Forget to Make a Payment?

I heard from several people this week saying they forgot to make a payment on their credit card or auto loan, and asking what they should do.

I will tell you straight up: missing a payment can devastate your credit score. If your score was top tier, it can topple by 70 points in a day! Why?

Because the credit bureaus think something terrible has just happened in your life, and now you are high risk.

If your score was mediocre, then missing a credit card payment can drop your score by 30 to 40 points. That’s still enough to knock you out of qualifying for a good auto or home loan.

There is no grace for “I forgot.” If there was an extenuating circumstance, such as one of the following, you might get some grace from the creditor:

  • Loss of income due to the impact of Covid-19.
  • Death in the family.
  • Natural disaster, such as a hurricane, tornado, or flood.

If you had one of the three circumstances above, contact the manager and have a discussion. Two of my book readers got their late payments removed and late fees reversed due to having a natural disaster and resulting loss of income.

On the other hand, if your missed payment was due to sloppy financial management, you are not going to get any sympathy. Here’s what I recommend:

How to Avoid Late Payments

  1. Set an alarm on your cell phone the day before and the day of a payment being due.
  2. Write on a calendar payment reminders.
  3. Post a notice on your bathroom mirror and on your refrigerator. Some people needs lots of visuals.

Additionally, you can set up automatic payments; but don’t set the date of payment on the last day, because that can backfire if it falls on a holiday or weekend. Set the pay date early. And, pay attention in case your creditor sells the account, which will require you to adjust your auto-payment in order to prevent it from going out (and causing a late payment).

Cleaning Up Bad Credit is Like Cleaning the Floor

You cannot mop up the mud while you are wearing muddy boots and expect to have a clean floor. Likewise, how can you repair your credit when you are missing payments currently? You cannot.

If You Made a Mistake Recently

Learn from your mistake and take action so it doesn’t happen again. Use the three ideas above. Ask for grace if you might qualify. People make mistakes and life goes on. Onward and upward!

Thank you for reading this article. I wish everyone the best with your finances and credit.

Are You Discriminating Against Yourself?

That headline sounds odd, but the fact is that some people assume they don’t qualify for better credit or for a home loan — when, in fact, they do!

Check out these legal facts:

FACT: A credit card company cannot give a young person a lower credit limit based on age.

WHY THIS MATTERS: The lower your balance-to-limit ratio, the higher credit score you get. Creditors cannot penalize young people by giving $500 limits to people under age 22 and $1,500 limits to people older. Age-based credit is prohibited by the Equal Credit Opportunity Act (ECOA).

FACT: A lender must allow you to include welfare, disability income, any type of public assistance income, social security, income child support, spousal maintenance/alimony in your loan application — as long as that income will continue for at least three more years.

WHY THIS MATTERS: If your income qualifies to make the mortgage payment, no one can deny you a loan based on the source of your income.*

FACT: A lender cannot deny your loan because you won’t live long enough to pay it off. Age discrimination is illegal. Some people assume they are too old to get approved for a 30-year loan, but that is not so.

WHY THIS MATTERS: If you are 100 years old and you want a 30-year fixed rate for the lowest possible payment, no one can deny you that loan based on your age. If you don’t live to 130, then you can pass on the ownership through your will. Your heirs can refinance into their name(s), or sell the property. This creates generational wealth.

If you have a question about discrimination and qualifying for a mortgage, let me know. U.S. laws are clear and very strict that any unequal treatment based on age, sex, race or color, national origin, religion, marital status, or the source of income is illegal.

*It goes without saying that the income must be from a legal source, not from illegal money laundering, etc.

You can read more about Your Equal Credit Opportunity Rights here.

A Message for Black Americans

Donnell Williams, owner of Destiny Realty and President of NAREB

“Black homeownership is where we build financial stability. We have security. We create generational wealth.”
~ Donnell Williams, President, National Association of Real Estate Brokers

I read this quote in a magazine for mortgage professionals, The Scotsman Guide. As a homeowner and a mortgage broker, I agree completely. It’s what I read next that shook me up.

Although Black home ownership has increased to a 12-year high earlier this year, the percentage of Black Americans who own homes is only 47%. That is 29 points below white home ownership, which reached 76% for the same time period (second quarter 2020).

