Credit Reporting Agencies: Friend or Foe?

Experian, Equifax, and Transunion, the three largest credit reporting agencies (also called credit bureaus) are looking out for whose best interests? Yours or theirs?

The correct answer is, they are looking out for their own best interests. Here’s what I’m talking about:

  1. When you request your free annual credit report online, you give up legal rights and agree to let them process dispute letters to their own convenience and advantage.

(This is why I recommend requesting your credit report only through the USPS mail system.)

2. When you provide your personal banking information in order to participate in “Boost My Credit Score,” you give all kinds of personal data to the credit bureau, but the “boosted score” is NOT USED by mortgage lenders.

(This is why I recommend saying no thanks to that privacy-invasive program.)

3. When your credit report is available for all creditors to see, they sell your name, address, and phone number to credit card companies who then harass you with junk mail that puts you in greater danger of identity theft.

(This is why I recommend opting out of receiving credit card offers. If you want an account, you can apply on your own. Go to http://www.optoutprescreen.)

4. When Hieu Minh Ngo hacked into Experian’s system in 2015, he stole 200 million identities belonging to American citizens and then sold them on the black market, exposing much of our personal identifying information.

(This is why I recommend placing a freeze on your credit reports if you don’t intend to apply for credit within the next month.)

Now you tell me, are these agencies your friends? Are they looking out for your safety and protection? Or do they exist mainly to make money from consumers, from lenders, from creditors, and from anyone else they can sell reports to?

It’s no wonder that one in five credit reports contain an error, according to a study by the Federal Trade Commission in 2019.

It’s no wonder that in 2020, consumers filed more than 280,000 complaints against the credit bureaus!

Could your report contain an error? Might the collection or charge-off balance reporting be wrong? Might someone else’s late payment be showing up on your report? It’s possible. And it is also possible to get those errors removed from your report.

Only when your credit report is 100 percent accurate, clean, and earning a high credit score do the credit bureaus become your friend. Learn how to make this happen for yourself by picking up a copy of Repair Your Credit Like the Pros here nd Build and Protect Your Credit Like the Pros here.

God bless you on your journey to credit you can be rightfully proud of!

Direct Lender vs. Mortgage Broker: Lies Exposed

I am fired up today after reading an article full of misinformation and lies titled, “Direct Lender vs. Mortgage Broker.” I am here to set the record straight.

I am shocked and dismayed by false information posted by freelance writers, who frankly, have no clue what they’re talking about.

I am saddened by the lies they are spreading on the Internet. For example:

NextAdvisor posted a “pro” and “con” list that is alarmingly untrue. Sure enough, the writer has never worked in the mortgage industry. I have no idea how she drummed up the list of falsehoods mixed with a few facts, so I will tell you the truth.

I am a licensed mortgage broker (NMLS # 1284134). I have worked for a direct lender and for a mortgage broker. I have worked in both retail and wholesale lending since 1998. I have both direct and inside experience in the mortgage industry.

Here are the facts:

  • Only a mortgage broker has a legal fiduciary responsibility to get you the best loan program with the BEST pricing and lowest interest rate they have available. The direct lender has a responsibility first to the lender, not to you, the borrower.
  • A licensed mortgage broker must pass a rigorous test, take classes annually, be fingerprinted and background-checked, and credit checked.
  • A mortgage broker shops 30 to 50 wholesale lenders for you.
  • A mortgage broker shops wholesale, so the vast majority of the time, he or she will get you a lower interest rate than what you could find yourself with a direct lender. Even though not all lenders work with brokers, those lenders usually have higher interest rates and fees anyway, so who needs them?!
  • Lie: “Brokers often charge their fees directly to the homebuyer.” NO. The broker fee is paid by the wholesale lender 99 percent of the time. It is normal for a homebuyer using a mortgage broker to pay no broker fee whatsoever. Only in unusual circumstances would that be different.

