The Role of a Credit Analyst on "The Real Estate Dream Team"

Transcript

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Welcome to real estate. Common sense. I'm your host, Lisa Spencer international trainer and real estate coach and author of the book real estate. Common sense. After you mastered the basics of launching your real estate business. It is essential to partner with other professionals to ensure a smooth transaction for consumers. How can you find the perfect partners and create the dream team of professionals that will support your clients and your business? Season two is dedicated to interviews with top professionals. They will explain their role in the real estate transaction and how we can work together to provide the best experience for buyers and sellers.

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So today we're going to be speaking with Lisa Myers, Senior Credit Analyst with Supreme Lending. And as we're talking about developing our real estate dream team, we've already spoken with a home inspector, a title company, and a mortgage lender. One of the next people you need on your real estate dream team is someone that can assist consumers with credit. So today I'd love to introduce Lisa Myers. Welcome, Lisa. Thank you, Lisa. I'm happy to be here. I appreciate you bringing me on today. Awesome. So I always start with the same question with the people I interview. Why do you love what you do? Oh, my gosh. I have been fascinated with credit really since the moment I walked into the credit business. I had originated loans previously and realized very quickly that I really didn't even understand what I had been looking at for years when I originated loans. And I'm talking about a credit report and credit scores. I realized that when I moved over to the credit side of the mortgage business. I had a unique opportunity to study the same credit reports, credit scores, and ultimately provide some real education for consumers. I wanted to share it in a way that really anyone could could understand it. and I think I do a pretty good job of that today. It's, it's incredible how mysterious credit still is today. I love that I can weed through all of this and share it, you know, share only the facts that matter. I do get so excited when I see someone's credit score is increased 40 points, 60 points, 100 points, 140 points, which happens all the time, simply because I'm able to take their unique credit situation and their unique credit profile and show them how they can generate a significant amount of points in a very short period of time, you know, and ultimately manage their credit the right way. So. I think that's what gets me so excited and yet, as you said, a lot of it still remains so mysterious. So let's start with the basics. Why is that credit score so important? Well, today, our daily lives really require us to use our credit and credit scores. If you have good credit, it can save you thousands of dollars, even more. throughout your lifetime. So when you apply for an auto loan, a mortgage loan, an installment loan, Banks and lenders are more likely to not only approve your loan, but having a better credit score affords you,, a lower interest rate. In general, this can save you thousands of dollars over your lifetime, even insurance companies, employers, landlords, they all pull credit and depend on credit scores to determine what kind of a risk you are. Just to give you a small example, Lisa, when you apply for auto insurance, I think most of us own a car. we, we all need auto insurance. the insurance companies. Pulls your credit, that credit score will actually dictate what you'll be paying in auto insurance premiums. If you have a lower credit score, you will pay higher insurance premiums compared to someone living in your same area, driving that same car, same age. Ultimately, most of us will use our credit and our scores throughout our lifetime. so we do want to make sure that we do have the right information on how to manage our credit the best way possible. it does reduce the amount of money we spend living our day to day lives. I couldn't agree more and I think in the future before we order off a menu, they're going to ask you for our credit score. We're going to pay more for the cheeseburger. If we have a low credit score, it is becoming that prominent in our world. I agree. And yet it can become very defeating. And really cause a shame spiral for people if they end up having a hiccup or having even something that happened, a death, an illness, something that that changed their credit score, and now is impacting their entire life. So. Let's just isolate this for a minute into what happens when you purchase a home. So, what is the difference between the credit score that I may get from my credit card for free or credit karma or 1 of these other credit. Advertisements what's the difference between that and what a lender might look at? Because we're really speaking with realtors and realtors want to know. Why am I seeing why did my consumer come in and say their credit was 725 and now you're telling me their credit is 650. what happened? Well, so what a lot of people don't know is that, there there are 2 big credit scoring companies today that do provide credit score models. These are credit score models for creditors and consumers to have access to 1st company. You're likely familiar with. It's a company called FICO. FICO has been a leader in credit scoring since. They released their very 1st FICO score model in 1989. They were the 1st company to ever, create what we call a credit score. They, they came up with that term. so this was a game changer for lenders and creditors and ultimately streamline the approval process. In the early 2000s, there was another company that was formed by the 3 credit bureaus. they wanted to compete with FICO. There was no other company out there, providing these credit score models except FICO. This company is a company called Vantage Score Solutions LLC. They released their very 1st vantage score in 2006. Believe it or not, this company vantage score solutions is actually owned by the 3 credit bureaus, Equifax, TransUnion and Experian. So, even though we've had vantage scores available to us since 2006 FICO still has the majority share of the credit scoring business today. Most of the top lenders and creditors still use FICO scores when you apply for a loan. If you are monitoring credit scores to a 3rd party website, something like credit karma, free credit report dot com, there are a ton of them out there. You're not monitoring a FICO score. You're monitoring a vantage score. So these are 2 totally different companies. They are competitors. They do not share information with each other. 