topic Re: "Mortgage lenders want to see you actually use your credit," what does this mean? in Mortgage Loans

"Mortgage lenders want to see you actually use your credit," what does this mean?

pdxmike — Fri, 23 Jan 2015 00:18:46 GMT

I've seen said a few times something to the effect of, "It's not enough to just have credit, mortgage lenders want to see you actually use it." This makes sense, but what specifically do lenders want to see? For example, I've seen credit report payment histories that show a row of green boxes with "OK" written in them for every month an account holder pays as agreed. If an account doesn't report a balance one month, is there not a green OK? Is that what lenders are talking about? Or is the historical high balance also looked at, to see that a borrower has actually used a substantial amount of the credit that was given and reliably made payments on it?

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

dursty87 — Fri, 23 Jan 2015 01:21:40 GMT

i'm pretty sure lenders can see more detail with CC reporting than most consumer type monitoring/report services show. For example, they can see how much your balance was each month and how much $$ you paid that month, in addition to the high balance reported.

Green "OK" boxes will still show up in payment history regardless if there was a balance that month or not. It is just an indicator that the account is current.

Most CC lenders want to know you have the ability to repay debts and use the balance/payment information to help them gauge that. I am sure mortgage lenders are no different.

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

pdxmike — Fri, 23 Jan 2015 01:39:11 GMT

I thought, especially with the official AnnualCreditReport.com files, consumers were able to see all the information that the bureaus had on them. Can a mortgage lender confirm whether monthly balance amounts are visible?

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

Peter1142 — Fri, 23 Jan 2015 14:40:09 GMT

In the vast majority of cases, lenders are only looking at your FICO score, plus any derogatory items. The lender (and the automated approval system) may flag very thin files (very short history - less than 2 years, 2 or less accounts), but no one is looking at how much you have used your credit cards in the past.

Monthly balance amounts being available varies based on the CRA. FICO scores do not look at balance history, though they may look at the date of last activity in weighing the account (I think this is moreso FICO '08, not the version used by lenders.)

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

pdxmike — Fri, 23 Jan 2015 19:31:19 GMT

I think this was more about a manual review, and it's because I'm an unusual case who's likely to get manual underwriting. I know it doesn't matter to FICO.

Which CRA shows monthly balances? And what would a lender like to see there? Consistent balances of a few hundred dollars that look like normal spending? One month where I use most of my limit followed the next month by a small balance, showing I can reliably pay debts much larger than a mortgage payment?

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

DallasLoanGuy — Fri, 23 Jan 2015 19:40:57 GMT

@pdxmike wrote:
I've seen said a few times something to the effect of, "It's not enough to just have credit, mortgage lenders want to see you actually use it." This makes sense, but what specifically do lenders want to see? For example, I've seen credit report payment histories that show a row of green boxes with "OK" written in them for every month an account holder pays as agreed. If an account doesn't report a balance one month, is there not a green OK? Is that what lenders are talking about? Or is the historical high balance also looked at, to see that a borrower has actually used a substantial amount of the credit that was given and reliably made payments on it?

never heard of such

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

DallasLoanGuy — Fri, 23 Jan 2015 19:41:26 GMT

@dursty87 wrote:
i'm pretty sure lenders can see more detail with CC reporting than most consumer type monitoring/report services show. For example, they can see how much your balance was each month and how much $$ you paid that month, in addition to the high balance reported. nope

Green "OK" boxes will still show up in payment history regardless if there was a balance that month or not. It is just an indicator that the account is current.

Most CC lenders want to know you have the ability to repay debts and use the balance/payment information to help them gauge that. I am sure mortgage lenders are no different.

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

Revelate — Fri, 23 Jan 2015 19:51:12 GMT

@pdxmike wrote:
I think this was more about a manual review, and it's because I'm an unusual case who's likely to get manual underwriting. I know it doesn't matter to FICO.

Which CRA shows monthly balances? And what would a lender like to see there? Consistent balances of a few hundred dollars that look like normal spending? One month where I use most of my limit followed the next month by a small balance, showing I can reliably pay debts much larger than a mortgage payment?

All of them now do (EX pioneered it in 2011/2012 IIRC, TU and EQ have since followed suit).

Don't even bother trying to optimize for whatever a UW would think on this one as no two are identical beyond overall guidelines at a single lender, but risk analysis looks for patterns and the big thing you can get out of this is tracking historical balances and payments: is spend and payments predictable over time, or is spending all over the map? Possibly worse are payments inconsistent? Also it can demonstrate whether a balance was an instant in time short-term float (designed use of CC's), or whether that balance has been hanging out for a while... and can napkin math based on consumer income if they're living in their means or not.

End of the day live your life, never miss or be late on a payment, and don't sweat this one.

To add to what Dallas said: most if not all mortgage and auto lenders usually get some sanitized version of the report (much like we do from say Credit Karma or myFICO) and not all the tradeline data is on there depending on what service they pulled it through. Could it be used by a lender somewhere in time and space, sure, but as I understand it the mortgage brokers / lenders typically pull a tri-merge report through a third party who consolidates the information from the 3 bureaus and then presents it. Payment information likely isn't on that one.

ETA: the data might currently be used by the credit card issuers, but honestly, mortgage industry moves glacially slow in comparison and really there's no financial incentive for them to make use of this data. Actually there's a financial disincentive as they'd have to retool non-trivial infrastructure.

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

pdxmike — Fri, 23 Jan 2015 22:34:37 GMT

I can't find anything in Google about credit reports showing monthly balance and payment histories. Can you?

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

DallasLoanGuy — Fri, 23 Jan 2015 23:20:50 GMT

@pdxmike wrote:
I can't find anything in Google about credit reports showing monthly balance and payment histories. Can you?

we get baklance and payment history and high credit

NOT balance history

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

Anonymous — Fri, 23 Jan 2015 23:53:23 GMT

Some lenders report different data. For example, us bank reports my actual payments each month. My account with them NEVER posts a balance, but on at least 2 of my reports it shows that in september i made 401 dollars in payments. Oct 386 dollars in payments. Etc. Whether a lender can see that or not, i dont know, but my actual credit report shows it. I will try to post a picture.

Re: "Mortgage lenders want to see you actually use your credit," what does this mean?

Revelate — Sat, 24 Jan 2015 01:47:00 GMT

Pull any of the reports from annualcreditreports.com and you'll see. I verified as of 2014 all 3 CRA's have this, though not all lenders report.

This is a sample from Equifax from a May 2014 report I had when I was going through a dispute for a tax lien; tradeline in question is a Cap 1 card.

Date	7/1/12	6/1/12	5/1/12
Balance	0	150	9
Scheduled Payment Amount		25	9
Actual Payment Amount	283	10	15
Date of Last Payment	Jun-12	Jun-12	May-12

ETA: the reason I suspect none of the third parties put all this information in is my full Equifax report is 47 pages long