Can You Become A Loan Officer With Bad Credit?

Can You Become A Loan Officer With Bad Credit And Get Your MLO License?

A career as a mortgage loan officer can be extremely rewarding. However, there are steps in becoming a licensed loan officer where once you have accomplished those steps, you will have great career opportunities as a loan officer with the many great mortgage companies who are in major need of loan officers. We will cover the necessary steps in becoming a mortgage loan officer, especially the mortgage licensing requirements. One of the most asked questions by many mortgage loan originator recruits is ” Can You Become A Loan Officer With Bad Credit”. I will cover this topic in depth and will tell you on my personal experience when I went through the mortgage licensing process with bad credit.

Becoming a licensed mortgage loan originator is different than becoming a licensed professional in any other field because every mortgage loan originator applicant goes through an intensive credit background check.  Attorneys, real estate agents, stockbrokers, financial planners, accountants, doctors, dentists, nurses, teachers, and other professionals do not go through credit background investigations by federal and state regulators like licensed mortgage loan officers. I cannot think of any other profession where federal and state regulators require credit background investigations where they review the licensee’s credit report, credit payment history, and credit scores other than a licensed mortgage loan originator. The main reason that mortgage loan originators go through a credit background check is because the government decided that a loan officer’s credit is important in determining whether they warrant financial responsibility and the way they deemed whether a mortgage loan originator has financial responsibility is by reviewing their credit and credit payment history. Many disagree with this because hard working people in general can go through a period of tough times such as periods of unemployment, loss of business, divorce, periods of health problems or other extenuating circumstances where their income stream is halted or disrupted where it affects their abilities to pay their bills on time.

Can You Become A Loan Officer With Bad Credit: 2008 Real Estate And Mortgage Meltdown

The Great Recession of 2008 has affected millions of Americans. Countless of hard working Americans has lost their businesses, lost their jobs, and whole industries got eliminated. Real estate professionals were the single largest group of professionals who got affected by the real estate and mortgage meltdown of 2008, especially mortgage loan officers. Entire mortgage lending sectors were completely eliminated. Sub prime mortgage lending was one of the largest mortgage lending sectors in the mortgage banking industry and all of the sub prime lenders like Countrywide and Washington Mutual literally went bankruptcy overnight. With the shutdown of these giant corporations, was losses of millions of jobs. Mortgage professionals in these industries were jobless. To top it off, the whole mortgage industry went through a major overhaul where all mortgage loan originators needed to get licensed and go through intensive federal and state background investigations and take the NMLS Examination . The NMLS was created and implemented where its purpose was to be a central informational center where it is a consolidation of all states and its regulators and its function was to centralize the licensing and information system of all mortgage companies as well as all mortgage loan originators.  All mortgage loan originators had to take a NMLS certified 20 hour pre-licensing course. They needed at least a 75% of the questions correct on the NMLS examination. All mortgage loan originators also needed to apply for each individual states that they wanted to get licensed in and pass the state exams as well as go through the state’s licensing requirements. Each state has their own licensing requirements which includes its own separate credit requirements.  Some states are much more strict when it comes to bad credit than others.

Can You Become A Loan Officer With Bad Credit: Case Scenario Of My Own Experience

I used to own and manage 7 apartment complexes, just under 3,000 residential units and due to the 2008 Real Estate And Mortgage Meltdown, lost all of my properties and went through a financial meltdown back in 2010 and had to restart my life over again. I was in my mid 40’s at that time and getting an entry level job in a different field was out of the question. Due to my extensive real estate investment experience and my knowledge in both commercial and residential lending, I decided that a career as a mortgage loan officer would be ideal. I found out at the time that part of the licensing process was going through a credit background check. My credit was always perfect until 2010 where it plummeted to the low 500’s and I had over 55 derogatory credit items which included outstanding unpaid collection accounts, multiple judgments, charge off accounts, and multiple foreclosures as well as other derogatory credit items. I contacted the regulators for the state of Illinois and state of Florida, the two states I wanted to get licensed in but the regulators told me that they cannot give me an answer whether or not that they will approve me with the credit I had at the time. I told them that I did not want to waste my time and money in preparing for the NMLS test and go through the licensing process to find out later that I did not qualify for my poor credit. The answers that I got was that I needed to go through the process and after I have submitted my application along with the proper fees, that they will then give me an answer. Paying the fee was not the issue here. The NMLS exam was a very tough exam and was extremely time consuming. This was a very difficult time of my life where I had no source of income and to take a month or two off to study and prepare for the NMLS exam and go through the 20 hour pre-licensing course to later find out that I do not qualify to get a mortgage loan originator’s license would be more than devastating. I must have contacted both the state of Florida and state of Illinois examiners dozens of times hoping to get someone there to give me a straight answer. If someone there would have told me NO that I do not qualify due to my poor credit and outstanding collection accounts and judgments, that would have made me happy so I can pursue other career opportunities but they did not give me a NO nor a YES or even a MAYBE.

