Credit, as you know, is one of the three Cs of mortgage lending, the other two being capacity and collateral. But it is the only one over which the borrower has any control. Some aspects of a borrower’s credit take years to affect a score: payment history, for example, or the age of his credit accounts. Yet others can have an impact quickly, i.e., usage and the total number of accounts.
With that in mind, the Hampton, Md.’s credit optimization tool uses both data science and predictive analytics to identify a borrower’s credit potential AND offers a detailed plan that will help him reach his scoring potential. The program, which also identifies aspects of the credit file that could be problematic to underwriters, is available to lenders as a white label add-on, and a consumer-centric version is on the way.
The program searches for “opportunities” a borrower could take to raise this all-important score. But many applicants never get the chance to do so. CreditXpert found that 65% of a representative sample of people who bought homes in the last six months and who intended to buy in the next six were never given the chance to improve their scores.
Steps To Improvement
On the flip side, seven out of 10 of those who were told how they might raise their scores took steps to do so. Their main reason, of course, was to save money. How much cabbage varies with each person. But in one example offered by the company, an actual borrower seeking a $400,000 mortgage raised her score 40 points, saving a boatload of moolah in the process.
By taking three steps — which CreditXpert did not innumerate — she was able to raise her score 33 points, from an original 640 to 673. By taking an additional fourth step, again not revealed, she bumped up the number seven additional points, to 680. In so doing, she was able to trim her interest rate from 7.65% to a flat 7%.
The savings in principal and interest were formidable — $158 a month — as were the savings in mortgage insurance premiums — $131 — for a grand total of $289 a month. In addition, she was able to knock half a year off the time she had to keep MI coverage in force. And in the long run — queue the music, please — she will have saved nearly $74,000 over the life of her 30-year loan.