How to Define Credit Optimization for Mortgage Borrowers

Since CreditXpert was founded in 2001, our predictive analytics platform has analyzed more than 750 million credit records. That’s big data! But as CreditXpert Vice President of Marketing, Mike Darne, will tell you, all that data is  a distraction if you can’t use it to benefit your borrower.

And yet, many still don’t fully understand the concept of consumer credit optimization. To get to the heart of what we’re really talking about, we invited our Chief Legal Counsel, Jen Sides, to a webinar with industry consultant and success mentor Laura Lasher (previously President of Mortgage for Arbor Bank), to discuss the topic of Fair Lending, Credit Optimization and the power of building custom credit plans for lenders to help borrowers purchase their dream home. You can see the recording here.

A new approach to a pressing industry problem

Sides opened the conversation by providing an overview of the credit optimization process and asked Lasher how important this work was to the home finance process.

“Credit is the piece that is the big unknown, but applicants know it affects their interest rate,” Lasher said. “No one wants to give someone the wrong advice, but applicants want to know that they have every opportunity to put themselves in the best position to buy the house or write the offer or build that new home. Consumers don’t want to be embarrassed after they are under contract. The sooner the lender can pull credit and run CreditXpert, the better. I think that’s huge.”

Big data wasn’t even available when Lasher got her start in the business. Even today, many so-called “data science” companies do not do a good job of making insights from the data easily digestible and usable by front line workers. Sides asked Lasher to recall when the industry was trying to do this important work manually.

“In the old days, we would call the credit tri-merge companies and ask, ‘What can we do? What do you think would be the best advice we can give this borrower?’” Lasher said. “We would have our opinion, but then call the bureau to get their opinion. But we couldn’t do that for every borrower.”

The CreditXpert approach is different. Sides explained that with credit optimization, the lender can run hundreds of scenarios in mere seconds.

“It doesn’t matter how good someone might be with math, you can do it in mere seconds,” Sides said. “More importantly, it offers your applicants certainty by providing a measure of the likelihood of reaching the target score by investing a precise amount that a borrower might bring to the table.”

Beyond that, Credit Optimization gives the borrower the exact steps and a timeline that allows them to do the work and realize the benefit during the loan origination process.

“This isn’t something that a borrower is going to have to go off and do and then come back to the lender in six months,” she said. “The consumers won’t come back.”

Help consumers find what they can’t on their own

There is a lot of information available online that can help consumers make better choices, but without an algorithm that tells them what actions to take to increase their scores, applicants are just guessing and cannot expect to see good results. Many applicants don’t even know what tradelines are showing up on their credit reports.

Credit Optimization offers mortgage loan applicants a tool that shows them how to “power up” their ability to qualify for a better loan. It makes it possible for 3 out of 4 applicants to go into the loan origination process stronger than they were when their lender pulled the initial report.

This puts the borrower in more control, Lasher pointed out.

“So often, consumers go into the loan origination process and they’re just waiting for someone to tell them ‘yes’ or ‘no.’ They’re not expecting more than that,” she said. “But for 74% of borrowers to know that they can have a significant impact — improving their score by at least 20 points within 30 days — that’s significant!”

See the entire webinar online here. Find out more about putting the power of Credit Optimization into the hands of your loan applicants by reaching out to CreditXpert today.