Watch Now: How To Turn Credit Into a Strategic Growth Engine

Transcription:

Rick Grant:

And welcome back. I’m Rick Grant, sitting now at the Credit Expert booth with Mike Darne. He’s the chief marketing officer for CreditXpert, and one of my favorite interviews. Mike, thank you so much.

Mike Darne:

Hey, thanks for coming by, Rick. It’s great to see you here.

Rick Grant:

Yeah, yeah. No, well, I’ve been seeing you everywhere. Big screens on both ends. You’ve been doing some interviews.

Mike Darne:

Yeah.

Rick Grant:

What’s going on?

Mike Darne:

So, I don’t know. I guess your guess is as good as mine. I looked up the other day and saw my big head up on a screen there, and so the MBA was just kind enough, I’ve done a couple of interviews with them recently and yeah, so it’s amazing to be out there, up on the big screen, over at the hub talking about what we’re doing so.

Rick Grant:

Well, somebody at MBA realizes what you’re doing is really different and disruptive, and so I want to talk about that a little bit. But first, what about the buzz at the show? Now you’ve been here on the booth for a day and a half.

Rick Grant:

What are you hearing? What’s the industry saying? What are you seeing?

Mike Darne:

Yeah. So I mean, Rick, you know this. We’re in a little bit of a free fall in the market. Right. And I think what we’re hearing is lenders are really adjusting to that. Right. So we’re hearing a lot of lenders talking about how they leverage technology like ours to be more competitive out there in this marketplace that we’re seeing. So a lot of great conversations, a lot of innovative lenders coming by. Those that are already using us, wanting to figure out how do they use us more? How do they use us more effectively? So great conversations there.

Rick Grant:

Yeah. Now, the new platform that you announced just a couple of weeks ago is going to make that a lot easier for lenders. Talk to us about that.

Mike Darne:

Yeah. So Rick, you know we’ve been around for about 20 years. We’ve got 60,000 users that use our platform every day, every year. And one of the things with this new platform is we’re making it easier for them to do that. And I think the biggest thing with the new platform, the tools that people have come to know CreditXpert for What-If Simulator, Wayfinder, credit assure, you kind of pull those off the shelf, right, when you need them. Right.

Mike Darne:

The new platform integrates credit much more strategically into a lender’s operations. Right. So making it so that they can institutionalize usage, they’re not pulling it down just when they need it. Right. So being able to see the credit potential of all their applicants as they come through is going to be a huge improvement. Some of the other things that we’ve really been thoughtful about as a company is once you have that applicant that wants to move forward, get their score up, we used to send them PDFs and they kind of go off into the ether. We’ve got a whole new interface for applicants where they can go in secure portal, see what they need to do. And as they’re checking those things off the list, the LO is able to see exactly what’s being done. We’re sending automated emails. So we’re making it easy for the lenders to keep in touch with their applicants and move them through the process.`

Rick Grant:

Wow. That is a significant change with how the industry normally treated credit. And so most LO’s that are watching this, they’re familiar with credit counseling, they’re familiar with credit repair.

Rick Grant:

You’re talking about something different.

Mike Darne:

Yeah. We get that question a lot. Right. So we get people coming by the booth. So you guys are credit repair. And I really like to differentiate. Right. And I think one of the ways to do that is to really kind of think about the end user, the applicant, and what tool would be relevant for them, right? So you’ve got credit repair, you’ve got credit counseling, and then what we do is we bring insights, right, data driven insights. And so when you talk about a credit counseling applicant, someone that might be right for that, that’s somebody that probably needs a lot more work on their credit. Right. It’s got a lengthier process, one on one, really kind of restructuring their financial life in some ways to get to a point where they could qualify for a home. And that’s going to be a lengthy process, and there’s certainly a place for that.

When you look at credit repair, that again, is probably for a smaller subset of the population out there that needs some help repairing some of those things on their credit file. What we do and how we differentiate is we are literally for anybody that is applying for a mortgage. Right. So whether you need help qualifying or whether in this environment where rates are going up, you want to be able to optimize your credit score such that you can qualify for a lower rate or get into a bigger jumbo mortgage or something along those lines. And so one of the things we produce on a monthly basis for the industry is called the Mortgage Credit Potential Index,

Mike Darne:

So what we do is we take the data. Right. So we see about 40 to 45% of credit polls that come through the industry. They come through our pipes every month. And so what we do is we report that out in a granular fashion, and we show lenders in the industry where that demand is coming from at each of the credit bands, the 20 point credit bands. And what we also do is we contextualize that. So we show what percentage of those can move up 20 points, 40 points. How many of those that initially would not qualify for an FHA loan, for example. Through the use of CreditXpert, could get there within 30 days.

Right now that number’s sitting at 53%. So that’s a big number. When you look up the other side of those that could benefit from improving their score such that they could get a lower rate, you’re talking 70% of the population under 760 could benefit from that now, which is really significant. So when you kind of stack us up against repair and counseling, repair and counseling, there’s a much narrower group that could benefit from that,

Mike Darne:

We’re literally talking 70 plus percent of people that could benefit from understanding the insights around their credit score and having those actionable insights where they can do something about that score in the moment.

