Mortgage Lender and the almighty FICO score

[daves87rs]

The problem is that they can't see how you handle payments....even with money, that always freaks them out...

Had a friend with the same problem-he hates debt, and pays a bunch in cash....

He just took their rate, opened a few credit cards, and refied about 7 months later for an even lower rate than that was offered before (shopped around too).

It's not a big deal, just grab the house for now-then fix it shortly down the road...

 

[CKN]

Another victim of Dave Ramsey.......

I have a credit score of over 800. When I want to borrow money- I literally have banks and credit unions waiting in line to loan me money.

I have several reward credit cards. (Has paid for several items on Amazon-restaurant meals as well). However-I now have no mortgage-paid off.


As suggested...you need to get "in the game".

 

[Wolf359]

Originally Posted By: Coprolite
If you haven't yet, get yourself a free credit report or join Creditkarma
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

https://www.creditkarma.com/free-credit-report

Credit Karma has simulated scores and credit modeling. It is freemium. They make money on referrals and adds.


I'm not sure what scoring model Credit Karma is using, lots of people call those scores fako scores because it's different than the scoring models used by lenders.

Anyway, to check your credit, you should get a free report from www.annualcreditreport.com, it's the only legit site that gives you a free credit report but not score once a year from all 3 credit bureaus.

We used to call people who didn't have a credit score ghosts. They don't exist.

 

[Food Scientist]

Originally Posted By: dareo
Not trying to be rude but here's a partial list of things you missed out on by not having some sort of credit history:

1. Car insurance is higher
2. Home owners insurance is higher
3. No credit card rewards. I've gotten thousands of free dollars back in 1.5 to 5% rewards on stuff i would be spending money on anyway. I had to invest 15k in renovating my first rental property and didn't have the money but Capital one let me use theirs for 18 months at 0% and paid me 1.5% cash back.
4. Not really possible to get a hotel, rental car, ect.
5. Jobs, if you needed a new one tomorrow and you have no credit for them to check that looks pretty wierd.
6. How do you buy stuff on Amazon?!
7. Obviously, mortgage or other loan rates are higher.

The fico score is so key i tried to get my 2yr old kid a credit card but now they wont accept applications until 18.

Its not really lazy bankers or anything like that its just that you are missing a big piece of the risk assessment puzzle. That unfortunately costs you more money every time risk is assessed in your life.

For home loans its mostly about income, proving that income and its stability, documenting/seasoning the down payment, then assessing the borrowers stability and only part of that is a fico score.


Doesn't sound rude to me.

1. Not really. Used to have AAA and ran into that problem with rates going up due to lower credit score. Switched to Progressive and never been happier.
2. Can't say it is or isn't. I think I get a fair rate and have price shopped and couldn't find anything cheaper.
3. Don't care. Never met any millionaires who made their wealth on points.
4. Do it all the time. Just went to San Diego, no sweat with the rental car.
5. Probably true.
6. Debit/Credit card that pulls directly from my checking account or PayPal, which does the same thing.
7. If I had applied for the loan back in December I would have gotten the advertised rates.

 

[CKN]

Originally Posted By: Wolf359
Originally Posted By: Coprolite
If you haven't yet, get yourself a free credit report or join Creditkarma
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

https://www.creditkarma.com/free-credit-report

Credit Karma has simulated scores and credit modeling. It is freemium. They make money on referrals and adds.


I'm not sure what scoring model Credit Karma is using, lots of people call those scores fako scores because it's different than the scoring models used by lenders.

Anyway, to check your credit, you should get a free report from www.annualcreditreport.com, it's the only legit site that gives you a free credit report but not score once a year from all 3 credit bureaus.

We used to call people who didn't have a credit score ghosts. They don't exist.



True-but based on personal experience-they are very, very close. They can't use the term "FICO" because that system is proprietary.

 

[Wolf359]

Originally Posted By: daves87rs
The problem is that they can't see how you handle payments....even with money, that always freaks them out...

Had a friend with the same problem-he hates debt, and pays a bunch in cash....

