Following on from last week’s column regarding scorecards I will attempt to debunk the differences between a lender’s lending policy and scorecards.
Lending policies outline what type of lending it will accept and takes into consideration things like LTVs, income types, geographical rules, property type, and age of borrower among other things.
If two lenders had the same lending policy and one used scorecards and the other didn’t and they were underwriting a case that had unusual income for example, this would be picked up by the lending policy and have nothing to do with scorecards.It is likely both would come to the same conclusion – it either fits policy or it doesn’t.
Our scorecards do what a good underwriter would do. They look at the borrower’s financial situation and assess the likelihood of them repaying their debts.
They pull the borrower’s credit file from Experian and if it shows a history of not paying on time or more debt than they can service it will give the case a low score.
Scorecards are consistent and give decisions quickly. They won’t always say yes but if they don’t the broker will know immediately.
Underwriters check every case to ensure a sensible decision has been made and that the scorecards are functioning as expected.
Anyone who tells you a lender turns down good cases because of scorecards is wrong.A lender takes on loans that fit its policy, whether the lender uses scorecards does not affect this simple truth.