What is Credit History Uncertainty?

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There are times when a person’s credit history lacks clarity or certainty. These situations are called credit history uncertainties. These situations make it difficult for lenders to accurately assess the borrower’s creditworthiness. Common examples of credit history uncertainties are:

Thin Credit History

It is a situation where the borrower has limited credit history because he or she is new to credit, does not use credit often, or has never taken out a loan or used a credit card. Lenders cannot evaluate a borrower’s creditworthiness based on very little information.

Credit Report Errors

A credit report may contain inaccuracies or errors that can impact the borrower’s credit score. Examples of errors include incorrect payment history, incorrect information, and incorrect accounts. These errors will make it difficult for lenders to accurately assess borrower’s creditworthiness.

Identity Theft

If someone uses the borrower’s personal information to open accounts or obtain credit without their consent or knowledge, false information will appear on the credit report. This will negatively impact the credit score and creditworthiness of the borrower.

Unreported Income

Borrowers may have unreported income or income not reflected on their credit report. This will make it difficult for lenders to assess a borrower’s ability to accurately pay the loan.

Recent Life Changes

Divorce, job loss, medical emergencies, and other recent life changes may affect a borrower’s credit history and increase the difficulty in assessing his or her creditworthiness.

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