He just took their rate, opened a few credit cards, and refied about 7 months later for an even lower rate than that was offered before (shopped around too).

It's not a big deal, just grab the house for now-then fix it shortly down the road...


Yeah, the only issue is that you end up almost paying closing costs twice when doing a refi. Only thing I would suggest is to do a no cost no closing mortgage where the rate is higher and then refi it in 6 months when you have a decent credit score. That will probably be cheaper than paying closing costs twice.

 

[Slick17601]

Originally Posted By: E150GT
Its pretty ridiculous. I bet you could go through a dave ramsey approved lender and they'd hook you up with a better rate.


Not if they can't sell the loan on the secondary market because of the credit score.

 

[Wolf359]

Originally Posted By: CKN
Originally Posted By: Wolf359
Originally Posted By: Coprolite
If you haven't yet, get yourself a free credit report or join Creditkarma
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

https://www.creditkarma.com/free-credit-report

Credit Karma has simulated scores and credit modeling. It is freemium. They make money on referrals and adds.


I'm not sure what scoring model Credit Karma is using, lots of people call those scores fako scores because it's different than the scoring models used by lenders.

Anyway, to check your credit, you should get a free report from www.annualcreditreport.com, it's the only legit site that gives you a free credit report but not score once a year from all 3 credit bureaus.

We used to call people who didn't have a credit score ghosts. They don't exist.



True-but based on personal experience-they are very, very close. They can't use the term "FICO" because that system is proprietary.


They can be off between 50-100 points depending on the scoring model. I think lots of those sites use Vantage score which has a range up to 950 whereas the ones the lenders use go from 839-850. I run them all the time and each of the 3 bureaus use some slight variation of the scoring model with a different score range. It matters because the best rate is over 740 now, used to be 680 back in the day but if you're using one of those fako scores and you think you have a 750 when the real score might be 700, that would mean you're not getting the best rate so it may have given you a false sense of security.

 

[Food Scientist]

Originally Posted By: Wolf359
Originally Posted By: SVTCobra
I fully understand credit. I just don't use it because my goal in life is not have the perfect FICO score. One of my goals is to have enough money to not rely on anyone for anything and I don't need credit to accomplish that. The rant is about laziness of bankers who are incapable of determining credit worthiness because I don't fit the normal model of applicants.



No you don't, otherwise you wouldn't have this rant that doesn't make sense. The bankers aren't lazy, they're doing exactly what they need to do. You don't meet fannie/freddie guidelines. You need to meet them in order to get the best rates. If you knew how the system worked, you would have adjusted things to take advantage of it. Banks don't really lend you their money, they just do the loan and if it's conforming, they just sell the loan in the market and can make more loans. They don't tie up their own money. If you're talking about a portfolio loan, those are loans that don't conform and they can't sell those and have to keep them on their books. They can make a lot more money just selling loans as opposed to locking up their money. That's why the rates are better on conforming.

You don't need to have a goal of having the perfect fico score. Your goals and having good credit are not mutually exclusive. As a matter of fact as others pointed out, it would help you actually get there faster. As others said, there's the 1-2% cash back aspect of using credit cards plus more limited exposure in case of any issues with debit cards getting hacked.


I do understand credit and how it works. Just because I'm not another sheep in the herd doesn't mean I don't understand. Probably has to do more with hard headedness than anything.

It is a portfolio loan which the banks can make more money on since they get the full interest payment, not just what they skim off the top for the loans they sell to Fannie Mae. The limiting factor is how deep their pockets are and most small credit unions don't have deep enough pockets, which is why they stick to conforming loans.

I know I don't meet the Fannie Mae guidelines as originally posted that I don't have a credit score of 640 or better. The whole point is that the credit union raised the interest rates because a lack of credit score doesn't fit their mold, and somehow someone who pays for things as they go along and saves money is more risky. One of the main reasons they use credit score as a large factor in their approval has already been mentioned - it's an easy way to determine payment history and they can't tell what payments I've had in the past couple of years, which requires more work on their part to determine my credit worthiness.

