What is Credit Inquiry and Why It Matter
Credit Inquiry is defined as a two-way conversation between lender and borrower. Credit inquiry helps lender understand what the borrower’s credit situation is and where the borrower is in relation to his or her goals. Understanding and obtaining full understanding of a borrower’s credit situation will help both lenders and borrowers determine the best plan for the borrower’s financing needs. Lenders primarily use credit inquiry to determine whether a borrower will meet his or her financial goals and how quickly. In the process of evaluating the borrower’s creditworthiness, the lender will ask specific questions about income, cash flow, employment, real estate, and debit/credit history.
How Credit Inquiry Works
There are a number of methods lenders use to gather information about the borrower and to establish a relationship. This is usually done over the phone or in person, but sometimes lenders may rely on a full-scale credit application. The lender will then use this information to determine the best way to lend to the borrower. Credit inquiry is used in many different ways, depending on the purpose of the loan. The process is similar to a “phone bank,” only this “bank” operates over the Internet.
The borrower initiates the contact and the lender responds. This is done in a number of ways. The following are some examples:
- phone
- interview with a trusted contact
- credit inquiry over the phone
- Live chat (Skype, etc.)
In many instances, a lender will get in touch with a borrower and use credit inquiry to validate or update their credit file. The process is called credit verification.
Why Credit Inquiry Matter?
Lenders use credit inquiry to build a bridge between borrowers and lenders. It is a two-way communication between the lender and borrower that should ideally result in a mutually beneficial agreement. The following are reasons why lenders utilize credit inquiry.
Credit Inquiry Can Help to Close the Sale
When lenders want to close a transaction and to close a loan fast, credit inquiry is a great way to do it. By initiating the credit inquiry process, a lender can help to close the sale. When the borrower is quickly identified and located, lenders can close the sale.
Lenders Have Real Time Access to a Risk Analysis
When lenders use credit inquiry to assess creditworthiness of a potential borrower, it helps to keep the loan pipeline moving. This helps to help the lender stay ahead of the competition. By measuring risk at a rapid pace, the lender is better able to deal with any potential problem. The borrower’s circumstances can quickly be assessed and resolved in a matter of hours or days.
Credit Inquiry Helps Improve Loan Resolution
Credit inquiry allows lenders to quickly resolve any financial issues. This is important in instances where a borrower defaults. By establishing a relationship with the borrower and understanding his or her financial situation, lenders can do a better job of resolving any situations. Credit inquiry does not just offer a source for resolving a problem, but also for enhancing future relationships. By asking relevant questions and verifying with the borrower, lenders can take a proactive approach to loan management.
Lenders Don’t Need a More Sophisticated Application Process
By using credit inquiry, lenders are able to achieve their goals. The application process can become more streamlined, and the borrower is able to move quickly through the application process. In most instances, the borrower does not need a more sophisticated application process. The process is quick and easy.
Credit Inquiry Can Help to Put the Borrower in Position to Pay
Credit inquiry gives the borrower the opportunity to pay the loan without having to physically visit the office of the lender. By setting up automatic payment through a third party, the borrower is able to avoid any interruptions in regular check-ins with the lender.
This allows the borrower to take care of the problems he or she may have during the interim period without being in a position to incur debt. By being in the position to pay, the borrower is better able to come up with a solution to a financial issue.
Credit Inquiry Provides an End-to-End Solution
By connecting with the borrower, lenders are able to put the borrower in a position to quickly resolve financial issues. By establishing a relationship with the borrower and understanding his or her financial situation, lenders can take a proactive approach to loan management. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management.
Credit inquiry does not just offer a source for resolving a problem, but also for enhancing future relationships. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management. Credit inquiry does not just offer a source for resolving a problem, but also for enhancing future relationships.
Borrower Characteristics Enhance Score Assessments
By determining the borrower’s credit profile, lenders can focus on other areas of the loan. This allows them to assess the overall customer experience, both in terms of the borrower’s ability to pay and how the customer is performing in other areas of his or her financial life.
Lenders using credit inquiry can identify specific customer traits, which help them determine whether a borrower will be able to make payments, and whether the borrower has the ability to change the behaviors that put the borrower in a position to become delinquent.
Credit Inquiry Enhances Lender’s Net Promoter Score
By connecting with the borrower, lenders are able to put the borrower in a position to quickly resolve financial issues. By establishing a relationship with the borrower and understanding his or her financial situation, lenders can take a proactive approach to loan management. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management. Credit inquiry does not just offer a source for resolving a problem, but also for enhancing future relationships.
Credit inquiry connects the lender to the consumer. By connecting with the borrower, lenders are able to put the borrower in a position to quickly resolve financial issues. By establishing a relationship with the borrower and understanding his or her financial situation, lenders are able to take a proactive approach to loan management. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management.