This was January 2012 and I decided to just take the gamble and take the 20 hour pre-licensing NMLS Course with Real Estate Institute in Niles, Illinois. It was  a three full day course.  The instructor who taught the course was a gentleman by the name of Peter Citera. Peter Citera was an extremely knowledgeable instructor at the Real Estate Institute in Niles, Illinois but also a practicing licensed mortgage loan originator. As soon as I met him, my first question to him was ” Can You Become A Loan Officer With Bad Credit?”. Peter Citera, like the mortgage regulators did not have a definitive answer to my question. You see, I did not just have bad credit, I had really bad credit. My background was that I owned, operated, and managed 7 apartment complexes which consisted of just under 3,000 units and had over 150 employees. I will explain on a separate blog on how I lost $100 million of my net worth in less than a year due to the lies and unscrupulous practices of Citibank ( It will be an interesting story on how commercial banks are not regulated and borderline criminal ). My credit report was dozens of pages of bad credit which consisted of outstanding unpaid collection accounts, judgments, charge offs, late payments, and any other derogatory credit that you can think of. I was still ready to call it quits and not pursue with my NMLS license if someone told me that I will not get a mortgage loan originator’s license due to my bad credit because I did not want to go through the stress of studying and preparing for my NMLS Test and go through the licensing process to get told that I do not qualify for my mortgage license due to my very poor credit.

Here I was, studying for the national NMLS exam for the next four weeks, investing more than 10 hours per day, 7 days a week with the uncertainty of not knowing whether I will ever get my license. I Googled search everyday on the internet looking for answers on whether you can become a loan officer with bad credit and got conflicting answers. I must have contacted over three dozen states and talked to their mortgage licensing division and got the same answer that they could not give me the answer to my question and the only thing that I can do is just pass the NMLS exam and apply for my mortgage loan originator’s license and that is the only way that I can find out.

Can You Become A Loan Officer With Bad Credit: Applying For My Mortgage Loan Originator’s Licenses

It was now February 2012 and after going over 1,000 practice exam questions and spending hundreds of hours of studying for the NMLS exam, I was ready to take the national NMLS Test. The test was a three hour examination given at a test center and I was done with the exam in less than 90 minutes. I passed the national NMLS Test with a score of 84%. I was happy but still the thought of me not being able to get my mortgage license still was stressing me out. The next step was for me to take the Illinois State NMLS Exam which I studied for it and passed it the following week. Now I was ready to apply for my Illinois mortgage loan originator’s license. I applied for my Illinois mortgage loan originator’s license through the NMLS and paid the proper fees. Within two weeks, I got the great news that Illinois has approved my mortgage loan originator’s license and I was ready for business. I could not be happier and it was one of the happiest moments of my life when I got my Illinois mortgage loan originator’s license and the many weeks of stress and worrying finally came to an end.

The next state I applied for was the state of Florida. Florida, again, approved my Florida mortgage loan originator’s license with bad credit. My credit scores at that time I applied for my Illinois and Florida state licenses were under 500 FICO. Both state regulators wanted to see a letter of explanation with regards to my poor credit, open outstanding unpaid collection accounts, judgments, and other derogatory credit information. I have also not filed my personal and corporate income taxes since 2008 because of financial constraints. My accountant wanted over $100,000 for him to do my corporate and personal tax returns due to having to file 7 corporate returns due to the 7 Limited Liability Corporations I had to do and the complexity of it. The IRS eventually helped me complete all of my returns ( I will write about how the IRS and special agent John Hedin, who turned out to be a great friend of mine, helped me with being compliant with my corporate and individual taxes and do my tax returns on a later blog ).

So, Can You Become A Loan Officer With Bad Credit? The answer is YES and NO. Here I was now very confident that I can now become a mortgage loan originator in any state with bad credit, however, that is not a case.

