What is an AKA Letter and Why Is It Important?
In the mortgage industry, it’s referred to as an AKA letter, or Also Known As. An AKA letter is one written by the applicant at the direction of the lender. And it can be required for a number of reasons when the name on the loan application doesn’t match exactly the name or names appearing on a credit report. How can that happen? How can several different names appear on a credit report for the very same person? It’s easily explained and if you’re going to soon complete a loan application you just might very well need to put one of these letters together.
AKA Letter Explained
Okay, so let’s say John Smith completes an application and submits it to his lender. John fills out the application and provides the requested documentation. Within 72 hours, John also receives a host of disclosures and forms that need to be filled out. There are various forms such as a credit explanation letter and a servicing disclosure notice for starters. Applicants are asked to sign or initial where needed and return to the lender. In John’s instance, he also gets a request from the lender for an AKA letter. What triggered the letter? On the credit report, there are other similar names showing up but not exactly ‘John Smith.’ Instead, there are three other similar names, John Q. Smith, John Quincy Smith and JQ Smith. Where did these different aliases come from?
A credit report contains much more information about the applicant than just payment histories and loan balances. A credit report will also list different places John has lived over the years. This and other information comes from the credit agency’s database. A credit report lists items that were reported directly to one of the three main credit repositories, Equifax, Experian and TransUnion. The credit agency doesn’t reach out on its own to create data but instead only reports what has been reported to the agency.
How it Works
Let’s say John has been out of college for a couple of years. John has had a credit card since he was a senior in school. When he first got that card, whatever address he was living at when in school is what will appear on the report. Upon graduation, he moved to a new apartment. With his new job, he bought a new car. Doing so, he applied for an auto loan using the address where the apartment complex is located. Soon thereafter, he bought his first home with a new mortgage. Still later, he sold his first car and bought another. Each and every time John applied for a new loan, his current address was the address of record. That means all the places John has lived will be listed on the credit report. The addresses don’t disappear, they remain as part of John’s credit history.
The same situation occurs when different names are used. John applied for credit under the names John Smith, John Q. Smith, John Quincy Smith and JQ Smith. The lender will want an AKA letter from John. His application read John Smith yet there are these other aliases listed on the report. The lender wants to know if these other names are actually his. His letter to the lender will simply say, “yes, I have used these names in the past.” Why is this important? It’s important because the lender wants to know exactly who the loan is for.
Jane Doe also applies for credit under her name. Later, she marries and takes on her new husband’s name. She is known as Jane Jones. Unfortunately the marriage didn’t work out but she kept using Jane Jones. An AKA letter will also be needed with an explanation such as “I was single then got married, then divorced and today still use Jane Jones.”
There can also be an instance where someone else named Jane Doe appears on a credit report but it’s not the same person. This “other” Jane Doe has some spotty credit and it’s appearing on Jane’s otherwise perfect credit report. Jane will then complete a letter stating the offending items do not belong to her but belong to some other Jane Doe. The lender will do a little research and confirm. An AKA letter is just to make sure the lender is sending money to the right person.