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Is it acceptable to use a credit report from a withdrawn application for a new application?

Is it acceptable to use a credit report from a withdrawn application for a new application? On occasion, a consumer will apply for one loan product and then decide he or she wants a different one. For example, the consumer may start with an unsecured line of credit and then decide he or she would prefer a home equity line. May the bank restart the process with a new application for the new product and use the credit report obtained for the original application in order not to “ding” the consumer’s credit a second time?

It may depend in part on how much time has elapsed between the original requires and the new application. The Fair Credit Reporting Act (FCRA) does not prohibit using a credit report for more than one permissible purpose e.g., for two separate but simultaneous loans requested by the consumer, if the uses are consistent with the certification submitted to the consumer reporting agency. FCRA does not require separate certifications for each request, only that the request be within the scope of an applicable certification agreement.

If too much time has elapsed, however, the answer would be different. The FCRA only permits consumer reports to be used for the purpose certified at the time of the request.

In addition, banks may have a contractual restriction with credit bureaus, which generally prohibit banks from re-using credit reports.

Another caution against re-using a stale credit report is that, in the interim, the consumers’ circumstances can change. For example, their credit history may have changed or they might have placed a fraud alert, active duty alert, or credit freeze on the report, leaving the bank vulnerable if, for example, there is identify theft. Similarly, if the bank is relying on credit reports for purposes of determining whether an applicant is a “covered borrower” under the Military Lending Act and subject to the protections of that act, it may need to determine whether the person’s military status has changed.

Finally, the FCRA requires lenders to provide a current credit scores to a consumer when the bank is pricing based on risk or declining a loan based on a credit score. A stale credit score would not be “current.” (November 2018)

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