What a Lender is Looking at When Reviewing your Credit Report (1)
Walking into a bank, car dealership or applying for a mortgage loan can cause most consumers a great deal of stress, especially if you know your credit report is filled with negative information such as late payments, collection accounts or excessive balances. Most consumers are aware of what information looks bad on a credit report and what it takes to get a loan based on their report. But do you really know what the lenders are looking at when they pull your report?
As a consumer when shopping for a loan or the opportunity to refinance, you need to consider what the lenders see when it comes to extending you credit. While the average consumer is aware of the obvious offenses on their report that make it difficult to get credit, below is a list of a few less evident areas that consumers need to pay attention to.
The first area of concern for a consumer when applying for a loan is inconsistent information. When you pull a copy of your credit report, you are given a single document but when a lender requests a copy of your report, it is given all of your information and perhaps even some information that isn’t yours. Often times reports are mixed with information that may not belong to you, including multiple names, addresses, social security numbers and birth dates. When a lender pulls your report, inconsistent information like multiple social security numbers can cause a lender not to approve you for a loan.
A second area to be aware of when submitting a loan application is the inquiry section of your report. Too many inquiries into your report can raise a red flag to a lender. Lenders may wonder why you applied with so many creditors or why other lenders did not approve you for a loan. While it’s financially responsible to shop around for the best loan, beware of excessive shopping.
Cosigning a loan for a relative or friend may also be a cause for concern to some lenders. When you cosign a loan the account is added to your report. While you may not be responsible for payment, you will be responsible if your cosigner falls behind. In the event the cosigner keeps up with payment, the account may still weigh on your report, as it is an additional account increasing your debt to income ratio, a number many lenders consider when extending credit.
When your credit report contains inaccurate information, under the Fair Credit Reporting Act (“FCRA”), you are allowed to include a “Consumer Statement” on your report explaining why your report is the way it is or why you feel your report is inaccurate. While this statement is a good way to explain away the inaccuracy, lenders really are looking at your report and not at the statement. If your report reflects inaccurate account information, you must dispute the information with the credit reporting agencies in an effort to have the inaccurate or outdated information removed. After a dispute is resolved, if you feel the information is accurate, then consider drafting a Consumer Statement to be included on your report if necessary.
If you believe your rights have been violated during a loan application process, contact SmithMarco P.C. for a completely free case review