About two years ago, I had a meeting with the Chief Risk Officer of a large sub prime lender in Toronto. Business was booming, delinquencies were high but contained within a range and the CRO was disinterested in using Machine Learning for Credit Decisioning. He felt that his algorithms were time tested, adaptive in his mind didn’t mean much and he just saw this as incremental costs for his business. He had built a large army of thirty people just for underwriting and didn’t see why he needed to change the approach. We just agreed to disagree.
You are pre-approved in 5 minutes says the advert by a lender. Now what does that mean. Nothing much it seems. All it really says is you meet some minimum criteria, but we cannot take you at your word, so we need to see documentary evidence and pull a credit score. Two days or more and a day or two to receive the money in your account. This does not sound like progress. Back to the future!
A number of loans are provided by banks for small business purposes and hence involve both personal credit and business plan evaluations. Traditional lending is very silo based. You are either a personal borrower or a business borrower. Almost all SOHO borrowing is business borrowing using personal credit.