Painting a Full Credit Picture
Not all borrowers fit into traditional risk categories
By Carla Blazek
Helping borrowers purchase the home of their dreams or refinance their existing home often comes down to their credit score. Ads and articles all talk about the
importance of credit scores for obtaining mortgage
loans, but how often do you meet with clients, pull
their credit, and immediately identify possible dif-
ficulties in getting them approved for a loan? Too
There are programs out there to help most borrow-
ers improve their credit rating, but there are people
who may not fit the normal lending model — that
no amount of credit repair will help. These scenarios
prove that it is not enough anymore to simply look at
a borrower’s credit score. Originators also must look at
the bigger picture of their credit history.
When underwriters review a credit report, they
analyze overall debt obligations, pay history, recently
opened accounts, new inquiries and high use of
revolving debt, but the automated underwriting sys-
tem, or AUS, plays an important role in qualifying
borrowers, too. It is typically only on manually under-
written loans where an underwriter needs to analyze a
borrower’s credit in more detail.
In these cases, underwriters must ask: Did that bor-
rower have a disregard for financial obligations or an
inability to manage debt? Or, was there a major event
in the life of the borrower that could be considered an
Good borrowers with the aptitude for repaying debt
may have a lower credit score because of extenuat-
ing circumstances, which are classified as being “the
result of circumstances beyond the borrower’s
control.” Each agency looks at specific extenuating
circumstance differently, so it is important to review
Some general examples of extenuating circum-
stances include loss of job, loss of wage earner, or
serious illness. In these situations, borrowers must doc-
ument the events. This can be an overwhelming pro-
cess for some borrowers, which may extend the time it
takes to complete the loan, but originators who help
borrowers gather thorough documentation before
the loan goes to underwriting actually help these
borrowers close on their home more quickly.
One extenuating circumstance originators might
come across are borrowers who lost their jobs and
homes during the mortgage meltdown and had their
credit scores damaged as a result of this financial loss.
Although many people have recovered from the Great
Recession, others have not.
When one of these borrowers comes looking for
a mortgage, do you turn them away or provide the
guidance they need to get back on track? The truth
is, mortgage loan originators should never turn bor-
rowers away outright even if they cannot see a path
to homeownership today for that client. Instead, take
the time to help borrowers get back on their feet by
educating and guiding them on how to improve their
credit and financial circumstances so they can eventu-
ally qualify for a loan.
Changes coming from
the credit bureaus
At a Glance
Equifax, Experian and TransUnion plan to stop re-
porting civil judgments and tax liens within con-
sumer credit reports, if those judgments or liens
are lacking certain information or are not updated
regularly. This change is expected to go into effect
July 1 of this year and could affect a large number of
consumers. Judgments and liens often have a neg-
ative impact on a borrower’s credit score, so elim-
inating incomplete or outdated filings from credit
reports may actually boost many borrowers’ credit
scores. This is good news for borrowers, but may
make it more difficult for underwriters to evaluate
risk. This could be a hot topic this year.
For those borrowers who need a little extra help,
originators can refer them to a reputable credit repair
agency. Providing education and guidance builds a
trusting relationship between the originator and the
borrower, which makes them much more likely to
come back after they have fixed their credit than if they
had been simply turned away in the first place.
Think of this as playing the long game with these
borrowers. You may not get the instant gratification of
closing a deal now, but it will be worth it when these
unqualified borrowers have the keys to their own home
after you helped them overcome their obstacles.
Another group of borrowers that often have credit
score issues that make it tough to qualify them for a
loan are millennials. Many millennials who have grad-
uated from college or graduate school are facing high
amounts of student loan debt and — at the same
time — are struggling to find jobs in their career field.
Even worse, without high-paying jobs in their field
of choice, some millennials are left to rely on credit
cards, which can further destroy their credit if they
cannot pay their balances on time, only make min-
imum payments, or can’t pay at all and default on
their credit. This is a typical narrative heard often in
the mortgage industry, but not all millennials fit
into this category.
There are millennials out there who would like to
purchase a home and have good jobs, favorable credit
scores, limited revolving debt and even have consol-
idated their student loans to reduce payments. Yet,
many of these good-risk borrowers still feel that
if they were to purchase a home today — with the
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Carla Blazek is underwriting manager for Inlanta Mortgage.
Blazek began her mortgage career in 1991 and has held
various positions in the mortgage industry, but underwriting
is her passion. She joined Inlanta as a senior underwriter in
2009 and was promoted to underwriting manager in 2012.
By holding true to Inlanta’s mission statement and guiding
principles, Blazek focuses on coaching and mentoring her
team while providing support throughout the company.
Reach her at email@example.com.