Can I Get Licensed as a Mortgage Loan Originator With Problematic Credit?

Let’s face it.  At one time or another, most of us fall upon hard times.  Not many people intentionally neglect to pay their bills or behave in ways that damage their credit but, when push comes to shove, if the money isn’t there to pay the bills, it isn’t there.

An individual who is transitioning into a new field and career, such as the Mortgage Industry, is doing so for a reason.  Perhaps things are just not working out with their most recent career.  Maybe the money’s not there.  The Mortgage Industry, with its lucrative income potential, regularly lures to it those who want to make a change and increase their cashflow.

Who Needs to Be Concerned?

If someone desiring to become a mortgage loan originator (MLO) pursues employment with a depository institution regulated by a federal banking regulator or the Farm Credit Administration (FCA), he or she is categorized as a “Registered Mortgage Loan Originator” and need not pursue a license.  Beyond any credit requirements established by the hiring entity, the aspiring Registered MLO’s credit will not fall under further scrutiny.  If, however, the aspiring MLO desires to pursue employment and sponsorship through a non-depository institution such as a mortgage lender or brokerage that is not regulated by a federal banking regulator or the FCA, he or she would be required to secure an MLO license through each state in which he or she desires to operate.  This process will subject his or her credit to thorough scrutiny.

Why Should Credit Matter in the First Place?

As a mortgage loan originator, you act as the quarterback to one of the most important financial endeavors into which your customer may ever embark.  That’s a whole lot of responsibility going on right there!  If the loan originator is incapable of successfully managing his or her own financial affairs, what qualifies him or her to evaluate and counsel others on theirs?  Furthermore, if the MLO’s personal financial situation is stressed, he or she might be more inclined to recommend mortgage programs that pay a higher commission rather than those that may pay a lower commission but serve the borrower’s needs more appropriately.

What Are the Standards?

The Secure and Fair Enforcement for Mortgage Licensing Act (SAFE) requires MLO licensing candidates to demonstrate appropriate character and fitness in order to earn their mortgage loan originator licenses.  Specifically, the SAFE Act requires MLO licensing applicants to, “demonstrate financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the mortgage loan originator will operate honestly, fairly, and efficiently within the purposes of the (SAFE) Act.”

As such, a person has shown that he or she is not financially responsible when he or she has shown a disregard in the management of his or her own financial condition.  A determination that an individual has not shown financial responsibility may include, but is not limited to:

  • Current outstanding judgments, except judgments solely as a result of medical expenses;
  • Current outstanding tax liens or other government liens and filings;
  • Foreclosures within the past three years; and/or
  • A pattern of seriously-delinquent accounts within the past three years.

Most states rely on the content of the applicant’s credit profile and do not consider the licensing candidate’s credit score.

So if My Credit’s Problematic, Does that Automatically Disqualify Me?

The answer to that question is, it depends.  If the licensing candidate’s credit profile demonstrates any of the aforementioned issues, other than a pattern of seriously-delinquent accounts within the past three years, in all likelihood, his or her application will be declined.  If, however, the problematic issues surround nothing other than delinquent accounts, the licensing candidate should prepare a letter of explanation to accompany his or her license application explaining:

  • The cause(s) behind what happened;
  • What he or she did or is doing to resolve the issue(s); and
  • How he or she plans to prevent the reoccurrence of the issue(s) that caused the problematic credit in the first place.

The letter should address each issue separately, be respectful, humble, not point blame elsewhere, and contain correct spelling, grammar, and punctuation.

There’s no guarantee that the credit explanation letter will successfully offset the problematic issues, but without one, the licensing candidate with problematic credit will likely face certain rejection.


Things happen in life that find us in less-than-ideal situations.  Having problematic credit does not necessarily make one a bad person; life happens!  Understanding this, the various state regulators responsible for issuing MLO licenses generally want to do everything in their control to facilitate a person bettering his or her situation.  Outside of conditions beyond which they have little-to-no control, most state regulatory authorities will bend over backwards to help the aspiring mortgage loan originator get beyond the issues that might otherwise hold him or her back.

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