Financing in Seattle>Question Details

mallisa, Home Buyer in Seattle, WA

Credit pull right before closing home loan??

Asked by mallisa, Seattle, WA Mon Apr 29, 2013

I am set to close on my home on the 17th. last year I was in a car accident and had a medical bill that was paid incorrectly go to collections. I hired a credit repair company to dispute it and they won. However, just tonight I pulled my credit(only on experian) and it shows that the credit report hit my credit yet again and drop my credit score on that reporting company 140 points!! I dont know of the other two reporting agencies! What should I do?? Its a debt that has already been paid by the insurance company and I won the dispute last month!! I am set to close my home loan in less then three weeks and I think they are going to pull my credit right before close! I know creditors normally use the middle score if it only hit one out of three creditors it wont affect my middle score so would I still be approved??

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sam.orallo’s answer
Many great answers to this question. Four words, Fair Credit Reporting Act. If you are correct, that blemish should not be on your credit report. End of story. They will eventually clear it up. I am hoping that if it is a concern, they will clear it up before you close. Communication with your loan officer is imperative. I am an optimist. You will close on time. Just be in communication with everyone.
0 votes Thank Flag Link Sun May 5, 2013
Yes, the lender is likely to pull your credit report one more time. Talk to your mortgage rep immediately. Your mortgage rep is working for you and can help in this situation. Forewarned is forearmed. With your documentation showing a paid debt, your mortgage rep can prepare an explanation for the underwriter. Your loan is most likely not in jeopardy. Next, prepare a letter of explanation and submit your evidence of a resolved debt to all three credit reporting agencies. By law, they must respond within a fixed number of days. Don't panic. You aren't the first person to have a surprise right before closing. With everyone working on this, you'll close your loan on time. Good luck!
1 vote Thank Flag Link Mon Apr 29, 2013
Mallisa,
I would discuss this with your loan officer immediately. The sooner the LO knows the better chance they have to address it with the underwriter "if" it comes up. You'll likely need to write a letter of explanation and provide proof that the collection was a mistake and shouldn't have appeared.
0 votes Thank Flag Link Mon Apr 29, 2013
The lender will probably pull your credit again. Depending on when our existing credit report expires, it may be a "soft pull" meaning that scores may not be checked - the lender is only looking for new debts or late payments or "hard pull" (if your report is going to expire) which will also include your credit scores.

Paying off collections will drop your credit scores. Credit scoring modules treat it as a new activity on the collection - impacting your credit score almost as if it were a new collection. I don't think there's much the credit repair company can do for you to repair the damage done. I advice my clients to avoid credit repair companies as most do the wrong things (like paying off collections or disputing accounts) for folks who are in the mortgage process or considering a mortgage.

I would let your loan officer know and find out if your credit report will have a hard or soft pull prior to funding. It's possible your lender may be able to do a rapid rescore (if needed) to bring your scores back up.

Are you doing conventional or FHA financing? FHA is not as credit score sensitive as conventional. How low did your score drop?

I've written an article about this on my blog - I've included a link for more information.

Good luck!
0 votes Thank Flag Link Mon Apr 29, 2013
You might want to contact a credit repair specialist I can refer if you need one. But yes also contact your lender and provide the documentation that supports your claim. The credit bureaus are in error to contact them and also fax them the documents as that will get it to them faster. You can do a rapid re-score of your credit through your lender too removing this much faster. But they need the documents showing this was not your collection or was an error. Good luck!
0 votes Thank Flag Link Mon Apr 29, 2013
If you are using Wells Fargo be ready to play the game with out of area impersonal underwriters.....another reason to use a local area lender
0 votes Thank Flag Link Mon Apr 29, 2013
Ask your lender. If you have written proof that the debt was paid then you should be fine. Also, send a certified letter to each credit reporting agency, including copies of the paperwork showing that debt was settled, and DEMAND that they remove this inaccurate information immediately. Threaten to report them to the authorities if they do not and demand that they send you copies of your credit report with the inaccurate information removed. You should do this whether or not it will affect your mortgage just to make sure you don't have the same problem again in the future.
0 votes Thank Flag Link Mon Apr 29, 2013
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