Understanding Your Most Important Financial Document and How It Impacts Your Life

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Credit capacity is the most important aspect of the financial lives of millions of Americans.  In fact, it is almost as unique as a thumbprint so it should be guarded and carefully protected.  Not only does your credit report share detailed information about your most personal financial details, but also it provides those people that are accessing the report an in-depth insight to your financial personality.

So if you are buying a home or automobile, want a credit card, have applied for new phone service or anything else that requires the pulling of your credit report, beware and be aware of what is on your report.

A Credit Report Is a Glimpse Of Your Financial Lifestyle

Though mortgage companies view a different version than you do, bear in mind that the details are very much available and to any creditor that chooses to look over the history of your financial responsibility.  The single most determining factor in deciding your mortgage application aside from your income eligibility and a few other aspects, is your FICO score.  Lenders take the median of all three scores obtained from the three reporting agencies but when you view your report you will have access to one FICO score rather than the average of all three.  You will however be able to view the same detailed information visible to creditors.

The basics will be included on the report but in addition there will also be contact information for each of your creditors, type of credit, the loan and/or credit amount that corresponds with each and the date each line of credit was established. There will also be information about any judgments against you and any settlements you may have made in the past.  Any derogatory things such as repossessions, bankruptcy, past due amounts or debts that have gone to collection will be included on the credit report as well. There is a new trend that has become more prevalent with many creditors, where agencies report your rental payment history and other things showing how responsible you are with debt in situations other than just those that appear on a standard credit report. The CoreLogic® CoreScore report is a new report that almost acts as Big Brother, reporting a lot more detail on your spending habits as a consumer.

Things To Look Out For When Reviewing Your Credit Report

One of the best things you can do for your financial health is to pull your credit report at least once every six months.  Check your report for any discrepancies and most importantly be aware of your financial situation.

If the balance owed is very close to or equal to the maximum high balance limit on any or all of your lines of credit it raises a red flag to potential creditors.  That shows you have reached the maximum credit limit on a number of your responsibilities, and it is a factor that could get in the way of your obtaining new credit.  As soon as you see your credit has reached about 80% of the maximum limit it is a good idea to start paying your debt down as soon as possible.

Additionally, if you see any derogatory items that are inaccurate you should work to resolve them by contacting the creditor and setting the record straight.
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The best way to ensure strong financial health is to be aware, stay up to date on your report and maintain accuracy.  Using the report as a tool you can guide your financial situation to where you want to be and once there, be sure to stay on top.  For assistance in pulling your credit report or any other inquiries you may have, contact your loan officer or Realtor today!

Recently there has been an increase in trigger activity when you or your client’s credit report  is pulled. Please keep the following information in mind to protect yourself and your clients.

Background-

When you pull a credit report for a "mortgage", Experian and Equifax sell that consumer's data as sales leads to competing lenders, brokers, or marketing firms.  Your borrower will get calls from lenders offering competing rates, though many other fees are often hidden.  Activity usually increases as mortgage rates get lower.

Triggers are sold by the repositories (only XPN and EFX, not TU), so it does not matter which CRA is used.  Education of your staff, referral partners, and clients is the most effective means of preventing confusion and retaining your business.

Prevention-

There is an Opt-Out process whereby a consumer can remove themselves from most marketing programs (888-5-OPTOUT or https://www.optoutprescreen.com).  However, this process takes up to 5 days to become effective - so it is of little value in protecting mortgage applicants from trigger leads unless you are able to get your referral sources to Opt Out consumers before they get to you.

If a potential customer hasn’t opted out before credit is pulled, their phone will ring with competing companies attempting to offer "rates".  These are often bait-and-switch tactics, and usually very misleading.  If you/your customer suspects the person calling isn't from your company, teach them to ask questions, simply stating, "What is the name of my Loan Officer?"  If the person cannot answer, they probably aren't with your company. You can also customize and distribute the attached Opt Out card to your new clients to increase their awareness.  The ancillary effects of Opting Out are a decrease junk mail and potential ID theft.

We do not participate in the sale of Trigger Leads, nor any data concerning our clients or applicants.

Feel free to call with any questions. 

Lower Fed Interest Rates Stimulate the Economy – Does It Mean Lower Mortgage Rates Too?

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Unless you are a financial analyst or someone with business-savvy, chances are you have not considered the effect the Fed changing interest rates will have on our economy.  One of the most frequently asked questions recently after an announcement made by the President in his latest State of the Union address was “does this mean mortgage interest rates will be lower too?”  The answer is no.

Still a Great Time to Buy – With Or Without Lower Fed Rates

Mortgage rates are already at their lowest they have been in decades.  Similarly, housing prices are also at much lower rates.  The positive buying market conditions remain but a zero Federal Reserve rate does not automatically translate to less expensive mortgages.

It does mean, however, that the institutions you borrow from will get better rates.  Classic supply and demand principles at work, lower rates facilitate more big ticket purchases like homes and cars for more people, increasing the demand for subsequent items that are related to these purchases.  The cycle goes on when consumers are able to pump more money into the economy as a result of having more in their pockets after securing lower interest rates.

Stronger Economy, More Jobs, More Homes Sold, Solid Economic Outlook

So, even though the zero Federal Reserve rate mentioned by Mr. Obama does not directly touch consumers’ mortgages, it really does have a positive impact in myriad ways.  Consider this:  when businesses are able to borrow easier and at better rates, they know they have more to gain in the future so they tend to invest more while getting such low rates.  More investment translates to more jobs, more jobs mean more homes and cars and purchases and so on and so forth.

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So the next time you come across a news piece talking about what the potential impact of lower fed rates could be on our mortgages, remember that however indirectly, the impact is a positive one even though you won’t be seeing anything lower from your lender than you’re already seeing today.
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Calling all Realtors or anyone interested in learning more about the 203k FHA renovation loan program.  We’re holding a luncheon and training seminar on February 22nd.

If you’d like to come by, please RSVP to JModerski@gatewayfunding.com and we’ll get you set up with your reservation.  It should be a lot of fun!