Rick Grant:

Wow. But thinking about it from the LOs perspective in such a competitive market, what a tool to differentiate yourself from your competition.

Mike Darne:

And Rick, we’re starting to see that in this market. So one of the things that we just released a couple of days ago was what we’re seeing in that market. So traditionally, we’ve been used in the sweet spot of helping people qualify, get over that hump, but we’re seeing huge increases in usage in the upper band, those that are well qualified. In fact, I was surprised by this. We’ve seen a 20% year over year increase,

Rick Grant:

Wow.

Mike Darne:

In usage of our platform among those that are well qualified. Now, that’s also in the face of declining volume coming in the door. Right. So we’ve seen about 36% drops. I know lenders are seeing very similar drops year over year in terms of application volume and credit polls and whatnot. But what we’re seeing is that same drop, but we’re seeing a 20% year over year increase in that upper band usage, which to me tells me that lenders are starting to understand the power of credit and how that can be used to differentiate themselves, not only to just lock in those that are already in the door, but they’re using it proactively as well.

Mike Darne:

They’re using that as an opportunity to get people in the door because it’s an added service that they can offer.

Rick Grant:

Yeah. Yeah. And what a benefit in the competitive market. It certainly speaks to the fact that lenders are seeing this as a more competitive market. They know they need to innovate, and they’re innovating at the front of the process with credit.

Rick Grant:

That’s smart.

Mike Darne:

Absolutely. And we talk about that. Right. So you have people, and we did research, and I think I’ve talked to you about this before. We did research last summer, and we wanted to understand from those that had just gone through the mortgage process, whether it was a refi or purchase mortgage. And what we found is that people are thinking about how they’re going to finance that home well before they even start shopping for it.

Mike Darne:

Because they know they need to be prepared. Right. So if you think about having that conversation around credit early on, you’ve got an opportunity to make a real difference by the time you’ve put that offer on a home.

Rick Grant:

Now, I think you guys are way ahead of the curve. I know other people have thought about the importance of credit report and credit before, but they haven’t really looked at it from the data perspective. And your kind of a data science company. This MCPI, it’s almost like a sales forecasting tool if they use it right.

Mike Darne:

It really is.

Rick Grant:

That’s exciting. Now, what do they subscribe to that, they pay a fee every month or?

Mike Darne:

That might be an additional revenue stream for us at some point, Rick, but right now we give it away for free.

Mike Darne:

Right. And that was one of the things when I joined the company, I had this hypothesis, right, that those would benefit the most from improving their score were probably down on the lower end of the spectrum. I had this hypothesis that those up on the upper end probably were managing their finances and their credit really well, and that opportunity would taper off. But I found something completely different. That opportunity spanned the entire credit spectrum. And so what we wanted to do was we, with the MCPIs, we wanted to take that data and we wanted to put it out there in the marketplace. As you mentioned, there’s a forecasting element to this, right?

Mike Darne:

So if you believe the research that we did last year where people are thinking about financing before they actually put those offers on homes, or even start shopping for homes, you’ve got a leading indicator there. Right. Let’s call it maybe 60, 90 days leading indicators. You can kind of see where that volume’s going to come.

Mike Darne:

One of the things that we’re going to do, Rick, is we’re going to go even deeper on the MCPI in the coming months here. We’re going to drill down to zip code level data.

Rick Grant:

Oh, wow.

Mike Darne:

So we can start to see what’s happening in various markets within the country. So the idea is we want to put that out there. In fact, we actually invite people to say, Hey, I’d love to see something like this, right, because we want it to be useful for the industry so that they can start to think about how they incorporate credit into their process and how that might help them think more strategically about what they’re doing.

Rick Grant:

Absolutely. And in an environment with increasing inflation, homeowners and wannabe homeowners are under increasing pressure to keep their finances in good shape.

Rick Grant:

This could be a really useful tool to consumers who have no really other view into what this means.

Mike Darne:

You don’t. And the thing Rick, when you look at, you could obviously start to guess on, Hey, this is what might move my score up or what have you. But these algorithms are so complex, you could actually end up hurting yourself. You can say you know what? I’m just going to do this. I’m going to do a little bit of that. And what we do, I mean, over the years we’ve analyzed nearly a billion credit polls. Right. So it’s a sizable sample size there. We rely on data to tell us what needs to be done. Right. So with the new platform, not only will we show you what your potential is, and specifically what they need to do to get from point A to point B, but we’ll also show you the probability of getting there.

Rick Grant:

Wow.

Mike Darne:

Right. So in my opinion, as you’re applying for a mortgage, you don’t want to be making mistakes. Right.

Mike Darne:

It’s a competitive market for the borrowers as well, right, because they’re coming in. You need that house, or you want that house, you don’t want to be making mistakes where it’s going to be more difficult for you to compete out there in the marketplace. So I think that’s one of the cool things is as you start to think about this is the data driven nature of all of this, is that we should be able to know what to do. But some of the things that you may think about doing could actually end up hurting you. So our advice would be use data as your friend here.

