The Cogent Road

I’m flying back to California from an extended weekend at my in-laws eighteen acre farm in Tennessee. It’s not a working farm, but one of those beautiful pieces of land perfectly accessorized with hundreds of yards of three board fence, ponds full of large-mouth bass, and lines of spectacular sixty foot tall oak trees. It’s the kind of place where you wake up to sounds even the Philadelphia Harmonic can’t duplicate. It’s a setting that, in the words of my brother in law, “will completely unwind a man”.

With the quickened pace of our California software company just hours away, and the quiet stillness of Tennessee only hours past, I’m stuck in a place that’s got me thinking just how important having a clear vision of who you are and what you want to be is to the success of your business.

You can learn a lot by watching chickens. Or fire ants. Or the way horses respond to a looming thunderstorm. Nature, for all practical purposes, is reactionary. The response may be simple, the way fire ants pour out of a hole made in their ant hill in such volumes it looks like blood streaming from some mortal wound. Or nature may respond complexly and more slowly, as in the way a tree will grow too tall for its own roots as it strains for light in a dense forest. Yet, no matter how beautiful, nature is a well orchestrated symphony of cause and effect.

Man, however is not a part of this symphony. We sit outside of nature’s rules in much the same way as the composer transcends the boundaries of the symphony being played. Man is gifted with the greatest of all gifts, an ability to envision, a capacity to create.

If you are a business owner, or an aspiring one, my weekend excursion into nature has compelled me to share one bit of advice: You will be successful if you continue to think and create. As you strive after your vision, you will grow. Become reactionary, (which this weekend has taught is the natural way of things) and you will stagnate. Keep creating. Keep growing.

My partner and I began Cogent Road with a simple vision – provide loan officers with innovative software that can help boost their business, and ultimately their incomes. This caused us to think about different ways in which our software could deliver this vision. Rather than trying to be a specific type of company, we focused solely on helping our clients. We began in 2001 with a credit platform we leased from a third party. As we thought about our vision, we created different ideas in which credit could be used to increase our client’s business. This led to ideas on how we could help our loan officer clients help their own client’s, the borrowers. It led to ideas in which credit could be used to increase our client’s word of mouth business from referring sources and previous borrowers. The led us to create Funding Suite, and in turn the concept of credit proofreading, which we believe to be the most powerful business building strategy a loan officer can use. And credit proofreading is leading us into new software offerings for loan officers that Cogent Road could never have anticipated just a few years ago.

Reflecting back on a weekend lived right out of the pages of Field and Stream, I realized how much we, as business people need vision. Perhaps for the first time I realized how contrary to nature a creative vision actually is. And likewise how difficult. Vision takes thought, and thinking may well be the hardest work a man can do. So it goes that I encourage you, wherever you find yourself right now, to begin creating. Begin the work of thinking about what you want to do and why you want to do it. Then by all means get to doing it. Break free of the reactionary nature of your industry, your competitors or even your own habitual way of looking at your business.

You possess what nature does not - the ability to create. Now get composing.

The other morning I read a story in the Wall Street Journal that reveals just how unsure people are about the relationship between their credit use and their credit score. Since WSJ was kind enough to post it on their free site, here’s a link to the story.

The problem I have with the article is that the casual reader is left feeling helpless, almost at the mercy of a random credit score attached to hit or miss credit card use. The fact is, many mortgage brokers use advanced credit proofreading software that can identify exactly where you may be going sideways with your credit use.

Don’t feel bad if you don’t know how your use (or non use) of credit cards is helping (or hurting) your credit score. How could you know? And for that matter, those that say they know are only guessing. Credit use is always considered in context of ones complete credit profile. This means that opening up a brand new credit card may help your score - or hurt it. It all depends on how many cards you currently have, how often you use them and to what extent.

