Is it legal for a seller to require FICO scores from an offeree?

Real Estate Broker/Owner with Richard Weisser Realty

Privacy and RESPAN v. REO sellersDid I miss something here? I thought that privacy laws precluded a seller from asking specific questions about a buyer’s credit unless owner financing was included in the transaction.

Now we are being told that bank sellers are requiring FICO scores with offers. And real estate agents are telling buyers that the banks will not consider their offer unless it is provided.

Sounds like a RESPA and Privacy Act violation all rolled into one. But I have been wrong before, and if someone could please tell me why I wrong I’d like to know. How did it happen that a listing agent can have access to confidential information from a buyer?

I’d like some opinions please.


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Deep River
Port Orange, FL

Richard, the answer to your question is yes, it is legal for a seller to require disclosure of credit information on a prospective buyer BUT there are numerous Federal laws which come into play. I seriously doubt that sellers, even REO sellers, are fully compliant with the relevent regulations.

First, the protections for the buyer are contained in the Fair Credit Reporting Act, not RESPA or the Privacy Act. Any seller requesting ANY data on a prospective buyer that is derived from a Credit Reporting Agency MUST comply with several sections within FCRA.

Second, the Seller must establish permissable purpose. FCRA Section 604 (a)(3)(F)(i) states that a person may obtain a credit report on a prospective buyer for "the legitimate business need for the information... in a connection with a business transaction that is initiated by the consumer". This establishes "Permissable Purpose" as required by law.

Definition of a Consumer Report (aka credit report): "The term "consumer report" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for... any other purpose authorized under section 604" [FCRA Section 603(d)(1)(C)].

The above definition means that FICO scores alone constitute a Consumer Report under the law.

Now the fun begins.

Once that credit report is obtained, ALL of the disclosure requirements, reporting requirements, and record keeping come into play. There are MANY requirements. One that may be of primary concern is the requirement that if the purchase offer is denied, the seller who obtained a consumer report as part of the decision to accept or deny the offer must notify the buyer within 60 days, using the proper Federally mandated format, that the buyer's credit history was used in part to deny the transaction.

The seller must provide the consumer with a means to obtain any CRA data at no charge.

Another consideration is that if FICO scores are routinely transmitted from buyer to seller by a Realtor as part of the purchase offer, the Realtor is now acting as a Credit Reporting Agency with all of the Federal regulations that go along with such a practice. Note that the definition of a CRA is somewhat "loose" in the FCRA, but in practive the Federal Trade Commission probably would not define a Realtor as acting as a CRA... but who wants to screw around with the FTC?

This is very dangerous ground. Banks and lenders in theory already have in place all of the compliance proceedures to ensure that they do not violate FCRA (and also ECOA) when requesting credit data on prospective buyers. Private sellers do not, and Realtors who inadvertantly act as CRAs probably do not as well.

I've spent nearly 20 years working with credit data on behalf of lenders. FCRA, ECOA, and newer laws such as FACTA and G-L-B are complex. It is easy to violate them once non-lender start playing around with credit derived data. There is NO SAFE HARBOR. You screw up once... you're done. If I had an hour or two I could post more of the specific regulations.


Jan 15, 2010 11:23 AM #127
Deep River
Port Orange, FL

After reading some of the comments above, I think a clarification is in order.

First, one poster states that sellers are requesting "FICO scores only" with the insinuation that provision of FICO scores are not a Consumer Report as defined by law. The poster is incorrect. Any infomation derived from a CRA, no matter how minor, that is used for determining eligibility for a business transaction initiated by the consumer constitues a Consumer Report (aka credit report). Back in 1998. a company which offered credit card protection sough an opinion from the Federal Trade Commission to specify if obtaining a list of credit cards consituted a Consumer Report. The FTC responded that any information obtained from a Consumer Reporting Agency (aka credit bureau) consitutes a credit report.

Second, other posters state they routinely provide FICO scores as a component of the purchase offer for purposes of demonstrating a buyer's eligibility or capacity to complete a transaction. Such practices are very close to the definition of a Consumer Reporting Agency. Most people think that sensitive credit data is limited to account history, account numbers, and so forth. The law defines Consumer Report data much more broadly. In fact, public records, if provided by a CRA, consititute a Consumer Report when used to evaluate a buyer's eligibility. Here is one of several staff opinion letters from the Federal Trade Commission defining the broad scope of a Consumer Report:

The issue of providing credit scores along with a pruchse offer to demonstrate eligibility or capacity is something Realtors should look at very closely. While Permissable Purpose may be met under FCRA Section 604 with written authorization or "any business transaction initiated by the consumer", the real concern to Realtors are all of the disclosure and reporting requirements that go along with the practice.

