Spooky season is officially upon us, and while Halloween’s ghosts and goblins are scary, there’s something even more frightening lurking in the shadows: the spine-chilling figures in your applicants’ credit reports.
From eerie errors to ghost-like credit invisibility, many aspiring homeowners’ credit reports need some TLC before they’ll be mortgage-ready. But fear not! Below, we’ll shine a light on these scary statistics and explain how you can resolve them proactively with your applicants.
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Stat #1: 34% of Credit Reports Contain Errors
Credit reports make up the foundation of applicants’ credit scores, so the quality of their data directly influences applicants’ mortgage eligibility. Over one-third of Americans’ (34%) credit reports contain inaccurate or outdated information, which can suppress their credit scores and constrain their financial opportunities.
As a lender, this statistic should scare you because it means that you may be losing out on business from creditworthy applicants. Fortunately, there’s a silver lining. By helping your applicants identify and dispute errors in their credit reports, you can earn their loyalty and expedite their home-buying journeys.
All you need is Certified Credit’s customizable credit reports. You can review these reports with your applicants to ensure they’re error-free. For reference, here are some of the most common credit reporting mistakes:
- Inaccurate personal information, such as names, addresses, phone numbers, and Social Security numbers (SSNs).
- Outdated account information, including mistaken account statuses, open dates, last payment dates, first delinquency dates, and authorized user data.
- Improper balance information, such as inaccurate balance sizes, credit limits, and credit utilization.
- Fraudulent activity, from credit accounts opened by another person to suspicious-looking transactions.
If you or your applicants uncover these errors, you can walk them through the dispute filing process. Once their credit reports’ accuracy is restored, you can use our Rapid Rescore service to ensure their updated data is factored into their formal credit score calculation.
If you want to go the extra mile for your applicants, ScoreNavigator can assist. This solution determines the best day of the month to pull your applicants’ credit reports to give them the best shot at qualifying for optimal rates and terms.
Stat #2: 17% of Americans Paid Their Credit Accounts 3 Months Late in the Past 2 Years
Payment history is the most impactful part of consumers’ credit scores, making up 35% of FICO’s calculation. As a result, recent late payments can have dire consequences on applicants’ mortgage eligibility.
Over the past two years, 17% of Americans failed to pay their credit accounts on time. Many of these consumers let these payments surpass the 90-day mark, exacerbating their credit score damage.
So, how can you help these applicants turn their scary credit situations around? Here are a few suggestions:
- Provide credit education – While most consumers understand that late payments have negative consequences, they may not understand the full story. For example, some applicants may not realize that the later their payments become, the more they bring down their credit score. Educating them on these details can motivate them to get back on track sooner than later.
- Leverage ScoreNavigator’s Manual Simulator – Using its powerful Manual Simulator, ScoreNavigator can show your applicants the best accounts to pay down first to create the fastest score improvement. This customized guidance can help them take strategic steps to improve their creditworthiness as efficiently as possible.
- Stay vigilant with Cascade UDM – Many applicants assume they’re in the clear once their mortgage application is approved. As a result, they may increase their debt or fall behind on payments before closing, not realizing the impact on their eligibility. Along with educating your borrowers about this risk, you can protect your business from unexpected fallout or repurchase demands using Cascade Undisclosed Debt Monitoring (UDM). This tool monitors your approved applicants’ credit reports continuously and alerts you of any signs that their creditworthiness may be at risk.
Stat #3: Negative Items Can Impact Consumers’ Credit Scores For Up to 10 Years
Poor credit management can haunt consumers for a long time. After all, it takes up to seven years for late payments, collection accounts, foreclosures, and chapter 13 bankruptcies to fall off their credit reports. Chapter 7, 11, and 12 bankruptcies last even longer – they can stick around for up to a decade.
Luckily, it’s not all doom and gloom. The impact of these derogatory marks diminishes as time goes on. According to FICO research, credit scores typically bounce back from these negative marks after the following amounts of time:
- New credit inquiries – 3 months
- Missed credit payments – 18 months
- Late mortgage payments – 9 months
- Foreclosures – 3 years
- Bankruptcies – 6+ years
No matter what skeletons are in your applicants’ closets, they can expedite their credit score improvement by taking the right steps. ScoreNavigator’s Mortgage Action Plan (MAP) can clarify these steps after conducting a detailed review of their credit reports. By sharing ScoreNavigator’s personalized action plan, you can speed up the improvement of your applicants’ credit reports.
Stat #4: 26 Million Americans are “Credit Invisible”
Like ghosts, “credit-invisible” consumers are often feared by lenders. That’s because they don’t have any recorded credit history with the major credit bureaus, leaving lenders in the dark about their creditworthiness.
