As seen in magazine, November 1, 2006

Credit Score Tune-Up

Like tweaking an automobile engine to improve its performance, experts say credit scores can be tweaked to help your borrower get an improved rate.

By Georgia Steele

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Credit service companies using online simulators can help mortgage originators use the credit qualifying process to increase their business by demystifying and enhancing credit scores for consumers. And by making the credit qualifying process more client interactive, originators can close more loans, build relationships and position themselves as trusted advisors.

Until recent years, credit-rating agencies withheld credit scores from consumers, although the "secret rate," ranging from a low 300 to a high 850, is the key borrowers need to qualify for a loan as it represents the consumer's creditworthiness. The credit rate number assigned to consumers determines risk and the price of a loan.

When access to credit scores allowed consumers to move one step closer to financial empowerment, real control could be experienced with access to simulators, which allow them to see how different financial decisions, such as paying down balances on credit cards or paying bills on time consistently, impacts the initial credit rating and can alter the cost of a loan. In September 2000, a small, innovative software developer, CreditXpert Inc., created an accurate predictive credit-scoring tool and pioneered the first credit analysis services to challenge FICO scores.

Using a technically advanced hybrid of artificial intelligence, statistical techniques and analytical methods, CreditXpert provides lenders and brokers with smart products and services, including a new simulator by which they can make highly accurate and informed decisions. Not available to consumers directly, for the most part, the company makes them available to credit service companies and originators. It's a tool brokers can now use to draw customers to them for the opportunity to use the simulator to improve their credit scores. By making hypothetical financial decisions such as payment of all bills on time for one month or reduction of credit card balances to half of their rate limit, those actions placed in the simulator's advanced projections can show how each decision effects their credit score.

David Chung, interim president of CreditXpert and one of its founding members, says some results may be surprising. They could produce enough change in a score to qualify for a loan at a better rate. Other decisions may prove of little value but save borrowers time by scuttling that approach and choosing a different strategy.

"What's really missing in today's thinking," he says, "is understanding credit as part of your assets and what you do with it does make an impact."

"For instance, you might want to buy a car before you buy a house because the car payments would produce a record of payments that would lower your mortgage rate in future."

Mr. Chung is confident the company's products and services will help brokers close more loans, establish relationships with more customers and build repeat business by using the credit process to help their customers get the loans they need.

A mechanical design engineer for years in research and development departments, he got into financial services by going to work for a friend as the project manager for an artificial intelligence endeavor for banks. The experience taught him and his two founding partners at CreditXpert how dependent financial services are on credit scores, yet how little they are understood or even less, explainable. Most lenders were too puzzled by credit scoring to figure out ways of improving them for borrowers and qualifying them for loans.

By positioning CreditXpert as a service provider to lenders and brokers, they could help them understand and challenge the credit process to close more loans for consumers and improve their business.

He described how CreditXpert came into one company and gathered up the remaining files for the month, reworked them using their own products and were able to close an additional 18 loans that month. Once the company saw and learned how they could do the same, their closings rose between 20% and 30% each month.

"Lenders can swiftly address all key causes of inaccurate scores." -David Chung, CreditXpert Inc.

A quick product list includes CreditXpert Detective, which instantly identifies incorrect, missing and outdated information. CreditXpert Essentials lets consumers know what their credit quality is, how it compares to others and which positive and negative factors are impacting it. The What-If Simulator lets users see what is likely to happen before they take action. It can be used to predict results, develop plans and make informed decisions.

The company's Three-Bureau Comparison is the essential analyzer of the individual report data from the three major credit bureaus and Credit Assure automatically pre-scans credit files for opportunities to raise credit scores based on the accuracy of credit management updates.

Mr. Chung says he is "very excited about Credit Assure," launched in April by the privately owned company based in the Baltimore suburb of Towson, Md.

Credit Assure will have a serious impact on technologies of credit optimization and accuracy scanning. It combines all of it (CreditXpert products and expertise) together and will be a free enhancement integrated into a platform that performs due diligence on consumer credit reports, alerting brokers and borrowers to potential issues that may be artificially depressing an applicant's credit scores or providing assurance that the credit scores are sound.

"Because it operates in the background of the loan origination process, brokers and lenders need only glance at the Credit Assure results within the credit report to see either reassurance that a file contains no significant inaccuracies or missed opportunities, or an indication of the number of points potentially available. It may read credit score 600+32, meaning a possibility of gaining 32 more points on the borrower's credit score is now possible.

"The analogy I use is it's like your virus protector. It's there letting you know your system is safe or alerts you to trouble." Credit Assure performs the same sentry duty on a user's credit scores, alerting them to any movement or potential for movement.

