Credit Score Disclosure
Question: We have an application that was given final approval in calendar year 2004 for a construction/permanent mortgage loan. Construction is now complete. Prior to distributing loan proceeds, we update all documents, including the credit report. In 2004 we were not disclosing credit score information to the applicant. By pulling the credit report at this time, are we required to disclose credit score data to the applicants? Do we follow regulations when the original application is taken or do we follow the rules as of now?
Answer: The credit score disclosure applies to the application and underwriting process, not to a subsequent review. The disclosure is designed to alert customers to the impact that credit histories and credit scores may have on the terms and pricing they are offered. It is really a shopping tool. Thus, even though you are now putting a permanent loan on the books, you made the loan decision some time ago - pre FACT Act. Therefore, you do not have to give the credit score disclosure. The act itself exempts subsequent pulls of the credit report and score that are simply to confirm that the borrower remains in good standing.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 6, 5/05
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