Definition: The process a lender uses to evaluate an application and determine risk and terms.
In plain words
Underwriting is how a lender decides whether to approve you and on what terms, using information such as income, bank activity, credit history and identity checks.
Why it matters
It explains why two people get different offers. Apps that read your bank transactions may approve people with thin credit files, but you are sharing a lot of data. Ask what data is used and why.
Example
Illustrative example: Two applicants ask for $1,000. One has steady deposits and few missed payments and is offered 18% APR. The other has irregular income and is offered a smaller amount at a higher rate, or is declined.
Always read the term in the context of your own agreement and local law.
Related terms and guides
Hard credit inquiry · Loan approval guide · How loan apps work