What is a credit supplement?

So, typically when a lender asks for a credit supplement from you as the borrower, it means that there is some item on your credit report which needs to be revised, prior to the loan being issued. Usually, each credit supplement will cost around $15 each, which might not sound like that much, but if the bank is asking for a lot of credit supplements then the costs get expensive pretty quickly.

Now one example, of where you’d have to pay for a credit supplement would be if you had student loans that showed up on your credit report that didn’t show a deferment date.

As I mentioned in another video, if you’re applying for an FHA loan and you have student loans, you’ll have to get documentation showing that your student loans are deferred for at least 12 months for the bank to not calculate that debt into your debt to income ratio.

Now if your credit report, which should show all of our federal student loans, doesn’t show that they’re deferred, then the bank will typically ask for a credit supplement showing the deferment date for each line item.

So, if you had 10 student loans that needed to be deferred and the bank asked you for credit supplements for these, then you’d have to pay around $150-200 total for those credit supplements.

Credit supplements can also be requested by the bank if you have some derogatory item that shows up on your credit that the bank wants to have removed. For example, if you’ve had a judgement filed against you, or you have collections on your credit report, banks will typically want credit supplements showing that they have been paid for.

Credit supplement expenses are one of the more uncommon costs that people typically think about when purchasing a home. However, if you know that there are issues with your credit and that you’ve had derogatory items in the past, then don’t be surprised if you have to pay for credit supplements at the close of the transaction.