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Broker Survival Tool: Credit Optimization
By Alton Gary Simpson
Mortgage originators who don't use credit optimization software are placing themselves at a disadvantage according to David Chung, managing director of CreditXpert Inc., Towson, Md., a provider of personalized credit management solutions. The company's flagship offering is the CreditXpert Solution Suite, which is composed of credit analysis, optimization and simulation tools.
Mr. Chung noted that especially in the current market environment where underwriting guidelines are stricter and credit has tightened up considerably in response to the subprime crisis, the ability to help prospective borrowers raise their credit scores is definitely a plus.
"If you're not doing credit optimization as part of your day-to-day routine, you are really doing yourself a disservice," he said. "It's not the way to survive. Don't just duck and cover. Take a look at what's possible now, so that when the market does turn around - and it will turn around - you'll be in a leadership position in the marketplace and poised to accelerate out of the downturn."
He said that there are three main components to credit optimization:
• An accuracy assessment to identify incorrect, missing and outdated information.
• Credit maximization, which identifies legitimate ways to increase a borrower's score through credit management and behavior modification, i.e., paying down debts.
• Relationship management, where brokers work with consumers to put their credit maximization plans into action.
A press release from CreditXpert states that more than 25% of consumers can qualify for a better loan, 35% of what is normally declined can be salvaged and 77% of all consumers can potentially improve their middle scores. CreditXpert Solution Suite can help mortgage originators tap these potential borrowers by automatically scanning credit files for opportunities to improve credit scores. The software conducts an accuracy assessment within and across all credit files, and recommends a credit maximization plan. CreditXpert Solution Suite also contains a simulator to see the potential impact on credit scores before taking action, which allows users to better predict results, develop plans of action and make informed decisions.
Noting that anecdotally, he has heard that some lenders are now requiring credit scores as high as 680 to qualify borrowers, Mr. Chung said that everyone in the mortgage industry is under pressure from lenders on down to loan officers. "Everyone is feeling the pinch," he said. "The decrease in (loan origination) volumes has been hurting everyone."
The brokers' pain has been CreditXpert's gain. He said that demand for his company's credit optimization software has grown dramatically over the course of the past year. He explained that his company's business is countercyclical to the mortgage industry - as falling loan volumes places pressure on mortgage originators to produce or fade away, the demand for credit optimization products have risen. He also stated that not only is demand for CreditXpert Solution Suite increasing, but so is the demand for training on using the software to its fullest potential as mortgage originators angle for an even better competitive advantage.
CreditXpert Inc. just completed a three-part webinar series on maximizing the potential of the software in September and is preparing a new one for the first half of next year, along with a host of new products.
"We're really excited about 2008," said Mr. Chung. "I know that there aren't many people in the mortgage industry who can say that today."
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