Under 1002.9(b)(2) it says "Statements that the adverse action was based on the creditor's internal standards or policies or that the applicant, joint applicant, or similar party failed to achieve a qualifying score on the creditor's credit scoring system are insufficient."

We have an applicant that first applied with our secondary market lender. The credit report was pulled (CREDCO) which gives all three reporting agencies information and scores (FICO model). The average score was 689. The applicant withdrew the application because he decided he didn't want to put 20% down or pay PMI.

The applicant was encouraged to apply for a portfolio mortgage loan with our bank. A portfolio lender received the application and when pulling the Equifax report (Vantage model) the score was 599. Our internal policy cut off is 640. Otherwise there is nothing in the credit report except 1 delinquency from 2012. The reason the score appears to be so low is mainly the key factors about the balances on bankcard or revolving accounts is too high/balances on bankcard or revolving accounts too high compared to credit limits. But really the balances are only about 66% of the total credit limits.

We have not done a income analysis yet so we don't know if they are ok for ATR. Generally we decline any applicant with a score below 640 but they typically have some derogatory information present on the credit report.

Is it ok to decline based on the high revolving balances that resulted in the low credit score, even though internally we don't have a cap on balances of other debts?

If the high balances are what caused the credit score not to meet your minimum then those are the reasons you provide.

Thanks for the help