Question about impact of credit denial on credit record

Posted on 12 Feb

Question: Last year, we applied for a refinance through a local credit union. In the process, it was discovered that, one of the credit agencies had mixed a history of several delinquent accounts into my wife’s history. I took care of the mix-up and had the records corrected (took about 2-3 days). However, the Credit Unions (CU) took forever to re-check our credit. While waiting, we found another lender and cancelled our application with the CU.

End of story, right? We thought so.

We just got a letter from the CU. In it, they reference our last year application and say that, they are required (by law?) to provide a decision on the credit application – even if it was withdrawn. The letter goes on to state that, the reason our application was denied was due to the several delinquent accounts. Of course, since all of this was cleared up in last year, I no longer have the record of the interactions with the credit reporting agency.

The letter from the CU goes on to state that “this notice has no impact on your consumer credit report or your credit score.” Is this true? It seems like a credit denial would be reported to the credit reporting agencies, or are denials not reported?

The bottom line is…I’m just curious as to how seriously I should treat this notification. I’m at least going to try and clear things up, but, the CU is not likely to make things easy (they’re already providing an out-of-state POC to mail responses to, vice a human to talk to).

It certainly does seem odd to me that, the CU would send such a notice 3+ year after denying/cancelling your loan.

A lender’s credit report will include previous inquiries (normally 24 months), which is why, many lenders ask new applicants to address recent inquiries; however, there is no way for a lender to know why the inquiry did not lead to a new credit/loan.

Since there is nearly zero chance the last year inquiry would be picked-up by a future lender, and even if it was, there is no way for a future lender to know the reason why that inquiry did not lead to new credit, I suggest you just ignore the letter.

For all of the advertisements we’re hearing about how ‘friendly’ and ‘non-big-bank’  Credit Unions are – this is a clear example of them operating under the same rules as the banks.

5 thoughts on “Question about impact of credit denial on credit record

    • Look for an attorney in your area that works in the consumer credit field. Many lawyers give free first consults, be sure to ask about that when you call to set up an appointment. If you past the collecting SOL (6 years in NY) you might file a counterclaim for them filing on a time barred debt. You might also be able to counter sue under the FCRA if the collector is reporting incorrectly and you can prove that you have suffered damages because of their reporting denied credit, required to pay a higher interest rate, etc. NY also has their own version of a FCRA that you may be able to claim on. Take your credit reports and any other info (denial letters, etc) with you when you speak to an attorney. Under the FTC FDCPA, collectors must cease all collections (including suing) when verification/validation is requested within the first 30 days of the first contact from the collection agency. If it is requested outside of the first 30 days, then, collectors do not have to cease collections until they respond. NY has it’s own version of a FDCPA that may require a collector to cease collections when verification/validation is requested. Bring that point up if the lawyer does not mention it. Collectors must be licensed in NY to collect. Check and see if they are licensed. Call the New York City Department of Consumer Affairs Legal Department and ask. Take everything with you when you see the lawyer. Copies of your credit reports, if you disputed with the CRA’s, then take copies of your disputes, copies of every letter the collector has sent you (never know, there may be a violation in the letter), if you’ve suffered damages because of the reporting then take whatever proof you have of that, if you filed complaints with any agency (BBB, AG, FTC) take copies of the complaints, etc.
    • There are some pretty good reading material reference sources. Start there and understand the process. Lenders are varied and not at all equal. However with the recent economic climate changes, almost all of the money comes from the government and all mortgage companies pretty much get their money from the same sources now. Investigate mortgage rates and also look at least one local Credit Union for comparisons. Credit Unions lend their own money (their “members” money actually) and don’t “sell” your mortgage to another company. You borrow and stay with them, usually at a good rate and usually with a more personal and realistic look at your credit history. They are subject to less credit requirements as it is their money. That means you too are less restricted as a borrower. There are four parties involved with the sale of the house usually. The buyer, the seller, the mortgage company and an “underwriter”. The underwriter is the unbiased party that assures the deal is legal, meets federal and state requirements for home loans and also that the buyer and seller are fully aware of the contents of all that damn paperwork you have to sign. Find a local, independent, underwriter and pay for some of their time. Have a list of questions ready when you meet with them. They can be amazingly informative as they are trained to spot cloak and dagger paragraphs and alert you to what you are agreeing to in the written documents. Finally, always ask this question when the banker, other lender starts talking all the jumbo rates, points, APR versus actual percent of loan, etc. “How much will my payments be and for how many years”. That is the single question that should let you know if you have the best deal or not. Do not be put off or dissuaded from a plain answer in language you understand. Good luck and enjoy your new house!
  1. Most local banks don’t deal with home loans any more. It may cost a little money, but, a realtor would be a good route, because, they know the whole deal about buying a house and are working for you and if they’ve been doing it a little while may have “connections”. Also consider getting a home inspection before buying. The house may have faulty wiring or pluming and know one knows it. It would be devastating to just buy a new house and then have to spend a lot of $ fixing things you didn’t plan on.

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