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How Equifax’s new Cashflow Insights could help you get approved for a loan
Your financial habits could be as important as your credit score when you need financing.
Equifax launched a new product called Cashflow Insights that allows you to report your bank account information to your lender when applying for a loan. It could speed up a trend that started at the beginning of COVID-19, where lenders deprioritize traditional credit scores to focus on your real-time spending and saving habits.
What Cashflow Insights means for you
Cashflow Insights could make it a lot easier to get approved for a loan as long as you can afford the repayments. This is especially if your credit score is below 670 — what lenders typically consider to be good credit — or are one of the 32 million Americans without a credit score.
Equifax predicts that this new product could increase the number of prime borrowers by as much as 5 million. And it could cut the number of Americans who don’t have a credit score in half.
It can also cut down on the documents and time required to get a loan. By making your financial information readily available, banks and credit unions that rely on traditional underwriters won’t have to spend as much time analyzing your bank statements and tax returns.
Where it’s available
Unlike similar products like Experian Boost, Cashflow Insights is available directly through lenders — not the credit bureau. Over 7,700 financial institutions are participating in the the program.
How it works
Lenders can only use Cashflow Insights with your permission. If you’d prefer to just use your traditional credit score, you can.
To sign up, your lender will direct you to log in to an online portal. Once in the portal, select your bank, verify your account credentials and give your lender permission to use the service.
After you give your lender permission, it will have access to up to 24 months of bank transaction data. This means it can see your withdrawals, deposits, investments and savings. It can also use this service to monitor your accounts while you pay off a loan.
What it means for the future of lending
Cashflow Insights might not be as much of an overhaul of the lending system as it sounds. It mainly makes it easier for most lenders to do what they’ve been doing since the start of COVID-19: Prioritize cashflow over credit score.
“COVID-19 uniquely impacts every type of consumer. When a person goes through a major life event, credit data may not immediately or fully reflect changes in their ability to pay obligations or to safely take on new loans, services or rental agreements,” said Mark Luber, chief product officer for United States Information Solutions (USIS) at Equifax in a statement. “New credit opportunities are increasingly important in today’s economic climate. Cashflow Insights is another way that Equifax is delivering differentiated data assets that provide consumers financial opportunity based on their unique profile.”
Looking at your spending habits gives lenders a much more accurate picture of your current financial situation. The main thing Cashflow Insights does is standardize the way lenders evaluate your income and debts.
Even with Cashflow Insights, lenders will still look at your credit report. Late payments, charge offs and bankruptcies will still affect your loan application.
But it’s a step toward overhauling the traditional credit score to make it easier to access financing when you can afford it.
Bottom line
Cashflow Insights gives borrowers with less-than-perfect credit an opportunity to demonstrate their ability to pay off a loan. When you compare personal loans, reach out to your lender to see if it works with Equifax and offers Cashflow Insights as an additional way to qualify.
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Photo: Getty Images
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