Effect of credit pull before closing

Ausfarm · ‎11-23-2021

I know a lender will usually re-pull credit right before closing and a buyer shouldn't go run up credit cards etc., but what happens if there's a slight enough dip in a borrower's credit score (e.g., borrower now has a balance on a credit card that previously reported a zero balance) such that the borrower would technically not qualify for the interest rate the person qualified for intiially? What effect, if any, would that type of lower score have on the loan terms? Will the lender adjust down the interest rate a borrower qualified for if the borrower is no longer in the tier the borrower once was?

Thanks in advance for all your help.

dragontears · ‎11-23-2021

@Ausfarm wrote:
I know a lender will usually re-pull credit right before closing and a buyer shouldn't go run up credit cards etc., but what happens if there's a slight enough dip in a borrower's credit score (e.g., borrower now has a balance on a credit card that previously reported a zero balance) such that the borrower would technically not qualify for the interest rate the person qualified for intiially? What effect, if any, would that type of lower score have on the loan terms? Will the lender adjust down the interest rate a borrower qualified for if the borrower is no longer in the tier the borrower once was?

Thanks in advance for all your help.

The credit pull before closing doesn't generate a score, it is solely to check for new debt that could affect the DTI of the borrower. It depends on the lender on if that final pull is a HP or SP.

The only time a new score is generated from a pull is if the original one is too old (or specifically requested in the case of a borrower having a score increase after qualifying).

Ausfarm · ‎11-23-2021

Thank you! That's super helpful.

Anonymous · ‎11-23-2021

What if a collection pops up on the soft pull. Like if it is medical collection. Will the Underwriter want to see the effect on the scores at that point?

@dragontears wrote:
@Ausfarm wrote:
I know a lender will usually re-pull credit right before closing and a buyer shouldn't go run up credit cards etc., but what happens if there's a slight enough dip in a borrower's credit score (e.g., borrower now has a balance on a credit card that previously reported a zero balance) such that the borrower would technically not qualify for the interest rate the person qualified for intiially? What effect, if any, would that type of lower score have on the loan terms? Will the lender adjust down the interest rate a borrower qualified for if the borrower is no longer in the tier the borrower once was?

Thanks in advance for all your help.
The credit pull before closing doesn't generate a score, it is solely to check for new debt that could affect the DTI of the borrower. It depends on the lender on if that final pull is a HP or SP.
The only time a new score is generated from a pull is if the original one is too old (or specifically requested in the case of a borrower having a score increase after qualifying).