tial borrowers possibly improve their financial standing by: l Removing derogatory information and accounts that were reported in error. l Updating an account that has been paid in full and closed. l Updating the status of a collection. l Updating a balance or paid-in-full status. l Updating an account to show that it was included in a bankruptcy.
With some industry experts predicting a
Footnotes 1—“Fear of Rejection Drives Almost Half of Today’s Potential Homebuyers Away From Housing Market.” PR Newswire. April 22, 2014. Source: loanDepot 2—“The Great Credit Divide: Millennials Struggle to Manage Their Credit While Boomers Express Confidence.” PR Newswire. Oct. 6, 2015. Source: loanDepot
Greg Holmes is national director of sales and marketing at Credit Plus Inc., a thirdparty verifications company serving the mortgage industry. Greg can be reached by e-mail at Info@CreditPlus.com. Jim Ryan is president of iQualifier, a service of Credit Plus Inc. iQualifier is an online program that features technology from CE Analytics and teaches consumers smart credit management. Jim can be reached by e-mail at GetSmart@iQualifier.com.
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n National Mortgage Professional Magazine n JANUARY 2016
How lenders should move forward
One of the most effective growth strategies for lenders to embrace is working with the applicants who have already reached out to them. Just because some do not qualify right out of the gate doesn’t mean they are unworkable. The tools available today can go a long way toward turning credit misconceptions into better financial decisionmaking, ultimately resulting in more mortgage loan approvals. They help reduce borrower acquisition costs and improve ROI. So, just like that neighbor with that great lawn, get out there and work with what you already have in your own backyard—your declined applicants.
Some scoring tools can simulate changes to a borrower’s credit file and predict the scores that may result from those changes. This innovative technology looks at the positive and negative factors influencing a borrower’s credit score. Then, it suggests actions that may positively impact their overall financial standing. The simulator demonstrates the impact that actions such as adding or removing accounts and correcting errors could have on the credit score—letting the lender potentially predict the results. Other scoring solutions come with credit experts who work directly with loan officers. They offer an in-depth analysis of each credit file and evaluate how various financial decisions may impact the applicant’s score and timeline. Personalized action plans are then created that the lender can review with their applicants, complete with specific, actionable recommendations. In fact, one such program randomly sampled declined loan applications that were rereviewed and found 83 percent of borrowers could have reached their goal. One of the newest approaches available to lenders is the establishment of a homebuyer’s club that gives declined applicants access to a credit management website which shows them how their financial behavior may affect their financial standing. It also provides applicants with a personalized action plan to help them better understand the connection between their financial decisions, credit scores, loan qualification and their interest rate. They even receive monthly credit reports to help them monitor their progress and monthly email notifications to help them stay on the path toward success. In addition, an online service is available which lets lenders view their applicants’ progress and monitor them every step of the way so they can help them meet their goals. By keeping an online eye on them, lenders can foster a relationship to help ensure their applicants turn to them when they are ready to buy a home. Lenders also benefit from this approach because it helps them improve the return on their marketing dollars by moving declined applicants back to their active pipeline. In essence, they are able to capture the money they would otherwise leave on the table when they reject an applicant.
slowdown in 2016, it’s time for lenders to get more aggressive with their marketing efforts. First, marketing materials should be audited to see if a change in messaging is warranted—one that acknowledges financial challenges and offers ways to address them. By taking an educational approach, especially where Millennials are concerned, lenders have a better chance of eliminating their misconceptions about credit and influencing their financial behavior for the better. Secondly, tools should be deployed to help declined applicants, especially Millennials, better understand exactly what their credit score means and the impact various decisions could make on their scores.