Sudden Credit Surprises
January arrives every year and brings with it some credit challenges for those who may have over indulged on their purchasing in December. Record online sales and spending on holiday gifts are nice, but may bring about a few “Sudden Credit Surprises” for your clients. Here are a few examples:
A client with a marginal credit score or already high DTI goes crazy with credit card purchases in December. The possible surprises are:
- Now total DTI exceeds program limits
- Lowers amount they can borrow
- May eliminate them from a loan completely
- Possible MI challenges
- New accounts
- New inquiries
- New credit lines that all require explanation/documentation
People with higher credit scores and no DTI issues are also at risk for being a victim of holiday season for the same reasons, and while not in jeopardy of losing their ability to borrow, the costs maybe higher than once before.
- Those in top tier pricing programs may fall out to a lower tier raising the cost.
- Those who fall out may experience severe price shock if they were locked in at a low rate before Christmas and now have to lock a lower tier credit score loan with today’s higher rates.
What if any or all of these things happen and you don’t find out about it until right before closing on the final credit check? Do you really want to run around trying to get a rescore or documentation cleared a few days before closing?
It’s time for every originator to review every file that is closing from now until the middle of February and have a quick conversation with each borrower to be sure we don’t have any last minute surprises! You may have to make a few calls, you may not have any issues, but what if you find just ONE HIDDEN CREDIT CHALLENGE and are able to correct it in time to avoid a delay or the termination of one of your deals?
Things are challenging enough without any more surprises! Spending a little time with borrowers and even those you have out looking with preapprovals may be in a position to fix some potential challenges because you called!
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