Mortgage Lender and the almighty FICO score

[MarcS]

Originally Posted By: Sayjac
Originally Posted By: Panzerman
I think alot is lost by faithful Dave Ramsey followers, who I don't agree with at all.
The point is you are missing all the advantages that responsible credit card users enjoy because you don't want to use a credit card in the system it was designed for. So just complain and be miserable and listen to that idiot Dave Ramsey. The rest of us enjoy the cash back, benefits and enjoy the system in place.
When your in Rome, Don't do as the Greek.

I like your post. Honestly, while I've heard the name Dave Ramsey, no clue who is. But if he eschews the responsible use of CCs as a tool for building a credit score, as you say he might just be an idiot.

I use credit and credit cards, I don't let them use me. Pay them off on time very month. I have no idea how much cash back I've gotten over the years, but it's been substantial. Not to mention the other benefits/advantages of using credit cards.

As they say, takes all kinds I suppose.


Bingo. I make 2-5% on every credit card transaction while the money sitting in my accounts accrue interest for an extra month before i pay off the card in full. I don't understand people who think using cash for their regular monthly expenses is more fiscally responsible when banks will literally pay you twice to use plastic

 

[Coprolite]

Win - How would you get millions to build on the empty lot without credit? If you partnered with someone to get the $$, they would have the lion share of the profit and if you wanted to borrow and pay relatively low interest, you would need credit.

The two most common consumer products are not a home or a car. They might be the two most common high value items, but definitely not the most common. I bet more consumers buy food or toiletries than houses or cars. Saving 2+% on the basics while enabling similar size savings on the big ticket items seems to be common sense. If someone wishes to be a ghost, they need to take extreme steps. A true ghost is truly off the grid and can't be tracked. The semi-ghosts just pay more money for things.

 

[Win]

Originally Posted By: 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.


Seen a lot of guys in bankruptcy court with that understanding of leverage.

 

[MedicRxDoc]

Credit scores are used for a lot more than lending money. Aren't they also used for auto insurance rates?

So not only are you paying more on a loan, but more for your insurance in addition to the money left on the table by not using a reward card.

 

[CincyDavid]

I'm trying to teach my kids how this works...the one gets it, the other one just sees a $1000 limit on her new Visa and thinks she hit the lottery. Ugh.

 

[MarcS]

Originally Posted By: MedicRxDoc
Credit scores are used for a lot more than lending money. Aren't they also used for auto insurance rates?

So not only are you paying more on a loan, but more for your insurance in addition to the money left on the table by not using a reward card.


Indeed, credit score also gets factored into insurance risk. You really end up paying more for everything when your score is low.

Originally Posted By: CincyDavid
I'm trying to teach my kids how this works...the one gets it, the other one just sees a $1000 limit on her new Visa and thinks she hit the lottery. Ugh.


I still can't wrap my head around basic finances not being taught in high school. I guess if kids understood compound interest they wouldn't get duped into taking out six-figure student loans at 7% for a degree in underwater basketweaving

 

[CincyDavid]

My kids went to relatively expensive private high schools and the all-boys school taught some basic household finance, but the all-girls school did not. This particular kiddo is a little impulsive anyway and I suspect she'll have issues with money management regardless of what she learned in school. She needs to learn lessons the hard way, in all aspects of her life.

I think the day may come where cash becomes obsolete and ALL transactions are done electronically, to avoid money laundering and tax evasion. Good bad or indifferent, government and other entities like banks, will be able to have a LOT more insight and control over our personal finances.

 

[MarcS]

Originally Posted By: CincyDavid
My kids went to relatively expensive private high schools and the all-boys school taught some basic household finance, but the all-girls school did not. This particular kiddo is a little impulsive anyway and I suspect she'll have issues with money management regardless of what she learned in school. She needs to learn lessons the hard way, in all aspects of her life.

I think the day may come where cash becomes obsolete and ALL transactions are done electronically, to avoid money laundering and tax evasion. Good bad or indifferent, government and other entities like banks, will be able to have a LOT more insight and control over our personal finances.


