Preventing Credit Surprises: Practical Tips for Brokers and Borrowers
By Dillon Freeman, Senior Loan Officer, Fidelity Bancorp Funding
Over the past month, several transactions in our pipeline were unexpectedly delayed or restructured due to credit scores coming in more than 100 points lower than anticipated. In all three cases, the borrower and broker believed they had a strong understanding of the credit profile, until the formal pull told a different story. This is a common issue in today’s lending environment and one that can often be prevented with early diligence.
Here are a few straightforward steps brokers and borrowers can take to avoid surprises and maintain deal momentum:
1. Pull Full Credit Reports from All Three Bureaus
Borrowers are entitled to a free credit report once a year from each of the three main credit bureaus: Equifax, Experian, and TransUnion. These can be requested directly through AnnualCreditReport.com, a federally authorized site. This is often the best first step. A full report provides visibility into:
Accounts in good standing and those that are not
Credit utilization
Potential reporting errors that can be disputed
Collection items or other issues that may not show up in third-party tools
2. Request a Soft Credit Pull Early in the Process
Before issuing or signing a term sheet, it’s a good idea to run a soft credit pull through the broker or lender. This method provides a general credit snapshot without impacting the borrower's score.
Soft pulls can:
Help identify red flags early
Prevent re-trades or adjustments to deal terms
Maintain credibility with capital partners or internal credit committees
For brokers, making this part of your initial documentation process can improve transaction quality from the outset.
3. Use Supplementary Credit Tools for Additional Context
While not a replacement for a formal report, various credit monitoring tools from financial institutions (like American Express, Chase, Mint, and others) offer free credit scores to their users. Borrowers can screenshot and share these scores to provide a preliminary read, which may help set expectations ahead of a soft or hard pull. Just keep in mind that different tools use different scoring models, and the numbers may not align perfectly with what a lender sees.
Final Thought
Credit scores are a key part of underwriting and can materially affect pricing, structure, or deal eligibility. For brokers and borrowers, taking these simple steps early can reduce uncertainty and prevent avoidable setbacks. In a fast-paced market, small details like this can have a big impact on efficiency and execution.
