As subprime auto lending continues to grow, most dealers and lenders still rely on traditional credit scores and customer-reported details to maintain the stability of their loan portfolios. However, these may not be the most accurate or comprehensive ways to assess borrowers’ qualifications. Credit scores reflect only a portion of the full picture that affects applicants’ credit-worthiness, and insufficient detail can result in the wrong terms or risk level being placed on deals, denying qualified applicants or inadvertently approving the wrong terms for excessively high-risk borrowers. In fact, some of the top reasons for contracts being returned to dealers are still:
1) A lack of verification of stated income;
2) Missing or inaccurate documentation to meet stipulations; and
3) A failure to meet approval terms and out-of-policy contracts.
In the white paper, “Trust, But Verify: What Research Reveals about Subprime Vehicle Loan Performance when The Work Number® Data is Used”, Equifax discusses how database-supported verification’s provide lenders and dealers greater accuracy, accountability, transparency and detailed insight into borrowers’ qualifications while also providing operational improvements. In addition, the white paper includes research illustrating the significance of verification’s by analyzing the impact of income, employment tenure, pay frequency and employment disruptions on borrowers’ credit-worthiness.
To view this white paper, click here.
