Profile picture for jjlen

Do lenders run a credit report another time before closing?

Having a small heart attack here. I am closing soon on a house. Loan commitment letter in hand. Just rechecked my credit report and a new, *very* inaccurate negative entry was just made on my report, completely decimating my score. A creditor is claiming I am currently delinquent by 180 days. I initiated a dispute, and I contacted the creditor, who admits that I am current and they have no idea why they reported me as late. They promise to correct it, and they are sending me a letter that I can show my mortgage lender if I need to, in case the lender runs my report before closing and the inaccuracy isn't removed yet.

But, I am in a panic anyway because I hear so much about how mortgages fall through at the last minute. I can contact my LO but until I have the proof in hand that I am current I'd rather not (proof is more complicated than showing payment receipts... the creditor that reported no longer owns the loan, so I have to get payment receipts together plus find the proof that the loan was transferred, etc., which would take a while to get). Any insight on how the final days before closing work would be appreciated.

  • December 07 2010 - US
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Answers (10)

To clarify what Augustus is saying about the credit refresh, this is only done on conforming conventional loans. If you have a government loan (FHA/VA/USDA) lenders are not required to do a credit refresh.

Sincerely,
Greg
  • June 28 2012
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Lenders order what is called a credit refresh, so if the issue dropped your score, that will not be seen. However the credit refresh is used specifically to show any new debts. If this "new" debt has a payment associated with it, the bank may include the payment in your qualifying ratios if you are not able to prove it is not yours. If you qualify with the debt, then it is no biggie.

If it is an issue, then you should be able to contact the creditor ask for a letter stating your name, address, the account number a brief explanation about what information needs to be changed, their contact info, all on letter head, then have the account rapid re-scored off of your report.
  • June 28 2012
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Profile picture for user360099
If you make a purchase prior to closing, you need to ensure you are able to pay off the debt 100%. Don't charge anything you can't pay off completely. In addition, allow yourself 2 weeks to pay off any new debt. This means, if you obtain any new debt (ie. $1000 cc), you should pay this off 2 weeks prior to closing. You want to make sure you pay off the new debt before the Credit Card Co reports and before you closing date. Follow this and you'll be well on your way to a new home!!! 
  • June 28 2012
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Profile picture for jjlen
Thanks all, for the helpful responses. I have the creditor's letter now -- got it sooner than I expected. I'll send it in to my loan officer and let her know the issue, so that if it needs to get fixed that can be handled ahead of time.
  • December 08 2010
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There is really no good reason for you to have re-run your credit report. The good news is that if the negative reported account was not on your lenders report initially, it is not likely to be on their updated credit report. With a letter from creditor stating account was reported in error, your lenders credit report service should be able to get it removed. Hopefully, it will not show up but I would get the letter immediately and discuss with your loan officer. Worse case is a rescore which would likely only take 3-4 days or less.
  • December 07 2010
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Profile picture for XanderTeam
What type of loan are you closing?  Due to Fannie Mae's LQI (Loan Quality Initiative) we as lenders are required to either repull or monitor the credit report for changes throughout the loan process if you applying for a Fannie Mae loan.

If you are applying for another type of loan (FHA, USDA, etc.) then you should be okay provided your current report doesn't expire.
  • December 07 2010
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It depends on how old the original credit report they are working with is. Generally speaking, we DO NOT pull more than one credit report on a transaction as (depending on factors such as loan type and a few others) credit reports are usually good for at least 90 days, sometimes as long as 120 days.

So long as the original credit report date is within the guidelines for the loan type and program there is usually no reason we would have to pull another report. What really matters is how old the report they are working with is. Your lender or any other company, I don't see why they would but it's possible.

It's still a good idea to be prepared and proactive about it, in case of the worst case scenario. Something it sounds like you are doing...

Sincerely,
Greg

  • December 07 2010
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Most Lenders will re-pull credit around the last week of closing to verify no new credit lines were established.  To be safe, I'd try to receive the letter from the creditor and provide it to your loan officer, whom can have it fixed with the credit bureau immediately.  I have seen negative marks complicate things in the middle of a transaction, so the sooner you resolve it, then the better your turn out will become.  Good luck with it.
  • December 07 2010
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Here is what we are generally looking for as part of Fannie Mae's governance.  We are looking at the re-pulled reports for evidence of any of the following events that might have occurred while the loan was in underwriting:

  • Did the applicant apply for new credit cards?
  • Did the applicant run up existing cards?
  • Did the applicant finance an automobile, or other major purchase?

If the updated credit report doesn't match the original credit report, the mortgage is subject to a complete re-underwrite and a possible loan turndown.

  • December 07 2010
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We are required to re-pull the credit however we do not repull your credit score to avoid your very issue.  If it's npot accurate it should not be a problem...just a hassle!
  • December 07 2010
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