It might surprise some lenders to know that not all credit reports are created equal, especially when it comes to loan stacking prevention. Traditional credit bureaus update lender information monthly to coincide with their billing cycles. Most lenders send bills once per month and report their data at the end of each cycle. That means it can take 30-45 days for new credit transactions to appear on a credit report. However, in the fast-paced alternative financial space, credit bureaus must report in real time to be competitive.
Amid rising concerns about the effects of loan stacking in the lending industry, some alternative credit bureaus offer real-time reporting as the answer. They would have you believe that it is the only solution you need; the ultimate prevention.
It’s time to get real about real-time reporting.
They don’t tell the whole story because they can’t provide a genuine solution to the problem. The truth is, real-time reporting isn’t instantaneous. It can happen in as little as a few minutes. It can also take as long as seven days!
The fact is, you can’t stop what you don’t see. Some customers may be desperate for funds to pay off other outstanding loans, and some may be deliberately committing fraud. Whatever the reason a customer has for taking out multiple loans, seven days is plenty of time to do it.
This lag time between a loan approval and the funding and reporting of the loan is an industry blind spot that leaves lenders vulnerable.
If you’re relying solely on a bureau’s real-time reporting, you may not see the loan that the applicant got yesterday. You definitely won’t see the one they got an hour ago.
A comprehensive view of a consumer’s financial history should include not only outstanding loans and obligations found on a standard credit report, but also pending loan transactions. Clarity’s Temporary Account Record was created to deliver just that.
When a customer is approved for a loan, a temporary flag appears on their credit report. Any lender pulling a report on that consumer will know immediately if there are other loans pending, even prior to funding. Having this crucial information during the underwriting process helps lenders avoid granting a loan to an overextended borrower.
In today’s fast-paced financial climate, it is essential for lenders to make every effort to protect their revenue while still responding quickly to customers’ needs. Real-time reporting simply falls short of providing the protection promised.