Could an Error at Experian Be Screwing Texas Consumers on Real Estate Loans — More

Recall last week when I told you about my friend Dormand Long, who has written to the Texas Attorney General because he believes Experian and other credit bureau agencies are wrongly lumping home improvement loans with consumer credit loans when they rate consumer credit. This is more important than ever today because mortgage lenders are looking for near-perfect credit scores when doling out home mortgages.

Here’s how this all started. Someone stole Mrs. Long’s Discover card and tried to get a cash advance. When she pulled her credit report and credit score through a credit monitoring service offered by credit bureau Experian and Discover, the Longs learned that Experian classified their home equity loan as an installment loan, not a real estate loan. Lenders tend to look more favorable on real estate loans and they are backed by the equity in the home.

The report also said Mrs. Long did not have any real estate loans. Well, gee, what do you call a home improvement loan?

Long’s dilemma and his letter to Texas Attorney General Greg Abbott caught the eye of Dallas Morning News reporter Pamela Yip, who is very finance savvy (sub req.). However, she interviewed credit experts who say it’s completely up to lenders to determine how they classify home equity loans.

“A home equity loan may be reported as either an installment loan or a revolving type line of credit,” said Tim Klein, spokesman for Equifax. “It depends on how it is structured and reported by the lending institution to us. And it does vary from lender to lender.”

Long’s credit report had said that too many installment loans can bring your FICA score down because they carry fixed monthly payments, which are sometimes viewed by lenders as negative because they may affect your ability to meet other loan obligations. But if it’s up to the bank to determine how they classify loans, it seems that our credit destiny is, once again, in their slimy little hands.

Another expert told Yip that a home equity loan isan installment loan,  is hardly credit-damaging and has much less of an impact on your credit rating than revolving debts. Which is the opposite of what Experian told Long.

Fun games. And this is a consumer who is just pointing out what could be a huge discrepancy. Can you just imagine the hoops home buyers are jumping through just to get financing. Used to be, all you had to do was fog a mirror… today you have to wine it, dine it and do everything but…kiss it!

What I want to know is, has anyone ever been denied a mortgage because of this issue? Too many consumer installment loans? CandysDirt wants to know!

0 Comment

  • Look up "Fair Isaac" this is the formula that the credit agencies use to compute credit scores. As someone who looks at credit bureaus everyday I am not impressed with credit scores. Basically, you can "game" "Fair Isaac" to improve your score. That's why I want to look at the "meat and potatoes" and not a person's score. I have seen great scores and all the person has are student loans in deferment. I have seen weak scores on a person who has clean credit, but it is the wrong mix of credit for "Fair Isaac." In addition, many mortgages don't report, so please take a complete application. Also, try this thought on. . .can "Fair Isaac" give two similar credit reports different scores based on where that person lives? I know this is only anecdotal, but I swear folks who live in Jones County have lower scores than folks with similar credits who live in surrounding counties.

  • Look up "Fair Isaac" this is the formula that the credit agencies use to compute credit scores. As someone who looks at credit bureaus everyday I am not impressed with credit scores. Basically, you can "game" "Fair Isaac" to improve your score. That's why I want to look at the "meat and potatoes" and not a person's score. I have seen great scores and all the person has are student loans in deferment. I have seen weak scores on a person who has clean credit, but it is the wrong mix of credit for "Fair Isaac." In addition, many mortgages don't report, so please take a complete application. Also, try this thought on. . .can "Fair Isaac" give two similar credit reports different scores based on where that person lives? I know this is only anecdotal, but I swear folks who live in Jones County have lower scores than folks with similar credits who live in surrounding counties.

  • Pingback: Legally Bond: Home Equity Lines of Credit May Not Be Your Friend! | Candy's Dirt | Dallas Real Estate News and Blog by Former Dallas Dirt Editor Candy Evans

  • Pingback: Legally Bond: Home Equity Lines of Credit May Not Be Your Friend! | Candy's Dirt | Dallas Real Estate News and Blog by Former Dallas Dirt Editor Candy Evans