[Mary Beth Devillier]

Our bank has an applicant applying for a loan in an amount @ $15,000 that has a 611 credit score. Most of the reporting debts were fairly new but no delinquencies. Our policy and underwriting guidelines state you must have a 620 or higher credit score to qualify for a loan. We do have a low credit score loan policy for applicants ranging from 550 to 619 for vehicle loans as well as unsecured loans up to a certain dollar amount. We are denying the initial request, but it is hard selecting the specific reasons other than our policies and underwriting guidelines, which the regulators prefer to avoid. Is it possible to select insufficient credit file even though there was a credit score and stating “other” – outside our underwriting guidelines. We are struggling with the specific reasons in this case. We agreed to counteroffer since the applicant did qualify under our low credit score loan policy. We will send out a combined adverse action notice/counteroffer. Am I on the right track for this scenario?

Topic

[Kimberly Boatwright, CAMS, CRCM]

IMO – I would not select insufficient credit file since the applicant has one. Unless your policy is specific on what constitutes an insufficient file. If you are counter offering for a qualified co-applicant that would be a good option to avoid a Fair lending issue. You never indicated what the loan type is but I’m assuming this is for unsecured or a vehicle since you stated that policy. I’m also assuming this is not a customer? If it is not a customer again asking for a qualified loan applicant seems reasonable to me recognizing that credit score is below and your have a policy on low score standard and not being a customer who I assume would be the norm for the 550 -619?

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[Mary Beth Devillier]

Okay, after reviewing this file from the Officer, this applicant is a new customer to the bank. He recently opened a checking account in early August and then applied for an unsecured debt consolidation loan. So, the accounts reported on his credit report were several education loans and credit cards. The oldest account starting in 2022 and most recent account in 2025. He qualified with his DTI, no delinquencies but a low credit score according to our guide lines. Due to his low credit score, he is not a qualified applicant. I was thinking that since we have a low credit score policy that this would be the only way to approve the loan by those guidelines. The struggle is handling the denied original request by specific reason that is acceptable (according to the regulators). Am I wrong to for what we are willing to counteroffer? Or for fair lending purposes, like you said above, counter for a qualified co-applicant since he needed more money than we could give offer with our low credit score policy?

[Kimberly Boatwright, CAMS, CRCM]

I would agree that a counteroffer with a qualified applicant would be the safest way to go to avoid DL issues. Particularly since you have the 550-619 policy rule, The insufficient file is not a valid reason based on having a file since 2022 with a score. You would have issues with the credit score reason because of the 550-619 policy.

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