If you are one of the Realtors who provide FICO sscores from buyers to sellers, are you issuing the proper credit disclosures? Are you in compliance with the required notices of ECOA and FCRA consumer rights? How are you storing such records... are those FICO scores under lock and key? Who has access? Have you trained your employees properly? Are you in compliance with Red Flags?

One step you might take is to contact a trusted loan officer for some training on FCRA, ECOA, FACTA, and G-L-B to ensure you are not violating one or more Federal laws. Many mortgage broker associations provide training in credit data laws... you might look into taking a class.

Be aware and be careful.

Jan 15, 2010 12:36 PM #128
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Deep River - Comment 127 - First Off, thank you for taking the time to find the right set of federal laws that addresses this issue. Out of all the responses, yours was the best (in my opinion).

I want to address your premise that FICO scores are information derived from a Consumer Reporting Agency, therefore are subject to the laws and guidelines in place to dissipate and disclose information.

I disagree with your stance. The Consumer Reporting Agency transfers data to the Fair Isaac Corporation. Based on the data provided, the Fair Isaac Corporation then issues a FICO score. The fair Isaac Corporation does not divulge any data given to it by the consumer reporting agency and is using their own proprietary mathematical system to assign a three digit number. Therefore, the FICO score does not fall under the Fair Credit Reporting Act in my opinion. I actually read all 86 pages! Had to keep going back and forth between the sections. In fact no mention is made about the Fair Isaac Corporation nor did I consider this corporation to be a Consumer reporting agency. An example of why I think my stance is correct is that by law, a Consumer Reporting Agency must give a free credit report once a year to anyone they have information on. However, none of those reports will have a FICO score nor is the Fair Isaac Corporation obligated to give a free FICO report (or any report!) to the general public.

I also disagree with your stance that a real estate agent can be defined as a consumer reporting agengy. The key word in the definition was "for monetary fees" in the following 603(f):

The term “consumer reporting agency” means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.

So I doubt any licensed agent will fall under that definition.

Finally I read the entire reference to the request for credit card information and it has nothing to do with FICO scores. In this instance, the Federal Trade Commission was correct as the data pertaining to the number and type of credit cards is in the actual report itself, therefore falls in the guidelines set forth.

Again, thank you for contributing to the conversation.

Jan 15, 2010 02:10 PM #129
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

An interesting topic.  This comes up routinely in So. Cal. As a listing agent, I don't require FICO scores. However, if they are provided, along with proof of funds and desk top underwriting, I am better able to advise my clients on the likelihood of a loan closing.

Jan 15, 2010 03:25 PM #130
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Area Real Estate

As far as I can tell if you don't treat everyone exactly the same,with every transaction, that would be discrimination.  So with your office procedure say, you must get FICO scores with every offer.  So as far as I've been schooled, it would be discriminatory.  I have had buyers volunteer scores when they are in the 800's to show they are not loosers, etc. (their words). 

Jan 16, 2010 01:35 AM #131
Gary Steuernagel ASSOC. BROKER, ABR, CRB
Keller Williams Southwest - Sugar Land, TX

Satar:  Execellent analysis all around and in keeping focused on facts rather than emotion, good topic in general, The request is not an "illegal or unethical" request.

Jan 16, 2010 06:03 AM #132
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Thanks Gary - Comment 132 - It's hard to compete against Lenn Harley. But somehow I was able to beat her to this blog and fill in the gaps of the discussion. ;)

I also thank Richard for allowing me to Hijack his blog and for allowing me to form a dissenting opinion. It's blogs like this that exalts my love for Activerain. Where else can you go to learn about real estate practices and debate and discuss them? For those who think this is illegal, unethical or discriminatory, now you know the facts and can better serve your clients when you are on the listing side of a transaction.

Activerain should re-feature this blog on a monthly basis.

Jan 16, 2010 06:56 AM #133
Richard Weisser
Richard Weisser Realty - Newnan, GA
Richard Weisser Retired Real Estate Professional


Dissenting opinions and lively discussion are ALWAYS welcomed on my posts!

I have written many AR posts, but this one BY FAR had the best comments. All polite, well thought out, and contributing to the conversation.

I wish to thank you and all of the others that took the time to present some great debate. It really is what AR and social networking is all about!

Jan 16, 2010 09:22 AM #134
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Thanks Richard. This is the first Non-short Sale related blog I devoted so much time too! Re-reading RESPA, The Privacy Act of 1974 and The Fair Credit Reporting Act and reading several pages of The Federal Trade Commission was no picnic!