1 company FICO has the majority share of the credit scoring business. The other company wants more of it, but but ultimately. The big difference is these 2 companies just look at credit very differently. Ultimately, they're going to generate very different credit scores, even if they're looking at the exact same credit data, simply because they just look at credit data very differently. Ultimately, what I find is, if consumers have credit challenges, a significant amount of credit challenges, they'll likely have a much higher vantage score than they do a FICO score, especially a mortgage FICO score. So, I do have a way for someone to monitor a FICO score. if they want to monitor it, they can actually download the Experian credit report app. They can monitor their FICO 8 credit score. It's not a FICO score that we, pull here in mortgage lending. But, I think if you are going to work on your credit report and, you know, have someone like, Supreme provide you with a credit plan to be able to work on and, and dramatically improve your credit scores in a short period of time you need to see how those changes are affecting a FICO score. Versus advantage score, because we do pull FICO scores in mortgage lending right now. We don't pull vantage scores. As a matter of fact, I've done business with a lot of creditors, and I've never come across a creditor myself. that has pulled Vantage score when I've applied for a loan. So I'm not saying they're not out there. I'm just saying I personally have not come across them. Can you just share with us a few ways that we can suggest to consumers a way that they can improve and or protect their credit? Because there are some myths out there. And one of the ones I don't like as a realtor, when I suggest that they go work with a lender that I enjoy working with, like I enjoy working with Supreme Lending. And then the consumer will say to me, Oh, my lender said it's going to hurt my score if anybody else pulls my credit. So I don't want to do that. And it's really tough to explain to them. There is a time frame. So if you can touch on that, and then maybe some other things that we can do to improve or protect our credit. so Supreme lending has a little bit of a different process when you apply for a mortgage loan. In most cases, when we, when we pull or access a credit report for you for mortgage for a mortgage loan, initially, it's actually a soft inquiry. I'm not sure if anybody understands that term, but we have, wouldn't you mind explain what a hard and soft pull if you will, we're talking some mortgage lingo here, but I think most agents can understand it. So, so our, so our initial pull in most cases is a, what we call a soft prequel. It's a soft inquiry. A soft inquiry has no impact on any credit score a FICO credit score or Vantage credit score simply because, you are the only person has access to seeing your soft inquiries and you can only have access to that by viewing your consumer copy of your credit report when you apply for a job. If the employer pulls your credit report, that is a soft inquiry. When you do apply for auto insurance, that's a soft inquiry. If you're doing business with a creditor and they're accessing your credit report, throughout the time that you, you have that account open and they can, they can do that. that is a soft inquiry. So those. Those soft inquiries have no impact on any credit score whatsoever when a mortgage lender is ready to start the process like us. If if you go under contract, or, you know, once you complete the credit plan that we provide to you, something like that, when we're ready to pull a hard inquiry credit report. Um, a lot of people do panic, you know, when I was in the credit business back a long time ago, I really never had consumers concerned about inquiries. Never. I didn't see that happening until credit karma became something that consumers really relied upon. and and unfortunately. When it comes to credit karma, you're, you're monitoring vantage scores. So hard inquiries have a very different impact on Vantage score. When you apply for a mortgage loan, that hard inquiry, can decrease advantage score by up to 10 points. Initially, when it comes to a FICO score, that's not the case. So FICO looks at some types of inquiries like the rate shopping inquiries. Uh, they know that. During the loan process that that lender that creditor may need to access your credit report. Multiple times, so FICO did not want that to be something that was going to have an impact on your credit score. So, when it comes to a hard inquiry, hard mortgage inquiry. In a 12 month timeframe, if this is the 1st time that you're applying for a mortgage. The very 1st, 30 day time frame that you're applying for a mortgage, uh, any more hard mortgage inquiries during that period of time are completely ignored by FICO. So you actually have in a 12 month time frame. You have a 30 day time frame where mortgage lenders can pull your credit report. Hard inquiries, uh, those hard inquiries have no impact on a FICO credit score. Now, after that 30 day timeframe, uh, for the duration of the 12 months, you'll have