A credit report fee is the cost of obtaining the credit information and credit scores needed to evaluate a borrower for a mortgage.
For mortgage lending, the credit report is much more extensive than the free credit report or consumer credit score you may obtain online. Mortgage lenders typically use specialized reports that pull information from the nationwide credit bureaus and provide the credit data and scores needed for mortgage underwriting.
Why Are Mortgage Credit Reports So Expensive?
The cost of mortgage credit reports has increased dramatically in recent years.
The Consumer Financial Protection Bureau has reported that mortgage lenders said their costs for credit reports and credit scores had increased by 25% to 400% in recent years.
As a result, a credit report fee on a mortgage may commonly range from approximately $100 to $275, depending on the lender, the type of report ordered, and whether there is one borrower or multiple borrowers.
These fees are generally third-party costs passed through as part of the mortgage transaction rather than simply income to the lender.
Is Anything Being Done About the Cost?
Federal housing regulators have been working to increase competition in the mortgage credit-reporting and credit-scoring system.
The Federal Housing Finance Agency has approved changes that allow greater competition among credit scoring models and has also been working toward allowing lenders to use credit reports from two nationwide credit bureaus instead of always requiring reports from all three.
The goal is to create more competition while still providing lenders and investors with reliable credit information.
How Long Is a Mortgage Credit Report Good For?
For most conventional mortgage transactions, credit documentation generally must be no more than 120 days old at closing. Fannie Mae requires credit documents to be no more than four months old as of the note date, and Freddie Mac generally uses a 120-day standard.
This can become important if you were prequalified several months before you find a home.
If your credit report expires before closing, the lender may need to obtain a new report.
Why Should a Homebuyer Pay Attention to the Expiration Date?
A new credit report can have two consequences:
- Your credit profile is evaluated again. Any changes in your credit score, balances, new accounts, late payments, or other credit activity could affect your mortgage approval or loan terms.
- You may incur another credit report fee. Because mortgage credit reports have become expensive, a second report can add another meaningful cost to the transaction.
If you were prequalified well before making an offer on a home, ask your mortgage professional when your credit report expires.
Knowing the date ahead of time can help you avoid surprises as you get closer to closing.
One More Reason to Protect Your Credit While House Hunting
Once you have been prequalified for a mortgage, avoid making unnecessary changes to your credit before closing.
Opening new accounts, increasing credit-card balances, financing a vehicle, missing a payment, or making other major credit changes can affect the information that appears when your credit is reviewed again.
Your credit does not have to remain completely unchanged, but if you are considering a significant financial move while purchasing a home, talk with your mortgage professional first.