Safeguarding Buyer's Credit

How Important is a Buyer's Credit Score? It is extremely important to caution your buyers about safeguarding their credit to the nth degree. After they have applied for their loan and have been approved, they need to continue to remain vigilant over their credit worthiness.  All lenders (few being the exception) will re-poll the buyer's credit right before sending the loan to underwriting. Any last minute hits will reflect and may certainly put your buyer right out of minimal score lending limits.  Let me exemplify this by way of a recent transaction. Mr. buyer was purchasing a home and had an FHA acceptable credit score. During the course of the lending process, he closed his out-of-state bank account and opened a local account. The bank advised him he was free and clear of all outstanding debits and transactions.  The buyer's lender pulled his credit for the underwriting process and discovered a significant credit hit which put him out of the lender's minimum limit. When the lender contacted the buyer's former bank, they advised there was an unresolved service charge on the buyer's previous account and they sent this to collections.  This of course resulted in a credit score hit on the buyer's tradeline.  The former bank did not notify the buyer of this service charge, but elected to send it directly to collections.  Once the buyer was notified of this situation, they immediately took care of the service charge.  Does the story end there? Not quite. Although the former bank sent the buyer's lender a letter stating the service charge was satisfied, they refused to restore the buyer's credit score, even though they had not previously notified the buyer of this service charge. The bank took the position there is nothing they can do and the credit bureau will not pick up the score correction for another 30 to 60 days.

Although this was certainly a situation wherein the buyer had no control or former knowledge, it does point to the importance of keeping your credit in full check throughout the lending process.  When a credit tradeline takes a hit, even a small hit, it can be disasterous. In this particular case, the service charge was small, about $100, but the credit hit was a whopping 70 points! This is significant when buyer's scores are close to the minimal lending limits.