A borrower's credit report shows multiple tradelines with 30-day late payments occurring 3 years ago, but perfect payment history for the past 24 months. How should an MLO evaluate this credit pattern?
Correct Answer
A) Focus on the recent positive payment history as it demonstrates improved financial management
Credit evaluation should emphasize recent payment history over older issues. A pattern of improvement with 24 months of perfect payments demonstrates the borrower has addressed previous financial difficulties. While the MLO may still request an explanation for the older late payments, the recent positive history is more indicative of current creditworthiness.
Why This Is the Correct Answer
Credit evaluation should emphasize recent payment history over older issues. A pattern of improvement with 24 months of perfect payments demonstrates the borrower has addressed previous financial difficulties. While the MLO may still request an explanation for the older late payments, the recent positive history is more indicative of current creditworthiness.
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