that can then be verified. Documents can be images like a passport scan or driver’s license scan or they could be bank statements. Once the document is uploaded, a preview is available on the Verification Dashboard. This enables the user to give the Document a first look and determine things like if the uploaded bank statement is for the correct month or if the scan of the passport is clear and legible. If the document is to be manually verified, the underwriter can pass or fail the document by adding a reason for failure along with Notes.
A versatile mode of document-based verifications is Ad-hoc Verifications. It gives the underwriter the flexibility to request documents from the borrower even when it is not part of the flow.
No matter how well-planned the steps and verifications in the underwriting process may be; there always is a chance that the underwriter may require additional documents from the applicant. The Ad-hoc verification allows them to do so.
Once a stip is requested, the applicant is sent a notification to provide the requested document and once that is received, it can be verified.
Verifications based on Checklists
At times, there is a requirement for the underwriter to simply follow a checklist. The checklist could be a list of artifacts or reports or data that they need to collect from various sources or simply a list of processes that must be completed when the borrower application reaches a certain point in the journey. A checklist can be a combination of both data and processes, making it a very easy-to-use yet effective tool. It can be set with any items that the user wants and they simply have to check the boxes next to the items on the checklist. Items can be made mandatory or optional. There are times when an underwriter is expecting to receive some data and for some processes to get completed, meanwhile, they have a bunch of other items from the checklist already available. In that case, they can check the boxes for which they are ready and save their selection, to come back at a later time to complete the checklist.
Conclusion
All in all credit underwriting is a fundamental process that plays a crucial role in determining the eligibility of individuals and businesses to obtain loans or credit facilities. The Verification Dashboard from LendFoundry is a feature-rich instrument that can be leveraged by underwriters and yield outstanding results if used to its full potential.