Can You Become A Loan Officer With Bad Credit? Not In The State Of Wisconsin

I live in Kenosha County, Wisconsin which is the border of Wisconsin and Illinois and my branch office is in Illinois, which is about an hour from where I live. Since I live in Wisconsin, I applied for my Wisconsin mortgage loan originator’s license in April 2013. I figured it would be no big deal in getting my Wisconsin mortgage loan originator’s license approved because I had no issues with the state of Illinois and state of Florida. Unfortunately, two weeks after I have submitted my Wisconsin mortgage loan originator’s license application, I get an email by a Wisconsin mortgage regulations investigator telling me that I cannot qualify for a Wisconsin mortgage loan originator’s license because I have multiple outstanding judgments which is recorded on Kenosha County public records. I told her that the judgments was due to my commercial properties being foreclosed on any my $14 million dollar mansion that was foreclosed on in Barrington Hills, Illinois and that the lenders who were the judgment creditors were leaving me alone. The mortgage licensing investigator told me that the unsatisfied judgment needs to have a written payment agreement and that it cannot be ignored if I wanted my Wisconsin NMLS license. I told her then that I will enter into a $50 to $100 per month payment agreement and will that be okay. She told me NO. One of the judgments was $6,000,000 and that I need to enter into a written payment agreement with the judgment creditor for at least 5% of the unpaid judgment amount or a payment plan for $30,000 per month. I told her that I could not do that. How can I come up with $30,000 per month. I spoke with the supervisor and it was like talking to a brick wall. Long story short, the state of Wisconsin was going to deny my Wisconsin mortgage loan originator’s license due to my prior judgments and prior bad credit. I ended up withdrawing my Wisconsin mortgage loan originator’s license.

The good news is that I now am licensed in the states of California, Ohio, Alabama, New Jersey, Virginia, Illinois, Florida, and Kansas. Can You Become A Loan Officer With Bad Credit? Yes, you can become a loan officer with bad credit depending on the state you apply. If you have any questions in getting your mortgage loan originator’s licenses with bad credit or are interested in joining my team as a mortgage loan officer, please contact me at 262-716-8151 or email me at gcho@gustancho.com. I am available 7 days a week, evenings, weekends, and holidays to take your phone calls and answer all of your questions.

 

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

26 Comments

  1. pat Lewis says:

    This helped me. I’m applying for a job as a loan officer and I’m concerned about my credit. I feel a little my confident about getting my license

    • Gustan says:

      No worries. You will do fine. Don’t let anything get in your way to the road of success. I respect your ambition and don’t let nothing get in your way. 😉

      Gustan Cho

  2. Gustan Cho says:

    No worries. It depends on each individual state on getting a loan officer license

  3. Gustan Cho says:

    California is one state that doesn’t even look at a NMLS Mortgage Loan Originator applicant’s credit scores or credit report.

  4. Gustan Cho says:

    I have a loan officer who applied for a Texas MORTGAGE LOAN ORIGINATOR License with a second mortgage charge off that was six years old. She had perfect credit besides the charge off. Texas was about to deny her MLO LICENSE so she withdrew her MLO LICENSE application. She went through credit repair and got her charge off removed from her credit report. She reapplied for her TEXAS MLO LICENSE and she got it approved.

  5. The state of Texas looks at everything, and they check and double check so that they do not miss anything so if you are trying to get your loan officer license with bad credit, please consider getting your credit in order before starting the process of getting your license please.

  6. Justin says:

    Hi!

    I’m glad i came across this. My name is Justin, I’m a 24 year old male located in California. I recently had my interview with a mortgage Company in Sacramento CA, I’m worried that my credit will hold me back from becoming a loan officer.. My credit it is in the mid 500’s around 550-560. I have no late payments on my record at all.. The only open accounts I have in collection are all medical.. Which was due to them switching everything in my name as soon as I turned 18.

    I really want a career in this industry. Do you think that will hold me back at all in my state ?

    Thank you for taking your time to answer my concern.

    • admin says:

      California does not even look at credit scores so I would not worry about it. Texas, Connecticut, Oregon are one of the toughest states for credit issues

      • Gustan Cho, NMLS 873293 says:

        California does not even look at credit scores so I would not worry about it. Texas, Connecticut, Oregon are one of the toughest states for credit issues. If you have any question, please feel to reach out to me.

        Gustan Cho NMLS 873293
        Area Manager
        The Gustan Cho Team

    • Gustan Cho, NMLS 873293 says:

      Justin,

      My name is Gustan Cho NMLS 873293 and I am the Area Manager for The Gustan Cho Team. You have nothing to worry about in getting your California NMLS SAFE license in the state of California. California does not even look at credit scores nor credit reports so you can rest assured that it will not effect you getting you license. There are states that do care about bad credit such as Texas, Wisconsin, Oregon, and Connetticut. Please feel free to call me or text me at http://www.gustancho.com or email me at gcho@gustancho.com.