a 45 day rolling window. If there are any mortgage inquiries, hard mortgage inquiries that are generated during a 45 day timeframe, uh, those inquiries are sort of lumped together and considered one hard inquiry. Now, I started studying this years ago, just like I did everything else when it came to a mortgage credit report scores. Uh, because consumers were so concerned about this. So I wanted to see really how these impact credit scores and credit score ranges. When I talk about credit score ranges, how does 1 hard inquiry in a 45 day time frame impact credit scores between 500 and 520, 520 to 540, right? So I would look at each each score range. And really, what I found is, the higher credit score that you have, especially when you get up into the 600 credit score range, which low 600s is is a is an okay credit score. But even when you get to the low 600 credit score range, even 1 hard inquiry that is being looked at by FICO in a 45 day timeframe may have no impact on your FICO credit score. Typically, we see some sort of an impact. if you have lower credit scores, high 400s, low 500s, and you're really not doing anything to improve your credit. but even in that situation, it was typically a few points. 3 or 4 points, is all it would have an impact so it's, you know, unfortunately, Um, so it's, you know, unfortunately, that's where we see consumers that are really concerned about inquiries is, is they're typically monitoring credit scores to some, some 3rd party website. And they've seen that score drop to a vantage score. Is there anything else that we do? Yeah, and I really want to talk about collection accounts for a moment because here's typically when consumers start working on their own credit, which, unfortunately, I'm not a fan of just because, if you don't really have the right education, right information. You can really go backwards when it comes to trying to help your credit scores, but let's talk about credit collection accounts for a moment when it comes to something like non medical collection accounts. Non medical before resolving them, make sure that the collection agency will agree to delete it from your credit report. Once it's resolved. This is important because this is the best way to generate the most amount of score improvement to a FICO score. You do not want the collection account to remain on credit, even with a 0 balance. I think the biggest common mistake consumers can make is settling out these non medical collection accounts without negotiating deletion because, you know, unfortunately, if you're monitoring. Your credit score through credit karma, your vantage score, and you settle out that collection account, not non medical, and it remains on credit, your vantage score can increase 30, 40, 50 points. Unfortunately, when it comes to a FICO score, especially mortgage FICO score, scores, we can see zero points gained. Sometimes we even see a decrease in a mortgage FICO score, if that collection account remains on credit. It's also unfortunate because Once the collection agency has their money, it's very difficult to go back to them and ask for something like, a deletion, deleting it. once they already have their, their money. Okay. So what what is a common mistake that are there any others? Yes, I wanted to talk about medical collection accounts for just a moment as well because I know, you know, there are a lot of consumers that do have medical collection accounts. Even though mortgage loan officers don't care about medical collection accounts, I do from a credit perspective because medical collection accounts do have an impact on mortgage credit scores, just like any other collection account, but treated the exact same way. So, best way to generate points when it comes to medical collection accounts is by settling medical collections for as little as possible. you don't have to negotiate anything else. Once the, the medical collection account is resolved. And the collection agency reports a zero balance to your credit report. The credit bureaus, Equifax, TransUnion and Experian will automatically delete medical collections only. Okay. So it's not up to a collection agency. It is something that it is a, you know, a policy that the credit bureaus came up with July 1st of last year. Uh, so the only thing that you need to negotiate on a medical is. How little money you're willing to pay to resolve it. That is it. So, if it's a regular collections, we want to negotiate up front. We may, or we may not win on that for deletion if it's a medical. We want to negotiate as low a price as we can pay. And as long as it's considered a 0 balance, it's coming off. Correct. Wonderful. Wonderful. Now, I will say that by far the best way to protect your credit and scores. Is by making just making sure that you make all your payments on time. Believe it or not, late payments can impact FICO credit scores by up to 35%. Uh, these can affect not only your credit scores, but also have an impact on underwriting decisions as well. So, we always hear that we need to make our payments within 30 days from our due date. But, what does that really mean? Not many people really know exactly when a late payment can be reported to credit. You may think that you have up to 30 days, right, from your due date to make a minimum payment on your account, but the fact is you only have just 29 days from your due date to make sure that a minimum payment is posted to your account or a late date will be reported to your credit report. So, making your payments before 30 days from your due date. Is the best way to ensure creditors are reporting good payment history to the credit bureaus every single month. late dates. Are the hardest to have removed from your credit report, because a lot of creditors do say that if they're reporting accurate information, like a late payment, not willing to remove it. So this is, the best way to protect the credit and the scores for sure.

