HUGE News about Credit!

On October 24th, the mortgage industry announced that they are changing credit report and credit scoring models. This is HUGE!

For the past 20 years, the mortgage industry has stuck with the old, tired FICO 2, 4, and 5 models. No updates or upgrades to any of the new models over the years. They didn’t want to spend the money to convert, and they said the old models were working just fine.

Except that as new data came in, they weren’t working so well for everybody. Credit scoring was called unfair and unequal for everyone.

In 2018, Congress told them to get with it and choose a credit model update already! This launched their big multi-year investigation and testing project.

Now, FINALLY, they have agreed that there are two new credit models that are more accurate and more fair:
FICO 10T and Vantage 4.0

FICO 10T is different than FICO 9 or FICO 10. The “T” stands for Trended Data. It uses Artificial Intelligence to look at how you are managing credit, not simply at what you’ve done. It is like a video of your credit activity rather than a snapshot.

For example, Trended Data sees more than if you paid on time. It also sees if you paid the minimum balance due or if you paid the balance in full. You get more points for paying the balance in full each month — something I have been advocating for a long time.

Another example is that if you consolidate a credit card with a personal loan in order to avoid the higher interest rate on the credit card, the Trended Data will see what you’re doing and dock your score a little. Why? Because it believes you over-charged on your credit card as evidenced by your need to consolidate the two.


With FICO 10T and Vantage 4.0, your rent payments, utilities, and telecom payments can be included on your credit report and you will get credit score points for paying on time. Yay! This helps groups of people, including young adults and minorities, who have not had the advantage of buying a home and having a mortgage payment on their report. It helps people with “thin credit files” to beef up the data for earning a good score.

NEW! Two Scores Required, Not Three

The mortgage industry has used a tri-merge credit report with Equifax, Experian, and TransUnion all on one report, showing three credit scores. They then use the middle score of the three, throwing out the lowest score. If a person has only two scores showing, the bottom score is used. But that has changed.

Now, they are required to use only two scores: one from FICO 10T and one from Vantage 4.0. These new versions have proven to be more accurate, according to the vast amount testing done over the past few years.

When Does This Start?

Starting now, mortgage lenders and banks can use FICO 10T and Vantage 4.0 for their mortgage applications. However, not all banks and lenders are going to transition immediately.

You need to ask your loan officer these questions if the new scoring is important to your credit scenario:
1) Are you using the new FICO 10T?
2) Are you using Vantage 4.0?
3) Are you pulling a tri-merge or bi-merge credit report?

If your loan officer or real estate agent has not yet seen this news please pass on this blog post t them. Please share on social media so the word gets out. Here is the official announcement. Thank you!

Available on Amazon
Available on Amazon

“Borrow From Yourself” LOL

I saw an ad by a bank that headlined “Borrow From Yourself.” It was an ad for a home equity line of credit.

How deceptive!

If you truly borrow from yourself, you would take money from your own source — your own savings account or investment account.

You would pay back yourself.

You would choose to charge yourself interest or not. If so, the interest would go to yourself. LOL

When you take out a home equity line of credit (HELOC), you are securing the loan on your house. You are using some of your precious home equity to take a loan FROM THE BANK.

Who do you make the payments to? The bank.

Who collects the interest charged? The bank.

Dear Bank: Stop running deceptive ads that make homeowners think your loan is borrowing from themselves.

By the way, HELOCs are up 12% this year. Why? Because of advertising. It is not because more homeowners need more HELOCs. People are falling prey to ads like this.

Banks and credit unions are desperate for loans now that interest rates are up, and refinances are no longer happening. They can only get a limited amount of purchase loans, which are also becoming more scarce.

So in their desperation for business, they are advertising HELOCs like crazy. Don’t fall for the ads!

You don’t need to gobble up your precious home equity to get money for something you really cannot afford right now.

WARNING! What’s more, if you have an open HELOC — even if the balance is $0 — you cannot qualify for the lowest interest rate when you want to refinance. You must actually close the HELOC entirely first, if you want the lowest interest rate.

WARNING #2! Watch for prepayment penalties on the HELOC. In California, prepayment penalties are the norm, and some of them are horrible! Such as the California credit union that charged $2,000 prepay penalty to close a HELOC with a $0 balance.

In WA state, it is illegal to put a prepayment penalty on a HELOC. Find out the law for your state before signing for a HELOC.

Always ask, “Show me where it says there is no prepayment penalty.” Don’t take their word for it, because there have been plenty of liars who have deceived borrowers who didn’t read all the verbiage before signing.

Thanks for reading and being diligent for what you believe and what you sign!

Are Your Personal Docs Being Outsourced?

I almost titled this, “The Dirty Little Secret,” because it’s something these mortgage lenders don’t want you to know.

Just today, I read about another big national mortgage company who has decided to outsource loan processing and low level underwriting overseas. This one is going to India.

India, the Philippines, Viet Nam, and other faraway places — is this where you want your bank statements, asset documents, credit report, and personal identification going?

These lenders have decided paying wages in the United States is cutting too deep into their profits. So they are laying off staff by the droves, and outsourcing the jobs halfway around the globe.

