What effect does my Credit Report have on a Modification

I get asked all the time weather or not lenders will pull and review a credit report when considering a homeowner for a loan modification. The answer is yes and no. Unfortunately, there is no universal procedure for doing loan modifications, and some lenders will pull a credit report just to have it in the file, some will pull one and review it as if they are underwriting the loan again, and others won’t pull it at all. And some don’t do anything consistently enough to say for sure weather they will or won’t.

In my experience, credit scores are of far less importance than income and expenses in the mod process. I have seen 780 credit scores denied for modifications due to overly negative financials, while 540 credit scores with financials that show they can make the new payments are modified regularly. Lenders are aware that you are in a financial bind, that’s why you’re applying for a modification in the first place.

If you are concerned about it, I would suggest you get a copy of all 3 credit reports, so that you can see what the lender sees. That way, if they ask you about something specific, you will have already reviewed it, and can give explanations as needed. But don’t spend too much time worrying about it because it probably won’t be a determining factor in the mod decision.

Credit reports are a key factor in getting a loan, but when applying for a loan modification, aren’t nearly as important as ability to pay. You already have the loan, you just need the payments lowered, or rate fixed, or term extended. To qualify for this, your credit report is really a non-issue.