Hello,

I'm in the process of trying to refi my house in California.  I first started the process in January when I gave my loan consultant my personal info and they ran a credit report for me and my wife.  My score was somewhere around 730-740, but my wife's was considered low at 706.  During the process we were told we'd have to pay 1/4 point extra in fees for the lower score and another 1/4 point extra for a cash out refi to pay off an existing HELOC.  We sat and watched rates for a couple months before finally deciding to lock in 4.875% at 2 points on 3/23/09.  Some of the preliminary docs I rec'd for signature showed an incorrect SSN for my wife (off by only 1 digit) which I informed my loan consultant about, but was told not to worry and to simply make the correction in ink to be changed later. 

My loan has since gone to the underwriter who had various questions for me and requested add'l documentation to update their records since it had been 2 months since I submitted everything to them.  I did so promptly, but the following day, I was informed that they had used the wrong SSN for my wife when they ran the initial credit report in January.  They ran a new report with the correct SSN and according to the loan consultant, the reports are almost identical.  I guess even though the original SSN was wrong it still pulled my wife's credit info based on other personal information.  Apparently the only differences between the two reports were some minor fluctuations in balance and the fact that my wife's score is now a 691!  I have no idea why her score has dropped 15 points, but because it is now under 700, I was told that my loan will now cost me 3.125 points instead of 2 points.  That's over $4,000 extra, even after they've told me that they will "eat" 1/4 point for my inconvenience.  

Needless to say, I'm very upset, frustrated and confused.  I feel like I'm getting shafted in this deal and I'm trying to determine what my options are.  Does anyone have any insights or suggestions?

Thanks in advance!

NCognito I would hold off on threats of cancellation or legal action as a last resort.  Any time you bring up attorneys you can make a fixable situation unrepairable.  There are a few options for you.  These days most credit providers have a rapid rescore or credit optimizer model that will tell you one or two things you can do to raise your score.  Also, if Transunion is your middle score there are two different models out there and two different possible scores. I would check into that.   Another solution may be to remove your wife from the loan.  Have you checked to see if you can qualify without her?   You can look at bumping the rate an eigth to absorb the  the additional costs.   I know raising the rate is not ideal but it may beat the alternative.   Lastly if you are working with a broker you may have to move the loan to a different investor.  Noone likes pulling locked loans but sometimes there are no other alternatives.  I would meet with my broker and discuss a few of these options and see what can be done before ruffling too many feathers.  Just my .02 cents.

Go with Downey's response.

Thanks for the feedback everyone.  I agree about taking it slow and not ruffling any feathers unless I need to.  Afterall, my hope is to complete the transaction that was originally agreed upon and it would be easiest to do this if things remained amicable.  I don't even know what legal rights I would have in a situation like this anyway, if any.

I like the idea of raising our credit score back to an acceptable level (at least 9 points I guess) and I will check with my loan consultant about the possibilities of the rapid rescore or credit optimizer model mentioned above.  I've been trying to figure this out myself and after reviewing my records, I see that all of my credit balances have remained the same or gone down slightly, except one which has increased by about $2,000 taking it from less than 20% of the credit limit to around 30% of the credit limit.  Some of the things I've read online suggest that overall credit balances play a big part in determining your score (30%) and that it's best to keep balances under 20% of the available limits.  Would this be a likely cause of the changed score?  If so, it's a no brainer to spend a few thousand dollars to drop my credit balance and improve my score than to give it to these guys...

As for the other options mentioned, I will ask about the transunion score and any other possible alternate score calculations.  Is the overall score basically an average of the scores from the 3 credit bureaus?  The other possibility about increasing my interest rate to offset the increased fees has already been suggested by my lender and I'd be looking at 5.125% at 2.625 points, which would be an extra $2600 for a .25% higher interest rate - something I still would not be happy about...  Also, taking my wife off the loan isn't an option as I need her income to qualify.

