Minimum Credit Score Denial

Posted By: Anonymous

Minimum Credit Score Denial - 09/16/10 10:05 PM

In order to obtain PMI, the minimum credit score needs to be 660. The customer's wasn't, so the loan officer put "minimum credit score needs to be 660 to obtain PMI." Is that okay for the denial reason? I wasn't sure since I know you can't just put credit score under Reg. B.
Posted By: Dani York, CRCM

Re: Minimum Credit Score Denial - 09/17/10 12:23 PM

I don't think that is sufficient. My understanding of denial notices has always been that the bank needs to give reasons that will tell the customer what they can fix in order to get the loan. Telling me that my credit score is not high enough to qualify for PMI doesn't tell me how to fix my credit so it will be high enough to qualify.

I would dig deeper and find out what factored into the low credit score. Do they have too much debt, late payments, public records, too many inquiries, high usage to limit ratios, etc....? Giving those types of reasons will at least give the consumer an avenue to pursue to fix his position and possibly be able to qualify later.
Posted By: NotDoneYet

Re: Minimum Credit Score Denial - 09/17/10 12:30 PM

Isn't one of the Reasons for Denial code 8, mortgage insurance denied?
Posted By: Dani York, CRCM

Re: Minimum Credit Score Denial - 09/17/10 12:35 PM

Originally Posted By: jcaldwell
Isn't one of the Reasons for Denial code 8, mortgage insurance denied?


For HMDA disclosure, yes, but for Reg B I think the bank would need to disclose enough to tell the customer what he can do to fix his credit (or whatever) in order to qualify for the loan (and PMI if that is all that is preventing him from getting the loan).
Posted By: Dan Persfull

Re: Minimum Credit Score Denial - 09/17/10 01:05 PM

Did not meet minimum credit score requirements is not a specific reason for denial. Why they didn't meet the minimum score would be the specific reason(s).
Posted By: Anonymous

Re: Minimum Credit Score Denial - 09/17/10 02:42 PM

After talking with the loan officer on this one (she knew the Reg. B requirement very well), I can see why she didn't mark anything else - or struggled with what to mark. She really wanted to make the loan, and you can justify making it, but with the scores, she knows she can't get the PMI. His high score was 735, middle 640, and low 635. Co-applicant's scores were all in the 700s.

On his report, there was only one paid medical collection for $90. Everything else was paid as agreed, and debt ratio is fine (28%). It does appear that his balances to credit limits/high credit are high (not all report credit limits, so it's hard to tell for sure). It could be the number of revolving accounts, but this was not listed in the factors that go into the score. The factors that go into the score said accounts too new, but in looking at the report, that's not true. We've seen much worse reports than this with better scores.
Posted By: NotALawyer

Re: Minimum Credit Score Denial - 09/17/10 10:23 PM

Listing the original reason (credit score is too low) along with the four FICO factors from the credit bureau should do it. The credit burea should provide the top four reasons that contributed to the score. You aren't expected to try to figure out what the bureau did or did not use to determine the credit score.
Posted By: NotALawyer

Re: Minimum Credit Score Denial - 11/12/10 11:53 PM

Here is another thread on a similar question. http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1464671#Post1464671

(edited to fix the link)