Chapter 10 — Key Takeaways

The one rule that prices the loan

REPRESENTATIVE SCORE — two steps, no averaging

  STEP 1  each BORROWER → one score
          three scores   → the MIDDLE      (742 / 738 / 751 → 742)
          two scores     → the LOWER       (688 / 701 → 688)
          one score      → that one        (subject to program rules)
          two identical + one different → the DUPLICATED score  (640/640/672 → 640)

  STEP 2  the LOAN → one score
          one borrower   → that borrower's step-1 score
          several        → the LOWEST of the borrowers' step-1 scores

  LINDEN STREET   742 and 706  →  the file is a 706 file.

Never average. 724 is not this file's score and never was. The pricing engine does not care which borrower earned it.

⚠️ Agency treatment of multiple-borrower selection has varied over time and by program. Teach the structure, verify the current rule in the Fannie Mae Selling Guide, the Freddie Mac Seller/Servicer Guide, or HUD Handbook 4000.1 — and always quote conservatively at the lower score.

The five factors, and what they are worth to you

Weights are commonly published as approximate and vary by model version. They are a map of where the mass is, not a formula that produces points.

Fast / slow / never

  ONE CYCLE (~30 days), rapid-rescore-able with documentation
    pay revolving balances down before the statement closing date
    correct an error: wrong balance, wrong limit, not-my-account, duplicate
    get a MISSING credit limit reported (pure upside)
    bring a currently past-due account current

  MONTHS
    inquiry and new-account effects decay
    the weight of a recent late decays

  YEARS — nothing you can do this quarter
    age of accounts · accurate payment history · credit mix

  NEVER
    disputing ACCURATE information — and mid-transaction it FREEZES the file
    closing old paid-off cards (raises aggregate utilization, kills age)
    opening a new account during a transaction

Utilization = reported balance ÷ credit limit, per account and in aggregate. Revolving only.

The date beats the amount. The balance that scores is the one the furnisher reports — usually the statement balance on the cycle date. Ask for each card's closing date and time the payment to land before it.

Reading a tradeline: the two numbers the report never prints

  REMAINING TERM   =  original term − months since opened     ← subtraction
     method A (reliable):  72 − 53 = 19
     method B (check):     balance ÷ payment = $7,798 ÷ $429 = 18.2
     method B always reads LOW (part of each payment is interest)
     if method B reads HIGHER than method A, the tradeline is BROKEN

  UTILIZATION      =  balance ÷ limit                          ← division
     missing limit → the model estimates from high credit → order a SUPPLEMENT

Remaining term is what Chapter 4's ten-month rule operates on. On Linden Street it is 19 and 31, so the rule does not apply — but if the \$429.00 auto had nine left, excluding it would take the back-end ratio from 42.66% to 38.58%. Four points, from a number the report never printed.

Three tools, three jobs

Derogatories, in one line each

• Late — 30/60/90/120/150/180 buckets. Severity and recency are separate axes. Mortgage and rental lates weigh far more than store card lates.
• Charge-off — the original creditor's accounting write-off. The debt is not forgiven.
• Collection — what a third party is doing about the debt. The same debt can appear twice; read the original-creditor field.
• Public record — bankruptcies. Judgments and tax liens came off consumer reports beginning in 2017 — so you will find them in the title search, in week three. That is why the URLA asks.
• Seven years for most adverse items; ten for bankruptcy. That clock is not the statute of limitations on the debt, and it is not something you may promise a borrower a date for.

🚫 What you may never do

• Never promise a score outcome. Not a number, not "about forty points," not "trust me."
• Never advise disputing accurate information.
• Never refer a borrower to an operation charging advance fees to dispute accurate items — CROA.
• Never pull credit without permissible purpose (FCRA).
• Never charge a borrower for a rapid rescore.
• Never discourage an application (ECOA/Reg B). A 580 borrower is entitled to apply and to a written decision.
• Never coach a borrower to omit a debt. That is fraud, not credit strategy (Ch. 27).

The safe formulation, in these words: "I can't promise you a number — nobody honest can, and anyone who does is selling you something. What I can promise is that I'll tell you exactly what this file prices at today, what would have to change, and the day it changes."

Key terms

tri-merge credit report · FICO score · representative score · tradeline · revolving vs. installment credit · credit utilization · derogatory · charge-off · collection · public record · inquiry · soft pull / hard pull · rapid rescore · credit supplement · dispute · authorized user · thin file · non-traditional credit

The Linden Street numbers to hold

Monday morning

Before lunch on your next new file:

1. Pull the report and read sections 2, 4, and 7 line by line — scores, tradelines, inquiries — before you say a number out loud.
2. Circle each borrower's middle score. Write the representative score at the top of the page. Quote from that number and nothing else.
3. Compute the remaining term on every installment tradeline (original term − months since opened). Circle anything at ten or fewer and anything that will be at ten or fewer before closing.
4. Build the revolving table: balance, limit, utilization per account, aggregate. Total the minimums and check them against what you put in the ratio.
5. Flag any account with no reported credit limit and order a supplement today. Pure upside.
6. Run the paydown against cash to close and reserves before you recommend a dollar of it.
7. Deliver the no-new-credit, no-disputes instruction — out loud, then in an email so it exists.
8. Say the safe formulation once, in the borrower's words, and never say a number of points.