Written By: James Hogle is nationally recognized as the “credit expert” author, speaker and is the Executive Director of US Consumer Credit Restoration Association, LLC. Former President of Trust Financial, Inc., an Indiana Licensed Mortgage Broker with over 15 years of experience he specialized in working with “credit challenged buyers”. Click here for more info.
What happens when a 20-year veteran Loan Officer in GA has his credit pulled for licensing and finds some old debts and collections that haven’t been paid? Well the State of Georgia is asking him for documentation – see exactly what’s happening below!
“The state I am in just pulled my credit and they also pulled my credit score. My income has gone down since 2007 and my credit has taken some hits, what are they going to do?”
“My credit was perfect until a messy divorce last year. My wife got the rental property, after it went into foreclosure; my income is way down because of the market conditions and property values. What are they going to do to me?”
The stories like this just keep rolling in.
If it isn’t bad enough that home values are down, lender guidelines are tighter, jobs have been lost and now this! Your license renewal or approval may and very probably hinge on your credit report and its contents.
Hopefully the following questions and answers will help prepare you when they pull your credit. Here is what we have found out so far and some actual responses from some states.
What is the SAFE Act Requirement pertaining to my credit? Most of you will have your credit reviewed between October 2010 – March 2011 according to the SAFE ACT (if they haven’t already gotten a copy). Each state is different, some are looking at your credit reports and some states are pulling credit scores.
What are they looking for? Any late payments, Bankruptcies, Foreclosures, short sales, tax liens, judgments, collections, school loans, and child support. Basically anything negative reporting on your credit report.
What if they are all paid?
So far it doesn’t matter. We have seen almost every state ask for a letter of explanation for each negative item EVEN IF IT’S PAID. So it’s on a case-by-case basis, you know – how old is it, was it an illness, job loss, medical etc. - so document your response well.
We did an hour-long webinar on this very subject and one person on the call had dismissed Chapter 7 bankruptcy OVER 10 years old (that shouldn’t have even been reporting) and she had to write a letter of explanation for it!!!
What if I do have negative items on my report because of the economy and our whole industry, is that going to be held against me? That remains to be seen. But take a look at this information that came directly from the State of Georgia…
Please supplement your application by providing the Department with a detailed written explanation why this/these debts are outstanding and any plans to pay the debts. The Department is aware of economic conditions, but a statement to that effect does not relieve the MLO of financial responsibility. The response must include documentation for any debts listed above that have already been paid or disputed, or documentation showing that payment plans have been established for each unpaid financial obligation that is past due and that at least three payments have been made on each one. (Explanations or documentation regarding any type of medical occurrence or debt should not contain personal information. For example, “surgery” is sufficient if you wish to describe the procedure; including the type of surgery is unnecessary. Remember that all documentation becomes part of the application file.) If you have no such documentation, please state that in the written explanation you will be providing to the Department.
Please note: The responsibility lies with the MLO to investigate, document, and respond to the Department regarding these credit issues. Failure to provide documentation as noted for each item listed above may result in the denial of licensure. Documentation must include:
- Proof the debt has been paid; or
- Proof that a payment plan has been established and that three payments have been made; or
- Proof that the debt is not yours and has been disputed with the credit provider
Your response must include your name, NMLS number, and your signature at its conclusion.
What are the penalties? Are they really going to revoke my license? The short answer is yes they can. We are seeing some states giving you 6 months to make restitution or set up payment plans. Some are putting you on notice and they will review your credit again in 3 months or 6 months. It’s really a crapshoot as to what each state’s specific action will be.
And in the Georgia case above, he has 3 open collections with balances and he was informed that if they are not settled by the end of July, his license will be revoked after 20 years in the business!! (One of the debts is past the statute of limitations for his state and will fall off his credit report in the spring of 2011.)
We have seen everything from a couple of 30-day lates during some tough economic times to a loan professional that has student loans that are 13 years old with balances. Documentation and your explanation will be key (have I said that enough yet?)
What can I do now to get ready? First, get a copy of your credit report and see what’s reporting on it... Here’s the site where you can get a FREE one:
www.AnnualCreditReport.com is monitored by the FTC (Federal Trade Commission) where you are allowed by law to receive one copy from each credit bureau every 12 months for FREE!
Second - get your documentation ready, including any proof, validation of medical, illness, or other "life happens" events. The better you document your case the better chances you will have.
How can I improve my credit before October? Here is how we can help! We have 9 TIPS on how to improve your credit and things to look for on your credit report! If you would like to see the webinar, we can forward you the link and USCCRA will be happy to provide you with a free credit report review if you have any questions. Just email us at info@usccra.com. We are here to help the industry.
Is this really fair? We have gotten a lot of feedback on this issue. Were there some bad apples in the bunch? Sure. But that’s true in any business or industry. But where is the correlation of having some credit issues in the last 10 years and doing a good job as a loan professional? That I haven’t seen.
FICO just released information that 25% of Americans have a 599 score or lower, so are we going to start using someone’s credit to judge their work habits and abilities? How about our legislators, senators and representatives? Are they held to this standard? Maybe it's time they are, but that’s another story. For now let us know how we can help you.
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