Twenty percent of auto loan applicants overestimate their income by at least 10%, while another third of borrowers underestimate it by 10% or more, according to the document review company on the stipulations of the artificial intelligence Informed.IQ.
Underwriters help lenders detect such errors. But Informed CEO Justin Wickett said the company found that humans overlook 12-17% of inaccurate revenue cases.
Data shared by Wickett in December illustrates an issue that Equifax has also highlighted over the past year while promoting its digital verification solution, Work Number.
According to an Equifax analysis of data from late 2018, 38% of consumers overstated their income by at least 20% on auto loan applications, and 14% understated it by at least that much. The research, the company’s most recent study on the subject, found discrepancies by comparing customer claims with actual payroll data available through Job Number.
Research from the two companies suggests that dealerships and lenders are relying on misinformation about the incomes of half of the customers they consider for contracts or retail installment loans. This can have real consequences for debtors and creditors.
According to Equifax, 4% of people who overestimated their income end up being at least 60 days behind on their car payments.
That’s double the 2.1% delinquency rate that Equifax found among those who correctly represent their incomes.
“It’s really a leading indicator,” said Shelly Nischbach, vice president of verification services for Equifax Workforce Solutions. Automotive News Last week.
According to Equifax, only 0.8% of those who understated their income were overdue for 60 days or more.
Informed.IQ found that consumers who understated their income were paying more than $1,000 more in interest on their loans than their risk would require, Wickett said.