Why is this? And more importantly, what can be done so that more Black citizens achieve the stability and security of owning their own homes?

As a mortgage professional, one thing I can do is offer hope in the form of some little-known facts. Facts that can help more people realize that they can become home owners sooner than they knew!

SEVEN FACTS YOU MAY NOT KNOW

  1. There are home buying programs with only 3% down payment.
  2. There are down payment assistance programs to help provide that 3% down. (These vary by state. Your mortgage broker is the best source for getting one.)
  3. If you have a boarder or room renter, you can count that income when they have been paying you for 10 months in a manner that can be verified (check or consistent deposit into your bank account — not cash under the table).
  4. You don’t need perfect credit to qualify for a home loan.
  5. Medical collections can be ignored with a FHA loan.
  6. Up to $2,000 in credit card collections can be ignored with a FHA loan.
  7. You may qualify for a FHA loan 24 months after a Chapter 7 bankruptcy is discharged.

TWO CAVEATS

  1. Down payment money must be verified, meaning you must show the source by providing two months’ bank statements. Cash is not allowed. More about that here.
  2. You should be on track with your finances, meaning no more than one 30-day late payment (preferably 0 lates) in the past 12 months.

I hope more Americans will make home ownership a reality. The sacrifice to save money is worth it. The sacrifice not to buy a snazzy car is worth it. Remember: house first, car second. No exceptions.

BEST WAY TO GET A HOME LOAN

I have a tee short that says, “Brokers are Better” for a reason. A mortgage broker has more flexibility and more options for home buyers — in addition to better rates most of the time. Brokers close loans faster and with less paperwork, in my experience. Therefore, it is my recommendation that you reach out to a mortgage broker licensed in your state.

By the way, I’ve never seen or heard of a mortgage broker who violated the Equal Credit Opportunity Act. It does not matter what is your color, race, national origin, sex, marital status, age (as long as you are of legal age), or if your income comes from public assistance.

Thank you for reading this post and for passing it on to other good people who it may help.

Beware of Election Scams

Liars, scammers, and criminals double their attempts to steal your personal information and your money during an election.

Don’t click on links without first checking to see if they are real.

Don’t donate money or reveal personal information either by phone or on the Internet if YOU did not initiate the contact. Criminals are experts at impersonating officials and parties.

Here is a short video explaining election scams, provided by Fusion Tech:

video

Professional Credit Expert’s Insight

If you know anything about credit repair and the Fair Credit Reporting Act, you know the bureaus are allowed 30 days to verify whatever minuscule details we are requesting. This protects you from dying of old age before getting a response, which no doubt would happen if they could get away with it. Let’s take a quick minute to examine the advantages we have with this 30-day response policy.

What’s actually happening behind the scenes is the bureaus are playing the middle man waiting for a response back from the creditors about a particular investigation.

It’s ultimately the creditors that have 30 days or less to respond to the bureaus, who in turn determine if that response is appropriate. We continuously see indications through our clients’ results that either no work or attempted work was done on our investigations. Simply, the account is now deleted, without any argument.

Was it because they discovered they dinged the wrong person, or they couldn’t find the details we were asking for, or perhaps they just didn’t get around to it in the timeframe they were allotted? They don’t divulge that information; but as office paperwork tends to stack higher than the Himalayas, letting documents age 30 days would appear to be the salient issue.

Also, consider government-related accounts such as judgments, bankruptcies, and tax liens: in your opinion, does the government operate at lightning speed, or are they slow as snails (like the DMV)?

It’s easy to see that when given only 30 days to complete a series of exquisite investigations into their misinformation–well, you can only guess what the result might be.

Many thanks to Jay O’Connor at National Credit Care for this insightful post.

National Credit Care
1499 W 121st Ave #300, Westminster, CO 80234
866-595-6313


Available on Amazon

Getting a Home Loan: The Three Basics

When I purchased my little white house with smelly carpet and beat-up walls, I felt a sense of power and accomplishment nothing could ever take away. This place was mine! I tore out the carpet, painted, and turned a run-down place into a charming bungalow. I’ve been a fan of home ownership ever since.

If you would like to stop renting and own your own home, here are the three basics you need to qualify for a mortgage.

BASIC 1: Income

You need to be able to afford the new house payment as well as all of your current monthly obligations.