The bottom line is that the impact of your present credit use on your credit scoring is complicated. But it doesn’t need to be confusing. I’m suggesting that the best time to select and visit with a mortgage professional is before you are ready to buy or refinance your home. Pick up the phone and talk with a few of them – find out what they know about credit scoring – and ask them about their technical ability to scan your credit files for errors. Can they detect the issues in the way you use credit that are hurting your scores? Can they offer suggestions to improve your credit use in order to strengthen your scores? And can they scan your credit file for data errors that may be unknowingly harming your credit score?

These mortgage professionals exist. I know, because more than 20,000 of them use our software nationwide to perform these services every day. A one hour visit with anyone of them may result not only I a stronger credit profile, but also in the best credit education you’ve ever had.

Why is credit proofreading needed?
When borrowers apply for mortgage loans, their credit files contain three credit scores, calculated by the credit bureaus: Experian, TransUnion and Equifax. The data used to calculate these scores is collected, managed and reported independently by each of these bureaus. Over time, these files gather corrupt, erroneous, outdated and otherwise harmful data that lead to inaccurate – and often lower – credit scores.

What is credit proofreading?
Credit proofreading is the automated examination of credit file data, supplied by the three major credit bureaus, to detect whether or not a credit score has been incorrectly evaluated due to errors within the credit file.

What errors does credit proofreading detect?
Two types of errors are spotted: credit data errors and credit usage errors.

Error Type #1:  Credit Data Errors
Creditors report payment history to the credit bureaus using data such as credit limit, credit balance, payment amount, current status and payment history. Computers read this data to calculate a credit score. If anything is entered incorrectly due to human or computer error, inaccurate scores may result.

Error Type #2: Credit Usage Errors
Credit usage reflects the way borrowers use existing credit lines. Since credit use is a factor in calculating credit scores, improper spending habits can lower credit scores. Credit usage is misunderstood because many borrowers have little awareness of how their credit use affects their scores. Credit usage activities that get factored into credit scores include the number of available credit lines, the amount of debt incurred or the balance on each credit line and whether a credit card is used too much or too little.

How can credit proofreading help?
Credit proofreading evaluates the accuracy of credit reports, identifies errors, estimates how many points each error is costing the borrower and lists specific actions that can be taken to correct errors. Results can typically be returned immediately, and most errors can be resolved within 72 hours. For borrowers with credit usage errors, mortgage brokers and loan officers who conduct credit proofreading can offer suggestions on how to alter credit usage habits to legitimately increase the credit score.

How is credit proofreading different from credit repair?
Credit repair companies falsely claim to clean up credit reports, for a substantial fee, so borrowers can get approved for auto loans, mortgages or insurance. These schemes do nothing more than dispute information, which borrowers can do for themselves easily and at no cost. Credit proofreading, on the other hand, evaluates the accuracy of credit reports and assists borrowers in correcting errors or changing spending behavior – at no cost to the borrower. Further credit proofreading analyzes the actual data within the credit file, something a borrower can not do without the help of a mortgage professional.

Where can borrowers receive this service?
More than 4,000 mortgage professionals around the country have automated credit proofreading tools to identify and resolve data and usage errors within credit files.

The next time you think about paying a credit repair service take out a $20 bill from your wallet or purse and put it in an envelope addressed to your favorite charity. Then pull out another $20 bill and mail it to your second favorite charity. Grab 10 more envelopes, 10 more twenty dollar bills and ponder ten more sources for your new found altruism. Do mail the envelopes.

Using a credit repair service may well cost you more than $500 in up front fees. Instead, I’ll show you how to do exactly what they would do for you for free. And faster too. Consider the $240 you’ve given to charity a chance to put 50% of the money you would have given to the credit repair firm to much better use. 

Let’s take the mystery out of credit repair right now. All a credit repair company does for you is dispute information on your credit report. This means they will tell the credit bureaus when information is wrong. Within 45 to 90 days, if the information really is wrong, then it will be corrected. That’s it. Ironically, in the time it takes you find and pay for a credit repair company, you could have completed the task with the bureaus yourself. And for free.

