Challenge the Lending Status Quo

by CUES Skybox

By Brett Christensen

A great definition of insanity is doing the same thing over and over again and expecting different results. It certainly applies to the current state of credit union lending. If returns are low, losses are high and growth is slow, it’s clearly time to try something new, particularly in the areas of underwriting and sales.

Underwriting

Here are a few thought-starters to encourage you to examine old-school underwriting policies that may be holding you back:

  • Do you only make “yes” or “no” decisions on each loan request? Instead of a “no,” what about a counteroffer that makes you comfortable?
  • Do you just approve the specific member request, or do you offer additional lending products the borrower qualifies for, like a credit card or overdraft line of credit?
  • Are you incurring the time and cost of securing collateral that is worth very little when a borrower actually qualifies for unsecured credit?
  • Do you automatically decline all requests from members whose credit score is less than 600? You may need to dig deep to find compensating factors, but that’s better than turning a member away when you could make it work.

The approach I advocate is aggressive, yet prudent. Lenders who move to a new-school style of underwriting and get comfortable taking on risk will be able to grow their portfolios, even in highly competitive environments.

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