Income Recognition
How different income types are recognized and treated in affordability calculations.
Not all income is equal when assessing affordability. oqui distinguishes between gross income (total received) and recognized income (amount considered for affordability).
Gross vs. recognized income
Gross income is the total amount received from all income sources.
Recognized income is the amount considered reliable for ongoing affordability, after applying haircuts to variable income.
Example:
- Monthly salary: R45,000 (100% recognized = R45,000)
- Monthly commission: R10,000 (60% recognized = R6,000)
- Gross: R55,000
- Recognized: R51,000
Income haircuts
A haircut is a percentage reduction applied to variable income to reflect its uncertainty. The remaining percentage is the "recognized" portion.
Default haircuts
| Income Type | Default Recognition | Rationale |
|---|---|---|
| Base salary | 100% | Stable, contractual |
| Overtime | 50% | May not continue |
| Commission | 60% | Performance-dependent |
| Bonus | 0% | Not guaranteed |
| Rental income | 75% | Vacancy risk |
| Investment income | 50% | Market-dependent |
| Pension | 100% | Stable, ongoing |
| Freelance | 50% | Variable workload |
Why haircuts matter
Lenders apply haircuts because:
- Risk mitigation - Variable income may decrease
- Sustainability - Affordability should survive income dips
- Regulatory compliance - Many jurisdictions require conservative income treatment
Payslip verification
When payslips are provided, oqui extracts detailed income breakdown:
- Base salary
- Allowances
- Overtime pay
- Commission
- Bonuses
- Deductions
Each component is matched to the appropriate income type and haircut applied. This provides more accurate recognition than bank statement analysis alone.
Income from bank statements
When only bank statements are available, income is identified by:
- Transaction descriptions (salary, wage, commission, etc.)
- Regular patterns (same amount, same day each month)
- Source identifiers (employer names, payroll references)
Bank-only income classification is less granular than payslip-verified income.
Customizing haircuts
You can create custom affordability rules with different haircut percentages. This allows you to:
- Apply stricter haircuts for higher-risk products
- Use industry-specific recognition rates
- Comply with your organization's credit policy
See Affordability Rules for configuration details.
Monthly averaging
Income is averaged across the statement period to smooth out variations:
- Consistent income: Monthly average equals typical month
- Variable income: Peaks and troughs averaged out
- Incomplete months: Excluded from averaging (first and last months)
Only complete months are included in averages to avoid skewing from partial data.