There are some really excellent money management tools out there nowadays. Put an app on her phone linked to the credit card so she can see a running tally of how much she has spent in the billing cycle. The real danger with credit cards for people like that is it doesn't feel like spending real money because your wallet doesn't get lighter. Also, set her up with some automated savings so she doesn't have to think about it. Worked with my sister.

 

[Donald]

Get the 3 types of credit, mortgage, installment like a car and credit card.

You need to build up the payment history and account age.

When you get a mortgage you will have a credit score.

I would check credit report and FICO yourself. Can you get someone to authorize you on their credit card? That will help greatly.

Credit Karma can give you reports for free but ignore their score. It's not FICO.

 

[CincyDavid]

Even FICO isn't "really" FICO since they sell so many variations on their own scoring, customized for each lender. Then you have the issue of the 3 big CRAs, and their numbers never seem to quite jibe with each other. When VW Credit pulled the numbers for my latest car lease, there was a 60 point variation between the different CRAs.

MarcS, I use apps on MY phone to keep me aware of where the money is going, adding them to her phone isn't a bad idea at all.

I applied for a Discover recently, and got declined, oddly enough. The score they show on their website (the score that led me to app the card in the first place) was 90 points higher than the score they sent on my denial letter, so they don't even use the same scores internally that they divulge to the public. Craziness.

 

[Wolf359]

Originally Posted By: OneEyeJack
My credit score is zero. I've never financed anything except real estate including the home I live in. I've never missed a payment and usually pay off real estate early. I've always payed cash for everything else including cars, boats, trucks and motor homes. I don't like the idea of being in debt to anyone or any organization. I do business with a bank and I do have a debit card in a separate small account that is kept at a minimum for my protection. My account manager at the bank where I do business said that people like me are called "ghosts".

A FICO score is just an indication that you play by their rules. It's a cheap, quick way to justify loaning money, getting a credit card, renting an apartment or lots of other stuff. You can use the score instead of hiring people smart enough to determine someone's ability and willingness to pay back money from a loan. You can also call it a behavior modification scheme. If you behave, you get the loan or whatever. The same behavior and reward process applies to lenders, too.

Just remember to follow the rules and you too can have a loan or get that apartment and so on. If banks are good and follow the rules they can package their loans and sell loans to another bank and receive a better discount ratio. That way they can free up their capital like a good bank should, get some more loans going and do it all over again. The FICO scores on the loans in the packages help make the deal. To get the best terms they must also follow the rules. Life is much better when everyone behaves (lol).


It's impossible for it to be zero as the starting range I think is in the 300's for some scoring models. More accurately, you don't have a score so you're a ghost. I've seen scores in the 400's. You have to be pretty bad to get a score that low, lots of defaulted loans/credit cards, tons of late payments, pages of it, pretty bad.

 

[Wolf359]

Originally Posted By: pandus13
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
...

...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.


OP/SVTCobra

Please do the annualcreditreport website:
-it gives you your 3 credit scores
-check all lines.... thoroughly
-kind of hard to get from 750-770 in 2015 to 0 in 2017; something is not right
-I lived in MIchigan near Ann Arbor, and to my surprise, my first reporting entity on my credit report was the Power/Electrical company (COMED)
-I would also shop other banks....unless you find something wrong on your credit....

Good luck

P.S. I would still open at least a meijer/kroger or major gas station credit card just for history. Just buy a gum once a month to keep it active

P.S to P.S.: One poster mentioned the Dave Ramsey approved lenders: there's your other option (after you check your credit scores for inaccuracies)


Technically you just get a copy of your credit report, you don't actually get your score. That costs extra. However if there are errors in the report, once you fix them, your score will improve. But he probably is a ghost for now as it sounds like he doesn't have any active credit cards.

It's just the way the system works, you can be hard headed and have it cost you money or you can work the system to your advantage. There's a reason why defendants wear suits in court, doesn't affect whether they're guilty or not, but I guess many believe it may confer a small advantage.

 

[Wolf359]

Originally Posted By: Win
Originally Posted By: 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.


Seen a lot of guys in bankruptcy court with that understanding of leverage.


