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.
Posted by Caped Crusader 