How Errors on Credit Reports Affect AUS FINDINGS

How Errors on Credit Reports Impact Mortgage Approvals

If you’re looking to buy a home, one of the first things your mortgage lender will check is your credit report. Your credit report is like your financial report card, showing lenders how well you’ve managed money in the past. But what happens if there are errors on your credit report? These mistakes can create major roadblocks when trying to get a mortgage.

In this guide, we’ll explain how errors can impact your mortgage approval, how to fix them, and how Gustan Cho Associates can help you get approved even if your credit isn’t perfect.

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Why Your Credit Report Matters in the Mortgage Process

Mortgage lenders assess your credit report to gauge your reliability as a borrower. This evaluation occurs through the Automated Underwriting System (AUS). This advanced tool analyzes your financial profile to ascertain your eligibility for a loan.

In this process, it’s essential to acknowledge that your creditworthiness significantly influences the approval decision. Fannie Mae’s Desktop Underwriter (DU) and Freddie Mac’s Loan Product Advisor (LPA) are the two main AUS platforms used by lenders.

These systems analyze factors like:

Your credit score
Payment history
Balances on credit accounts
Past bankruptcies, foreclosures, and short sales
Judgments, liens, and collections

If your credit report contains errors, the AUS might wrongly deny your loan application, even if you’re otherwise qualified.

Common Errors Found on Credit Reports

Credit report errors are more common than you might think. Studies show that as many as 1 out of 5 consumers have errors on their credit reports. Here are some of the most frequent issues:

Incorrect Personal Information:
- Wrong name, address, or Social Security number.
Outdated Account Information:
- Closed accounts showing as open.
- Incorrect balances or credit limits.
Duplicate Accounts:
- The same account is listed more than once, doubling your debt.
Misreported Negative Events:
- A deed-in-lieu of foreclosure is reported as a full foreclosure.
- Wrong dates for bankruptcies, foreclosures, or short sales.
Unauthorized Accounts:
- Accounts opened due to identity theft.

These mistakes can drastically lower your credit score and create red flags during underwriting.

How Errors on Credit Reports Impact AUS Findings

The AUS relies on accurate data from your credit report to make a decision. If there are errors, the system might label you as a higher-risk borrower, resulting in a denial or unfavorable loan terms. Let’s look at a real-life example:

Scenario:

A borrower applies for a conventional loan after completing a deed-in-lieu of foreclosure four years ago. The AUS requires a 4-year waiting period for this type of foreclosure. However, if the credit report incorrectly lists it as a full foreclosure, which requires a 7-year waiting period, the AUS will deny the application.

Errors like these can mean the difference between an approve/eligible and a refer/ineligible AUS decision.

The Role of Lenders in Identifying and Correcting Errors

At Gustan Cho Associates, we understand how crucial it is to identify and fix errors before submitting your loan application. Unlike other lenders who may overlook these details, we take a hands-on approach to reviewing your credit report. Here’s how we help:

Thorough Credit Review:
- Our loan officers review all three credit bureau reports (Equifax, Experian, and TransUnion) for inaccuracies.
Rapid Rescoring:
- If errors are identified, we can work with third-party credit vendors to correct them quickly through a rapid rescore. This updates your credit report in as little as 3-5 business days.
No Lender Overlays:
- Many lenders have additional requirements beyond the AUS findings, known as overlays. At Gustan Cho Associates, we don’t have overlays, which means we approve loans based solely on AUS findings.

Steps to Fix Errors on Credit Reports

If you suspect there are errors on your credit report, follow these steps to resolve them:

1. Get Your Credit Report

Request a free copy of your credit report from AnnualCreditReport.com or directly from the credit bureaus.

2. Review Your Report Carefully

Look for inaccuracies, especially in personal information, account details, and negative items like collections or foreclosures.

3. Dispute Errors

When addressing errors on your credit report, it’s important to take action by submitting a dispute to the credit bureau involved. Be sure to include relevant supporting documents, such as proof of payment or any applicable court records, to strengthen your case and ensure your concerns are understood.

4. Monitor the Resolution

Credit bureaus must review disputes within 30 days, and monitoring their response closely is important. Additionally, be proactive in ensuring that any necessary corrections are properly implemented.

5. Work with Your Lender

Share your findings with your loan officer if you’re in the mortgage process. They can help escalate corrections through rapid rescore if needed.

