Understanding How Credit Works For Your Borrower

Understanding How Credit Works For Your Borrower

 

One of the key concerns a borrower may have about credit checks is how it will impact their overall credit score.

There are typically two types of credit checks:  Soft and Hard.

A soft credit inquiry typically occurs where you check your own credit or when a lender checks your credit for a pre-approval for a loan. Soft hits won’t impact credit at all, so both the borrower and lender benefit from gaining this information – without adversely affecting the borrower’s credit score.

Hard credit checks are more thorough and usually occurs when a lender reviews your full credit report as part of their decision-making process in approving your loan. Hard hits are now being grouped together by Equifax to minimize the impact of the overall credit credit score. For example, a client goes to a car dealership and applies for a car loan. The finance person then applies at a number of financing companies. These companies  are now grouped together, as they recognize a client is shopping for something specific so there is lower impact. The same would apply to mortgages as well.

Pront-O, Ownest’s financing approval engine, instantly determines a borrower’s creditworthiness using a soft credit check.

The borrower simply answers 8 questions and is pre-approved in an instant – verified with information from Equifax and ranked with the Five Cs of Credit. The borrower benefits because they instantly know how much they can borrow and it doesn’t affect their credit score. The vendor or lender benefits because they know up-front exactly how much the customer can borrow – with no waiting!

How Your Credit Score is Determined

Credit reports hold the latest 7 years of history, so inquiries would be present on your credit report for that long. As to how much impact this has, there is really no way to to know exactly – although the impact is minimal. However, if a client is seeking credit and applies for a car, mortgage and a credit card all at the same time, it could have a bigger impact.

What is a FICO Score?

A FICO Score is simply another type of credit score, which is widely used by top lenders. It formulates a borrower’s credit score based on five predictive variables.

The predictive variables that factor into a FICO Score is based on the following criteria:

  • Payment History – 35%
  • The Amounts you owe – 30%
  • Length of Credit History – 15%
  • New Credit – 10%
  • Types of Credit in use – 10%
  • Credit Score is only one factor in assessing an individual’s creditworthiness
  • Delinquency scores do not say that a specific individual is a good or bad customer
  • Lenders have their own unique adjudication strategies

 

Only small changes are needed to move a credit score or make significant changes.

Whether it’s driven by gradual score changes over time, or shock factors, they can impact clients scores immediately.

Examples of gradual score changes:

  • Small changes in balance/utilization
    • EG: A 25% increase in credit card balance, may only see a 5pt to 10pt change in score
  • Age of trades on credit files
    • EG: A 3 year-old trade vs a brand new one can see a 10pt difference
  • Depth of credit file history
    • EG: increased history & trade volumes provides more confidence in the stability of an individual’s credit behaviour
  • Examples of Shock factors score changes such as:
  • Missed payments/delinquency
    • EG: 80% of consumers with no delinquency ever score 685 to 850;
  • 80% of consumers with current delinquency score 450 to 700
  • Very large balance/utilization changes
    • EG: Moving from 0% utilization on a credit card to 90% could lead to a drop in score over 100 points
  • Significant increase in level of inquiry/applications
  • Moving from no inquiries in the last 12 months in a short time frame to 10 or more across multiple products, could lead to a drop in score. Recent payment deferrals are a key requirement for maintaining a borrowers’ credit score. It takes over 6 months to recover from the pre-crisis level.

 

Credit Scores and Deferrals

 

Credit Scores and Deferrals

 

Fico Scores range from 300 – 900, the higher the score the lower the credit risk while the lower score the higher the credit risk. Each lender has their own lending criteria when approving applications.

  • Score Range: 800 or Higher; Rating: Exceptional; Demonstrates: Borrower is exceptional
  • Score Range: 720 – 799; Rating: Very Good; Demonstrates: Borrower is very dependable
  • Score Range: 640 – 719; Rating: Good; Demonstrates: Borrower has a good score
  • Score Range: 580 – 639; Rating: Fair; Demonstrates: Borrower has okay score
  • Score Range: <579; Rating: Poor; Demonstrates: Borrower is risky

Want To Learn More?

If you would like to learn more about credit and mortgages, or what Ownest can do for you, contact us below.

 

References:

https://www.canadianmortgagetrends.com/2020/07/credit-score-different-lenders-see-part/

https://www.canadianmortgagetrends.com/2020/07/9-ways-keep-credit-score-high-possible-part-ii/

https://askross.ca/good-credit-hygiene-saves-100k-on-typical-mortgage/

https://www.cbc.ca/news/business/marketplace-credit-score-1.5314868

https://ficoscore.com/wp-content/uploads/FAQs-About-FICO-Scores-Canada-2019.pdf

 

Ownest Joins the Prestigious Holt Accelerator 2020 Program

FOR IMMEDIATE RELEASE

Ownest Joins the Prestigious Holt Accelerator 2020 Program

Selected as Top 1% of All International Fintech Applications

 

Calgary, Alberta – August 6, 2019 – Ownest Financial (Ownest), an innovative provider of autonomous financing software, is pleased to announce that the Company has been selected to join the Holt Accelerator 2020 program. Ownest is one of only two Canadian companies to join this year’s program.