Thanks again for your advice!

You have to look at the credit reports to determine the differences that are affecting your score.  You may have closed a revolving account or it stopped reporting, the balances when the account reported could have been higher (eg the balance may have reported the day before your payment was applied, thus showing a higher balance than your records indicate), etc.

You could also look into an FHA loan if the loan size meets the requirements.  Credit score means far less on FHA loans than on conventional.

Thanks for everyone's input.  I really appreciate it!  Here's where I am now...

I contacted my loan consultant and asked for copies of both credit reports and my home appraisal, so I could review the documentation myself and try to determine what happened.  The first report was run on 1/14/09 and they did use the wrong SSN, but everything on the report is my wife's and it even gives her correct SSN everywhere else on that report...  Those scores were 710 (XPN), 706 (EFX) & 699 (TUC).  The second credit report was run on 4/6/09 using the correct SSN, but again all the accounts, info, etc is the same except some fluctuations in the balances.  These scores were 668 (XPN), 691 (EFX) & 703 (TUC).  I'm assuming the middle scores are used as a sort of average??

Anyway, I went over these reports very carefully to see what could have caused the 15 point decline in score.  The total revolving credit balances actually declined $72 from January to March.  Most account balances went down, but one account went up about two thousand dollars.  I've read that credit balances make up about 30% of your score, especially balances exceeding 20% of the cards limit.  Since my overall revolving credit balance declined , would I be correct to assume that because this one card that I've used has gone from about 15% of the credit limit to about 24%, that this is the likely cause???  I've had some recent business travel expenses and an unexpected car repair charge that have all been put on that card as well, so it's gone up even further since 4/6/09.  Since I absolutely loathe the idea of paying an extra $4-5,000 to my lender, I was thinking about putting that same amount of money towards this one card's balance to bring it back to where it was originally, hoping that this, along with the fact that all of my other balances are at similar or lower balances (none higher) than in 1/09, would raise my score back up enough to avoid the increased fee (ie, above 700).

I've got the cash, but I realize this is a bit of a gamble since I don't know exactly how the scores are actually calculated and I'd have to time the next credit check so that any new payments would be reflected on it.  Also, I now have several credit inquiries that may adversely affect my score as well, which was also a concern raised by my loan consultant. 

So there's my quandry: Do I gamble hoping to drop my debt and save the original deal I expected, but risk making things worse (more costly) or do I suck it up and pay the extra money to these guys and move on?  (Walking away isn't much of an option for me since I've already paid $750 for appraisal, app fee, etc, so I'm committed to do something.  I'm leaning towards paying down the one balance and hoping for the best, but wanted to get your expert opinions on the matter... 

FYI: My current loan is a 30 yr fixed at 5.75%.  A refi with a 30 yr fixed at 4.875% would drop my monthly by about $540.  I think my break even on closing costs/points would be about 21 months at 2 points and 29 months at 3.125%.

Thanks again for any thoughts or insights!

You've given us a lot of good information, but without actually seeing the credit reports it is difficult to give you the best advice.

If you have the $4,000 to pay down the credit cards and you can live without that money for a while, I would pay them down and get a rapid rescore.  You can always charge those credit cards up if you need to access that $4,000 in the future, so you wouldn't really be losing access to those funds.  Worst case, you end up right where you are now.

In regards to your other question. The credit scores we use is the lower middle score if there are two borrowers. If there is one borrower, we use just the middle score. If there are only two scores reporting, we use the lowest score.

It is also possible that you have inquires on your credit that lowered the score. If you shopped around looking for the best deal, you could have had a few people pull your credit and that could be the answer for the lower score. If you applied for a charge card or opened a new account that pulls credit, that could be the answer for the lower score as well.

If you have the time and the money, a 'rapid rescore' or 'enhanced credit bureau update' may be worth your while. Ask your loan consultant if they have a 'what-if' simulator and see if you can get those pesky 9 points back. FYI - a rapid re-score can get pricey. The company I use charges $25-35 per person / per bureau / per tradeline that gets adjusted and can take roughly a week.