As a loan officer and mortgage broker, I always liked my ability to speak with my underwriter — either in person or on the phone — about any sticky conditions or needless paperwork requirements. How can anyone do that when they’re an ocean away in an opposite time zone with no available phone number?

If you don’t like the idea of your loan file being sent electronically out of the country, ask these questions upfront:

  1. What city is your processing staff working in?
  2. What city are your underwriters working in?
  3. Does your company outsource some of the loan tasks outside the United States?

If outsourcing doesn’t concern you, that is fine. I’m just saying you have the right to know.

Have you picked up your copy of Credit Repair MINDSET? It’s available on Kindle and paperback from Amazon.

Get inspired with this guide.

Three Things to Know About Debt and Homebuying

Getting blindsided on your loan application is not something anyone wants. Not the realtor, not the loan officer, and especially not you, the homebuyer.

Particularly NOW with the volatility in interest rates and changing market, you need to be aware of three things:

  1. When the interest rate goes up, your loan approval can change.
    Keep in touch with your loan officer while you shop for a home, because your preapproval letter can turn void if rates jump up and you are buying at the top of your price range.
  2. If your down payment is minimum, underwriting will be tougher on your debt-to-income ratio.
    Gone are the days when you could push your debt-to-income ratio to 49.9% on a 3% down payment loan and still get approved. With the volatility in interest rate now, most underwriters are saying keep the DTI below 43%.

    43% DTI means all debts on your credit report plus the proposed new mortgage payment (including taxes, insurance, mortgage insurance) = 43% of your gross income.
    Your gross income is what the underwriter says it is, not what your personal spreadsheet says it is.
  3. Any purchase made during the loan process can void your approval.
    Even if you have signed all mortgage disclosure documents, your loan can still be denied if you make a new purchase, such as: furniture, appliances, an automobile, or even open a new credit card.
    Underwriters monitor your credit activity every day until your loan closes and funds.

Yes, they can do that! Federal lending law gives them the right to turn your approval into a denial, even after you have signed the contract, if your financial or credit situation changes.
Once you are preapproved, maintain the status quo until closing. And, please, keep in communication with your loan officer, who is your advocate, looking out for your best interests.

Stop! Before You Open New Credit

Stop and consider before you open a new line of credit, a new credit card::

Opening new credit temporarily lowers your credit score, because it is unknown how you will manage the new tradeline.

If you plan to purchase an automobile or home in the next year, do not open any new credit. (This is assuming your credit report is not blank with no credit ever used.)

If you are just starting out building credit or you are restarting after bankruptcy, then you need two or three tradelines, so proceed with the application, but keep your balance low and pay the bill in full each month.

If a company waves an enticement: “open a credit card to save 10 percent now,” ignore it. The savings isn’t worth the hit to your credit report. If you have a Visa or MasterCard, you don’t need all those individual store cards. But, if you have a favorite store you shop at a lot, then there’s nothing wrong with carrying their card. Just limit it to 3-5 cards max. Personally, I have two store cards. I don’t use them every month.

Your insurance premium is also partially based on your credit score — a fact that is good to know.

If you’re looking for the path to excellent, top tier credit in the fastest way possible, pick up a copy of Build and Protect Your Credit Like the Pros. It will take you from basic to expert!

Available in Kindle and Paperback

Buying a First Home at Age 47

Do you know what it feels like to finally become a home owner for the first time, at age 47?

The words triumphant, victorious, and successful come to mind.

Wherever you are on your financial journey, don’t give up. Below are 10 Facts about qualifying for a home loan that might surprise and encourage you.

Earlier this week, one of my book readers wrote to say that he is soon closing on his first home.:

“I am grateful for your books and presence. I am buying my first house at 47 after building my credit and securing a mortgage following your advice. Thank you for your excellence and kindness.

Ten home buying facts:

1) There are zero down loan programs available for U.S. Military Veterans, people buying in a non-metropolitan area (USDA loan), people of minority groups who live in specified areas (see last week’s post).

2) The Federal Housing Admin offers 3.5% down payment for credit scores down to 600. Bankruptcy Chapter 7 okay if discharged for 24 months.

3) Medical collections are ignored.

4) Tax debt is okay as long as you have a payment plan and have made at least three consecutive payment

5) Mortgage lenders go by the middle credit score of three, with the lowest score being thrown out.

6) Two years’ employment required and does not have to be at the same job. College counts toward that timeline (you would then need one year of employment for income qualification).

7) Two years’ self-employment required. (You cannot combine one year W2 and one year self-employment.)

8) For part-time work, two years required to count it.

9) Disability income, social security income, child support income, spousal maintenance income all count as long as they will continue for another three years or more.

10) A mortgage broker can shop the wholesale lenders for you with only one credit pull.

Thank you for reading. If you need some inspiration, see here.

Zero Down, $0 Cost, No Credit Score Required!

Several major lenders have rolled out new zero down loan programs for people of minority race. If you qualify, this is an excellent offer to take advantage of.

