The Credit Decision API allows you to improve your current process using AI technology. With this system, you keep full control of your credit by setting your existing credit on 15 criteria. These criteria include minimum credit score, maximum DTI, maximum interest rate, loan amount, etc.
Once an applicant qualifies for your credit policy, AI is activated. The AI ââmodel will help predict the risk of default for each individual applicant. This value is calculated as a percentage and is updated for each month of the loan.
With this data behind you, you can better assess which loans are worth it for you. Once you receive the probability of default, the Credit Score API will enter your target asset return for each level of risk in its system.
Your target return is used to determine the borrower’s APR. The higher your return target, the higher the borrower’s APR will be.
Before committing to a loan, it is essential to have this information in your back pocket. In addition, you should only accept loans that match your credit policy and risk capacity.
What is the API?
API is an acronym for “Application Programming Interface”, a software intermediary that allows two applications to communicate with each other. Every time you use a digital app, you are using an API. This includes actions like scrolling through social media, sending emails, and checking the weather.
Have you ever heard of a credit report API? In this case, the API is used to consolidate the data collected from different credit report repositories and produce an organized view of the consumer’s credit report file.
An API allows for bulk requests, which are processed via CSV files or other compatible spreadsheet formats. They are typically used in industries that rely on a high volume of fast communications.
APIs can also improve the security of a business. Consumer credit report data is sensitive. Therefore, it makes sense to use APIs to keep this data on secure servers. In addition, these servers usually have very high security restrictions, making them less vulnerable to attacks.
What is the credit decision?
Now you may be wondering what the credit decision is. For example, the term consumer refers to the internal process used by an institution to decide whether or not to accept particular credit risks. This procedure is also known as the credit approval or granting of credit process.
The credit decision is used by banks and similar businesses that engage in the granting of credit. These businesses typically provide loans to other businesses, as well as to individuals.
There is usually a hierarchical approval structure within the credit decision process. However, this structure depends on the size and business model of the organization.
However, you can usually expect the first line of defense to be individual officers. Then above them are the agency directors. Then there are the regional directors. Finally, senior managers will complete the final round of reviews.
Credit analysis process
So what happens in a borrower’s credit assessment process? There are many different techniques for judging an individual’s creditworthiness. These techniques include cash flow analysis, risk analysis, trend analysis, ratio analysis, and financial projections.
The credit analysis process can take several weeks or even months. It starts with the first step of collecting information. The next step is to decide on the loan. Finally, the creditor must decide on the amount of credit to extend to the borrower.
Information gathering step
In the first step of collecting information, the creditor will analyze the customer’s previous repayment record, the organization’s reputation, its financial skills, as well as any transactions with your bank or other financial institutions.
Borrowers should be prepared with all financial documents that are relevant to their equity. For example, if a creditor cannot confirm that a borrower can generate sufficient cash flow to repay the debt, their request will be denied. Likewise, if a borrower is at risk of defaulting on other obligations, it is likely that their application will be rejected.
Once a creditor has thoroughly analyzed a customer’s profile, they will either approve or reject the loan. For each borrower, a credit analyst is assigned to assess your request. They are the ones who are responsible for making the final decision.
Once they have made their decision, they will write a report to their superiors, who will make a decision based on the information provided. This process will continue until it reaches the final approval stage.