How Credit Disputes Affect the Mortgage Process

While disputing errors is important, timing matters. Open credit disputes can complicate your mortgage application. Here’s why:

FHA Loans:
- FHA guidelines don’t allow open credit disputes on non-medical collections with balances over $1,000. You may need to resolve or retract disputes before proceeding.
Other Loan Types:
- Conventional and VA loans have more flexibility, but open disputes can still cause delays or denials in AUS findings.
Impact on Credit Scores:
- Retracting disputes can sometimes lower your credit score temporarily, so plan carefully.

How Gustan Cho Associates Can Help

At Gustan Cho Associates, we focus on assisting borrowers facing credit difficulties. Whether you’re dealing with errors on your credit report or struggling to meet traditional loan requirements, we have solutions tailored for you:

Non-QM Loans:
- We offer non-QM loans with more flexible underwriting guidelines for borrowers who don’t qualify for traditional mortgages.
Credit Rebuilding Support:
- We’ll guide you on improving your credit profile, including strategies to pay down debt and correct inaccuracies.
Fast Loan Approvals:
- Our efficient process allows us to swiftly obtain approval as soon as your credit report reflects the correct information.

Tips to Prevent Errors on Credit Reports

Monitor Your Credit Regularly:
- Check your reports at least once a year to catch errors early.
Freeze Your Credit:
- Taking the step to freeze your credit is a proactive measure to protect yourself against identity theft and the creation of unauthorized accounts. This simple action can give you peace of mind and security in today’s digital age.
Keep Records:
- Save copies of important financial documents, like payment confirmations and discharge papers for bankruptcies or foreclosures.
Be Proactive:
- If you plan to apply for a mortgage, review your credit report months in advance to allow time for corrections.

Conclusion

Errors on credit reports can feel overwhelming, especially when they’re standing between you and your dream home. But with the right steps and a trusted lender like Gustan Cho Associates, you can overcome these challenges and get approved for a mortgage. Our team is here to help you navigate credit issues, fix errors, and secure the loan you deserve.

Ready to take the next step? Contact us today to get started on your journey to homeownership!

Frequently Asked Questions About Errors on Credit Reports:

Q: What are Errors on Credit Reports?

A: Credit report errors are mistakes or inaccuracies in your credit history, such as incorrect personal details, outdated account statuses, or incorrect reporting of negative events like foreclosures or bankruptcies.

Q: How Can Errors on Credit Reports Affect My Mortgage Application?

A: Errors hurt your credit score and may result in inaccurate information utilized by the Automated Underwriting System (AUS). This can cause delays or even deny your mortgage application. Reviewing all details closely is essential to ensure a smoother application process.

Q: What is the AUS, and How Does it Relate to Errors on Credit Reports?

A: The AUS (Automated Underwriting System) is a tool lenders use to evaluate your credit report and financial history. If your report contains errors, the AUS may wrongly label you as a higher-risk borrower.

Q: Can I Get a Mortgage if There are Errors on My Credit Report?

A: It’s possible, but you’ll need to fix the errors first. Working with a lender like Gustan Cho Associates, which specializes in helping borrowers resolve credit issues, can make the process easier.

Q: How do I Fix Errors on My Credit Report?

A: Start by obtaining your credit report, reviewing it for inaccuracies, and submitting disputes to the relevant credit bureau. Include proof of the error, such as payment receipts or court documents.

Q: What is Rapid Rescore, and How Does it Help with Errors on Credit Reports?

A: Rapid rescore is a process that quickly updates your credit report after correcting errors. This can take as little as 3-5 business days and is often facilitated by your lender.

Q: Do Credit Disputes Impact my Mortgage Application?

A: Yes, open credit disputes can complicate the mortgage process. Some loans, like FHA, don\u2019t allow disputes on non-medical collections over $1,000. It’s best to resolve disputes before applying.

Q: What Should I do if My Credit Report Incorrectly Lists a Foreclosure?

A: To address the error with the credit bureau, it’s important to take action by providing supporting documentation, such as a deed-in-lieu of foreclosure statement. In addition, your lender can be a valuable resource in helping correct the record and preventing potential AUS denial. You’re not alone in this process, and there are steps you can take to support your financial future.

Q: How Can I Prevent Errors on Credit Reports in the Future?

A: Monitor your credit regularly, freeze it to prevent identity theft, and keep detailed records of financial transactions like loan payments and discharge papers.

Q: How Can Gustan Cho Associates Help Me Deal with Errors on Credit Reports?

A: Gustan Cho Associates offers credit report reviews, rapid rescoring, and non-QM loan options for borrowers with credit challenges. They’ll guide you through fixing errors and securing mortgage approval.

This blog about “How Errors on Credit Reports Affect AUS FINDINGS” was updated on January 21st, 2025.