Kent, I like your point about not really losing access to those funds if I were to pay down my credit balances.  That's why I really don't want to pay the lenders more than I have to because then I do lose that money.  At least this way, the money is used on me.  Also, I hope that the worst case scenario would be that I'd be in the same position I am now, but I don't know.  Could the extra inquiries, etc, lower my score even further, putting a refi out of reach all together?

Troy, thanks for explaining the lower middle score concept.  In my case, there are two borrowers - my wife and me.  I am concerned about the number of inquiries too, but how many are too many?  The last report on 4/6/09 indicated that there have  been 6 inquiries in the last 12 months, all from this lender that I'm working with.  4 were apparently done on 1/14/09 (2 for me and 2 for my wife I assume) and 2 on 4/6/09 (1 for me and 1 for my wife).  I don't know why they ran 2 reports on us the first time...  Now, is the "rapid rescore" different from a regular credit report?  I was simply thinking they would "repull" (my lender's words) another report and use the latest score...  Is there an advantage to a "rapid rescore" vs the other?  Also, would the pricing be around $75 to run the 3 bureau's for my wife only then?

Thanks again everyone!  You are a great resource for people like me who have only a very limited understanding about this stuff.

Yes, extra inquiries will lower your credit score - a few points for each time they pull a report. When you have multiple pulls in one day, the credit bureau will adjust these credit pulls and 'lump' them together as one inquiry.

I am unsure why your loan officer is pulling separate credit reports for you and your wife - he should be pulling a joint report and you two should have less inquiries.

A Rapid Re-score is an online tool that brokers/loan officers/lenders have that help address errors that could be on your credit report. The stats say that 70% of all credit reports have errors and a rapid re-score addresses these errors. There could be information that is outdated or someone with the same name got something reported to your file, etc. The 'what if' simulator will tell a broker/lo/lender how many points you can go up if certain information is corrected. Be wary that some old information, if adjusted, is like pulling off a band-aid off an old wound and could cause scores to go down. I would ask your loan officer if (s)he has access to a rapid re-score program and run you through the what if simulator to see how many points you can gain.

As far as the $75 - that is for a company I use to pull credit and if I were to use the repid re-score feature. Some have different fees than what I told to you, but if I were doing your rapid re-score and we were going to fix one thing and it reported on all three bureaus, the final bill would look like:

$25 - Mr. jones for TUC credit card adjustment. $25 - Mr Jones for XPN credit card adjustment. $25 - Mr. Jones for EFX credir card adjustment. $25 - Mrs Jones for TUC credit card adjustment. $25 - Mrs Jones for XPN credit card adjustment. $25 - Mrs jones for EFX credit card adjustment.

That is $150 for both you and your wife to take care of 1 thing wrong on your credit report. Lets say your real name is John Smith and you have 15 things like that on your credit report (it really does happen) that are wrong, that would be $1,125 just to fix his and if hers has the same errors... I think you see what I'm saying. OR you can fix all those items by yourself for free... it just takes a long time vs. 72 hours with rapid re-score.  

Last year I attended our state required training and they told us that inquiries make up 10% of your score.  Credit scores are spread over roughly a 500 point range, from 350-850.  Thus inquiries can affect up to about 50 points of your score.

The credit pulls that affect your score are grouped into 3 categories: mortgage pulls, installment loan pulls (car loans, etc), and revolving credit pulls (credit cards, etc)  When your credit is pulled, the scoring system looks back 30 days and counts all like category pulls as only 1 pull.  Any category pulls previous to this are grouped in 45 day periods and counted as 1. 

The thinner your credit profile (number of accounts that you have), the greater the impact of inquiries on your score.

I would not be too concerned with the number of credit inquiries causing your score to drop further than it has already.

I think you mean $.02.