Another misconception is stating that Quicken is a direct lender. The truth is that Quicken (now called Rocket) has both a retail (direct lender) channel and a wholesale (broker) channel. If you go directly to Quicken, your interest rate will be approximately .25% to 5% higher than if you go through a mortgage broker.

The problem with the Internet is that anyone can post whatever, true or not.

The good thing about the Internet is that professionals can also post what is true. We can only hope that consumers find the truth and shun the lies.

If you found this information to be important, please share it with friends and associates who want to become home owners. Personally, I am not accepting new applications for home loans at this time, so my intent is for educating the public, not for generating new applications for myself.

Thank you for reading and sharing.

How to Avoid Needless Junk Fees When Buying a Home

Some of the biggest junk fee offenders are escrow companies, also called settlement agents. Some of them add several unnecessary fees to pad their profits.

These fees have good-sounding names in order to fly under the BS radar. Federal law says it is illegal to charge a fee for a service you don’t perform. OK, fine; but come on, do you really need to charge extra for the lettuce, ketchup, and pickle on the hamburger?

There are good escrow settlement agents that do not charge padded fees.

For example, here are some fees I don’t want to see on a Loan Estimate:

  • Doc prep fee
  • E-doc fee or email fee
  • Archive fee or filing fee
  • Messenger fee or courier fee
  • Overnight fee
  • Endorsement fee
  • Tie-in fee

At this time, paying for a licensed notary to travel to you for signing is reasonable and common due to Covid-19. This is typically $200.

The time to look at fees and avoid them is BEFORE SIGNING the Purchase Agreement that stipulates which escrow settlement company will be used.

Once you have signed a contract agreeing to use Junk Fee Escrow Company, you are legally stuck with that company. You have put your signature on a legal document.

The time to choose your escrow settlement company is the same time you are shopping for and choose your mortgage lender (preferably a mortgage broker). That way, you tell your realtor which company to write into your offer. This is the time when you can still choose and negotiate.

If you failed to do your due diligence ahead of time, didn’t pay attention to which escrow settlement company was written on the contract, and only discovered all over-charges midway through your loan process, then it would take the seller agreeing to switching companies and making the change on the contract in order for you to change. That is highly unlikely to happen. The realtors will never allow it, because they will perceive it as creating a bump in the road to closing. In this case, chalk it up to a Life Lesson and write a review on Yelp and Google to warn others.

Prevention is better than cure. And with the federal lending laws enacted in 2010, sometimes prevention is the only cure.

Three Things You Can’t Do While Buying a Home

If you make one of these mistakes during the home buying process, your approval can be turned into a denial.

Even if you are fully approved and have signed documents, you can be denied — even one minute before closing. The lender has the right to stop the loan from funding if they believe the risk of lending to you has increased.

Here are Three Things You Cannot Do Without Jeopardizing Your Financing

  1. You cannot quit your job or go on furlough. This will turn your approval into a denial
  2. You cannot open a new credit account without possible jeopardizing your approval. Opening a new account increases your debt ratio and possibly lowers your credit score. Yes, they keep a watch on your credit throughout the process.
  3. You cannot buy a car, truck, SUV, or other high ticket item without jeopardizing your approval. Wait until after closing to consider purchasing a vehicle.

Protect your financing during the process. Speak with your loan officer BEFORE making any financial moves or changes in employment.

Available on Amazon

Two Pitfalls of Auto-Pay

Setting up automatic payments on your credit cards and other accounts is a good idea. In fact, I just set my own Paypal Mastercard to auto-pay so that I don’t have to worry about slow mail delivery.

However, there are two possible “gotchas” that can catch a person off-guard and create a late payment on the credit report.

I don’t want this to happen to you!

Two Tricky Traps of Automatic Payments

You should not be charged a fee for setting up automatic payments.

  1. If your account is sold to a new creditor and you don’t reset the auto-pay with your bank, your payment can become “late.”
    That’s what happened to someone who had a student loan. They never told him they transferred to a new student loan servicer, so his auto-payment never went out, and the new company reported him as late.
  2. If your pay date happens to fall on a holiday, your payment might go out “late.”
    Check the system with your credit to make sure you have at least 3 days’ buffer or that the funds will transfer even if your bank is closed for the holiday.