The real question is what is your current opinion of providing FICO scores now that all information was presented and debated?  ;)

Jan 16, 2010 10:58 AM #135
Roger Johnson
Hickory Real Estate Group - Hickory, NC
Realtor - Hickory NC Real Estate

This is definitely bookmarked for later reference material, if needed.  Thanks

Jan 17, 2010 10:27 AM #136
Arlene Garcia Hanner / Arlene Garcia Hanner, Broker - Downey, CA

The goal is to sell real estate not hold onto it while buyers frantically seek financing at the last minute, because someone didn't do their job properly.  I think I have become a better agent on behalf of my clients by making sure that the buyer has satisfied the minimum criteria for procuring financing.  My savvy buyers are pre-approved by at least one major direct lender.   

I am both a listing and buyer's agent.  As a listing agent, I request a complete offer package to include: Pre-approval from a direct lender, FICOS, recent source of funds and depending on the seller, cross-qualification of the borrower.  As a buyer's agent, I get these items from my buyer and their signature on the buyer-broker agreement during our initial talks.  This is before I put them in my car.  I educate my buyers on what is required of them for the successful purchase of a property and they appreciate it.

I treat my business seriously.  My clients are acquiring or disposing of properties worth in the hundreds of thousands, if not, millions of dollars.  Who am I to be so trusting of others when dealing with someone's valuable assets.  If the buyer is creditworthy, they should be ready and willing to prove it.

The minute I hear excuses for items missing in the offer package, the red flag goes up. If a buyer is not willing to verify their assets to substantiate the down payment or their FICO, human nature makes me assume the worst.  So I'm usually not surprised when I find out the FICOs left out of the package, are in the "high" 500s.  (Ohhh but don't worry, I heard a buyers agent say, I have a lender that has a special program for them.)  Hmmm. Or the pre-qualification letters I get from mortgage brokers that says this buyer is qualified for a government program that ran out of funds months before the date of the letter.  I could go on and on.  Needless to say, it is important to receive and review a buyer's complete package and then call the buyer's lender to clarify any ambiguities.

I understand a request for buyer's FICOs and any other documentation to substantiate the buyer's offer. My buyers are ready for this scenario and can quickly make acceptable offers while others are still debating on what to do.






Jan 17, 2010 12:36 PM #137
Deep River
Port Orange, FL

Satar, I love your response to my comments - well argued, sir! It's refreshing to come across another FCRA aficinado.

You are correct that mechanically speaking a FICO score is calculated by Fair-Isaac using their proprietary algorithims and are not necessarily data resident in a credit file in the same way as account histories. Your support of your argument by noting that Fair-Isaac may not be a CRA since it is not required to issue a free credit report annually under FACTA is insightful. In the interest of spirited discussion, I'll offer a counter opinion.

FICO Scores as a Consumer Report:

The FCRA language defining a Consumer Report is very broad:

The term "consumer report" means any written, oral, or other communication
of any information by a consumer reporting agency bearing on a
consumer's credit worthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living which is used or expected
to be used or collected in whole or in part for the purpose of serving as a factor in
establishing the consumer's eligibility...  in connection with a business transaction
that is initiated by the consumer
[FCRA Sec 603(d)(1) and Sec 604(a)(3)(F)(i)

Again, the above establishes a seller's and a listing Realtor's permissable purpose to obtain FICO scores (as welll as financial data) to determine capacity of a buyer to complete a purchase offer, but it is broad enough to include any data (such as FICO scores) transmitted from a CRA to an end-user (ie seller).

If the FICO scores provided to the seller are obtained by the buyer directly form FICO or another non-CRA source, then there is no concern. However, it is reasonable to assume that the scores are drawn from the buyer's tri-merge credit report as issued by one of the credit report compiliers (who are all CRAs) and used as part of the loan pre-qual or pre-approval. Thus the scores would fall under the definition of a Consumer Report. If a purchase offer were turned down by the seller, then the seller would be required to issue an Adverse Action letter if the FICO scores were used to determine eligibility of the offer.


Realtor Acting as a Consumer Reporting Agency:

I admit that my argument that a Realtor may be acting as a CRA is not as clear - the argument is an indirect one. Certainly the definition of a CRA implies an entity that regularly collects fees in return for providing consumer reports. My supposition extended the defintion by suggesting that Realtors that make a regular practice of offering or requiring buyer FICO scores as a factor of eligibility to complete the purchase transaction, in return for a commission, might be considered as acting as a credit reaporting agency. The key factor comes in this part of the definition of a CRA:

...regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information...

