Before a lender approves your mortgage application, it must pull and review your credit reports. Lenders generally want to view your credit history and FICO scores from all three credit bureaus to ensure they get a complete picture of your current and past financial stability. Residential mortgage credit reports allow lenders to evaluate all of your credit information without comparing and contrasting three different reports that often contain redundant information.
Residential Mortgage Credit Reports
A lender has the option to either order your credit history from each of the three credit bureaus or to purchase a residential mortgage credit report (RMCR) from a third party. A lender may opt for an RMCR for simplicity's sake or if discrepancies exist between two or more of your credit reports. Lenders who depend on RMCRs when making lending decisions often subscribe to an RMCR provider's services. When the lender requests a report, the provider pulls data from the credit bureaus and combines it into a single document, complete with FICO scores, for the lender's review.
RMCR providers must verify certain information contained within your credit history before inserting the data into your RMCR. Your employment history is a good example of this. If data about your previous employment appears in any of your credit records, the RMCR provider must verify this information as accurate before reporting it to the lender. The same is true for other personal data, such as your aliases or previous addresses. If questionable data exist in any of your credit reports that the RMCR provider cannot verify as accurate, it must include this fact in the RMCR.
The U.S. Department of Housing and Urban Development, Fannie Mae, Freddie Mac, the Farmers Home Administration and the Veterans Administration have developed a set of standards for RMCRs. The RMCR must contain all legal and credit information on the applicant that covers the past seven years. Each account listed on the RMCR must also reflect the creditor's name, the debt's status, the date the account was opened, the full payment history for the account, the balance owed and the minimum payment and spending limit, if applicable. If your mortgage loan is insured through the U.S. Department of Housing and Urban Development, your lender is required to obtain its RMCR through a company that meets these standards.
Like standard credit reports, RMCRs are not infallible. If inaccurate information exists on your credit reports that you have not disputed, that same information will appear on your RMCR. It is not cost-effective for an RMCR provider to investigate each item that appears on all three of your credit reports.
Under federal law, you have the right to request a free copy of your credit report from each credit bureau once a year. Doing so allows you to review your information and correct errors that could lower your credit scores and hurt your chances of being approved for a mortgage.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.