Equifax Learns to Value Self-Employed Income for Car Loan and Other Lending Scenarios

By Justin Stoltzfus
Thursday, Jul 14 2011 14:41

An Equifax service called The Work Number is helping lenders to legitimize self-employment as bankable income for loan purposes. This breakthrough, detailed in a recent press release, is likely to change how a wide spectrum of lenders view the many applicants who work for themselves, rather than drawing an hourly wage or salary from a large company.

By nearly any estimate, there are quite a lot of Americans working as freelancers, independent contracting or otherwise self-employed, and all of them can face significant challenges getting even a moderate car loan, not to mention a high-dollar car loan or a mortgage. Equifax estimates that 15 million Americans, or 1 in 9, have some kind of self-employment arrangement. The Work Number may be part of helping to change some of the challenges that these consumers face by creating new and better ways to verify personal income. Equifax says that the service provides for a “uniform and auditable process” for tracking income from self-employment. In past times, lenders tended to downgrade the income of the self-employed to hedge against the risks caused by someone having an uneven income – lender reps used annual tax filings as ballpark figures, which was a shoddy system at best. Now, the Equifax subsidiary’s method of valuing self-employed income more accurately can help families where one or more breadwinners connects with clients rather than taking home a pay stub every two weeks. One way to fully document self-employed income is through gathering various ongoing client invoices and calculating them on an average, with a significant time frame, to see how the self-employed do collect a stable income over time.

The new progress that Equifax has made on borrower evaluations could help you get a better deal on your next car loan if you or anyone in your family is self-employed, but the gains shouldn’t stop there. Consumer bear a lot of the burden in negotiating the best car financing deals for themselves, whether they go through the dealership or directly through a captive financing company or third party lender. Always ask about the best interest rates available, and check prime lending rates to make you’re not getting taken advantage of. Use your credit, your income and your assets to your advantage to drive away “in more car” without additional debt. When it comes to getting a fair car loan, you are your own advocate, and the more homework you do, the better you’ll understand locally available deals that will put you in the driver’s seat.


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