Credit repair companies prey on ignorance, on consumers that don’t know how to do what I am going to plainly show you how to do. Because the process seems difficult, and involves highly personal credit reporting information, consumers blindly trust these firms and unfortunately pay whatever they ask. The fact that some credit repair firms hide behind a lawyer title makes the process all the more deceiving. The most insidious aspect of this somewhat shady business practice is that the company implies it will somehow give you a better credit score than you rightfully deserve. This is a lie – and, regrettably is the biggest reason people throw lots of money at these firms.

Again, all a credit repair company can actually do for you is dispute wrong information in your credit file. And who knows whether something is wrong in your credit file better than you? Even if you hired a credit repair firm, you would still have to tell them where the errors are. Let me say here that some firms will suggest you dispute every derogatory item on your credit report – and make the lender prove whether its true or not. Don’t fall for this. Even if the lender doesn’t respond within the time allowed, the information will only be changed in the short term. (which renders the costly improvement effort useless). You see, the next time the lender reports to the bureau, your accurate derogatory information will reappear.

The really good news about disputing wrong information is that all three credit bureaus (TransUnion, Equifax and Experian) now use a free online dispute process – which means you can review your credit file line by line, search your file for errors and dispute any you find without picking up the phone or even mailing a single letter. The whole process takes a few minutes and costs a big fat zero. And you can do it once every single year – which, by the way, isn’t a bad habit.

To check your credit report for errors simply go to www.annualcreditreport.com where you can order a credit report for free once a year. Make sure you review all three bureaus since each is an independent company and any one of the three may be reporting your payment history in error. While reviewing the report, each bureau gives you the option to dispute information. Each uses a slightly different dispute method, but all are easy nonetheless.

When reviewing tradelines look for any accounts that are not yours. Keep in mind, some may report using creditor names with which you aren’t familiar, but you may well be the account holder. Look also at the inquiries – has a company pulled your credit without your permission. If so, you can get the inquiry removed. Look for balance on credit cards reporting incorrectly as well as high credit limits. Creditors are notorious for misreporting credit limits – and if they are reporting a limit that’s too low it may hurt your credit score. Ditto for balances reported erroneously high.

In the end look for anything inaccurate and use the online process to let the bureaus know about it. The bureaus will contact the creditor for you and verify if what you are saying is correct. At no cost to you, the bureau will update your file to reflect the accurate information. And, in addition to saving a lot of money, you’ll learn a lot about your credit file – which is a rather nice side benefit.

There is more, however. Technically competent mortgage brokers can make very dramatic and legitimate increases in your credit score in just a few days. I’ll blog about this later.

Initially this blog was intended for those who made a living originating mortgage loans. I’ve discovered however, that some readers are non-industry types, desiring simply to better understand the ins and outs of credit reports. Glad you’re here, and starting today I will included blogs about credit from the borrowers perspective.

I am not a mortgage broker, but as I work in the mortgage industry I know many both personally and professionally. As in any profession there are some well versed in the job, and others not so much. In a way, mortgage brokers are a bit like their professional cousins, the real estate brokers, in that when real estate is booming everyone wants to be one. Know up front that newbies in the mortgage business fail because they try to maximize their own earnings (commissions) up front. The good ones understand that helping you find the best (lowest cost) mortgage today, means additional business from you (and the clients you’ll refer) in the future.

And that’s the rub. Good mortgage brokers can save you money, a lot of money, during the course of home ownership. I’m often surprised by the number of people who tell me (smugly and in a way that implies they are letting me in on a secret I’m not quite worthy of hearing) how they always go directly to lenders to save money by cutting out the middle man.  Their logic breaks down because mortgage brokers are not analogous to typical retailing middle men. So whenever one of these jaw waggers corners you and starts spouting mortgage buying strategies, just remember this – mortgage brokers don’t cost you money, they save you money.