Here are three new mortgage programs:

BANK OF AMERICA: Community Affordable Home Solution

  • Available currently in areas with a population more than 50% Black. They are rolling this out in Charlotte, Dallas, Detroit, Los Angeles, and Miami. No money down, no bank fees, no mortgage insurance (only fire insurance required).
  • No minimum credit score required. You do need to show income and ability to pay. Contact your local Bank of America for more details.

CHASE BANK: Enhanced Homebuyer Grant Program

  • A $5,000 grant can be used for the down payment and/or closing costs. If you complete their homebuyer education course, you get an additional $500. This is a true grant that does not need to be repaid. Depending on the purchase price, it may or may not cover all the down payment and closing costs.
  • This program is rolled out in 6,700 communities across America that have a majority Black population.
  • Contact your local Chase Bank for more details.

TD BANK: TD Home Access Mortgage

  • Offers a $5,000 credit toward down payment and closing costs to Black and Latino/Latina homebuyers who are in one of their specific communities. Contact your local TD Bank for more details.


These lenders are taking specific action to increase homeownership — and generational wealth — among communities that have struggled to meet the traditional asset requirements. When more Americans enjoy homeownership, our nation becomes stronger.

Statistics in 2020 showed the percentage of Black homeownership was 43%.
Latinx homeownership, 51%.
Asian American homeownership, 62%.
White/Caucasian homeownership, 72%.

If you or someone you know could benefit, please pass on this information to them.

Three Questions About Charge-Offs

Are you required to pay a charged-off account? Let’s look at three questions people ask.

#1 If my account was charged off, does that mean the company got a tax write-off; and therefore, I no longer have to pay? No.

That would be like saying, “If I steal a leather jacket from Macy’s, they got a tax write-off, so I can keep the coat for free.” Wouldn’t that be dandy if it were true! We could all become thieves and help companies lower their taxes at the same time.

If your account is a charge-off, you still owe for the product or service you purchased. It is still going to hurt your credit score until you get it taken care of. (How to do that is in Chapter 15.)

#2 If my unpaid bill is sold to a third party collection agency, and I never had an agreement with that agency, am I off the hook for the bill? No.

Selling unpaid bills to a collection agency is a common practice, and it is legal. You still owe for the product or service you purchased. The collection agency must follow the Fair Debt Collection Practices Act in order to legally collect from you. You have every right to hold them to this before sending any money (as explained in Chapter 2.)

#3 If I negotiate for a settlement on my collection or charge-off and pay only a fraction of what I owe, will that harm my credit score? No.

Ha, that is a lie some collectors try to use in order to get more money from you. Negotiating a settlement does not harm your credit score more than paying the full balance. However, some collectors will agree to remove the charge-off from your credit report only if you pay the balance in full. In that case, you need to look at the age of the account, the balance owed versus the settlement offer, and your overall credit profile in order to decide what’s best for you.

I’ve had numerous old collection accounts removed from my credit report and am pleased that my credit score has increased from about 500 to 700 or so today.

Robert R., March 2022

Learn how to handle collections and charge-offs like the pros.
The full step-by-step guide is in Repair Your Credit Like the Pros here.

Credit Karma to Pay $3 Million to Consumers

Did you get tricked by Credit Karma into thinking you were pre-approved for a credit card? Did Credit Karma waste your time and cause you to have another hard inquiry on your credit report?

The Federal Trade Commission doesn’t like trickery, nor does it like a big company taking advantage of consumers, and today, it has taken action!

The FTC alleges that the company used claims that consumers were “pre-approved” and had “90% odds” to entice them to apply for offers that, in many instances, they ultimately did not qualify for.

The agency’s order requires the company to pay $3 million that will be sent to consumers who wasted time applying for these credit cards and to stop making these types of deceptive claims.

“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”

For detailed information see FTC website.

Doing my best to keep you informed about important credit information! Thank you for subscribing.

If You Had a Bankruptcy

Important Facts to Know if you have a bankruptcy in your credit history:

1) It is legal to have the bankruptcy (BK) removed from your credit report prior to 7 years (Chapter 10) or prior to 10 years (Chapter 7). The law limits the maximum time it can stay on your credit report, not the minimum time.

2) If your bankruptcy does not show on your credit report and you are applying for a home loan, you MUST truthfully declare it on the mortgage application. Falsifying an application by checking the box for “no” rather than “yes” on the question, “Did you file bankruptcy in the last ten years?” is a FELONY CRIME.

3) The purpose of removing a bankruptcy early from a credit report is so your credit scores goes up; thus, enabling you to get a lower interest rate on all types of financing. It is never to lie on an application.

4) You can get a good FHA home loan just 24 months after a Chapter 7 BK is discharged. Two years is not too long to wait! It gives you time to re-establish good credit and save money for a 3.5% down payment.

5) You do not get a bankruptcy removed early by sending a “609 Letter” or other dispute letter. You must take steps prior to correct your personal identifiers and to get the individual accounts that say “included in bankruptcy” fixed/updated/removed. The complete step-by-step guide is here.

There is no shame in having declared BK. It is a legal tool that enables people who need a fresh start. No one should have thoughts about suicide or robbing a bank due to being overwhelmed with debt. That is what bankruptcy is for. Each state has its own laws, so speak with a local BK attorney if you need to explore that option.

Available in paperback on Amazon.