The Direct Lenders Perspective of the Credit Report
Every Direct Lender has its process, rules, and outlook on how they look at credit reports. No two are the same. A BIG book can be written about every direct lender’s perspective on the credit reports. Therefore – we wish to make sure that you know what it is that we look at, here at CHB.
The puzzle with all the edges missing is what it sometimes feels like when trying to decipher what a direct lender wants in the CBR. And we are no different. So I hope that this guide will help to decipher the code of our lending perspective.
The Minimum Credit Score – 625.
Read More about the 625 score
625 – The hard line has to be drawn somewhere and we have chosen this number as that line. Why, you ask?
We have found that the 625 line is where there is an intersection of good and bad risk. Here is the tale of the two 2 different characteristics of the 625 credit score.
The applicants who are going from a higher score down to and on through the 625 usually have these characteristics
- Recent late pays on term loans
- Active collections with a balance due
- Past dues with a balance
- High credit utilization
We will stay away from these credits as they have yet to hit rock bottom and will most likely be under 600 in 6 months.
The applicants who have hit rock bottom with a BK over 3 years ago. They are going from a much lower score up through the 625. They usually have these characteristics.
- Late pays are 12 months and older
- All active collections have been taken care of
- All past dues with a balance have been taken care of
- Reestablished term credit with an auto loans and mortgage
- Low credit utilization
We will work with this type of credit as they are usually a much better risk. Give us the story behind what is going on. We will take that into consideration.
650 – 720 – The right credit for CHB…
These applicants have never had to hit rock bottom. They may have had credit challenges in the past, but they are clean now and have been for over 25 months.
- Low to medium credit utilization
- Late and slow pays are over 25 months’ old
- They have at least 2 – 3 current term loans
- They are not exceeding their ability to pay their credit obligations
- Collections – They may have been close, but never been to collections
The Poor 700 credit score –
Then why do you deny credit scores that are as high as a 700 or more – if you go down to 625?
- Intersection of risk. Characteristics of a “POOR” 700+ credit score
- Usually it is an account with a small account in collections, under $800. But it has been in collections for over 12 months.
- Not enough to really hammer the score according to the reporting agencies.
- But – enough for a Direct Lender to take note.
- This is usually accompanied by several accounts who were past due, but are now current,
- Plus, a number of accounts in “Dispute” about obligations, 1 account in dispute is OK, but several – not so much. It is a pattern.
- Some Direct Lenders may be OK with an “aged” collections, but they will use it for leverage of a higher down payment and/or much higher interest. We do not stretch our credit box to fit these “aged” collections
What does all this data mean? Patterns of Credit
- A pattern of a rising credit score for the applicants that at first glance seem high risk because of a low score
- A pattern of a falling credit score for applicants who at first glance look like a great risk.
If the pattern is trending to a lower credit score – we will be reluctant to take on the deal.
If it looks to be trending to a higher one – we will dig deep into the deal and take the “story” into consideration when making a decision.
We here at CHB believe in Interest rates from 8.9% to 21.9% and down-payments no higher than 25%. Most down-payments will be 20% and the average interest rate is 14.9%
We want to keep those interest rates and down-payments in our portfolios, so we do not stretch or contract our down-payments or interest rates to “fit” deals that are outside of our credit box. A and D credits may not fit in with what we do, but B and C credits FIT well.
As questions come up – Call Kit 307.241.7005 or