"For the first time, lenders can swiftly address all the key causes of inaccurate credit scores, from credit utilization levels to inaccurate data in the credit file. What's more, lenders can automatically scrutinize the credit file without slowing down the loan application process or incurring major expense.

"By using proprietary technology based on advanced statistical techniques and analytical methods, Credit Assure provides a powerful new way for lenders, brokers and credit service providers to attract, engage and retain customers."

Asked about new Americans and emerging ethnic populations with little or no credit history but not necessarily cash poor and how they might fit into CreditXpert's range of products and expertise, Mr. Chung says he is well aware of this growth market and its value to brokers who want to build a rewarding niche market in those communities. Helping people reach their goal of homeownership he finds admirable. It can also be a rewarding market niche where sincerity, trust and professionalism are repaid by word-of-mouth referrals and repeat business.

For brokers interested in building relationships in these markets, he has two strong recommendations. Borrowers with cash can most quickly enter the nation's credit system with purchase of a secured credit card. And second, brokers and borrowers should acquaint themselves with the nontraditional credit bureau PRBC, which has a Web address of http://prbc.com.

PRBC has a community development mission, does not charge consumers a fee and its mailing lists are not sold. It is partnered with the National Association of Mortgage Brokers, the National Credit Reporting Association, AccountNow Pay Anyone Bill Pay Service, Prudential Action Real Estate, Luxor Technologies and a host of other reputable and nationally recognized associations and product/service providers.

The PRBC acronym once stood for Payment Reporting Builds Credit. But over time, as the credit bureau provided more service choices and tools to demonstrate the creditworthiness of rent, utility and other bill payers just as homeowners do with mortgage payments, PRBC now stands for Pay Rent, Build Credit.

CreditXpert products and services are offered to consumers through credit reporting agencies, consumer finance information providers, brokers and lenders.

In May, SharperLending LLC, Spokane, Wash., a provider of a secure Web-based platform that enables lenders to order, store and manage products and services from multiple vendors at a single point of entry, partnered with CreditXpert Inc. to offer its users Credit Assure, a loan closing software tool that automatically pre-scans credit files and identifies opportunities to raise credit scores based on credit data accuracy and credit management. SharperLending is the first bundled services platform allowing lenders access to Credit Assure to quickly and efficiently perform due diligence on all credit reports.

"We were impressed with the optimization and simulation technology Credit Assure offers as well as its ability to identify opportunities for restoring artificially low scores," said David Black, president of SharperLending.

"It will be imperative to create value-added relationships." -Kelly Gontarski, Advantage Credit

The partnership, he said, "gives our customers dynamic auditing capabilities that can be used to ensure quality originations. Additionally, it aligns with our commitment to give SharperLending users a single point from which they can obtain all the information they need, from credit to compliance, to close loans more efficiently and faster."

Mr. Chung pointed out, "In an increasingly automated industry, the accuracy of credit reports are seldom questioned since scrutinizing individual credit files has been time consuming and difficult. Our partnership with SharperLending now enables our users to quickly identify opportunities and achieve optimum bottom-line profitability by approving more applicants, making better offers and closing more loans."

Kelly Gontarski, vice president of marketing for Advantage Credit, Penscola, Fla., remembers the first face-to-face meeting of the two companies' work teams.

Mark Simms, president of Advantage, had joined the company a few years earlier with the goals of implementing stronger systems, increasing productivity, lowering costs and providing a structure for future revenue and profitability growth. That was in 2000. The market for credit reports was growing fast between 2000 and 2003 due to interest rate decreases and by 2003 Advantage Online was ready to launch a new generation of credit products. CreditXpert's score improvement report was sure to be one of them but it had other products of interest to Advantage as well.

"I remember when we chose CreditXpert three years ago," Ms. Gontarski said. The two groups clicked, recognizing in each other the same young energy, looking at new ways of achieving goals. And these were the "little guys" who were challenging the traditional credit scoring system, but "had the financial savvy" to understand the "secret sauce recipe" of credit rating and a method for improving it to close more loans.

"There was just a lot of synergy between our two companies." She also noticed "they always tried to listen a lot" and how "their What-If program gave brokers so many opportunities, so many options to for improving credit ratings. It can help a benchmark of 540 move up to a 625 in rating. An increase of 25 points can save you $10,000 a year in mortgage payments. And that kind of support for the customer creates an affinity with that broker, a trust factor that will build future business. And you're going to see in the future of this business that it will be more imperative for brokers to create value- added relationships.

They're going to have to work for it and steal market share." At the very least, she says, "everyone will be wanting to close those loans already in the pipeline."

Credit processing and the ability to re-qualify borrowers by improving their scores will play a critical role, she says, in closing loans and sustaining and growing market share.

© 2006 Broker and SourceMedia, Inc. All Rights Reserved.

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