Around 26 million Americans (11% of adults) currently fall into this category. You can help these consumers (and possibly win over their business down the line) by teaching them how to build credit from scratch using the following strategies:
- Using secured credit cards and credit-builder loans
- Becoming an authorized user
- Applying with a co-signer
- Reporting alternative credit history, including rent and utility payments
Want a ready-made resource to share with your credit invisible applicants? Check out this article: How to Build Credit with No Credit History
Stat #5: Identity Theft Happens Every 2 Seconds
While the internet has facilitated many incredible innovations, it’s also given rise to online identity theft. Identity thieves have unprecedented opportunities to capture and exploit consumers’ personal information using phishing attacks, data breaches, and other schemes.
Every two seconds, a new person falls prey to identity theft. Considering that nearly half (43%) of Americans haven’t checked their credit scores in the past year, this theft may go undetected for a long time.
Since identity theft is so prevalent, you should encourage your applicants to check their credit reports regularly for suspicious activity, such as unexpected dips in their credit scores or unfamiliar hard inquiries. Some other proactive measures to pass along to your applicants include:
- Exercising caution online – Despite the dire threat of identity theft, most people (87%) leave their personal information exposed online. Thus, it’s crucial to remind your applicants to exercise caution by creating complex passwords, enabling two-factor authentication, and limiting what personal information they share online.
- Leveraging credit freezes and credit locks – A credit freeze is a free service offered by the credit bureaus that allows consumers to temporarily “freeze” their credit reports. Similarly, credit locks are paid services that allow consumers to lock and unlock their credit reports in real-time. Both of these services can safeguard consumers’ credit reports from fraudulent credit applications.
Learn More: How Credit Freezes and Credit Locks Can Protect Your Score
- Setting up fraud alerts – Once a consumer has fallen victim to identity theft, they can set up fraud alerts with Equifax, Experian, and TransUnion. These alerts tell creditors to take extra steps to verify their identity before extending new credit in their name.
Stat #6: As of 2018, ⅔rds of People Had Their Records Hacked, Compromised, or Stolen
While you can teach applicants how to protect their credit reports going forward, that doesn’t erase the past. As of 2018, two-thirds of Americans had their records compromised or stolen by bad actors.
With this menacing metric in mind, you need to take mortgage fraud identification and prevention into your own hands. Luckily, we offer several comprehensive Fraud & Risk Mitigation tools at Certified Credit.
Our Flex ID SmartSelect Shield can verify critical details about your applicants’ personal information before you order their credit reports, saving you time and money. Meanwhile, our Wire Transfer Fraud Report can verify applicants’ bank information and vet settlement agents to ensure their transfer goes smoothly. We also have several robust reports to confirm applicants’ tax transcripts, SSNs, liens, and judgments.
Learn More: Mortgage Fraud Trends & Why It’s So Hard to Detect
Banish These Sinister Stats From Your Applicants’ Credit Reports With Certified Credit
From identity theft to poor credit management, many things can tarnish your applicants’ credit reports. By addressing these six spooky statistics with them, you can empower your applicants to overcome their credit score setbacks and bolster their mortgage eligibility.
Before you do, it’s important to ensure your mortgage lending business has the right tools to support this process. From ScoreNavigator to Cascade UDM, we offer all the tools you need to analyze and enhance your applicants’ credit reports at Certified Credit. Some of our other mortgage lending solutions include:
- Automated lead generation solutions
- Automated prequalification
- Automated credit supplements
- Property and valuation support
- Flood zone determinations
- Underwriting compliance
- Settlement services
Ready to lift the curses from your applicants’ credit reports? Schedule a credit consultation with Certified Credit today.
Sources:
Finmasters. 15+ Credit Score Statistics for 2024.
https://finmasters.com/credit-score-statistics/
Upgraded Points. 30 FACTS AND STATISTICS About Bad Credit & How It Impacts Your Financial Life.
https://upgradedpoints.com/credit-cards/30-facts-about-bad-credit/
NerdWallet. How Long Do Derogatory Marks Stay on Your Credit?
https://www.nerdwallet.com/article/finance/negative-marks-on-your-credit-report-how-long
FICO. Research Looks at How Mortgage Delinquencies Affect Scores.
https://www.fico.com/blogs/research-looks-how-mortgage-delinquencies-affect-scores
Fox Business. Someone Became an Identity Theft Victim Every 2 Seconds Last Year.
Exploding Topics. 30+ Identity Theft Statistics for 2024.
https://explodingtopics.com/blog/identity-theft-stats
Astra. 130+ Data Breach Statistics 2024 – The Complete Look.
https://www.getastra.com/blog/security-audit/data-breach-statistics/
