Credit Analysis & Risk Assessment Flashcards
7 cards from real CRU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Credit Analysis & Risk Assessment flashcards as text
A borrower has a 680 credit score, a 38% back-end DTI, and a 10% down payment on a conventional loan. Which factor most increases the layered risk?
Answer: Low down payment combined with borderline DTI
Layered risk occurs when multiple marginal factors combine; low down payment plus borderline DTI significantly elevates default probability.
Under the FICO scoring model, which action by a borrower would most likely cause an immediate score improvement?
Answer: Paying down a revolving balance from 85% to 20% utilization
Credit utilization is highly weighted in FICO models, and reducing revolving balances sharply lowers utilization and boosts scores quickly.
A non-traditional credit report (NTCR) is most appropriate for borrowers who:
Answer: Lack sufficient tradelines to generate a standard FICO score
NTCRs document payment history for rent, utilities, and insurance when a borrower has no scoreable credit file.
Which credit event carries the longest standard waiting period before a borrower is eligible for a new conventional conforming mortgage?
Answer: Foreclosure
Fannie Mae guidelines require a 7-year waiting period from the completion date of a foreclosure for a conventional loan.
A mortgage underwriter notices a borrower's credit report shows a $500 collection account opened two years ago. Under standard Fannie Mae guidelines, this collection:
Answer: Does not need to be paid if the borrower has no other derogatory credit
Fannie Mae does not require payoff of isolated collection accounts; the underwriter evaluates the overall credit profile.
When evaluating a borrower's credit history, a mortgage underwriter finds three 30-day late payments on a student loan in the past 12 months. This pattern most suggests:
Answer: A recent and recurring inability to manage debt obligations
Recent, recurring late payments indicate ongoing payment management problems and elevate mortgage default risk.
A borrower applies with a 720 credit score but has a mortgage late payment from 14 months ago. How should the underwriter treat this?
Answer: Note it as a significant derogatory event and require a written explanation
A mortgage late payment is a significant derogatory event regardless of credit score and requires explanation and underwriter judgment.