A common misconception: Credit bureaus are responsible for rejecting loan applications due to bad credit scores.
But that is not the scene.
How do lenders actually use credit reports?
Credit bureaus simply report factual information and do not alter any data. Lenders have incorporated credit scores into their credit policies by setting their own minimum score, defining their own age and gender criteria, and establishing their own risk appetite. By doing so, they’re able to make informed decisions on whether to approve a loan application or not.
Lenders take into account various documents such as salary slips, balance sheets, P&L statements, tax returns, and more to understand the borrower’s “ability” to pay back the loans.
They also look at documents like past credit history and credit score to determine the borrower’s “intent” to pay the loan.
So, let us make sure we’re all on the same page and have a solid understanding of how credit bureaus and lenders work.
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After smartphone penetration, people are not watching their SMS at all. They use SMS only for OTP related transactions. That’s it.
But What can a Lender see in your SMS after you consent to them?
Lender can see income, expenses, and any other Fixed Obligation like (EMIs/Credit Card).
1) Income – Parameters like Average Salary Credited, Stable Monthly inflows like Rent
2) Expenses – Average monthly debit card transactions, UPI Transactions, Monthly ATM Withdrawal Amount etc
3) Fixed Obligations – Loan payments have been made for the past few months, Credit card transactions.
It also tells the Lender the adverse incidents like
1) Missed Loan payments
2) Cheque bounces
3) Missed Bill Payments like EB, LPG gas bills.
4) POS transaction declines due to insufficient funds.
A massive chunk of data is available in our SMS (more than 700 data points), which helps Lender to make a credit decision.
#lendtech #fintech #manispeaksmoney