The Importance of Credit and the Role it Plays in Mortgage Qualifying- Part I

Written By: Stacey Sprain,
Certified Ambassador Loan Processor (CALP)

As we’ve all come to know in the mortgage business, credit plays one of the most important roles in borrower qualifying. The most important and crucial component of a mortgage application has become the credit history and fico scores associated with each borrower’s credit profile. If a borrower’s credit history reflects periods of late payments, collections, judgments, charge-offs and low fico scores, our ability to approve them for home purchase is greatly reduced.

Therefore, it becomes even more important that WE are educated about credit and the important role it plays for our borrowers. Our knowledge can be passed on to help potential borrowers become solid customers and future homeowners. In the following weeks, I will pass on the knowledge I have acquired over the years in hopes it will help educate YOU so you can educate your potential borrowers. Credit education is valuable for everyone and everyone can benefit from it.

Let’s take a look at the three major players in the role of credit reporting. There are three major credit repositories throughout the world that employers, banks, lenders, financial institutions, and credit card companies report their consumer data to- TransUnion, Equifax and Experian. It is the date these three repositories receive that creates every individual person’s credit profile and credit report. Based on the data received, each of the repositories then renders an individual fico score. We’ll get to more information on fico scores later. First, let’s take a closer look at these major repositories.

TransUnion

TransUnion, headquarted in Chicago, was founded in 1968 and maintains credit histories on approximately 500 million consumers throughout 25 countries on 5 continents.

Equifax

Equifax employs approximately 7000 people in 15 countries. You may be surprised to learn of its largest business unit which we access regularly in our daily mortgage processing routines. TALX Corporation is behind the Work Number of Everyone which provides us with electronic employment and income verifications for many major businesses throughout the United States.

Experian

Experian supports clients in more than 65 countries and employs more than 15,500 employees in 38 countries. The corporate headquarters are in Dublin, Ireland with operations headquarters in California and the United Kingdom and it maintains credit information for approximately 215 million consumers in the United States alone.

Next week we’ll take a look at the standard components of an individual credit report and review who reports the information that makes up each individual’s credit report.

About the Writer. As one of NAMP's volunteer writers, Stacey Sprain is currently a NAMP member in good standing and is a NAMP Certified Ambassador Loan Processor (CALP). If you would like to become a volunteer writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)