The mortgage broker makes money in two ways. First, they’ll ask you to pay them loan origination fees. This is money you pay during closing which amount is based on the size of your loan. You need to know that you should never agree to origination fees. Its kind of like agreeing to put money down when you agree to lease a car. They may request it, but just say no.

Instead let the lender pay the mortgage broker for you. Lenders generally quote the mortgage broker a wholesale interest rate which will be a bit lower than the rate your mortgage broker quotes you. The higher the rate the broker can get you to accept, the more he or she makes. Fine, we’re all capitalists after all, but simply do your due diligence and compare loan rates and programs with others and you can ensure a good deal. Some brokers, the good ones, aren’t greedy – and will present you a very attractive program. By comparing rates and terms you’ll quickly identify the best offers.

Brokers can save you money because they shop multiple loan sources for you. Many lenders do nothing but originate mortgage loans through mortgage brokers. Since these lenders have low overhead (no branches, no tellers, no mortgage sales people) they can often price lower than the direct lender even when using an independent mortgage broker to originate the loan. And the good brokers get very attractive wholesale pricing, which ultimately saves you even more.

In the future we’ll talk more about mortgage brokers, they other ways they help and how you might select a good one. But for now, just realize that you should talk with a professional mortgage broker before you make that offer on the new home.

And, yes, we’ll talk about credit too.

I’ve got a headache. Literally.

In a mortgage market that is arguably one of the most difficult we’ve seen in decades, you’d think today’s mortgage originators would use every available resource to increase their applicant’s qualifying ability. Too often however, they do nothing but order a credit file, glance at the scores and decline the applicant.

[Head throbbing]

For the past six months I’ve been talking with broker after broker in webinars, on the phone and via magazine articles about the simple and very real fact that FICO is punishing applicant credit scores because of errors and issues in their credit files. I could say the same thing this way: “Don’t trust the credit scores on your applicant’s credit report, their probably lower than they should be”.  Yet in all this, it seems I’m the only one that’s learned anything and that being how true the saying, “old habits die hard”, which is to say they don’t really die at all.

Ok, so I’ve given my self a headache by beating my head against wall after wall – but I’m amped up on Advil, so here I go again. Mortgage qualifying depends (to a great extent) on the credit score. While the paper credit report reveals your applicant’s current credit scores, it doesn’t reveal the data used to calculate those scores. The credit report is a composite (merged data from three different sources) which makes it near impossible to understand how the account tradelines relate to the credit scores. But what we do know is that over 70 percent of the time credit scores are wrongfully lowered because of bad file data or the applicant’s improper use of available credit.

So what to do? Since the odds are that the scores you see on a printed credit report are lower than they rightfully should be, it would be helpful to know A) what the scores actually should be and B) what issues need be corrected. You can pour over the paper credit report for hours on end and never answer any of these questions. But, run the file through some good credit proofreading software and you’ll get your answers instantly. You see, you need software to sift through the data solely from TransUnion in order to understand where errors are pulling down its score. Ditto for Equifax and Experian. You can’t use the merged tradeline data in a printed report since it may be a mash-up of data from all three sources. When it comes to qualifying, paper credit reports aren’t enough.

The ironic thing about this… and perhaps the root cause of my headaches is that credit proofreading software doesn’t cost anything since these tools come free when you purchase a paper credit report. All it requires is a change of habit. Most mortgage originators connect to their credit agencies through loan management software like Calyx Point or Encompass, which only pass through a paper (PDF) credit file. Left behind are all the credit proofreading tools that can help them increase file accuracy and raise credit scores. This is the habit that needs breaking. Instead, order the credit file directly through the credit agency’s software so that you can see the true qualifying potential. Then retrieve the existing file into the loan management software (rather than ordering it). There is no extra cost to do this – and it doesn’t add much time to the process. It will however, help you qualify significantly more applicants.

I happen to work in the mortgage industry, a space dominated by large, buttoned up, bureaucratic competitors. And over the past five years I’ve realized that most of these large companies have a tough time getting out of their own way.

