By Brandi Hamilton
Auto lenders play a vital role in helping consumers purchase new vehicles. But, unfortunately, new car financing often becomes a race between lenders during the loan origination process to see who can approve the loan first. Success isn't only about being fast, however. It's also about who can provide the best offer and underwrite loans with high integrity. During this race, lenders must consider the risks for wrongful or fraudulent income and employment data from borrowers.
In traditional credit score-based lending decisions, loan applicants are often tasked with providing additional documentation, including W-2 forms, pay stubs or proof of residency, to prove creditworthiness. Unfortunately, having applicants provide these documents increases friction and can open the door to risks such as misrepresented or falsified income and employment information, and fake financial documents (including paystubs). Lenders should partner with third-party innovators to provide automated and trusted income and employment data. Instant and secure data exchanges help accelerate loan deals by reducing the need for drawn-out, paper-based processes or requests for sensitive banking log-in credentials from applicants. Further, it's not uncommon for consumers to overstate (and sometimes even understate) their income on loan applications. Income and employment data directly from employers can also help mitigate the loan affordability and integrity issue caused by inaccurate earning information.
The more reliable and faster way to verify income and employment is through a third-party verifications provider, such as The Work Number® database from Equifax. In fact, auto loan applicants are 40% more likely to be funded when lenders use third-party income and employment verifications in the decision process.*
With increasing competition and evolving ways to transact, lenders should leverage technology to improve their decision-making and to protect against risk. With more than 125 million active records, including traditional payrolls and 1099s, lenders can quickly tap into The Work Number and incorporate a more efficient way to verify a borrower's ability to repay auto loans.
Get more information on auto verification solutions from Equifax.
* Equifax Internal Study of The Work Number Inquiry Data, December 2019 United States consumer finance loans. Individual results may vary.