I was at one of my closings yesterday and the person handling the closing temporarily left the room to make some copies. As she did, my client asked, "So, is our credit okay?" I said, "Sure, everything's fine." She again asked, "But I mean was anything on our credit report, you know ... kinda weird?" I confessed. I hadn't even looked at her credit report much less seeing if there was anything out of the ordinary. "How can you approve my loan if you didn't even look at my credit report?"

That question struck me as odd. I mean, fair question and all, but I've never been asked that before and quite frankly why wouldn't I review a credit report? The reason is that credit reports for most conventional loans aren't looked at with as much scrutiny as in the olden days. Like five or six years ago.

Credit reports would have to meet muster just like any other loan document such as how long have the accounts been open, were there any late payments and if so provide a written explanation as to why those payments didn't arrive on time. Were there any times the balance exceeded the limit and how many trade lines were open and available to the borrower? These and other credit report clues would give a lender a clue as to being paid back on time every month. Bankruptcy? Collection account? Forget it, go back to the drawing board.

It's different now, and I didn't realize how different until my client asked me if I had seen anything weird on their credit report. She asked because several years ago her husband had been in an accident and the insurance company never paid for the ambulance charge. He paid no attention to the charge, figuring eventually the insurance company would take care of it. Like so many stories, the insurance company in fact didn't pay for it and also sent the item to a collection agency. He still never paid it. She wanted to know if it was on the report. Fair question, right? But I didn't know the answer.

How can a lender approve someone without looking at his or her report? By using a credit score and an automated underwriting system, that's how. These two applications alone made me think, "She's right, I didn't even look at her credit report!" Come to think of it, I can't remember the last time I really reviewed any credit report at all. All I need is an approval using the credit score and an automated approval system. No, I didn't "look" at her report because I didn't have to.

Granted, if there are some serious credit issues that need to be addressed that a conventional or government loan won't allow, then yes, the credit report is reviewed with a fine-toothed comb. Or if a loan can't go conventional and needs a sub-prime lender. But for most everyday loans? Why bother?

The loan process has become streamlined to the point that poring through credit reports looking for this or verifying that is simply obsolete. I really had no idea what was on my client's credit report. All I needed was her approval. That still seems weird to me, but I'm getting used to it.

Published: July 2, 2004

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.