The idea that the large company’s suffer from their own inertia began to bubble up about three years ago as we worked in partnership with one of the industries largest organizations. (For confidentiality reasons I’ll call this company AIG). My partner and I developed a business process that could effectively replace the need for physical appraisals, yet guarantee that the value of the residential real estate collateralizing a mortgage loan equaled the sales price. Without getting technical, suffice it to say we used fancy mathematical formulas that could measure risk – and then price an insurance policy accordingly.

It’s a simple, strait forward concept. Why use an appraisal, which after all is simply a personal opinion of collateral value, when you could get an insurance policy guaranteeing the value in seconds. When you consider that it costs only 50% of typical appraisal prices, that there is no cost unless the loan actually closes, and there is no valuation risk it seems like a no brainier.

I then set out to find a large, well connected company to sell this product for us. After several phone calls and preliminary discussions a division of AIG known for selling mortgage related insurance products signed an agreement to become Cogent Road’s sales agent. As a small mortgage technology firm, I believed we needed AIG to get an audience with the large mortgage securitzers which would be most concerned that the collateral backing up their investments was properly valued. I believed large companies only buy from large companies.

We came to AIG with a turn key business process, and the complete software solution needed to execute. All AIG had to do was sell it. Instead, they began ooze bureaucracy into every nook and cranny of the project. Its not their fault really, its simply that they were doing what big companies do…which is cranking out an endless stream of meetings. And meeting meant more interal work (called “action items”) and pages of unnecessary documentation (called “business case studies”). Before they could sell they decided the software should be modified a zillion different ways – and everything integrated with their own client billing system. Ok, fine. We did all that.

Then we had to have more meetings with additional (more senior level, presumably) managers who had no idea what the product even was. However, they knew enough to demand more changes to the software that again we believed were baseless and entirely unnecessary. But fine, we agreed to that too.

And we spent almost a year ironing out a contract with nary a prospective client in sight. AIG demanded what large companies demand and we conceded what smaller companies concede. In the end we had a one year sales agreement and an equitable financial distribution. AIG would get the product introduced to the many different lenders they assured us were practically tripping over themselves to get started. Cogent Road would provide all hardware, software, billing and collections. It was time to sell.

But the selling never happened. In fact, nothing ever happened. During our initial couple of conference calls we realized the big company didn’t really understand what the small company was offering. Slowly, it dawned on us that if they didn’t understand it they couldn’t sell it. And they didn’t. The year came and went and we never heard a word from them. In the end, they never even called us.

Perhaps its my fault because I picked the wrong partner, who knows. But, as I write this I am sitting on a plane en route to a sales meeting with one of the nation’s largest mortgage securitzers. My advice to the smaller company with a good idea; think twice about enlisting a partner to sell it for you. If its your idea, you can communicate its benefits better than anyone. Be confident and start selling.
 

Last week, during some quick research for an article I was writing, I came across a 2004 article posted on CNNMoney.com which stated 25% of credit files contain errors serious enough to decline a loan application. 

My last blog revealed that “credit use” errors can harm a consumer’s loan chances. I define, “credit use” errors as the multitude of ways people use existing credit cards that unknowingly lower their FICO scores.  The type of credit file errors we’re discussing today have nothing whatsoever to do with the person affected – yet can be financially devastating.

If you could dissect a credit report the way you dissected a frog in biology class, you’d quickly discover that each credit report actually contains thousands of data elements that come from three different companies. These unrelated, disconnected companies are TransUnion, Experian and Equifax. Each company performs essentially the exact same service, compiling loan and payment history on every consumer in America. Ironically, three companies exist because no single one can be depended upon to supply accurate data. This means that the typical credit report actually blends or merges the data from these three different companies to supply (ideally) the most accurate picture of the consumer’s payment history. The silent message here is that these companies make mistakes.

