From Application to Approval: Tracking Credit
Score Drifts
Description
The purpose of this study was to understand how credit scores “drift” or fluctuate between the initial credit pull when a consumer is applying for a mortgage and a subsequent credit pull generated within a month of the first pull.
Methodology
Xactus conducted an extensive review of approximately 1.2 million credit reports and scores across eight different lenders. Using Tri-Merge credit reports ordered between March 1, 2023, and February 29, 2024, Xactus analyzed the scores from each bureau taking the median of the three scores to represent the Tri-Merge score and used a unique encrypted borrower ID. The Tri-Merge credit reports were analyzed based upon each unique borrower’s highest and lowest credit score and the number of days between each pull. Only unique borrower IDs with multiple credit score pulls within a 31-day period were included.
Note: If more than two credit reports were pulled, only the highest and lowest Tri-Merge credit score were used. The outcome of each application and impact of rescore assistance were not factored into the analysis.
Key Findings
▪ While approximately 42% experienced a score change, only 11.75% of the scores saw a variation of +/- 20 points within the one month timeframe.
▪ Roughly 58% saw no change in the credit score regardless of the days apart.
▪ The majority of consumers’ scores that did change (approximately 64%) improved over time.
▪ The higher the initial score, the less the score changed during a 31-day period.
▪ Lower credit scores were more likely to change with more time.
Results
In general, Xactus did not see much score variation in the first week. However, as time went on throughout the month, approximately 42% of borrowers experienced a score change. Nevertheless, only 11.75% saw a variation of +/- 20%.
Of the ~1.2MM Tri-Merge credit reports analyzed, roughly 31,000 borrowers had additional scores on separate days within a 31-day period. Of those Tri-Merge credit reports, roughly 18,000 (~58%) saw no change in the credit score regardless of the days apart. Our findings revealed that score variation does not materially begin to change until the 7th day, and the variation trends became greater each subsequent day.
Distribution of Change in Credit Scores by Days Apart
Using the same population of 31,000 borrowers with additional scores on separate days, ~11.75% saw a variation of +-20 points.
Distribution of Change in Credit Scores by Days Apart With +/- 20-Point Variance
In the industry, bins (or credit score ranges) refer to groupings to organize data for analysis. This helps mortgage professionals understand how credit scores change over time and across different score ranges. The median score variation is illustrated in the graphic below by the maximum tri-merge score bins and days between credit pulls. The lower credit scores bins experienced more volatility where the scores changed earlier and more frequently than the higher score bins. The median score difference/variation also increased as days between the credit pulls increased.
The findings revealed that the majority of consumers’ scores improved over time. The higher the score, the less likely the score changed much in a 31-day period. Lower credit scores were more likely to change with increased time.
Median Score Variation by Maximum Tri-Merge Bin and Days Between Credit Reports
Better With Age
For the population of credit pulls with multiple scores and a score change, 64% resulted in a higher score on the subsequent pull. Only 15% of the total population received a lower score on the subsequent pull; and only 3 - 4% resulted in a score that was 20 points lower than the borrower’s initial credit pull. The median score of those that changed trended higher the further apart from the initial credit pull. The higher score bins were more likely to decrease, and the lower-tomid score bins were more likely to increase.
Count of Changed Scores by Amount Changed
For the population of 42% where scores changed, the scores generally trended higher as time went on.
Median Score Change by Days Between Credit Reports of Changed Scores
The majority of borrowers within the 500 - 740 credit range saw their scores increase by 1 - 12 points. The reason some buyers with higher credit scores saw a slight dip in their scores may be due to the hard inquiry on their credit which can bring a score down nominally.
Therefore, if you are using a soft pull initially, you may see less change or more upside when a hard inquiry is pulled later in the mortgage process.
Median Score Change by Tri-Merge Bin of Changed Scores
Roughly 90% of the Tri-Merge credit reports analyzed fell above a 620 bin credit score, where the median change in credit scores remained negligible within a seven-day period.
Distribution of Overall Credit Scores by Bin
Final Thoughts
The results of this study show that lenders like you may have options in your credit ordering process, such as a Xactus’ PreAppX soft pull, which may provide you with a competitive advantage without sacrificing your portfolio to triggers.
Let Xactus help identify opportunities for a more efficient and cost-effective workflow. We can provide insights and guidance on where there may be gaps and areas for improvement. For more information, reach out to your strategic account manager today.
About Xactus
Xactus is the leading verification innovator for the mortgage industry. The company has over 6,500 clients ranging from the largest bank and non-bank mortgage originators to credit unions and mortgage brokers.
Xactus works closely with its clients to digitally integrate a 360° approach to verification across their workflows. As a result, lenders can easily access the technology necessary to meet consumer demands for a modern mortgage experience with industry-leading speed, reliability, and accuracy – while also closing more loans more quickly with greater profitability.
370 Reed Rd., Suite 100
Broomall, PA 19008
(888) 212-4200
info@xactus.com
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