The "evaluation" part could be met by a Realtor simply by stating to a seller "Buyer A is better than Buyer B because A has better scores". But I wish to emphasize that my argument rests on the condition that even if a Realtor regularly collects/provides FICO scores and evaulates them, the Federal Trade Commission would have to define the payment of commission on the sale the same as a direct fee. I doubt that the FTC would do so... but it is a possibility.

To those who may think I am relying overly much on details in the defintions, please be aware that the Feds most definitely look at the detail of the language in the legislation. I've written to them for rulings and clarification on several occasions in my past career (and they were most helpful), and you would be surprised to see how interpretation can hinge on a single word or phrase. If interested, peruse some of the published staff opinion letters here:

Lastly, bear in mind the above is an opinion based on some 20 years of working with credit data and credit derived offers and not a reliable legal analysis.


Jan 18, 2010 12:42 AM #139
Deep River
Port Orange, FL

Further note:

Anyone who is concerned about my supposition that use of FICO scores in evaluating a buyer's eligibility for a purchase constitues a Consumer Report, and wishes to cover himself/herself with the proper Adverse Action notice required under FCRA Section 615, be assured that compliance is simple.

The law requires any "person" (not necessarily a lender) to issue a notice of a consumer if data dervied from a CRA was used inwhole or inpart in denying the consumer's transaction.

Specifically, FCRA Section 615 states:

Duties of users taking adverse actions on the basis of information contained in consumer. If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall
   (1) provide oral, written, or electronic notice of the adverse action to the consumer;
   (2) provide to the consumer orally, in writing, or electronically
     (A) the name, address, and telephone number of the consumer reporting
          agency (including a toll-free telephone number established by the agency
          if the agency compiles and maintains files on consumers on a nationwidebasis)
          that furnished the report to the person; and
     (B) a statement that the consumer reporting agency did not make the decision
          to take the adverse action and is unable to provide the consumer the specific reasons
          why the adverse action was taken; and
   (3) provide to the consumer an oral, written, or electronic notice of the consumer's right
     (A) to obtain, under section 612 [§ 1681j], a free copy of a consumer report on
          the consumer from the consumer reporting agency referred to in paragraph
         (2), which notice shall include an indication of the 60-day period under
         that section for obtaining such a copy; and
     (B) to dispute, under section 611 [§ 1681i], with a consumer reporting agency
          the accuracy or completeness of any information in a consumer report furnished by the agency

Compliance is simple. Every credit report obtained by a ender for use in determining a consumer's eligibility for a loan contains a Credit Score Disclosure that must be issued to the consumer at time of application. Use a copy of this with the buyer's purchase offer. If the seller turns down the purchase offer due in part or in whole to the buyer's credit scores, the Adverse Action requirement can be met by including a copy of the Credit Score Disclosure in the written purchase refusal letter along with a paragraph for 2(B) and 3(A) and 3(B) above. The Credit Score Dislosure already contains 2(A). If you want to have a perfect Adverse Action letter, just ask for a blank copy from your favorite loan originator.

Note that although the law permits denial to be made orally, it is better to have a copy of a written communication on hand just in case. 

Jan 18, 2010 01:09 AM #140
JL Boney, III
Coldwell Banker - Columbia, SC
Columbia, SC Real Estate

Banks are becoming more and more demanding of the consumers. It's funny that they went from no demands what so ever to requiring the world to buy a run down shack.

Jan 19, 2010 01:07 AM #141
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

Hi Deep River - Without you, we would not know what laws we might be violating. So again, thank you for bringing it to our attention.

In regards to FICO scores as a Consumer Report:

I'll stand behind my argument. I do not have the experience and background as you. Nor do I have the legal capacity to make a legal conclusion. I therefore, cannot accept or deny the argument.

I did find some great reading. These two links tell me that FICO does not apply to the FCRA:

It talks about ammending the Fair Credit Reporting Act to disclose FICO scores. If you have to ammend something, then it means that it is not currently regulated? right?

Look under 12/21/04


Realtor Acting as a Consumer Reporting Agency:

"The key factor comes in this part of the definition of a CRA: ...regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information..."

A real estate agent does not assemble (gather information) or evaluate consumer credit information. So my argument is two fold:

1. An agent does not gather or assemble information from a on a consumer. Neither does an agent evaluate information as the information (FICO scores) have already been created.

2. The agent's broker gets paid by brokering a real estate transaction, not for gathering, assembling or evaluating information.

So in conclusion, I agree to disagree until we can get some answers from either a lawyer or from the big players. Maybe we should ask Fair Isaac Corporation, The FCRA or the Federal Trade Commission? I'll do that and see what responses I get.

