Mortgage rates have hit their lowest level since May 2023, and with the Fed’s guidance on future rate cuts in 2024, loan providers should be ready for an influx of potential clients shopping auto loan and mortgage rates. Now is the time to improve prequalification experiences for applicants. Prequalification forms often represent the first step in a homebuyer’s or auto loan purchaser’s journey. Loan providers should ensure their prequal experience sets the tone for a relationship. If forms prove difficult to use or lack clarity around industry terms, firms may lose out on loan originations to competitors with clear, streamlined prequalification experiences. In December, Corporate Insight’s Lending Monitor team published a Prequalification Prospect Experience Report that covers six auto lender and six mortgage provider prequalification journeys and follow-up communications. This article will highlight two of four summary findings from the report.

Firms use differing methods of credit check disclosure presentation to varying degrees of success.

Aside from the large financial implications, auto loan and mortgage prequalification prospects must also ensure their credit is in good standing to receive the best rates. Therefore, firms should clearly state potential credit score implications ideally before and at the start of the prequalification experience.

  • Every auto loan firm in the coverage set clearly stated any credit score implications prospects should expect, along with clear messaging on the soft credit check required.
  • Three firms covered in the mortgage set—Bank of America, Community Bank and Freedom Mortgage—did not clearly state the credit score implications and gave unclear messaging on the requisite credit checks.
    • Bank of America devotes the last step of the application to the credit check authorization, but the firm uses extremely small print and fails to clearly outline the hard credit check requirement.
This screenshot shows Bank of America's credit check page during its loan prequalification journey
Bank of America Mortgage Prequalification Journey Credit Check Page
    • Community Bank provides a checkbox at the start of the application authorizing a credit report pull, and while this information appears at the start of the application, making it more helpful to clients searching for it, it still fails to use clear terminology around whether a hard or soft credit check will take place.
This screenshot shows Community Bank's Mortgage prequalification step during its application journey
Community Bank Mortgage Prequalification Journey Credit Check Page
    • Freedom Mortgage matches Bank of America in providing credit check information at the end of the application but fails to mention whether a hard or soft credit check takes place despite having ample opportunity to do so. Our prospect had to place a call to the firm in order to confirm that a hard credit check occurs.
This screenshot shows Freedom Mortgage's prequalification credit check page during its application journey
Freedom Mortgage Prequalification Journey Credit Check Page

Prospects may have an expectation based on their outside knowledge of what a prequalification application entails. Firms that support that knowledge by matching prospects’ expectations upfront may do better to retain applications throughout the entire auto loan or mortgage purchase process. Terminology should be consistent with expectations, but some firms require hard credit checks despite naming the form prequalification, a term universally known to use a soft credit check.

  • Firms that display this information before prospects even reach the application page do well to inform clients ahead of the application process.
    • This includes Bank of America, Capital One, Carvana and Chase in our auto category and SoFi, U.S. Bank and Wells Fargo in our mortgage category.
This screenshot shows Capital One's auto loan prequalification page
Capital One Auto Loan Prequalification Credit Impact Information

 

This screenshot shows Wells Fargo's mortgage prequalification credit page
Wells Fargo Mortgage Prequalification Credit Impact Information
  • Lenders should ensure this information is not left in fine print or disclosure areas to help increase discoverability.
  • Mortgage providers with unclear credit conditions often withhold credit check disclosure until it’s too late; while this may still push clients to complete the application given the time already spent filling it out, this practice may not be worth the potential ire from prospects.

Mortgage and Auto Loan providers offer detailed applications with multiple entry fields but miss big-picture enhancements

Lenders should improve their prequalification experiences with major UX elements to create a modern digital experience. For example, progress meters should be table stakes for multi-step application interfaces as they help establish user expectations.

  • Both multi-step journeys in the auto loan coverage set—Capital One and Carvana—use progress meters to support applicants.
    • Capital One offers a more successful implementation by separating the meter into partitions aligned with the number of steps while labeling each step with the content covered. This helps users view their action history, current progress and remaining steps.
    • Alternatively, Carvana’s meter lacks a step indicator but still helps users understand their progress.
This screenshot shows Capital One's progress meter
Capital One Auto Loan Prequalification Journey Progress Meter

 

This screenshot shows Carvana's progress meter
Carvana Auto Loan Prequalification Journey Progress Meter

 

  • This screenshot shows Community Bank's progress meter
    Community Bank Mortgage Prequalification Journey Progress Meters

    All mortgage prequalification journeys appear as multi-step interfaces and 83% support the experience with progress meters.

    • S. Bank is the only firm in the mortgage coverage set that lacks a progress meter which may cause users to abandon the application flow due to less clarity surrounding the task.
    • Freedom Mortgage and Wells Fargo use a horizontal progress bar. Freedom Mortgage provides a step-of-total fraction to create a full-picture summary of progress.
    • Bank of America, Community Bank and SoFi offer vertical meters that provide named steps and visual indications of completed steps.
      • Notably, Bank of America hides its progress tool behind a hamburger menu button that greatly hinders its findability.

Proactive valid entry indications can help users remedy mistakes before attempting to progress through the application, creating a more seamless and reassuring experience.

  • 100% of auto lenders include this feature in some capacity.
    • Uniquely, Capital One provides a green checkmark within custom-entry fields for valid entries, while Carvana similarly places a white checkmark in a green circle within its custom fields. These are the only two firms to provide positive validation in addition to error responses.
  • 67% of mortgage providers support entry validation, all using reactive alerts—alerts appearing after an attempt to submit or advance through the application—to invalid entries.
    • No mortgage lenders use reaffirming elements, such as green checkmarks, for valid entries.
    • Firms should implement proactive validation to limit user frustration.
These paired screenshots show invalid entries highlighted on both Bank of America and Capital One's mortgage application pages
Capital One (Top) and Bank of America Mortgage (Bottom) Valid Entry Indications

Additionally, this report highlights two more key findings:

  1. Collateral communications vary widely between firms in method, approach and intensity.
  2. Prequalification journeys rely heavily on contextual information and tooltips, missing out on key opportunities for education.

Prequalification experiences may be a prospect’s first induction to the firm and give insight into how the firm’s account servicing experience will appear. These journeys should be exceptional regarding ease of use if firms hope to convert prospects to loan clients, particularly if the prospect has no prior relationship with the firm. For a deeper discussion on how to improve lenders’ prequalification experiences, check out the full Prequalification Report (December 2023, subscription required). For more insight into loan application and onboarding experiences, check out our PNC, Chase or Ford Auto Loan Account Opening Studies. For more detailed insights or access to these reports, contact us about custom work or explore our research services here. And view our Insights page for the latest from the world of financial services, insurance and healthcare.

Andrew Woolston

Andrew Woolston is an Analyst on CI's bank and cards team.