      Gustan Cho NMLS 873293
      The Gustan Cho Team

  7. Maria says:

    I have a question, what about NEW Jersey? That’s my goal of becoming a license loan officer, but my credit score I’d below 620 and have late charges and two collection. Thanks, Maria

    • Gustan Cho, NMLS 873293 says:

      Maria,

      There are certain states that really care about a loan officer credit scores such as Connetticcutt, Texas, Wisconsin, and Oregon. However, New Jersey does not care about credit scores. Other states that are lenient are Illinois, Florida, Ohio, Alabama, Indiana, Virginia, Alabama, and many others. California does not even look at the credit reports. Please feel free to contact me on the number below if you have any other questions or if you are interested in a career with The Gustan Cho Team NMLS 13589

      Gustan Cho NMLS 873293
      Area Manager

    • New Jersey is like California. They don’t even look at credit scores or credit.. Connecticut is a different story. As long as your DLA was at least 6 or more months, you will have no issues.

      Gustan Cho NMLS 873293
      Gustan Cho Associates
      The Gustan Cho Team

  8. Haylee says:

    What about Minnesota? How does Minnesota view bad credit?

    • Gustan Cho, NMLS 873293 says:

      Bad credit is a very general broad term. If you had a prior bankruptcy, foreclosure, deed in lieu of foreclosure, short sale, that is alright. Regulators look at the candidates overall credit report and payment history. If you can be more specific, I may be able to answer your question.

      Gustan Cho NMLS 873293
      Area Manager
      The Gustan Cho Team

    • I really do not know about Minnesota. One thing you need to realize is that bankruptcy and foreclosure or short sales don’t matter. Some states like Wisconsin, Connecticut, Texas, and Oregon cares about charge offs and collections where they want to see a payment plan. Connecticut requires one year after Chapter 7 Bankruptcy and Oregon has 5 years after bankruptcy discharged date. This requirement is illegal but they still do it
      Once Obama is out of office, I think this will change.

      Gustan Cho NMLS 873293
      The Gustan Cho Team
      Gustan Cho Associates

  9. Haylee says:

    Thanks for the quick response. To be more specific with bad credit. It is collection and judgement and charge off for revolving debt due to joining debt consolidation program.

    • As long as you have been timely in the past 12 months, most states don’t care about past bad credit. They don’t look at credit scores. They just look at past 12 months payment history. I hot Florida and Illinois approved with a 480 credit score. Don’t worry about it. Save your worries on other things that matter
      Call or email me if you need more clarification.

      Gustan Cho NMLS 873293
      AREA MANAGER

  10. Shelly says:

    I have been asked for an interview from a mortgage company in Missouri. My credit is poor I filed bankruptcy 2 years ago did a deed-in-lieu back in 2009 everything went bad due to Medical reasons. Health is better but stuck with all the bills which are on my credit report. How does Missouri handle poor credit for being a loan originator. Thank you

  11. Emily says:

    I was told by an employer after a review of my credit that I could not get a mortgage loan originator license unless I entered payment plans with all creditors in Michigan. It has been six years since the medical problems I had resulted in an 8 month hospital stay and loss of job, apartment, credit cards, plus medical bills. I told them that on the phone. Some of the negative accounts have begun falling off and I do not want to enter into payment arrangements as that would restart the clock. My credit score is 638 right now. I currently hold a MI Salesperson license as a Realtor and had no idea that the requirements to be a loan officer were based off credit.

    • Gustan Cho, NMLS 873293 says:

      Your employer is full of it. Please contact me at gcho@gustancho.com or call me anytime on my cell phone at 262-716-8151. I will help you and you can even work for me.

      Gustan Cho NMLS 873293
      Area Manager
      The Gustan Cho Team

  12. Tosha says:

    I’m in DC and the company that wanted to hire me withdrew their offer because I recently had a discharged BK7. DC’s licensing website wasn’t very clear in terms of creditworthiness or financial responsibility requirements. Is there a certain amount of time I need to wait after BK before applying for licensing or will a letter of explanation suffice.

    Thanks

    • Gustan Cho, NMLS 873293 says:

      Tosha,

      There are no rules that a company not hire you because a Chapter 7 Bankruptcy discharge. We are a national FANNIE/FREDDIE Direct mortgage lender licensed in 50 states and we do not have such policy. Same goes with licensing. Most states like that you have filed bankruptcy because you are now debt free and have no liabilities. There are certain states like Connecticutt that has a one year mandatory waiting period after a Chapter 7 Bankruptcy discharged date and Oregon where it has a five year waiting period after a Chapter7 Bankruptcy. If you are looking for a remote loan officer position with a great national mortgage company with chances of advancement, please contact me at gcho@gustancho.com

      Gustan Cho NMLS 873293
      Area Manager
      Website http://www.gustancho.com
      Toll Free Direct 1-800-900-8569
      Cell 262-716-8151
      Direct 262-878-1965
      Available 7 days a week

  13. Dayna says:

    Hi. I am taking applying for my license and I live in New Jersey. My credit score is low 500’s. I have a few late payments, but mainly my credit is poor from being late student loans and have my credit cards maxed out. I have about 7 cards maxed out. Will I be okay?