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Sam Hodges is the co-founder and U.S. managing director of Funding Circle, a leading lending platform for small businesses. He is responsible for overseeing the overall strategic direction and day-to-day operation of Funding Circle in the U.S.
Our credit system runs on the power of data. A simple IT upgrade at the IRS would put more of this power in your hands.
Credit - Loan - Credit - Card - Mortgage
When you apply for credit, such as a loan, credit card or mortgage, you essentially ask a lender to evaluate your financial picture to make an informed decision about your approval, rate and terms. Right now, the information that lenders use primarily comes from two sources: you (the applicant) and private credit bureaus that keep track of things like your payment record to your current and past creditors.
This system is imperfect for a variety of reasons. It frequently leaves lenders with gaps and distortions in assessing your creditworthiness. Critical information that could make the picture clearer can’t be accessed at the speed our modern economy moves. Notably, this includes detailed, verified, multi-year financial data from your tax return, which can prove facts such as the applicant’s steady income. It’s held back by outdated technology at the Internal Revenue Service.
New - Legislation - IRS - Data - Verification
New legislation would change this. The IRS Data Verification Modernization Act of 2017, recently introduced in Congress by Rep. Patrick McHenry (R-NC) and Sen. Cory Booker (D-NJ), would set up an application programming interface (API) at the IRS.
This API would turn a cumbersome, manual process into an automated one. An API would allow the agency to provide your transcripts the instant you give your authorization. Credit providers would then have more information to make better decisions about your approval and rate. This could cut financial fraud and improve credit prices, speed and access for everyone.
Right now, you can file what’s called a...
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