Robert - I found this that I thought might be of interest to you:


Fallacy: Credit scoring is unfair to minorities.

Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.

Fallacy: Credit scoring infringes on my privacy.

Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.


Jan 20, 2010 03:48 PM #142
Deep River
Port Orange, FL


Good answers. Your reasoning is sound - and it's obvious you have carefully studied the regs.

I agree that strong opposing arguments can be made on whether a FICO score alone constitutes a Consumer Report as currently defined under the law. Your point that the Congress is considering amending the FCRA on scoring is a telling one... but I'm not completely persuaded. In the final anlaysis, one would have to write to the Federal Trade Commission for an official staff legal opinion.

As for asking Fair-Isaac... I wouldn't bother. Fair-Isaac is in a marketshare battle right now with the Big 3 CRAs (particularly Experian) over the market for consumer credit monitoring services. Back in February 2009, Experian actually terminated its relationship with Fair-Isaac (I believe they came to an agreement afterwards) in which Experian would no longer provide data for Fair-Isaac's "MyFICO" monitoring service. This follows a lawsuit filed by Fair-Isaac against the Big 3 back in 2006 over VantageScore, a competing scoring model developed by Experian/Equifax/TransUnion. It's likely that any response from Fair-Isaac will be prejudiced against the CRAs. If you're truly interested, the FTC is your Huckleberry for the right answer.

Regarding a real estate sales agent... I would argue that any statements about a buyer's expected ability to close a sale based in part on FICO scores constitutes a credit evaluation. I base this on past experience working with credit data for captive auto finance companies. In developing a prospect mailing list, data was leased from one of the CRAs. Although only FICO scores were passed (along with NACSZ of course) to the end user, all the rules about "Joint Users" of credit applied to my firm since our software screened prospects for offers based on FICO. In other words, some prospects received offer A; others received offer B depending on FICO score alone. A ruling to us from the FTC at the time (late 90s) stated that the segmentation by FICO score constituted a "credit evaluation".

However, there isn't a direct correlation between fee income and use of FICO data by Realtors, as I have previously stated (and you've correctly argued). I make the argument as a note of caution. Should the practice of supplying FICO scores to sellers by Realtors become widespread, the FTC is likely to take a closer look at it.


Jan 21, 2010 01:12 PM #143
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

"If you're truly interested, the FTC is your Huckleberry for the right answer."

I'll ask and see what they say. You bring up great points and it would be nice to see an official answer.

"Should the practice of supplying FICO scores to sellers by Realtors become widespread, the FTC is likely to take a closer look at it."

It's widespread in Southern California. Not only in the REO market, but in the short sale and retail market as well. They are also asking for proof of funds for downpayment. I wonder how much longer it will take to be widespread as it makes sense to ask for these items.

It was a real pleasure having the opportunity to discuss with you this subject. I will ask and see what the response is. I will post my results on this blog.

By the way, I notice you are new to Activerain. I highly suggest you pay the monthly fee and join. God knows we need more intelligent, professional people here like you. Also, if you blog about what you love, you'll get people contacting you. I get a lot of leads from Activerain because I consider myself an expert in short sales and I am able to debate best practices and go up against the agents on here who claim to know short sales. Besides leads, I have met a lot of great members both online and offline who have made me a better person.

Jan 21, 2010 02:06 PM #144
Dana Devine
Charles Rutenberg Realty - Apollo Beach, FL

if the loan officer provided a underwriting conditional commitment, this is the commitment from the u/w that with conditions this buyer/borrower is approved....not pre-approved not pre-qualified

Jan 31, 2010 04:23 AM #145
Pete Xavier with X Group Real Estate Advocates
Investments to Luxury - Pacific Palisades, CA
Outstanding Agent Referrals-Nationwide
The bank lobbyist group can make exceptions for themselves as they see fit, some of the time.
Feb 03, 2013 03:04 PM #146
joanne bautista


i am helping my sister purchase a home she is interested in and we approached the listing agent to represent her in order for her family to get the house that they really want. i have been working as a Sr Loan Processor / some re coordinator for 15 yrs now and seen as much as i can in real estate to learn from it. so the listing agent of the property who potentially represent my sister asked me for the norm which is the odder on the sale of her condo and bank statement from a buyer that is purchasing her condo plus a full credit report and paystub. i have never for as long as i have assisted many brokers or agents have i ever had this request even if dual agent. is this legal? what do they need to provide me to request such thing?
please help

Sep 05, 2014 04:46 PM #254
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