 

[CKN]

Originally Posted By: Wolf359
Originally Posted By: CKN
Originally Posted By: Wolf359
Originally Posted By: Coprolite
If you haven't yet, get yourself a free credit report or join Creditkarma
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

https://www.creditkarma.com/free-credit-report

Credit Karma has simulated scores and credit modeling. It is freemium. They make money on referrals and adds.


I'm not sure what scoring model Credit Karma is using, lots of people call those scores fako scores because it's different than the scoring models used by lenders.

Anyway, to check your credit, you should get a free report from www.annualcreditreport.com, it's the only legit site that gives you a free credit report but not score once a year from all 3 credit bureaus.

We used to call people who didn't have a credit score ghosts. They don't exist.



True-but based on personal experience-they are very, very close. They can't use the term "FICO" because that system is proprietary.


They can be off between 50-100 points depending on the scoring model. I think lots of those sites use Vantage score which has a range up to 950 whereas the ones the lenders use go from 839-850. I run them all the time and each of the 3 bureaus use some slight variation of the scoring model with a different score range. It matters because the best rate is over 740 now, used to be 680 back in the day but if you're using one of those fako scores and you think you have a 750 when the real score might be 700, that would mean you're not getting the best rate so it may have given you a false sense of security.


Has not been my experience. Maybe yours. Each case is different I guess. As mentioned-mine is consistently very close with the "FICO" system.

 

[CKN]

Originally Posted By: Slick17601
Originally Posted By: E150GT
Its pretty ridiculous. I bet you could go through a dave ramsey approved lender and they'd hook you up with a better rate.


Not if they can't sell the loan on the secondary market because of the credit score.



That guy (Dave Ramsey) causes more people distress than he helps. And if the "OP" is a fan-this is a PERFECT example.

You won't get in to debt on the "pay as you go" system. But you can't buy a portfolio of rental properties either. One of the ways an "everyday person" can create wealth. Ask me how I know.......

 

[Food Scientist]

Originally Posted By: CKN
Originally Posted By: Slick17601
Originally Posted By: E150GT
Its pretty ridiculous. I bet you could go through a dave ramsey approved lender and they'd hook you up with a better rate.


Not if they can't sell the loan on the secondary market because of the credit score.



That guy (Dave Ramsey) causes more people distress than he helps. And if the "OP" is a fan-this is a PERFECT example.

You won't get in to debt on the "pay as you go" system. But you can't buy a portfolio of rental properties either. One of the ways an "everyday person" can create wealth. Ask me how I know.......


So since I own my first home I couldn't turn that into a rental property and move into the house I'm buying?

One of my buddies is buying up a lot of rental houses (6 or 7 already) and is deep in debt. I'd agree that his way is probably faster but I can keep buying houses as the cash becomes available and build up rental properties that way as well, albeit slower.

 

[jimbrewer]

Have you considered the possibility that they might be lying? If you already own a mortgaged house you have a score.

These days you can get your score. Do it.

 

[Wolf359]

Originally Posted By: jimbrewer
Have you considered the possibility that they might be lying? If you already own a mortgaged house you have a score.

These days you can get your score. Do it.


There's lots of guidelines. They're probably not lying. Some typical ones are having at least 5 tradelines (just one credit card won't do.) Having a report on your credit in the last 6 months. That can just be the fact that you used a credit card and paid it off.

 

[Wolf359]

Originally Posted By: SVTCobra
So since I own my first home I couldn't turn that into a rental property and move into the house I'm buying?

One of my buddies is buying up a lot of rental houses (6 or 7 already) and is deep in debt. I'd agree that his way is probably faster but I can keep buying houses as the cash becomes available and build up rental properties that way as well, albeit slower.


You just don't understand leverage. Sure you can pay cash for a rental property, but if you bought 4 rental properties and got a mortgage on all 4, if they go up 10% in value, it's really gone up 40% because you only put 25% down. Back in the 20's, they used to let you do that with margin on stocks, 10 to 1. Vast fortunes were made back then. And lost when the market crashed and now you can't do that anymore.

