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If you want any kind of credit these days, you’re going to get assessed by one of the private credit bureaus for credit worthiness. These bureaus rely on from past and present creditors to evaluate your position. What they’re missing, however, is information from the about how much you earn and how good you are at paying your taxes. That may be about to change thanks to APIs. Sam Hodges over at TechCrunch explains.

New legislation, the IRS Data Verification Modernization Act, introduced by Rep. Patrick McHenry (R-NC) and Sen. Cory Booker (D-NJ) commits the IRS to creating an API. The idea is that the agency would have to provide your transcripts instantly via the API to credit agencies or creditors when you authorise it to do so. The hope is that this would mean creditors would make more informed decisions when granting loans, which should help you and will certainly help them make loans more fairly and securely. 

You can already file a 4506-T form with the IRS now to send transcripts of your tax returns to third parties but this can take weeks and might be too late. The API promises to mean instant return of transcripts for faster decisions from creditors. It could mean the between your getting a loan and your not getting a loan. 

It promises to be especially helpful to business (hence why it might revolutionize the economy) because many entrepreneurs run up credit card debts in the early stages which damage their credit score and hence make getting a business loan harder. 

The idea of having an API to provide creditors with data to assess a business loan application is not new. The UK, for example, has Companies House which provides an API with information on every company registered in the country, tax return information. Banks use this API to make decisions on loans. 

But why do we have to enact legislation for an API? Well, because lawmakers are not confident that the IRS will go to the trouble of prioritizing an API unless forced to do so. The bill currently has bipartisan support in both houses so expect the IRS API soon. 



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