Automated Banking and you.

Dear Friends,
Welcome to the world of automation and computers making decisions on your loan applications. It’s not artificial intelligence yet, but it still sucks. Let me give you a brief view of how bank automation works. When you apply for a loan, whether it’s online or with a handwritten credit application, all of your information is sent via internet or fax to a data entry person. This person probably gets paid minimal money. If you apply for something online, you are the data entry person. Now comes the interesting part. All the banks in the USA have different internal scoring systems. What this means is your information, your credit score, your job, your residence, your depth of credit, open accounts, late payments, installment loans etc. are all put together to create some magical internal banking score. I’ve spoken to many underwriters/loan officers and most of them have no idea how the internal bank score works. I’ve spoken to representatives from Equafax (the credit reporting agency) they say it’s a mystery how the computer comes up with your credit score. Now, there are basic credit score parameters that create the CREDIT SCORE. If you have had credit for a long period of time; credit cards, auto loans, home loans etc., and everything is paid perfectly and your debt is not too high, you will have a high credit score. Anything over 700 is considered A-type credit. But here’s the catch - I’ve seen 700 credit scores on kids with one account with $100 dollars on it. So, with an automated banking system this type of person could slip through the cracks and get the same loan as someone with real credit. I’ve seen it happen many times. Whenever you take the human element out of loan decision making you set yourself up for fraud. Everyone knows now that the mortgage industry pushed a bunch of unqualified loans through in recent years. How do you think they did that? My theory is the automation. Computers don’t know that a guy that works at McDonald’s doesn’t make $7,000 a month, a human would. So you got a guy that scores 700 and works at McDonald’s and makes $85,000 a year. The computer takes all this information and spits out a loan approval. The beautiful part is that as a underwriter you just blame it on the computer. When you let computers make your decisions for you no one has to take the blame. In the old days the underwriter and manager would have to analyze a application and sign off. Now it’s all done through automation, and computers aren’t very savvy so it’s easy to work around a set system with no human element.
Just remember when applying for a loan, don’t take it personally when you are turned down, the computer doesn’t.