 

[Wolf359]

Originally Posted By: SVTCobra
I do understand credit and how it works. Just because I'm not another sheep in the herd doesn't mean I don't understand. Probably has to do more with hard headedness than anything.

It is a portfolio loan which the banks can make more money on since they get the full interest payment, not just what they skim off the top for the loans they sell to Fannie Mae. The limiting factor is how deep their pockets are and most small credit unions don't have deep enough pockets, which is why they stick to conforming loans.

I know I don't meet the Fannie Mae guidelines as originally posted that I don't have a credit score of 640 or better. The whole point is that the credit union raised the interest rates because a lack of credit score doesn't fit their mold, and somehow someone who pays for things as they go along and saves money is more risky. One of the main reasons they use credit score as a large factor in their approval has already been mentioned - it's an easy way to determine payment history and they can't tell what payments I've had in the past couple of years, which requires more work on their part to determine my credit worthiness.


If you understood it, then your rant is pointless. If you meet the guidelines, then you'd fall under automatic underwriting which is a simpler and easier process than manual underwriting. And they can actually make more money selling the loan on the secondary market because it doesn't tie up their money. I think that's the part you don't get. They can basically do an unlimited number of loans and sell them all off. They're limited in how many portfolio loans they can do and they just want to limit their risk to 5 years. The part you're not getting is that they do less work, make more money and have less risk because their money isn't at stake once they sell off the loan. With your portfolio loan, it's more work, higher risk hence the higher interest rate and their money is at risk.

 

[DdDd]

When I leased a car my credit shot up almost 100 points after six months payments. Before I was almost not qualifying for the primo financing. Had the savings and income but was still treated like 2nd class because I was debt free otherwise.

System wants you to have enough income AND enough debt. Clever mother foxers.

 

[PandaBear]

It takes time to build a credit, but you can still get something first then refinance later. A credit card is a must no matter how much you hate borrowing, pay it off every month and in a few years you will be at 720 debt free. To go to around 800 would probably take a few years of having an existing mortgage.

Why not do a 30 year fix for the moment even at higher interest, you can always refi later when you have the score to do that.

Now if you have a net worth of 10B, you can probably get a 1% home loan like Mark Zuckerberg.

 

[AirgunSavant]

Originally Posted By: Wolf359
Originally Posted By: CKN
Originally Posted By: Wolf359
Originally Posted By: Coprolite
If you haven't yet, get yourself a free credit report or join Creditkarma
https://www.consumer.ftc.gov/articles/0155-free-credit-reports

https://www.creditkarma.com/free-credit-report

Credit Karma has simulated scores and credit modeling. It is freemium. They make money on referrals and adds.


I'm not sure what scoring model Credit Karma is using, lots of people call those scores fako scores because it's different than the scoring models used by lenders.

Anyway, to check your credit, you should get a free report from www.annualcreditreport.com, it's the only legit site that gives you a free credit report but not score once a year from all 3 credit bureaus.

We used to call people who didn't have a credit score ghosts. They don't exist.



True-but based on personal experience-they are very, very close. They can't use the term "FICO" because that system is proprietary.


They can be off between 50-100 points depending on the scoring model. I think lots of those sites use Vantage score which has a range up to 950 whereas the ones the lenders use go from 839-850. I run them all the time and each of the 3 bureaus use some slight variation of the scoring model with a different score range. It matters because the best rate is over 740 now, used to be 680 back in the day but if you're using one of those fako scores and you think you have a 750 when the real score might be 700, that would mean you're not getting the best rate so it may have given you a false sense of security.



Credit Karma is feel good nonsense. In my experience their scores are worthless.

 

[Mr Nice]

Originally Posted By: DdDd
When I leased a car my credit shot up almost 100 points after six months payments. Before I was almost not qualifying for the primo financing. Had the savings and income but was still treated like 2nd class because I was debt free otherwise.

System wants you to have enough income AND enough debt. Clever mother foxers.


Yep. That debt keeps the economy going when people buy expensive things on credit.