Even if you have auto-pay set up, review your accounts to ensure all is as it should be. Then you will have peace of mind and know you are establishing a great credit profile that you can be proud of.

Easter is Resurrection Sunday

Praise be to the God and Father of our Lord Jesus Christ! In his great mercy he has given us new birth into a living hope through the resurrection of Jesus Christ from the dead,

and into an inheritance that can never perish, spoil or fade. This inheritance is kept in heaven for you,

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who through faith are shielded by God’s power until the coming of the salvation that is ready to be revealed in the last time.

In all this you greatly rejoice, though now for a little while you may have had to suffer grief in all kinds of trials.

These have come so that the proven genuineness of your faith—of greater worth than gold, which perishes even though refined by fire—may result in praise, glory and honor when Jesus Christ is revealed

though you have not seen him, you love him; and even though you do not see him now, you believe in him and are filled with an inexpressible and glorious joy,

 for you are receiving the end result of your faith, the salvation of your souls.

I Peter 1:3-9 New International Version

How I Got a Late Fee Removed in 3 Minutes

I couldn’t believe my eyes when I opened my Paypal Mastercard bill last week. What was that late fee doing there? And the interest charge on top of it? I never pay late!

Further scrutiny showed the balance was $25, the late fee was $29 and the interest was $3 and some pennies.

According to the bill, I now owed $57 on a $25 purchase!

My checkbook showed I’d written the check on the 9th, and I knew I’d mailed same day. But the Mastercard statement showed it posted on the 13th, which was one day late.

They’re never going to remove the late charge, I fumed. At least it won’t go on my credit report. I pulled out my checkbook ready to write a payment for $57. But then I paused.

I dialed the phone number instead. Here’s how the conversation went:

Me: I’d like to speak with someone who has the authority to remove a late fee.

Mastercard rep: I have that authority.

Me: Very good! I just received my bill and was shocked to find a late fee of $29 plus $3 interest. You can see my check was written on the 9th, but due to slow mail or slow posting, it shows as one day late. I think it’s not fair that I am charged more than 100% of the balance. As you can see, I’ve had this account for quite a few years and have never paid late. Could I get the $32 penalty charge removed?

Mastercard rep: Yes, I have now removed the late fee and interest.

Me (with a big smile): THANK YOU! I REALLY appreciate it!

A good ending to a bad story, and all taken care of with one short phone call.

Key Points

  • I made the phone call immediately upon receiving the billing statement.
  • I asked upfront for someone who had the authority to remove a late fee.
  • I had a history of paying on time.

If you have a story to share, I would love to hear it.

Available on Amazon here

Credit Freeze vs. Credit Monitoring

Which is better? To freeze your credit report or get credit monitoring?

My recommendation is to place a credit freeze, and here’s why…

A credit freeze locks up your credit file so that no one can take any new credit in your name. Even if you apply for a loan, the creditor will not be able to obtain your credit report until after you lift the freeze.

On the other hand, credit monitoring watches your credit report, usually by checking one of the three credit bureaus (Experian, Equifax, TransUnion) each quarter. A credit monitoring service will alert you to fraudulent activity after it has happened.

Which would you rather do: prevent fraud or have help fixing the fraud after it’s happened?

GOOD TO KNOW

You can still receive your free annual credit report with a credit freeze in place.

In addition, your current creditors (your Visa card, your mortgage lender, et. al.) can view your credit report to check for accounts going late, etc., while your credit freeze is in place. This is in accordance with federal law, and it does not create a hard inquiry that affects your credit score.

Should You Place a Fraud Alert on Your Credit Report?

What about placing a Fraud Alert? I would not do so unless you were truly a victim of fraud, and fraudulent accounts appear on your report. With a fraud alert, a mortgage lender is required to go through additional steps to get your loan approved, which will delay your closing. When you want to remove it later, it is a bit of a hassle. If you were not a victim of fraud in the past, there is no reason to place a fraud alert on your report — especially since a credit freeze is better protection anyway.

