Under what conditions can a lender legally refuse to lend based on a borrower's credit history?

A lender can legally refuse to lend based on a borrower's credit history if they provide a clear justification grounded in creditworthiness, as defined in their established underwriting guidelines. This practice is in line with the Fair Credit Reporting Act (FCRA) and other regulatory frameworks. Lenders are required to assess a borrower’s creditworthiness comprehensively, which often includes analyzing credit scores, credit history, and other relevant financial indicators.

When a lender uses their underwriting guidelines to make determinations about creditworthiness, it reflects an objective and systematic approach to evaluating risk associated with extending credit. Clear justification ensures transparency and fairness in the lending process, allowing borrowers to understand the reasons behind the decision and, if necessary, take steps to improve their credit profile for future applications.

Other factors, such as low income, a specific threshold for credit scores, or lack of prior mortgage history, do not inherently justify a refusal to lend unless they are directly tied to the lender's established criteria. These factors can influence a lender's overall assessment but should be considered in conjunction with a complete review of the borrower's financial situation.