A Guide to Automated Credit Decisions

Automated credit decisions are systems that assess an applicant's creditworthiness. These systems rely on pre-set rules, policies, and algorithms to analyze various data points like credit scores, payment histories, and financial records. The goal is to make the process faster, more consistent, and in line with company policies.

Unlike traditional methods, which may involve manually entering data and seeking multiple approvals, automated application software can process credit applications instantly—or in just minutes. This is a huge benefit for companies looking to reduce human error and ensure fair treatment for all customers. 

Creditsafe’s Check & Decide is a no-code solution that automates business decisions, cutting down on operational costs and errors while boosting efficiency across various areas of business.

Leighton Weston, a product expert at Creditsafe, highlights how automation is all about efficiency and fairness: 

"Automated credit is about creating efficiencies within an organization, enabling businesses to ensure they are treating customers fairly and equally while maintaining a system for auditing decisions."

This approach not only speeds up decision-making but also helps businesses avoid errors and keep processes aligned with their policies.

Top Tip: Before you implement an automated credit system, make sure your business goals and KPIs are clearly defined. This will help you set up a system that aligns with your objectives. Whether you're looking to increase sales, reduce credit risk, or improve operational efficiency, understanding your goals will guide your automation process.

Leighton adds further insight on the importance of clear objectives in guiding the process: 

"Having clearly defined goals makes it easier to align your credit decisioning system with your broader business objectives. It allows you to focus on what really matters—improving efficiency, reducing costs, or mitigating risks."

Automated credit decisions rely on algorithms and decision models to process data and provide outcomes in real-time. Companies define rules and thresholds—like credit score requirements or payment history—which the system uses to evaluate an applicant’s creditworthiness. The system then makes a decision: approve, deny, or refer for further review.

These systems are customizable, letting businesses create decision models that fit their industry needs, risk profiles, or sales goals. Check & Decide makes this process easier by offering standardized templates based on best practices in credit and compliance. Businesses can tweak these templates to meet their specific criteria, and the best part is, no coding is required. You can implement and adjust decision models quickly and efficiently. Better yet all the information you need is ready and available and pulled directly from our business credit reports.

Leighton explains the core aim of automation:

"The ultimate goal is to meet company KPIs and create efficiency. Whether it’s reducing friction in the sales process or speeding up credit approvals, we focus on aligning decision models with company goals, ensuring the right data is used to make the best decisions." 

This is all about creating a smooth process that aligns with the company’s goals and minimizes any barriers to faster decision-making.

Top Tip: When getting started with automated credit decisioning, use a pre-built, standardized template. These templates follow industry best practices and make it easy to automate decisioning quickly. As you gather more data and get a better understanding of your business's needs, you can refine these templates further.

Automated credit decisions offer more than just speed. Here are some of the key benefits:

• Efficiency and speed: Automated systems cut down the time it takes to process credit applications. While manual reviews can take days, automation makes decisions almost instantly. Check & Decide helps businesses reduce bottlenecks and speed up the entire process.

• Consistency and fairness: Since decisions are based on predefined rules, the process is more consistent and less prone to human error or bias. With Check & Decide, businesses can standardize their checks, ensuring fair treatment for all applicants and alignment with internal policies.

• Cost savings: By reducing the need for manual intervention, businesses can save on labor costs and reallocate resources to more strategic tasks. Check & Decide helps lower operational costs by automating routine decisions, letting credit teams focus on high-value work.

• Scalability: As businesses grow and handle more applications, automated systems can easily scale to handle increased volumes without compromising quality or speed. With Check & Decide, businesses can quickly expand their decision-making capacity without hiring extra staff.

• Improved risk management: Automated systems help improve risk management by evaluating credit risk more accurately and consistently. Check & Decide uses real-time data from over 430 million companies worldwide, enabling businesses to make more informed, effective decisions.

Top Tip: Make sure the rules in your automated credit system are aligned with your company’s credit policies and risk tolerance. This consistency will help reduce risks and keep your decision-making within the parameters you’ve set.

Automated credit decisioning is already a reality for many companies. For example, Pinterest uses an automated system for businesses applying for credit lines on its platform. Once an application is submitted, the system immediately processes the request, and if the business meets the criteria, their credit line is activated within seconds.