Ownest’s autonomous financing solution was created by the Company’s Founder and CEO, Kendall Raessler, who has more than 25 years of industry experience as a top mortgage expert in Canada. In 2019, the company launched a comprehensive mortgage point-of-sale portal for borrowers to easily self-manage a simple online application to pre-qualify for a loan – aggregated from over 22,000 mortgage products.

Since then, the software was enhanced to benefit borrowers, lenders and businesses that offer financing for their products by merging the innovative features of the mortgage portal with the functionality of a CRM and Loan Originating System. The cutting-edge, AI-driven platform automates most time-consuming, manual tasks performed by sales teams in the lending space. Ownest’s fully customizable widget-based interface drives qualified leads directly from the point-of-sale and their Pront-O app significantly reduces credit risk by quickly qualifying and intelligently screening the applicant’s borrowing capabilities. Ownest’s comprehensive platform also provides in-depth business intelligence data and is the only financing software solution of its kind that rewards partners with referral and annuity bonuses.

Kendall Raessler, Founder and CEO, stated, “We are thrilled and grateful to have been selected to join the Holt Accelerator 2020 program. Their expertise will help us achieve our aggressive growth targets.” He added, “The pandemic created an economic climate that requires leaner teams and a remote workforce. Our secure, cloud-based platform is a perfect solution to address those challenges – while creating operational efficiencies of up to 70%. Our current focus is on mortgages, but our end-to-end software solution will truly revolutionize the way people borrow and lend money. We’re very excited about the future of financing.”

“We are excited to have selected Ownest, following an extensive vetting process”, stated Jan Arp, Founding Partner, Holt Accelerator. “With over 720 international applications received this year for a coveted spot in the Holt accelerator, Ownest’s financing software capabilities stood out as a necessary innovative solution in a market overdue for disruption. I am proud to welcome Ownest as part of our 2020 family.”

###

About Ownest
Ownest started in 2012 with the goal to innovate how financing is done around the world. In 2019, the Company launched its B2C software to empower homebuyers to obtain financing online by aggregating best lenders and best rates from over 22,000 mortgage products. Since then, Ownest has shifted their core focus to a cloud-based B2B SaaS model, providing their partners an AI-driven platform that quickly qualifies and intelligently screens potential borrowers. Their cutting-edge platform is designed to drive qualified leads, increase revenue and significantly streamline operations through autonomous financing while providing in-depth data-driven business intelligence. www.OwnestFinancial.com.

About Holt Accelerator
Backed by Holdun, a 5th Generation Family Office, Holt Accelerator is Canada’s most active seed fintech investor. Holt Accelerator is the only business accelerator in Canada that’s focused exclusively on fintech, including insurtech and cybersecurity. Holt tracks over 10,000 early stage fintechs globally and solicits the ones that present a best match with our Partner & Advisory network (over 300+ and growing). They have received over 1,800 applications from over 75 countries, in which they invest in the top 1% of applications globally.


Contact Information:

Kendall Raessler, CEO
Phone: 1.855.699.2400 Ext. 101
Email: Kendall@ownest.ca

 

Meet the Team – Ray Yip, CTO

Meet the Team

 

We’d like to introduce you to some of the great people who work behind the scenes at Ownest.
We recently spoke to Ray Yip, Chief Technology Officer.

 

Ray Yip, Chief Technology Officer at Ownest
Ray Yip, CTO ziplining at Whitefish Resort

Tell us about your role at Ownest.

I joined Ownest in May 2019. I call myself a technologist. My job is to understand the vision of the company and figure out the technology strategy to turn the vision into reality.

What did you do before you joined Ownest? What interested you in Ownest?

I had created many software, web and mobile applications across multiple domains and industries, in past 20+ years. Ownest gives me yet another opportunity to create a disruptive technology. How can I resist that?

What do you like most about working here?

The people, the fun, the trust, and the respect among the team.

What excites you most about the future of Ownest?

We are disrupting the financial industry through technological advancement and artificial intelligence. We are changing the way how people borrow and lend money.

Tell us about your life outside of Ownest.

I’ve been married for 21 years and I have a 20 year-old son and 17 year-old daughter with my beautiful wife. I still have to explain to people that I wasn’t 10 years old when my son was born but I’m glad that I’m not getting ID’ed at a bar anymore ?

As for hobbies, I like playing badminton and enjoy spending time gardening with my wife.

Any hidden talents?

I often do things in random order and still manage to get a few things done. If you are going through a list with me, you will find me start at the second or third item and then go up from the bottom of list. I hope that you know which item I’m talking about at the moment.

Who inspires you or which company do you admire (and why)?

The person inspired me the most is Zig Ziglar. I listened to his audio series every day when I went through tough times in my life. His life story, his value and every lesson in his speeches have motivated me and affects how I do things every day.

What piece of technology can you NOT live without?

It would have to be the high-speed Internet. Must be high-speed, not dial-up.

If you had a superpower, what would it be?