Rick Grant:

Well, this has got to be one of the best examples of applying AI to the mortgage process. And I know lots of people have tried to put it in different places. We see some in QC, but this makes so much sense because you actually, you’ll see the results in 30 days.

Mike Darne:

You will. You will. And one of the other things, Rick, is that if you think about a lender and the relationship that they have with applicants and everything, what this does is this makes credit much more transparent. Right. Rightfully so, credit scores are these black boxes, right, of taking all this financial data and kind of crunching it down and giving lenders indicators.

Mike Darne:

But if you can be sitting across from an applicant and saying, look, I know you’ve been tracking your score on any sort of site, and you have a 720 in mind, and I’m telling you that the FICO score that we have to evaluate you on is 40 points lower. That’s a great opportunity for a lender to have that conversation with the applicant. It starts to build trust, it brings transparency, and it’s actionable.

Mike Darne:

It’s not just a, Hey Rick, we’re sorry, but this is the way the world works.

Rick Grant:

Right. Right.

Mike Darne:

We’re giving applicants, or we’re giving lenders the power to work with their applicants and have them do something about it.

Rick Grant:

What a great tool, especially in this market.

Rick Grant:

So I don’t know if I can ask you this, Mike or not. Some things may be secret, but,

Rick Grant:

What can you tell me about what we should expect out of CreditXpert next?

Mike Darne:

Well, I think, don’t want to get too far ahead of my skis, but there were some big announcements that were made yesterday around new credit models. So those are going to be really lengthy processes to implement. This is a very big industry, so it’s going to take time, but we’re ready to use those new models as they become implemented. But as I mentioned, we’re looking at new ways in which we can automate what we do, take decisioning out of the hands of individuals so that they don’t have to go and guess and move up and down on trade lines and what have you and tweak here, tweak there. We’re looking at applying AI to make it easier, giving different insights, making it easier.

So this is a big passion point for mine, and something that we’re going to be working on is your average person might do five mortgages on the high end in a lifetime. It’s a daunting thing. People don’t go around thinking about their credit all the time. So we want to make it easy for them to understand what do they need to do? What’s the impact of that? I think that’s one of the key things is oftentimes people kind of think of those three digit numbers as more abstract concepts.

Mike Darne:

But what is this going to mean? So we’re really going to be working to make this a great experience for applicants as well.

Rick Grant:

All right. So Mike, I’ve been seeing people go by the booth all since we’ve been talking. I know you got to get back to work, but if you have time for one more question, tell me about the conversations that are happening at the booth here today as the lenders come by and ask what were you doing.

Mike Darne:

Yeah. Yeah. No, I think what’s interesting is we’re having a couple of conversations. Right. People come by and we’ll ask them if they’re familiar with CreditXpert, and they’re like, no, I haven’t heard of CreditXpert. And we explain kind of what we do, and they say, well, is that anything, like What-If Simulator or Wayfinder? And that’s one of the things that we’re on. So we’ve got some very popular products out there in the marketplace that have not been branded as CreditXpert. And so they’re like, oh, I love you guys. I’ve been using… And so we’ve been having those conversations. And then as I mentioned before, we’ve been having a lot of conversations with lenders that are looking to use us more and more and in different ways. Right. So as I mentioned before, there’s been a lot, and especially when you look back on 2020 and 2021, lenders were back against the wall.

There was so much demand coming in. They were moving as quickly as they could to get those loans originated because the demand was there. And it was quite honestly, unprecedented demand. They now have time. Right. They now are focusing on a couple of things. They’re focusing on their lead resources. Right. So if you look at where leads are coming from, we’re in a purchase market. Reestablishing those relationships with real estate agents.

Same thing with the applicants, right? They now have a little bit more breathing room to be able to work with them. And if you think about the competitive nature of this market, they’re doing that because they need to, they need to work closely with those applicants so that they can get those loans closed. And the way they get those loans closed is putting the most compelling offer out there and showing that applicant that they’re actively working with them through that process to get them the best offer so that they can walk away and say, you know what? I feel really good about this. I know that I got the best offer because my LO worked really hard with me to get me this offer. Right.

Rick Grant:

That’s how you win referrals right there.

Mike Darne:

100%. And that’s going to happen. Right. So I believe there’s going to be a little bit of revolution here, right?

Rick Grant:

Yeah.

Mike Darne:

Because there’s more time. Consumers are going to be, I believe, smarter shoppers too. Right. When you’re looking Rick at these almost free money rates that we’ve become accustomed to, somewhere between a three and a quarter and a three and a half, hey, not going to make, but now when we’re bumping up against seven, it really starts to matter. It’s going to hit them in the pocketbook. So,

Mike Darne:

They’re going to be looking for ways to really optimize what they do.

Mike Darne:

And 150 bucks a month makes a huge difference on a monthly basis.

Rick Grant:

You bet.

Mike Darne:

You amortize that over a 30 year period of time, you got college education.

Rick Grant:

You bet you do. That’s right.

Mike Darne:

Big money. It’s big money.