The South Windsor, Connecticut-based private lender announced Tuesday that moving forward, only tri-merge soft credit pulls would be required for 100% of originations. RCN Capital specializes in new construction financing, short-term fix and flip and bridge financing, along with long-term rental financing for real estate investors.
Previously, the company required hard pull tri-merge credit reports with at least two of the three primary credit bureaus (Equifax, Experian, and TransUnion) reporting. Additionally, credit reports had to be dated within 120 days of the proposed loan closing date for every loan transaction.
In comments submitted to NMP about the switch, the company said they performed due diligence to ensure that the degree of visibility soft credit pulls provided into borrowers’ credit histories matched that of hard pulls. “We get the same level of security and insight into a potential borrower with a tri-merge soft pull credit report as we would with a hard pull," officials wrote. "The three primary credit bureaus’ scores appear on that report as well as a detailed credit history, which gives us everything we need to underwrite a borrower with certainty.”
Switching to the tri-merge soft credit pull enables RCN to run borrowers’ credit reports every 90 days, and though the soft pull does appear in their credit histories, it does not impact borrowers’ credit scores the way hard pulls do.
RCN says the switch especially benefits borrowers who do multiple transactions throughout the year because every hard credit inquiry could lower a client’s credit score by several points. “While we want to be aware of any potential issues that may arise on a client’s credit report, for our serial repeat clients, we were not seeing any significant changes to their credit reports but our process was still dinging their credit.”
The switch also benefits borrowers trying to improve their credit while seeking financing. “In situations where a borrower's credit might improve after 90 or 180 days,” the company added, “we would be able to reflect that in the terms we offer them, rather than negatively impacting their score every time we run credit.”