By mistakes I’m speaking of incorrect numbers. Bad data. Outdated information. These are the same mistakes that CNNMoney describes in its 25% error rate. And don’t forget, these are serious errors…large enough to cost the consumer a loan by damaging the credit score.

Last time I checked 25% means that one in four of your loan applicants has a big problem. And this group isn’t helped by the fact that a mortgage originator can’t even tell there’s a problem by looking at the paper credit report. The reason? The credit report reveals a single tradeline which is a merged expression of the data from three companies. And, here’s the kicker, the credit score has no bearing to the tradelines you see on the credit report.

TransUnion, Equifax and Experian each calculate a credit score based on their own data.  Let’s assume that all three companies are reporting a ChargeMore credit card for Jeff. The credit report reveals a single tradeline showing that Jeff has never been late, has a high credit limit of $10,000 and carries a balance of $2,000. Everything looks good to both Jeff and his loan officer. Yet, behind the scenes something altogether wrong occurred. While Equifax and Experian both report the ChargeMore card correctly, TransUnion data reflects an outdated card balance of $9,800, in effect reporting a maxed out credit card. Accordingly, Jeff’s TransUnion score reports lower because it was calculated using an incorrect balance.  Since the credit report looks fine, its not possible to see the bad data that lowered the TransUnion score, and Jeff pays the price when qualifying.

The good news is that it’s now possible to prevent these situations using free software tools supplied by your credit reporting agency. Before taking the printed, paper credit report at face value, this software does a quick, cost free data scan to ensure no errors exist. Most software can not only identify any errors, but can even reveal how many points you’re losing as a result. Your credit agency can fix most errors without any effort on your part in less than 72 hours. I’m still puzzled why most mortgage originators don’t understand this. The vast majority read a paper credit report from within their LOS system, and never even realize credit error detection is even possible, let alone free and immediate.

I’m hopeful you’ll be different, that before you qualify your next applicant using a paper based credit report, you’ll consider it may very well contain serious data errors. Why let a TransUnion, Equifax or Experian mistake cost your client a loan.

This morning I led a seminar for mortgage brokers and loan officers that introduced the concept of Credit Proofreading. Afterward I was even more convinced that Credit Proofreading is a big opportunity. Not only can it be used as means of positioning brokers as credible financial consultants, but credit proofreading may be one of the best (and lowest cost) referral building strategies I’ve ever encountered.

Credit Proofreading simply means using computer software to optimize a credit profile for borrowing strength. It means reading the data in the profile and optimizing it in these three ways:

1. Optimize the way your applicants use their available credit
2. Optimize the accuracy of your client’s credit profiles
3. Optimize the file for underwriting engines

For today let’s look at how and why you would optimize your borrower’s credit usage.

The ways your applicants use available credit are a significant factor in credit scoring. The FICO score weighs the number of open accounts and may ding the score if they have too many or even too few. Another factor FICO considers is whether your client has too much usage on one credit card and not enough on another. It even scores based on whether there is not enough use on specific cards – or too much.

The difficulty here is that no borrower really understands how to use credit correctly. How could they learn? Consequently, people make seemingly good short term financial decisions, only to drain their credit score in the long term. Here are a couple of real world examples.

Let’s assume that Tom and Tracy are a young, financially savvy couple. They understand stocks and invest regularly, and when possible enjoy saving money. One day Tom and Tracy go shopping and upon checkout are offered an immediate 15% savings if they will simply open up a credit account with the store. They agree and leave the store having pocketed $52. What they don’t know is that their new credit card account, with a limit of $400 and a balance of $350, has just lowered their credit score by more than 20 points.

When Tom and Tracy get home, they see a letter in the mail offering 0% financing for any transferred balances. Realizing they could save hundreds in interest payments, they get the card and roll over their balances. Once again, they have made a good short term move that inadvertently harmed their credit score.