Benefits to Consumers
By putting the borrower in a position to quickly resolve financial issues, lenders are able to put the borrower in a position to resolve financial issues. By connecting with the borrower, lenders are able to put the borrower in a position to quickly resolve financial issues. By establishing a relationship with the borrower and understanding his or her financial situation, lenders are able to take a proactive approach to loan management. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management. Credit inquiry takes a proactive approach to loan management.
By identifying concerns about the borrower, lenders can identify issues before the loan becomes delinquent and mitigate future credit risk. Beyond meeting the requirements for obtaining a loan, it is important for lenders to know their potential customers and the extent to which their customer base is prepared to repay their loans. When lenders start to learn more about their customers, they can determine which customers will be prepared to repay their loans, and which customers are at risk of defaulting. Credit inquiry can reveal whether a borrower has the ability to pay, and whether the borrower has an opportunity to improve his or her situation.
Benefits to Lender’s Net Promoter Score
A lender can use credit inquiry to increase their net promoter score. By determining the creditworthiness of the borrower, a lender can direct their effort towards making the customer successful in all other areas of his or her financial life. By identifying concerns about the borrower, lenders can identify issues before the loan becomes delinquent and mitigate future credit risk. Beyond meeting the requirements for obtaining a loan, it is important for lenders to know their potential customers and the extent to which their customer base is prepared to repay their loans. When lenders start to learn more about their customers, they can determine which customers will be prepared to repay their loans, and which customers are at risk of defaulting.
Credit inquiry can reveal whether a borrower has the ability to pay, and whether the borrower has an opportunity to improve his or her situation. By helping consumers resolve financial issues before they become delinquent, credit inquiry will help reduce future delinquency risk. Increased net promoter score leads to higher loan origination volume for lenders. A final benefit is to discover if the borrower has an opportunity to improve his or her situation by seeking financial help from another lender or other sources. This can provide lenders with an opportunity to build business relationships with other lenders, allowing for business growth.
Supporting Documents
By providing supporting documentation, lenders are able to complete a better credit inquiry. By providing supporting documentation, lenders are able to complete a better credit inquiry. Supporting documents are the key to completing a credit inquiry properly. Supporting documents provide a deeper understanding of the borrower’s financial situation. Lenders can provide supporting documentation when following the due diligence process for a loan, or after approving a loan for a borrower. This documentation is often used to prove the borrower’s eligibility to borrow.
Supporting documentation comes in the form of bank statements, rent receipts, tax returns, and any other income documentation provided by the borrower. Lenders can provide supporting documentation when following the due diligence process for a loan, or after approving a loan for a borrower. This documentation is often used to prove the borrower’s eligibility to borrow.
Additional Recommendations
The cost of doing business in today’s economy is driven by technology, data, and the ability to innovate and make better decisions. The right technology can provide valuable insights into customer behavior and financial trends. While the bottom line is the result, the true value in this industry is the ability for financial institutions to take a more proactive approach to analyzing their clients. As technology advances, new solutions are available that allow financial institutions to improve their ability to deliver personalized service. Credit inquiry allows for more personalized service by providing lenders with an opportunity to discover the customer’s needs and helping them to solve the underlying financial issues.
Powerful, yet inexpensive, data analytics can be harnessed to reveal patterns in borrower behavior that can help lenders evaluate creditworthiness. Today’s credit inquiry is one of the most important tools lenders have to accurately assess borrowers. Simply put, lenders are better able to lend to customers who are more likely to repay their loans. By conducting a more robust credit inquiry, lenders can make more accurate business decisions and identify opportunities to grow. Lenders are increasingly turning to technology to improve the efficiency of their business. By using innovative credit inquiry solutions to connect with customers and establish a business relationship, lenders can build lasting relationships.
Summary
Regardless of the cause of the debt, credit inquiry brings a lender and borrower together to understand the borrower’s financial situation. By asking relevant questions and verifying with the borrower, lenders are able to take a proactive approach to loan management. By identifying concerns about the borrower, lenders can identify issues before the loan becomes delinquent and mitigate future credit risk.
Far too often, lenders focus on customer service and operational metrics such as marketing ROI and bad debt rate at the expense of serving borrowers. A lender’s Net Promoter Score does not factor into loan decision making, because a customer’s net promoter score cannot be measured. Credit inquiry may be a tool to assist with credit decisions, but it is not an active decision, as lenders tend to view credit inquiry as just a last step. Instead, a credit inquiry is a data point to consider to enhance loan decisions and improve the borrower’s overall financial health.
Must Read : Reasons You May Not Have a Credit Score