I want to have power to travel back in time. I don’t want to travel to the future because it would ruin my excitement about the future, but I want to travel back in time to correct my mistake and change the choices I made.

Anything else you’d like to share?

I’m still waiting for new technologies to upgrade my body after I torn all my knee ligaments and went through four eye surgeries just because I played too much badminton.

The Five Cs of Credit and Why It Matters

The Five Cs of Credit

and Why it Matters

 

What Are the Five Cs of Credit?

The five Cs of credit is a set of criteria used by lenders to gauge the creditworthiness of potential borrowers. This type of approach weighs five different characteristics of potential borrowers and conditions of the loan, to help predict the chance of potential default and overall risk or loss for the lender.  The Five Cs are: Collateral, Credit, Capacity, Capital and Character.

Explains the 5 C's of Credit

 

Why is it Important to Use the Five Cs of Credit?

Evaluating a borrower’s creditworthiness based on the Five Cs of Credit is important because it gives the lender a better overall picture of the borrower and their ability to pay off the loan. It also takes into consideration the more “personal” side of financing by considering the borrower’s character, as opposed to simply looking at past credit history and collateral. For example, if the credit check reports a default payment, it could have been due to unique or rare circumstances, such as an illness or divorce. These types of questions will help lenders understand the borrower’s credit – looking back to the credit history and looking forward to the client’s future capacity.

Save Time: Ownest’s Software Automatically Calculates the Five Cs

One of the biggest challenge when it comes to financing is knowing the actual creditworthiness of a potential purchaser or borrower. For example, if someone is interested in purchasing a home, the sales associate spends a lot of time with the customer during the sales journey. Waiting for a mortgage approval can take 7 – 10 days, and in the meantime, your sales team is spending valuable time building a relationship with a client who may not be approved for financing.  Wouldn’t it be nice to know this information at the beginning of the sales journey?

Ownest’s Pront-O app instantly pre-qualifies and intelligently screens
applicants based on their actual borrowing ability.

 

Ownest's Pront-O app Instantly Pre-Qualify Borrowers with the 5Cs of Credit

 

The software performs a soft credit check using the Five Cs of Credit, then sorts and ranks the leads by  summarizing the information in an easy-to-read stoplight snapshot (green, yellow, red rating system). This data  empowers our affiliate and lender partners with key insight and visibility of the borrower’s overall credit profile – faster and more accurately than any other software on the market – so you know where you’ll get the best return for your sales efforts.

 

How Much Time and Money Will You Save?

 

Whether you’re a lender or a company that offers financing for your products, Ownest software can provide valuable insight and streamline your sales process. Pronto’s pre-qualification capabilities are just one of the many features of our revolutionary software. Contact us to schedule a demo today!

Request a demo of Ownest Software

 

New CMHC Lending Criteria

Ownest has in-house mortgage experts

 

 

On June 4, 2020, CMHC announced changes to their underwriting criteria, which will impact sales in some parts of the new home sector. How does this affect home builders, realtors, mortgage brokers – and home buyers?

What are the changes?

  • Credit score requirement increasing from 600 to 680 Beacon;
  • Flex down mortgages are no longer available (no more zero down mortgages);
  • Stricter Debt Servicing Requirements.

When do these changes take effect?

  • July 1st, 2020

Why are they Changing the Criteria?

  • The COVID-19 pandemic, related job losses, business closures and a drop in immigration are adversely impacting Canada’s housing market.
  • CMHC states that these actions will protect home buyers and reduce government and taxpayer risk while stabilizing the housing market.

What do these Changes Mean on a Practical Level?

  • If you have deals in the pipeline, get them to apply for a mortgage NOW. Clients will need to be approved by the lender and insurer (CMHC) prior to July 1st in order to qualify under old rules. After July 2020, there will be more restrictive requirements for credit and debt servicing.
  • For example: For a purchase of a $350,000 house with 5% down the requirement for income is $73,571.13, after the changes the requirement will change to $81,979.26. This will have a significant impact on income requirement.

What can you do to assist your buyers using CMHC?

  • Any clients with lower credit scores, unsure of their direction should firm up purchasing now.
  • Any clients with a little extra debt with the requirement of more flexible guidelines should firm up agreements now.
  • Try to secure new home upgrades as soon as possible to avoid big material changes that require re-approval closer to possession as it may cause an issue.

It is important to note that this is not a directive from the Ministry of Finance, so Canada’s private mortgage insurers such as Genworth and Canada Guaranty are not adopting the new mortgage rules.

Ownest is Here to Help

Ownest’s team of in-house mortgage experts are second-to-none and work with a large network of preferred lenders.

  • We will put in the extra hours necessary to ensure your clients’ needs are met.
  • Any offers submitted where approvals from lenders are obtained, we will ensure CMHC or other insurer approval is obtained;
  • Wherever possible, we will work with lenders that don’t require CMHC or other insurer approval after financing had already been approved, to help ensure your client has approval upon possession (some banks require resubmission closer to possession).

If you need advice or would like us to help you navigate the changing landscape of mortgages, we invite you to contact us and we’ll be happy to help.

Contact Ownest for Mortgage Advice