You need to know something about mortgage people and credit reports.
We cannot thoroughly qualify anyone for a mortgage loan without a credit report in front of us. And that credit report must be provided within the company we are working for. We use a Tri-Merge report with reporting from all three credit bureaus provided by a company called Credco.
Other mortgage companies and banks use a wide variety of other types of reports and various other service providers to access those reports.
Is it possible for me to look at another mortgage company’s report to qualify? Yes, and no. If you have a copy of such a report (and you’re not supposed to have one, only the score disclosures) then I can review that report and get a sense of your creditworthiness. But I cannot use that report to qualify you thoroughly.
Why is that? Well, depending on the service provider the report may not be as complete as the report we use. More often, though, it’s a matter of age. Mostly, it’s because a Lender has underwriting requirements related to the reports used.
So, no matter which way you look at it, if you are getting qualified for mortgage financing, people are going to run your credit.
What you must watch out for are those people who say they won’t run your report. Or, worse, those people who say they’ll only run it once: only to have it run multiple times.
To the first group there, remember that under Fair Credit Reporting Act, we can only run your credit report with your written permission. The New York State Banking Department requires we keep a log and a record of your signed authorization. Problem is many mortgage people run credit reports just on a verbal authorization. So, you’re on the phone with a loan rep. and he’s taking basic information about you to qualify you. He asks you for your social security number.
You say, “Oh, I’m not ready to have you run my credit. I just want to hear more about the 4% 30year fixed interest rate you’re offering with no points, no application fee, no closing costs, no nothing and someone comes to my house to do the windows every Tuesday afternoon after I close with you, advertisement.”
He says, “We can’t properly qualify you for that program without complete information from you.” (That part is true)
He continues, “We just have to put this information in your file. But don’t worry, we won’t run your credit.” (This is a good time to hang up the phone or run for the hills)
They will run your credit if you give them the information. Later they’ll tell you not to let anyone else run your credit report because the inquiries will stack up and lower your credit score (partly true, mostly a bad sales gimmick).
The second group of mortgage folks will tell you they will run your credit report. But only once. That may be true: it’s what I do when I qualify you (with your written, signed, permission). But, I work for a Direct Lender. I’m not shopping your loan with seven different Lenders. My underwriters review your ONE report and use that to prequalify you.
When working with a mortgage broker, it’s different.
What they don’t tell you is that when they’re shopping for your loan approval with different Lenders—this is typical of mortgage brokers, who don’t lend directly, they place your loan with a Lender—they send a basic application for you to the Lenders. This is part of the qualification process and there’s nothing wrong with that.
When the Lender gets your application, guess what the Lender is going to do? Run your credit! Again!
The more Lenders receive your application from the original mortgage broker, the more inquiries on your credit report.
I recently tried to qualify a client for a refinance. He had been working with two different mortgage brokers for almost a year trying to refinance. His credit report had 67 inquiries within three months. His score was in the 400’s. He had decent credit, not great, but not bad enough to have such a low score. His low score was a direct result of all those inquiries.
Guard your credit information. Try to suss out the mortgage people you want to work with before they run your credit report. Once you’re comfortable with that, then you can proceed to complete the qualification process.
Because at the end of the day, no matter what, they’ll run your credit.