In a competitive market where most borrowers are mortgage rate shopping, credit optimization can be the difference between closing a loan or losing out to an offer from a competitor. Here’s why CreditXpert’s new platform — which combines the best of Wayfinder and the What-if Simulator — can help you reach more buyers and close more loans.
HW: CreditXpert has been in the industry since the early 2000s with tools like Wayfinder and What-if Simulator, why introduce a new platform now?
Mike Darne: The What-if Simulator was first introduced to the market in 2004 and it allowed credit specialists to optimize a borrower’s credit score at the tradeline level. Our predictive analytics engine would then show them how those changes could impact the borrower’s score. At the time, this was a groundbreaking tool and has helped millions achieve a better outcome. That said, the manual input nature of What-if Simulator required credit specialists to spend considerable time on each file.
In 2018, we introduced Wayfinder which was a more automated way to optimize a borrower’s credit score. The addition of automation made credit optimization more accessible to mortgage loan officers who could simply set a target score and allow our predictive analytics engine to run hundreds of simulations in just seconds to arrive at a detailed plan. With Wayfinder, we also added in a likelihood score which was not available to those using What-if Simulator. This likelihood score was revolutionary in that it allowed a mortgage professional to understand the likelihood of their borrower getting to where they need to be within the specific timeframe.
Much has changed in the mortgage market over the five years since our last major product launch. As credit has become a more strategic tool for lenders, and the pace and competitive nature of mortgage lending intensified, we knew that we needed to develop a next generation credit optimization platform.
With that in mind, we set off to improve upon some of the deficiencies in both Wayfinder and the What-if Simulator that were holding lenders back from being able to offer credit optimization to all borrowers. To begin with, we doubled down on automation and looked for ways to make credit optimization as simple as clicking a button.
To ensure that the automation was rock solid, we also brought all three bureaus into the picture. The single bureau nature of Wayfinder and What-if Simulator required reconciliation from the lenders across many tradelines. We have also added role management capabilities, dashboards, a new way for lenders to track a borrower’s progress against their plan and the ability to easily see how changes between credit pulls impacted a score. These were some of the top things we were hearing from some of today’s most innovative lenders that have scaled their credit optimization offering.
And finally, the new CreditXpert is now hosted in our secure cloud which will allow us to easily push innovative features throughout the year and quickly implement several industry changes that will be coming in the next year.
HW: Is credit optimization just for those that need a little help qualifying for a mortgage?
MD: There is certainly a strong use case for those that are on the cusp of qualifying for a mortgage. We know that more than 50% of those rejected for a low credit score by a conforming lender could get to a qualifying score within just 30 days. Many lenders place their attention here as it is a great way to improve their top of funnel pull through.
That said, we also know that nearly 80% of those with initial scores below 780 could improve their score by at least 20 points in that same 30-day period. This means that lenders can offer more competitive loan programs, interest rates and increase transparency.
HW: Some of today’s most successful lenders are using CreditXpert to optimize their borrower’s credit score, how is this ultimately helping borrowers?
MD: When you look at the three C’s of mortgage lending (capacity, collateral, and credit), credit is the only one that can be changed in the short run. We know that relatively small moves by a borrower can result in changes that have a meaningful impact on their overall cost of homeownership.
Think about a borrower with an initial 640 mid score that is looking to purchase a $400,000 home with 10% down. With just a few strategic moves, that borrower could improve their score by 40 points in just 30 days. This could drop the interest rate by 65 basis points which would end up saving $158 a month in principal and interest payments. A higher credit score would also have a meaningful impact on mortgage insurance payments; $131 in savings each month and eliminating six months of required payments, saving this borrower more than $70,000 over the life of the loan.
Today’s most innovative lenders understand that savings like this give them a significant competitive advantage over those that don’t offer credit optimization to their borrowers. In a study we conducted last year among those that had either secured a new mortgage or refinanced an existing mortgage, we learned that only 35% were offered an opportunity to optimize their credit score. Of those that were offered the opportunity nearly 70% took the necessary steps to reach a target score.
HW: Aside from the obvious benefits for borrowers, how do lenders benefit from credit optimization?
MD: In that same study I just mentioned, we asked borrowers why they would be interested in credit optimization. Lower rates and payments obviously topped that list. We also found that the mere act of offering to work with a borrower on their credit score made them feel more empowered, confident, and helped make the mortgage origination process more transparent. For lenders, this presents an opportunity to differentiate themselves and establish a connection with their borrowers. We have seen this lead to higher close rates and more referrals.
We also know that higher credit scores can help a lender lower their LLPA premiums. In the previous example of the borrower that improved her score by 40 points, the lender would stand to reduce the resulting LLPA premium by $1,800 — that’s just on one loan. We recently wanted to see what this would mean to a broader loan portfolio.
Applying what we know about credit optimization, we found that LLPA premiums could be lowered by 17% across this portfolio. In a time where lenders are looking for ways to improve profitability, a 17% drop to a major expense like LLPA premiums is a great place to start.
HW: How can lenders upgrade to the new CreditXpert?
MD: Our current tools, Wayfinder and What-if Simulator will no longer be available after October 1, 2024. Over the past year, we have been working closely with all the major credit report providers to make it as easy as possible for lenders to upgrade to the new CreditXpert. The major change for lenders is that the new CreditXpert is only available directly from us.
As for the actual process, we’ve worked to make that straight forward and a relative low lift for lenders. One lender on the new platform recently reached out to our client success team asking to have eight additional users added to their account. Five minutes later, we got another email asking us to disregard the first one as they had already set the users up themselves.
We understand that when lenders hear upgrade, many may worry that it will disrupt operations or take months to complete. That’s why we have been working so closely with credit report providers to make this a smooth transition.
