An operations lead compares the file facts with Credit Analysis and Documentation during a borrower follow-up call. Which conclusion is accurate?
Correct Answer
A) Use credit-report information for a permissible purpose
Why this is correct: The core concept of credit evaluation is to use verified information for a permissible purpose, as defined by the Fair Credit Reporting Act (FCRA). During a borrower follow-up call, the operations lead is comparing file facts with Credit Analysis and Documentation. This process inherently involves using credit-report information to verify debts, assess repayment ability, and make a credit decision, which is a permissible purpose under the law. Why the other choices are wrong: "Treat disputed accounts as irrelevant without following program or investor requirements" is wrong because disputed accounts must be addressed according to specific guidelines; they cannot be ignored. "Ignore a recent inquiry because the borrower says no new account was opened" is wrong because a recent inquiry is a factual item on the credit report that requires verification and explanation, not dismissal based on borrower statement alone. "Calculate DTI before resolving known obligations shown outside the credit report" is wrong because debt-to-income (DTI) must be calculated using all known, verified obligations, including those not on the credit report (like child support or private loans); calculating it beforehand would be inaccurate. Exam tip: Remember the FCRA's "permissible purpose" is the legal foundation for any use of a credit report. If an action involves using credit data, always confirm it's for a permissible purpose like a credit transaction.
Why This Is the Correct Answer
The correct response is "Use credit-report information for a permissible purpose" because Credit evaluation uses verified credit, debts, history, and repayment ability.
Why the Other Options Are Wrong
Option B: Treat disputed accounts as irrelevant without following program or investor requirements.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Ignore a recent inquiry because the borrower says no new account was opened.
This choice is a tempting shortcut, but it conflicts with credit evaluation because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option D: Calculate DTI before resolving known obligations shown outside the credit report.
This choice is not the best answer because it applies the wrong file step for credit evaluation; the governing rule is tested by the correct option.
Memory Technique
credit evaluation: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For credit evaluation questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
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