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#2227750 - 12/19/19 10:58 AM Minimum credit score adverse action
Kristi Offline
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Kristi
Joined: Feb 2005
Posts: 85
We have just started offering a few loan products with a minimum credit score requirement. If we automatically deny the customer if their credit score is lower then our minimum what do we check on the adverse action notice? Would we still check delinquencies or collections even though we aren't really looking at that for the denial, we're just looking at the credit score?

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#2227754 - 12/19/19 12:32 PM Re: Minimum credit score adverse action Kristi
rlcarey Offline
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Galveston, TX
You would provide them the major reasons that impacted their credit score.
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#2227758 - 12/19/19 02:25 PM Re: Minimum credit score adverse action Kristi
Adam Witmer Offline
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As Randy said, you need to provide them with all of the specific principal reasons for denial (typically not to exceed 4 reasons). Under 1002.9(b)(2) of Regulation B, it is generally not considered specific enough to say that an applicant was denied due to your internal standards/policies or because they didn't achieve a qualifying score. Therefore, you would need to list the factors that presumably made their score lower, such delinquencies with others, collection action or judgement, foreclosure or repossession, or bankruptcy. More examples of "specific" reasons can be found in Appendix C of Regulation B. I've found that 99% of the time, you should be able to find one or more "specific" reasons that resulted in the lower credit score, so you will want to start there.
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#2227760 - 12/19/19 02:31 PM Re: Minimum credit score adverse action Kristi
rlcarey Offline
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Galveston, TX
And if you are getting the score, then the CB will provide you the top four reasons that impacted the score (five, if it included inquiries). You just match those up with your adverse action reasons.
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#2227803 - 12/19/19 06:52 PM Re: Minimum credit score adverse action Kristi
swiggles Offline
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swiggles
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I am curious as to how to do that. Our software provides the Reg B "model reasons" for denial and we stick to those. All of the credit score factors don't match up with those reasons. After applying for an auto loan with my daughter, where the auto dealer "farmed out" the request to a number of lenders, I received AANs out the wazoo. And although my credit score had nothing to do with the denial, every one disclosed to me, my score information. But the reasons for denial were specifically, verbatim, the factors affecting my daughter's score. We would have to type those in manually in the "other" field in both software systems we use.

Typically, if an applicant's score doesn't meet with our minimum and there is nothing derogatory on the report, it's because the applicant doesn't have much on the report (short report). And so we deny due to limited credit experience.
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#2227807 - 12/19/19 07:16 PM Re: Minimum credit score adverse action Kristi
rlcarey Offline
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Galveston, TX
Then that is your denial reason. The standard denial reasons on a standard AAN usually match on a general basis to those on the credit report. The fact that you have system limitations is not really a valid excuse. But you should be able to match the reason codes (probably outside of a few) to the more general categories on the standard AAN, if you lack the ability to use the actual reasons. I, in the distant past, used to have a matrix that we used to match so everyone used the same reasons on the AAN based on the credit bureau reasons codes.

Like for FICO, you could take this and create your own matrix for matching (not sure if this is the latest).

https://www.fico.com/en/resource-download-file/3425
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