Perhaps we should consider their neighbors, Max and Marti. This couple realizes the importance of good credit and would one day like to purchase a new home. In an effort to protect their credit score the primary credit card used is an American Express card since it must be paid off each month. They’ve also worked diligently to pay off all their other credit cards, which now maintain zero balances. They’ve made seemingly sound financial decisions that have unknowingly wreaked havoc on their credit scores. 

Can you see the opportunity here? If potential borrowers have not learned to used credit properly, (and I’d argue that they have not), they can not know if their scores are being negatively affected. As a mortgage professional, wouldn’t it be helpful to suggest changes to your borrower’s credit use – and then see a healthier, higher credit score in just three days.

This is the first step in effective credit proofreading. And it’s as simple as looking at a credit report using credit proofreading tools. Immediately upon pulling credit you can see how many points are being lost due to poor credit use. In seconds your software generates a step by step plan for your borrowers that details strategic payments to specific accounts, whether money should be transferred from one account to the other or even if new credit accounts need be opened.

After your borrower completes the plan, the higher score resulting from optimized credit use can be obtained in just three days. 

As I prepared a blog to continue the theme of credit proofreading I thought it might help to lay a little groundwork. Without it, I might lose some mortgage originators from the conversation before it even began.

Credit proofreading simply means computer analysis of a credit profile to ensure its optimized for borrowing strength.

Not to sound simplistic, but remember that  a credit profile is not a credit report. The traditional, paper credit report is actually a grossly simplistic representation of the data within your borrower’s credit profile. The fact that you are looking at a merged credit report should clue you in to the fact that the tradelines you see can’t show you the whole picture. Three lines of data have been “merged” into one.

It wasn’t that many years ago (I’m talking the early nineties) when mortgage professionals received credit reports via fax several hours after the request. The credit data from three sources was merged and organized on paper in ways underwriters could understand. That’s right, actual people reviewed these paper reports tradeline by tradeline to determine a borrower’s eligibility. Laying out the data on paper was the best solution technology offered at the time.

But remember, we are talking about data here. Lots and lots of data, which when  combined create our borrower’s credit history. Today’s mortgage brokers have become so accustomed to the old paper format they’ve lost sight of the data behind it. And they’ve forgone the business opportunities inherent in those data.

Need some examples? For starters, a majority of credit reports get reissued to Fannie Mae, Freddie Mac or some other automated underwriting system. These systems read data – not paper. How can you tell by looking at a paper report what the underwriting conditions will be? Here’s another one… how can you tell if there are reporting errors that may be wrongfully lowering the credit score? There are more, but my point is that looking at paper will only tell you so much. And not very much at that.

I realized brokers don’t understand this when I discovered that most of our mortgage clients spend their entire loan processing lives in their LOS (loan origination systems) like Calyx Point, or Encompass. And they do so because these systems accept a paper based credit report directly into their loan file. They are so accustomed to manually studying paper credit reports – the idea of using computers to assist them in their analysis never even occurs to them.

I’ll get on my soapbox and say (annoyingly loudly) that you’ve simply got to get out of your LOS system and start analyzing credit profiles. Failure to do may end up costing you loans and referrals. Instead, let specialized credit management software help you analyze the deep data elements in a credit profile. You’ll then discover things about your borrower that a paper credit report could never reveal– things that can help you close loans you’d otherwise not. Software can tell you if credit scores are held down by outdated or blatantly wrong information in the profile. You can even see what Fannie Mae or Freddie Mac will think of the file – before you pay to run it through their systems. You can even discuss a credit profile with your clients in ways that will teach them how to use debt in ways that can maximize their scores.

This is serious business, and mortgage originators that get it (and I know they exist because I’ve talked with them) are closing more loans and increasing client loyalty. The average consumer understands the financial importance of their credit profiles. The new breed of mortgage originator understands that credit analysis tools can help protect their clients credit health and optimize scores. They’ve positioned themselves as  credit profile experts with the technical competence to put their clients in the best loans.

These credit proofreading tools exist – and every one I’ve discussed is free. You just won’t find them in your LOS.