October 18, 2012
Some FHA loan applicants may consider the credit check something of a mystery. Borrowers should know and understand how the FHA loan application process works–including the credit check–as it can help better prepare the borrower for the preparation needed to get an FHA loan approved.
What does the lender need–and get–from the credit check process?
Many lenders rely on something known in the industry as the “three repository merged credit report” or TRMCR to gather the borrower’s credit information.
According to FHA loan rules, this report must contain information on all credit inquiries made within the last 90 days, any credit and legal data “not considered obsolete under the Fair Credit Reporting Act (FCRA)” which may include the last seven years worth of information about bankruptcy, court judgments, lawsuits, tax liens, foreclosure actions, etc.
This report may also include information on all borrower debt including the date the account was created, the credit limit and required minimum monthly payments. It should also include the unpaid balance for each account and most importantly, a record of the payment history.
FHA loan rules state that for any “open debt listed on the loan application, but not referenced on the TRMCR, the lender must develop credit information separately.”
All credit data in this report is required to be furnished by the credit reporting agencies and NOT the borrower. It may be listed on the loan application, but the lender must verify that application data with a credit report directly from the credit reporting agencies.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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