For monthly obligations, the lender goes by what shows on your credit report: auto loans, student loans, any other loans, and credit card minimum payment due. Do not include cell phone, transportation costs, or food.

Use your gross income, before any deductions. Use the minimum payment required, even if you pay more. The debt-to-income ratio (DTI) must be under 50% for conventional and FHA loans. (VA can sometimes go higher.)

BASIC 2: Down Payment

You will need 3% of the purchase price for the down payment on a conventional loan. 3.5% for FHA. 0% for VA.

If the purchase price is $300,000, then $9,000 down payment is the minimum for a conventional loan.

There are down payment assistance programs, which vary by state. Your mortgage broker can advise you on qualification and availability.

In addition to the down payment, there are closing costs. Closing costs can be paid by the buyer, the seller, or a combination.

Down payment and closing costs can also be a gift from family.

BASIC 3: Credit

Credit requirements have become stricter due to the effect of the pandemic on the economy. Most lenders are looking for a credit score of 680+ now. The credit score used is the middle score from the three credit bureaus. The lowest score is thrown out.

There are exceptions, of course. People with large down payments can get a loan with a lower credit score, depending on the lender.

For the best interest rate, you want a score of 740+.

If your credit needs some help, check out these guides here and here.

Home ownership is both financially and personally rewarding. Three years

Photo by Scott Webb

after purchasing the little white fixer, I sold it for a profit and purchased a nicer home in a better neighborhood. Making the effort to save money and establish clean credit is very much worth the work and patience.

Why Goodwill Letters Rarely Work

If you got behind on bills and have late payments showing up on your credit report, you may have read that it’s a good idea to send a goodwill letter. A goodwill letter is a letter in which you say you are sorry for the late payment and ask them to please remove them from your credit report. Big mistake!

Rarely, will a creditor remove a late payment simply because you are a nice person and they are a nice company — and with everyone being so nice and all — let’s just erase that bad mark on your report.

Who do you think they are, your mother?

Put yourself in the place of a large company, say someone like Capital One. You go to work and open 100 envelopes. 98 of those are letters asking you to remove the late payment for no valid reason other than “goodwill.” What are you going to do?

Are you going to sit right down, compose 98 letters to the three credit bureaus and send them off just so you can do 98 good deeds today? And the same thing tomorrow and all five days of the week? Are you going to remove thousands of late payments simply because the customers said “sorry”? Are you going to send messages to thousands of people, in essence, telling them that failing to pay on time is no big deal?

Capital One is one of the creditors that does not respond well to goodwill letters, and maybe now you can see why.

This is why in Repair Your Credit Like the Pros, I say, “throw those goodwill letters into the trash bin.” Most of the time they don’t work. But wait, there are exceptions.

One of my book readers had recent late payments due to a natural disaster that caused her music business to flood; which, in turn, prevented her from conducting music lessons. She drove into her bank and spoke with the branch manager. She explained the reason why she temporarily lost her income and ability to pay, and that now with the water gone, she was again teaching music and receiving income.

The manager not only removed the late payments, he also reversed the late fees!

Available on Amazon

The two elements of success to this story is that the cause was a natural disaster and that the woman had taken the initiative to speak with the manager who had authority.

While the general goodwill letters for removing late payments are usually a waste of time, if you have a valid and verifiable reason why you, as a perfect paying customer, were temporarily late and are now back on track, you should make a sincere effort to ask for grace (in person preferably, but on the telephone if distance prevents). You might be surprised, as another reader in Florida who had been victim of a hurricane was, when the late payments are removed.

Check Your Name on Your Credit Report

Are you overlooking an important step in building an accurate credit profile? Many people are.

Maybe no one has ever told you that your name matters, or that the name you use when applying for credit is important. I’ll explain.

Let’s say your name is Carolyn Warren. But one time when you got a credit card at Macy’s, the clerk typed in Carolynn with two n’s. And another time while getting a car loan, the finance guy shortened your name to Carol.

Now you’ve got credit for a Carolyn Warren, a Carolynn Warren, and a Carol Warren on your credit report.

These three name variations can cause problems. (And we’re not even counting the variations of the middle name or misspellings of the last name.) You don’t want the Carol Warren who was late on her Macy’s card reporting you as being late. Nor do you want the Carolynn Warren’s auto repo showing up on your credit report.