There's lots of guys who buy cars and they get repossessed. What's your point? Leverage is a double edged sword, works great in a rising market, it can kill you in a down market. There are risks in any transaction. It's just another tool in the toolbox. For rentals, if you keep them fully rented and the rent can cover your expenses, then you can probably make money in a rising market or a down market. It just all boils down to execution, not leverage. If you over leverage yourself, then when the market drops and you can't keep up, it destroys you much faster. It's just part of the risk factors.

 

[Mr Nice]

This is slightly Off Topic but relevant to BITOG members...

On Annual Credit Report you can do a 'Credit Freeze' to reduce the risk of a criminal using your identity to open up lines of credit and do CC fraud. You set up a PIN , then use that PIN to unlock it when you want a car / home loan.

 

[MarcS]

Originally Posted By: Mr Nice
This is slightly Off Topic but relevant to BITOG members...

On Annual Credit Report you can do a 'Credit Freeze' to reduce the risk of a criminal using your identity to open up lines of credit and do CC fraud. You set up a PIN , the use that PIN to unlock it when you want a car / home loan.


My girlfriend did this since her employer did a poor job of securing everyone's tax documents last year...

 

[CKN]

Originally Posted By: Win
Originally Posted By: 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.


Seen a lot of guys in bankruptcy court with that understanding of leverage.


It's like anything else-you need to be smart about it. I retired at 55-thanks to leverage.

 

[Mr Nice]

CKN,

Just wondering how many rental properties you have ?

 

[Food Scientist]

So one of the questions I saw was did I check my credit - I used two of them in the past year and the one I hadn't, Transunion, didn't show anything out of the ordinary. I have frozen my credit accounts for 2 years now and had to apply a temporary lift for the bank to look at it. That's my method to ensure that someone can't open a card in my name.


I think its lack of credit reporting, revolving accounts, etc. that has doomed my credit score. I am travelling so when I get back to town I can swing by the bank and ask to see what they are seeing in case there is something different.

 

[CKN]

Originally Posted By: Mr Nice
CKN,

Just wondering how many rental properties you have ?



I'd rather not say. What I will tell you is that the wife and I purchased unique rental properties-all student approved condos located near the BYU campus in Provo, UT. So-the rents are virtually guaranteed. The students enter in to a years rental contract. If they don't pay the rent-the university gets involved. Conversely-if there is a little tiny rip in a window screen-and the student housing coordinators want it fixed-you fix it-even though you may not have fixed it if it was your own home.

No trouble in rents in the 30 years we have owned them. We had to seize a couple of cleaning deposits-for damages. But only a couple.


Of course-they are now all paid for-and have appreciated in value dramatically. The only issue we face-is at what point in time do we liquidate them and put the proceeds in to the trust?

 

[OneEyeJack]

When I said my FICO score was zero I should have more properly said no score. I was not listed. My real estate loans were from a non bank lender, that is not a financial institution. I have not consciously avoided more traditional credit it just has never occurred to me to use a traditional credit solution for a financial transaction.

I have always been a private person as I grew up. I was an orphan and lost the family that adopted me as a 10 year old when I was 12. I lived in foster care homes until I was 16 and up until late teens everything I owned could be worn or put into my pockets and a backpack. I purchased my first home by signing a contract with the owner and making payments to him. He based my credit worthiness on his evaluation of me. I was drafted into the military and when I returned from Vietnam I purchased my second home the same way, and my third and so on. Other than real estate I don't want to ever owe anyone or anything ever. If things go bad I think of mortgage payments as rent and try not to worry about real real estate values but feel nervous about it. I have never gone beyond 10 years without paying off a mortgage. If I have a few dollars left at the end of a month it goes into the mortgage if I have one. I'll work extra hours to pay it down and go to great lengths to minimize other expenses. If I owed 10 or 20 thousand dollars on a credit card or other such debt I would not be able to sleep at night. I understand that this kind of thinking is almost un-American and people would call me stupid or uninformed or a financial cretin. I understand that all this financial behavior training has passed me by that's okay with me. Contrary to popular opinion my insurance has not been effected. I have very carefully checked this out. So, I'll just continue, it's too late to change now.