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I think this brings us back to the reason why I think it's so important to have someone like you, Lisa, on our Real Estate Dream Team. Many times a consumer will come in and they're not quite ready. Now we need to have this pre approval process done. Of course, my favorite way to ask is to say, Have you spoken with a mortgage lender to confirm your purchasing power? Now they go ahead and speak with my favorite lender. And then they come back and the lender says, Hey, they're not quite ready. Then I'm going to go ahead and send them to the programs that Supreme lending offers, uh, our credit essentials and budget essentials. And they'll go through that program after they go through the program, then they actually qualify to work with you and their lender to get their credit score increased. So that they can purchase a home and this is such an important tool because we never want to just send someone away sad and like I said earlier in that shame spiral that their credit isn't what it needs to be if we can offer them solutions, we become someone that can stay in their life until they are ready to purchase a home.

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Can you give us an example of a recent transaction where you really helped someone increase their score?

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I'm pretty passionate about this business. I, I love when, I see a consumer that it takes their game plan and they run with it and they work on it and they're diligent about it. And then they come back and there's, they're just so excited. They're like, I took care of all of the words, did all the work, and then we re pull credit and we see scores, increase dramatically. we have it happen all the time. We take high 400 credit scores. That's 1 of 1 of the biggest ones I saw in about the last 3 or 4 months. Someone started at a high 400 credit score. We re-pulled credit 4 and a half months later. A middle credit score was a 683 that's taking a buyer from. Thinking they probably have 2 or 3 years before they can ever be approved for a mortgage or be close to it. You know, score wise to now we're able to. You know, be able to close this loan in just a couple of 2 or 3 weeks. I think, if they just understand that they can get started today, even if they're not looking to purchase until next year, they can, they can start the, the plan today and, and work on their credit and they can see a lot more score improvement than they even thought they would, you know, could imagine. Lisa, I always like to end our podcast with what are you most grateful for both professionally and personally? Well, I think, you know, for me personally, I'm most grateful for obviously my family, my friends. I just feel so blessed in my life. I have the people around me that I just love and adore and that love and adore me. but I think for me, most important. Is my health, I'm a very healthy individual. I have been all of my life and, trust me. I will tell you, I do not take that for granted. So I think my health is probably the most important thing. I'm most grateful for. And I do. I do really try to take care of myself professionally. I will say. I am grateful for the time and the hours that I was allowed and I say that because when you work for credit agency, like, I worked for, you're either basically data entry customer service or your sales. And so I was allowed to study, learn and test this business. I was looking at thousands of credit reports and scores on a daily basis. I had free reign to learn it, understand it, read, make phone calls to Fannie and Freddie to wherever I needed, whatever I needed to do. I really became, just really obsessed with the credit business. I was looking at stuff 20 hours a day and then dreaming about it at night. So, I think I'm just very grateful for the opportunity that I had to be able to grow up in this business because I really did. And I didn't realize until probably about 5 years ago, believe it or not, that I had a unique skill set. It never occurred to me when you grow up in something like that, it's just a part of you, you know, when you love it and adore it, and it's it really became my family too. I just didn't realize it was such a big deal. So, so I love that. My brain is a computer when it comes to looking at this credit stuff. And I love I'm a problem solver. So I love. Picking through credit data, finding the best ways to save consumers money, generate as many points as we possibly can. And I, and I, I hope I do a good job at it. Uh, so I think that's what I'm most grateful for. Professionally, we're privileged to have you as Supreme lending. And I'm privileged to know you as a person. And I wanted to bring up what you were saying was very interesting. And I think realtors should. hear that hopefully there's a wonderful book called the artist way by Julia Cameron and she feels it's brought forth in this book that we are all born an artist and we get so tunnel vision that artists are people who play music or paint paintings or write books and there could be a credit. Artist, and that's what I think you are. And I have view of myself as a real estate artist, because I love what I do. And I love putting my name on the work that I do. And I know you are very proud of the work. I'm very protective of my work. Very, I love it. And that is what defines an artist. An artist wants to put their name on their work and be known for their work. And I appreciate how dedicated you are to your work. So, so much for being with us. We appreciate you. We appreciate your work.

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We hope you were able to take away a few suggestions on how you can assist a buyer that is not quite ready in their home purchase journey. You can learn more about the specific program that Lisa Myers senior credit analyst with Supreme lending is involved with by going to their website and the credit essentials course. Located online at supreme-essentials.com. Tune into our next episode, where we'll step away from our interview format and review how you can form your real estate dream team and how you can build the relationships with professionals that will help you build your business. This is Lisa Spencer, sending you love and wishing you success.