Mortgage tech can't fix bad credit data

The mortgage industry loves speed. Faster verifications, faster underwriting, faster closings. Over the past decade, lenders have invested heavily in technology designed to compress cycle times, reduce manual touchpoints, and improve margins in an increasingly rate-sensitive market.

But there is a structural problem technology alone cannot solve: a mortgage decision is only as reliable as the data behind it.

Credit reports and the scores derived from them continue to function as an underwriting "ground truth." In practice, they are often treated as objective and self-validating inputs. They are not. When the underlying data is inaccurate, even the most efficient workflow can produce outcomes that are flawed, costly, and difficult to unwind.

The scale of the issue is not marginal. According to the CFPB's Consumer Response Annual Report, consumers submitted approximately 2.7 million of consumer reporting complaints in 2024, with incorrect information cited as the most common issue. The bureau reported that credit reporting complaints increased 182% compared to the monthly average of the prior two years.

READ MORE: CFPB accused of siding with credit bureaus on complaints

Mortgage-related complaints represent a smaller share by volume, roughly 26,100 in 2024, but they carry outsized financial and operational consequences. Mortgage underwriting depends heavily on credit data at precisely the moments when inaccuracies cause the greatest disruption.

In practical terms, this gap shows up as fallout the industry often labels "borrower friction." A conditional approval stalls because a tradeline does not belong to the applicant. A borrower's score drops due to an inaccurately reported delinquency. A file is flagged for identity mismatch, mixed credit files, or outdated derogatory information.

Underwriting teams lose time chasing documentation for problems the borrower did not create, and often cannot resolve quickly. Rate locks expire. Pull-through declines. Loan officers end up managing reputational damage tied to third-party data systems they do not control.

Technology vendors frequently describe these situations as edge cases. Regulatory activity suggests otherwise.

In recent months, the CFPB has emphasized enforcement and litigation related to dispute handling and accuracy obligations within the credit reporting system, including its lawsuit against Experian for alleged failures to properly investigate consumer disputes. If the system were reliably self-correcting, such scrutiny would be unnecessary.

READ MORE: CFPB implements new requirements for complaints on its portal

For mortgage executives, this leads to an uncomfortable reality: even when lenders do not generate or modify credit data themselves, they still bear the business consequences of relying on it.

They issue the adverse action. They explain the denial. They manage the borrower relationship when automated decisions rest on questionable inputs.

This is not only a consumer fairness issue, though it is that, it is also a governance issue. Mortgage lending is fundamentally data-dependent, and regulators have consistently rejected the idea that reliance on third parties eliminates accountability. Reuters' reporting on the CFPB's prior monitoring of Bank of America over mortgage reporting accuracy underscores that data quality can quickly become a supervisory concern, not merely an operational one.

So what can lenders do beyond hoping the credit ecosystem improves?

First, stop treating disputes as someone else's problem. Borrowers often encounter credit errors at the exact moment they are most time-constrained: while attempting to qualify for a mortgage. Many discover that "fixing the report" is not a customer service task, but a process governed by statutory timelines, documentation requirements, and frequent delays. When lender teams treat inaccuracies as peripheral issues, borrowers experience the brand as indifferent, regardless of fault.

Second, treat data accuracy as a measurable pipeline risk. Fallout reporting should distinguish credit data problems from generic "documentation delays." The CFPB has noted that many consumers report reinvestigations exceeding 30 days, and that credit reporting agencies often rely on furnisher responses without meaningful validation. In mortgage terms, those timelines routinely conflict with purchase contracts and rate-lock periods. When a risk is predictable, it can be operationally planned for, rather than repeatedly absorbed as surprise fallout.

Third, be cautious about celebrating automation speed without equivalent attention to correction pathways. As underwriting becomes more automated, errors embedded in consumer reports are no longer isolated issues. Automation amplifies them. Systems become faster at producing inaccurate outcomes. In that environment, efficiency is not a virtue unless accuracy and remediation keep pace.

The industry has invested heavily in cleaning up processes. It now faces a harder challenge: improving the quality of the data those processes rely on, or at least acknowledging when that data is unreliable.

Otherwise, mortgage lending risks building increasingly sophisticated systems that simply deliver the wrong decision faster.