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Income Estimation from a Credit Report

By
Mortgage and Lending with Homeowners Financial Group USA, LLC

I read an article this morning regarding Lenders coming up with new ways to "Guess Your Income".

The article made some interesting points regarding how lenders make decisions based on a person's credit and income.

In mortgages, Income, Assets, and Debts all play a major factor in determining who will qualify to purchase a new home.  As a loan originator we ask for these details and require verification that the information provided is accurate.  By asking and obtaining the income and asset information, mortgage lenders can use ratios of debt to income, amount of assets, and the credit score together to make the proper determination.

Seeing the information and analyzing it is the best way to make a credit decision.  Of course, unforseen circumstances can always change a person's ability to repay the mortgage but diligence up front will hopefully eliminate many of the "problem" mortgages that came about in the last few years.

So what does the above article have to do with mortgages?  I think it has a lot to do with mortgages.  For example, if a person is unable to obtain a small credit card due to these income estimators, it may affect their ability to establish solid trade lines and credit history that will help them obtain a mortgage in the future. 

With lenders tightening up their restrictions on who is issued a credit card, it makes it very difficult for young people to demonstrate responsibility with credit, which is a key determinent in mortgage guideline qualification.

So, should lenders be allowed to "Guess Your Income"?  Is it okay for them to use past history and other variables, that you as the consumer, may not even know they are checking, to make the decision on your credit worthiness?

In a time when the credit crunch is still occurring and the mortgage market remains selectively restrictive, are the decision by these lenders today going to impact the future ability of first time home buyers to obtain a mortgage?

All questions that should be considered, especially if they are guessing your income to make a determination on whether you are credit worth or not. 

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