Accuracy of Credit Information in a Credit Report
Lenders must check the borrower’s credit report and all related credit information to ensure it meets the standards set by Fannie Mae. This includes confirming that the information assessed by the automated underwriting system (if used) is correct.
If a borrower finds something wrong in their credit report—like accounts they don’t recognize or incorrect negative information—the lender should go over the credit information with the borrower. Then, the lender should ask the company that provided the credit report to verify the information’s accuracy.
Disputed Tradelines
Manually Underwritten Loans
When a borrower has disputed information on their credit report, and the credit reporting company verifies that this disputed information is wrong or incomplete, but the loan underwriting needs to finish before the credit report can be corrected, the lender cannot use the credit scores for manually underwriting the loan. Instead, the lender must evaluate the borrower’s creditworthiness based on their overall credit history outside of the disputed information.
If a borrower disputes several tradelines or a dispute involves a mortgage account, the lender should get a written explanation from the borrower about why they disputed the information. It’s important for the lender to know what part of the account information (like the balance or payment history) is being disputed, as it helps assess how this dispute affects the borrower’s overall creditworthiness.
The lender must decide if the borrower’s reason for disputing is reasonable and whether they need more proof (like payment receipts) to challenge the negative information. Lenders don’t have to investigate disputes related to medical bills.
DU Loans
For loans processed through the Desktop Underwriter (DU) system, DU will specify if the lender needs to investigate a disputed account. This is to confirm whether the account really belongs to the borrower and whether the account information is accurate and complete.
For more information on how to handle incorrect credit report data, how DU data accuracy is checked, and how DU analyzes credit reports, refer to:
– B3-2-09, Erroneous Credit Report Data
– B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report
– B3-5.3-09, DU Credit Report Analysis
References
For more details, visit Accuracy of Credit Information in a Credit Report of the Fannie Mae Selling Guide.