Available on Amazon.com

https://www.transunion.com/credit-freeze

https://experian.com/freeze

https://www.equifax.com/personal/credit-report-services/

While you are repairing your credit, I recommend having a credit freeze in place.

Can Your $1,400 Relief Money Get Seized By Creditors?

Time Urgent Message!

The government relief deposits have started going out now. The $1,400 funds are being released in batches.

If you owe money to a collection company for an unpaid bill, the collector is allowed to seek a garnishment of your $1,400 Covid Relief check. The previous stimulus checks could not be garnished; but for this round, it is legal. There is no protection this time to prevent a seizure or garnishment.

If you owe your bank overdraft fees, the bank is allowed to automatically collect from your government deposited funds.

If your money is coming by check, then you can protect it from being seized by cashing the check instead of depositing it.

If your money is coming by direct deposit, you should keep a vigilant watch. If you need money to pay rent, a mortgage, your electric or cell phone bill, or to buy food, then you want to withdraw that money and take care of those necessities before a collector grabs it.

If you don’t have collectors or back-owed debt, then you can breathe a sigh of relief. My advice is to use the money for its intended purpose: TAKE CARE OF YOUR BILLS. Pay off credit cards. Pay off your car loan early. Pay whatever account you are being charged high interest on. Fill up your gas tank and get the oil change.

If you have credit card balances, do not be foolish and spend the money on new shoes, clothes, fun toys, and other non-necessities. Don’t blow your money!

Don’t use the money to go into debt! In other words, don’t use it as a down payment on a car or other expensive item that you will end up paying interest on. Don’t give it to a scammer, because they are out thick as thieves right now.

If you have outstanding collections, you can use the money to negotiate a settlement. Make sure you get the offer in writing, make sure the creditor agrees to remove the negative item from your credit file upon the receipt of funds. To learn how to negotiate, including scripts on what to say, read Chapters 15 and 16 in Repair Your Credit Like the Pros: How credit attorneys and certified consultants legally delete bad credit and restore your good name. It is available here.

Please pass this urgent message onto to others who might need this information. Thank you and have a lovely day!

Buying a House With Imperfect Credit

If you’re tired of paying rent when you could just as well be paying for your own home, but you are concerned about imperfect credit, this message is for you.

Be encouraged, perfect credit is not required to become a home owner!

The Federal Housing Administration has a loan program for good people who fell on hard times in the past. Or made mistakes in the past. Or who have a debt ratio a little too high to qualify for a conventional bank loan. Here are the facts.

Seven Quick Facts About the FHA Loan

  1. Down payment required is 3.5% of the purchase price. On a $350,000 home, that would be $12,250. The down payment can be a gift from family, from your own funds, or from a down payment assistance program offered by your state. (Each state has their down DPA protrams.)

2. FHA does not require a certain credit score. Many lenders go down to a 600 score. Some down to 580. Some lower. The best way to find those lenders is to go to a local mortgage broker who can shop 30 lenders for you.

3. You can get a FHA loan 24 months after a Chapter 7 has been discharged. For a Chapter 13, there is no waiting period after the discharge as long as payments were made to the court on time.

4. You can ignore medical collections.

5. Non-medical collections up to a total of $2,000 can be ignored.

6. Open collections or judgments where you have a monthly payment plan, and have been paying on time for six months, is okay for getting an FHA loan.

7. The Seller can pay some or all of your closing costs.

If this all sounds encouraging, but you aren’t quite there yet, don’t be discouraged. Get your copy of the self-help credit repair book that explains how you can Repair Your Credit Like the Pros.

Knowledge is power and power brings success. Get started now, and who knows, you might be opening the door to YOUR OWN HOME (!) before the summer is over.

(Many thanks to a book reader for sending this photo.)

Remember these two rules: (1) Get preapproved for financing before house shopping. (2) Get a professional real estate agent to represent you, as the buyer.