One time, I saw a credit report where the woman had 16 variations of her name. Not good!

You want only one legal name on your credit report: the one you are using for important purchases, such as your mortgage and your automobile. If your legal name is Carolyn N Warren, that is the only name you want to see on your credit report.

This was confirmed at CreditCon 2020 earlier this month. Three different professional speakers (a representative from one of the credit bureaus, an expert witness in court cases involving credit, and a successful credit repair business owner) all spoke about the importance of having correct and accurate identifiers on your profile. Your name is one of the identifiers.

Three Reasons Why You Should Remove Incorrect Names

1) Name variations open the door to having your credit mixed with another individual’s credit. “Mixed files” is a major problem that can ruin your credit score and put your debt ratio out of acceptance when buying a home.

2) If you have many variations of your name, it opens the door to the question “why?” There is no positive answer to that question.

Were you trying to open credit cards in name variations to circumvent credit scrutiny? Were you trying to hide bad credit? Were you trying to create multiple identities? Are you simply sloppy and careless about your name? And if so, are you also sloppy and careless about paying your bills on time?

3) Having too many names on your credit profile can negatively impact your score. You’ve never seen that on a pie chart of credit scores, but let me tell you a secret from inside the credit business. All three credit experts mentioned above confirmed that personal identifiers do impact your credit score.

The next time you order your free annual credit report, take time to look at your name. If there are misspellings, nicknames, or other inaccuracies, you want to write to the credit bureaus and get that fixed.

And while you’re at it, check your name on your cell phone bill, your electric bill, TV/Internet bill, and your bank accounts for consistency and accuracy. Fix what needs to be fixed. Create a true and accurate profile for yourself.

Available on Amazon

“A good name is rather to be chosen than great riches.” ~ Proverbs 22:1

Message from a Book Reader and Author

Many thanks to David Simone for posting this on Facebook:

Two of the absolute best easy to work DIY books in America for building or repairing your credit. I’ve had so many wonderful credit repair mentors along along the way who helped me achieve results… namely Jesse RodriguezJesse, Jorge BuenoJorge, and Carolyn Warren. I’m within a month or two now of qualifying for a quarter million dollar mortgage to buy a house for Rosie Tesorero Cocal and me.

This stuff works.Books.jpg

There are no more credit secrets. I have them all now.

Just note that if you aren’t paying attention to the insane effect of interest on your life, it may explain why your bank accounts look the way they do.

Also, its just not a good idea to ignore the 3 credit bureaus anymore. They control your life in a far bigger way than you now realize.

Being a good steward of money and converting to an investor mentality instead of consumer mentality can and will change your life.

What I’ve personally accomplished in two months is so exciting that i couldn’t sleep last night, i mean not one wink. I’ve been up all night watching my own dreams come true.
~ David Simone, author of The Motivational Book

Record Low Interest Rates! 💰🏡

Mortgage interest rates are the lowest in 50 years. But not everyone can get that 2.9% advertised rate.

Take this yes/no quiz to see if you qualify for the best interest rate on your home loan.

1) Is your true mortgage credit score over 740? (Credit Karma is not your true mortgage score.)

2) Is the property your primary residence? (A loan for a rental property is a higher risk to the lender, so the rate is higher.)

3) Do you have 30 percent or more equity? (Loan-to-value ratio is a major factor in the interest rate. However, there are loan programs that include monthly mortgage insurance that come with the lowest rate. Your loan officer can advise you further.)

4) Is your home a detached single family residence? (A condo, townhouse, co-op, or multi-unit property may have a higher interest rate, depending on equity. A condo with significant equity can still get the lowest rate.

5) Do you need a jumbo loan? (Jumbo loans are classified as high risk, especially now during the economic downturn due to the coronavirus. A jumbo loan carries a higher interest rate to offset the risk to the lender.)

Even if your loan doesn’t qualify for the lowest rate, it might still be worth refinancing.

As a general rule, you need to lower your rate by at least .5% to consider refinancing. In some cases, such as a small loan, your rate reduction needs to be more in order to make sense.

Loans are very much individualized to a person’s specific situation. The purpose of this post is to make people aware that the lowest advertised rate might not apply.

Additionally, interest rate is not the only factor. Lender fees and a possible buy-down fee are items you want to ask your mortgage broker about.