Fraud 5: Credit Reports and Appraisals: Hidden Clues Lenders Often Miss

One of the most valuable habits I picked up early in my underwriting career was simple: never rush the credit report. I used to treat it like a checklist item—pull the score, glance at the debts, move on. But over time, I realized it’s more than just a snapshot of financial health. It’s a quiet narrator. And if you read it closely enough, it tells a story that might contradict everything else in the file.

In this post, we’re exploring two overlooked sources of fraud detection: credit bureaus and appraisal reports. Each holds subtle—but powerful—clues that can reveal when a deal just doesn’t add up.

Credit Reports: More Than Just a Score

The credit report isn’t just about numbers—it’s about patterns. And those patterns can help verify (or dismantle) a borrower’s story.

Red flags to watch for:

• Inconsistent identity details: If the name, SIN, or birthdate on the bureau doesn’t match the ID or app, stop. Even small mismatches—like reversed middle and last names—can point to identity fraud or synthetic ID use.

• Employment mismatch: The credit bureau often lists employer info. If the app says “Marketing Director at ABC Corp” but the bureau lists “Retail Associate at DEF Stores,” ask questions. It could be an outdated entry—or a fake job letter.

• Thin credit file with a high score: A 780 score sounds great—until you see it’s based on one credit card and a car loan. Fraudsters can build synthetic files to mimic strong credit but without depth.

• Suspicious inquiries: If five other lenders have pulled credit in the last two weeks, it’s worth asking why. Was the deal declined elsewhere? Was another lender suspicious?

• Fraud alerts or consumer statements: Many applicants forget these show up. If there’s a note like “I do not have a loan with Bank X” or “My identity has been compromised,” treat it seriously.

Appraisal Reports: Watch the Edges, Not Just the Value

Appraisals can be quietly manipulated—often just enough to tip a loan over the qualifying edge. That’s why a good underwriter never just looks at the final value. You read the whole report.

Common warning signs:

• Exact match with purchase price: If the appraisal lands perfectly on the contract price with no adjustments, be skeptical—especially in a slow market.

• Weak or distant comparables: Fraudsters may hand-pick comps that inflate the property value. If the comps are miles away or drastically different in features, ask for justification.

• Missing details or sloppy formatting: No exterior photos, missing license numbers, strange white-out marks—these could mean the report was edited post-issue or even fabricated.

• Ownership history red flags: If the property was flipped in the last six months at a huge markup, and there’s no renovation evidence, something may be off. Also check for related-party transfers or off-market sales.

• Misalignment with occupancy claim: The appraisal says “rented basement unit,” but the borrower insists it’s owner-occupied? That’s a fraud-for-shelter classic.

The Cross-Check Mindset

The best underwriters treat documents like puzzle pieces. A credit bureau, an appraisal, a job letter—they should all fit together. If one piece doesn’t align, it’s not “probably fine”—it’s a signal to pause and ask why.