Some businesses, on the other hand, may take a more cautious approach, using automation to refine their decision-making process and only approve creditworthy customers. This is a common practice among businesses looking to reduce bad debt. While it might take longer to process applications, it allows them to mitigate risk. Check & Decide helps businesses streamline this process, enabling them to quickly assess prospects and make decisions before investing too much time into potentially unqualified leads.

Leighton adds:

"In some cases, speed is essential, but in others, businesses may need to slow down and focus on reducing their risk. Check & Decide gives companies the flexibility to choose between these approaches, allowing them to adjust as needed." 

This flexibility allows businesses to adapt the speed and focus of their credit decisions based on what’s most important at the time.

Top Tip: If your goal is to reduce risk by approving only creditworthy customers, make sure to test your decision models. Finding the right balance between reducing bad debt and keeping the approval process efficient is key.

Automated credit decisions are incredibly effective in managing and reducing credit risk. By using data analysis, these systems evaluate whether an applicant is likely to default, helping businesses reduce financial exposure. Automated systems assess various factors, like payment history, existing debt, and industry conditions, to make well-informed decisions.

Automation also ensures businesses stick to their internal credit policies and regulatory requirements. This reduces the chance of overlooking risks or making biased decisions. Check & Decide uses standardized templates that align with industry best practices, so businesses can maintain transparency and ensure decisions are in line with company policy.

Leighton explains how comprehensive data analysis improves risk management:

"With Check & Decide, businesses can assess risk more accurately by using a more complete set of data—such as credit history, existing debts, and external factors like industry-specific risks. It’s about having a more comprehensive approach to risk." 

This approach helps businesses have a fuller picture of their credit risks, allowing for more informed decisions.

Top Tip: Regularly review your automated credit decision models to keep them in line with changing business goals and market conditions. This will help maintain effective risk management.

Credit risk is often assessed using the 7 Cs framework, which includes:

• Character: The applicant’s reputation, assessed through credit history and payment records.

• Capacity: The applicant's ability to repay based on income, revenue, or cash flow.

• Capital: The financial resources available to the applicant, like assets or savings.

• Collateral: Assets offered as security for credit.

• Conditions: External factors, like economic conditions, that may affect repayment.

• Credit History: The applicant’s past borrowing and repayment behavior.

• Control: Internal business factors, like credit policies and risk management practices.

Automated systems evaluate all 7 Cs to give businesses a thorough understanding of an applicant’s credit risk. Check & Decide analyzes these factors systematically, helping businesses create repeatable decision models based on the data that matters most.

Top Tip: By using automated decisioning systems like Check & Decide, businesses can ensure that all 7 Cs are assessed accurately, leaving no critical factor overlooked during the credit evaluation process.

While automated credit decisioning has many advantages, businesses often have concerns about its implementation:

• Accuracy of data: Since automated systems rely heavily on data, it’s vital to ensure the data used is accurate. Any discrepancies can lead to wrong decisions. Check & Decide uses real-time data from Creditsafe’s global database, so businesses always have access to accurate information.

• Loss of human touch: Some worry that automation may reduce human involvement in the process, affecting customer relationships. However, Check & Decide allows businesses to maintain human oversight in complex cases, while automating routine decisions.

• Complex setup: Setting up an automated system can be complex, but Check & Decide simplifies it with no-code decision templates, so businesses can get started quickly without needing technical expertise.

Top Tip: To avoid common pitfalls, make sure you understand the data you’re using for credit decisions. Testing your automation system with real-world data before going live helps identify and resolve any potential issues.

The technology behind automated credit decisioning includes advanced software, machine learning algorithms, and data integration tools. These systems keep evolving, learning from historical data and improving their decision-making.

Check & Decide offers an intuitive, no-code platform that automates decision-making based on industry best practices. Businesses can easily modify decision models to match their evolving needs, risk profiles, or goals. The platform integrates with CRM or ERP systems and can be accessed online, via API, or directly within Salesforce.

"The goal of automation is to free up valuable time for teams, allowing them to focus on higher-value tasks. It’s not about eliminating jobs, but about improving overall productivity and making the decision-making process more efficient."