Homeowner Assistance
Fair Credit Reporting Act
Why did I get a letter about adverse action?
If you receive an adverse action notice from MGIC, it means that your lender applied to MGIC for mortgage insurance coverage on your loan and, based on a credit score or other credit report information about you provided to MGIC, we determined either not to insure your loan or that the rate we would charge your lender for mortgage insurance would be higher than it would have been if your credit information had been better.
What information in my credit report caused the mortgage insurance rate to be higher?
The credit score used by MGIC to determine the mortgage insurance rate applicable to your loan is based on the information in your credit file at the consumer reporting agencies. Credit scores are determined using a model at the time the scores are ordered. Companies do not disclose the formula behind their credit-scoring models, but most scores are based on a combination of several factors, including your credit payment history, how much money you owe, the length of your credit history and other factors. If you order your credit score, ask for the factors that influenced your score.
How do I dispute the accuracy or completeness of the credit report information about me?
The name and contact information for the consumer reporting agency that provided the credit score or credit information we used in our underwriting decision is included in your notice. Contact the consumer reporting agency for a free copy of your credit report. You will receive information with the report on how to correct any information in your report that is wrong or incomplete
What is the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies (sometimes called credit bureaus). FCRA protects information collected by consumer reporting agencies, limits the persons who may obtain consumer credit reports and requires users of such reports to notify consumers when “adverse action” (as defined under FCRA) has been taken on the basis of such reports. Further, users must identify the consumer reporting agency that provided the report so that the accuracy and completeness of the report may be verified or contested by the consumer.
You have a right to obtain a free credit report when you receive a notice of adverse action. You also have a right to receive a free credit report, at your request, once every 12 months from each of the nationwide consumer reporting agencies – Equifax, Experian, and TransUnion.
For more information about your rights under FCRA and how to obtain free credit reports, visit the U.S. Federal Trade Commission’s website at www.ftc.gov and search for Fair Credit Reporting Act or FREE Annual Credit Reports.
What is a credit score?
Credit scores are numerical ratings that predict how likely you are to make your loan and other credit payments on time. Credit scores are based on the information in your credit report file at one or more of the consumer reporting agencies. The consumer reporting agencies generate credit scores using a scoring model. For more information on credit scores, see the FTC website at www.ftc.gov.
How can I get my credit score?
You can get your credit score from the three nationwide consumer reporting agencies, but you will have to pay a fee for it. Many other companies also offer credit scores for sale alone or as part of a package of products. For more information, go to see the FTC website at www.ftc.gov.
What is mortgage guaranty insurance?
Mortgage guaranty insurance or private mortgage insurance protects the lender against a loss if a borrower defaults on a mortgage loan. It is usually required for purchase money loans in which the down payment is less than 20% of the sales price, or in a refinancing transaction when the amount borrowed is greater than 80% of the appraised value of the property.
Who is Mortgage Guaranty Insurance Corporation?
Mortgage Guaranty Insurance Corporation (MGIC) is the nation’s leading provider of private mortgage insurance. We are not just the leader, but the founder of an industry that has made homeownership possible for millions of families. Private mortgage insurance makes it possible for buyers to put as little as 3% of the purchase price down to buy a home.
I did not give you permission to order a credit report about me, so how did you get my credit report?
The Fair Credit Reporting Act (FCRA) restricts the purposes for which consumer reporting agencies may provide credit reports. You may provide written instructions authorizing a consumer reporting agency to provide your credit report to another person. However, under FCRA, consumer reporting agencies may also provide your credit report without your consent to certain persons, including creditors and insurers in connection with your request for credit or insurance. Because MGIC underwrites mortgage insurance requested in connection with your loan application, MGIC is permitted under FCRA to obtain your credit report.
Why does my letter say that MGIC charged a higher rate for mortgage insurance based on credit information of my co-borrower?
MGIC determined the applicable mortgage insurance rate to charge for your loan based on credit information provided to MGIC about your co-borrower. That rate would have been lower if the co-borrower’s credit information had been better. You received the notice because you will be affected the same as the co-borrower whose credit information was used.
How will my credit information affect the mortgage insurance rate?
Lenders generally charge borrowers for the cost of mortgage insurance. MGIC offers mortgage insurance programs for various types of loans and credit profiles. If you receive a notice of “adverse action” from MGIC, it means that under the program applicable to your loan, the rate we charged your lender for mortgage insurance was higher than our lowest rate based on your credit information. Depending on how your lender recovers the cost of the mortgage insurance premium on your loan, your payments or loan fees may be higher than if the mortgage insurance rate had been lower.
What if there has been a mistake or incorrect information in my credit report?
The rate that MGIC charges your lender for mortgage insurance is based on information provided to MGIC by your lender. Corrected information received before closing can affect the mortgage insurance premium; however, the insurance is effective when the loan is closed. Correcting erroneous information in your credit file is important and may improve the terms of credit and insurance offered to you in the future. For information on how to correct information in your credit file, search for credit report errors at www.ftc.gov.