Don't Rag on RAG: The AI Acronym Creating Buzz

As part of Wilqo’s AI implementations, the term RAG has been cropping up more and more. RAG is short for Retrieval-Augmented Generation, and we think more folks in lending should know about it.

Most AI models, like ChatGPT, are trained on a snapshot of the internet. That’s cool for general questions like “What’s the capital of France?” but it falls short when you need answers grounded in your business. AI can give confident answers that are totally wrong, or at least not relevant to your specific guidelines or workflows.

That’s where RAG comes in.

What is Retrieval-Augmented Generation?

RAG is a way to combine a large language model (LLM) with a trusted set of documents or data, like your credit policies, rate sheets, or operational guidelines. When you ask a question, instead of guessing, the AI retrieves the most relevant information from your documents first, then uses that to generate an answer.

Basically, it gives your AI some reading glasses.

If you are using the paid version of ChatGPT, this is the equivalent to dropping in some documents into the training module while editing.

Why it matters for lenders

We want to reap the rewards of AI but accuracy is paramount. If you’re using AI (or thinking about it), RAG makes the difference between a tool that actually helps and a tool that frequently hallucinates.

Imagine:

• A new hire asks: “Can we use one year of tax returns for self-employed income?”
• Your AI checks your current underwriting guide and gives the answer straight: cited, specific, and accurate.

No digging through PDFs. No misremembered policy. Just better answers, faster.

Final thought

AI is getting better every day, but it’s still only as good as its context. RAG is a way to close that gap. It’s not perfect, it will only work as good as the information that is provided, but it’s a big step toward making AI truly work for your business.

If you want to read more here is an AWS article on the subject. Worth a 5-minute read.

https://aws.amazon.com/what-is/retrieval-augmented-generation/