How to Leverage Soft Credit Pulls to Save Costs and Earn Borrower Business

More and more borrowers today expect a faster, streamlined mortgage experience from lenders, void of hassle and unexpected costs. In the quest to meet those expectations, forward-thinking lenders are leveraging technological advancements to help their borrowers save time and money and to ensure a smooth, efficient loan process.

One such innovation is soft credit pulls. Soft credit pulls, also known as soft inquiries or soft checks, are inquiries that don’t affect an individual’s credit score and are often used for background checks, pre-approvals, and other non-lending purposes. These checks are a valuable tool for mortgage lenders since they improve borrower experience while lowering origination costs and improving conversion rates.

Streamlined pre-approval

The pre-approval stage is crucial in the mortgage lending process, as it sets the tone for both the borrower and the lender. Traditionally, a hard credit pull was necessary to assess a borrower’s creditworthiness. However, this process sometimes deterred prospective homebuyers due to concerns about the impact to their credit score.

Soft credit pulls offer an elegant solution to this problem. By conducting a soft credit pull, mortgage lenders can swiftly provide borrowers with a preliminary assessment of eligibility without any negative impact to credit score. This streamlined process not only enhances the customer experience, but it encourages more individuals to explore their mortgage options.

Better borrower rapport

Soft credit pulls also contribute to a positive borrower experience by fostering better rapport from the get-go. By avoiding hard credit inquiries during the initial stages, lenders show that they value their clients’ financial well-being. This builds trust and transparency, creating a more positive relationship between lenders and borrowers. Plus, the quick response provided by soft credit pulls gives borrowers a clearer picture of their financial standing and the type of mortgage they might qualify for, allowing them to make more informed decisions.

Reduced operational costs

The traditional process of underwriting a mortgage involves extensive documentation, time-consuming procedures, and expensive practices, with hard credit pulls in particular expected to rise in price—by as much as 400% in 2023 by some estimates. This rising cost is something lenders are often forced to swallow, with no return on investment if the applicant is found to be not qualified.

Soft credit pulls allow lenders to expedite the application review process and reduce operational costs. By quickly assessing an applicant’s creditworthiness, lenders can allocate resources more efficiently, focus on higher-priority applications, and streamline the underwriting process. This increased efficiency not only saves time but also helps lenders manage their resources more effectively.

Risk mitigation

Soft credit pulls empower lenders to reduce the risk associated with qualifying a borrower by assessing an applicant’s credit history without committing to a full inquiry. This enables lenders to identify red flags early in the process and make informed decisions about whether to proceed with a full application. By mitigating the risk of lending to high-risk applicants, lenders can make more prudent lending choices, reducing the chances of default and non-payment.

Winning business in a competitive market

In the current market, lenders are vying to earn and retain borrower business. Without a baseline of innovative tools, it will only become more difficult to win remaining loan volume. Increasingly, soft credit pulls are becoming a table stakes feature; if lenders fail to offer this functionality, home buyers may turn to another lender to avoid negative impacts to their credit score.

What’s more, hard credit pulls have been known to alert competition of a borrower’s intent to purchase a home. In these instances, credit agencies may sell hard-pull data to competitors, giving other lenders the opportunity to swoop in and steal that customer. 

To remain competitive, lenders need to get ahead of new mortgage innovations by partnering with solutions providers that offer the latest efficiency-driving functionalities. With Maxwell’s new soft credit pull feature, lenders can quickly make a soft pull on credit for borrowers directly from Maxwell Point of Sale, helping lenders drive a higher conversion rate, lower cost of origination, and more satisfied borrowers. 

We’d love to chat about how Maxwell Point of Sale can boost your efficiency, reduce your costs, and empower your team to serve more borrowers. Click here to schedule a meeting.

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