Recently I read an article about holiday wishes that championed the free monthly offering of “FICO” scores by various credit card companies. The writer was excited that in 2015 “FICO” scores were being provided to credit card holders by most creditors. It seems as though the writer assumes that this is a good thing and will help bring clarity to consumers but when you take a closer look is this really the case?

The majority of credit card companies now offer a free “FICO” score once a month. Most assume there is one version of the “FICO” score and do not realize the score given to us with our credit card is not the same as the “FICO” score lenders use. There are about 50 different versions of the “FICO” score and the one we get from our credit card provider is the FICO 8. The FICO 8 is usually higher than the FICO score lenders use for the purpose of a mortgage or business loan.

The other problem is the credit card company only provides one of the three FICO scores needed to assess the score threshold. Each individual has a FICO score for each of the three major credit bureaus that represents the risk level of the information presented. Most lenders use the middle score of these three numbers to decide the risk of lending to this borrower and loan pricing.

Here are some examples of how the credit card score can cause confusion and cost consumers dearly:

Joe has been watching his credit scores monthly through his credit card FICO 8 score. He does not read the fine print and assumes since it is a “FICO” score it is the same as the score his banker will use when he refinances his mortgage next month.

Fine print:
“Your FICO® Score and Credit Dashboard are for your educational purposes and based on data from Experian. The score we provide is FICO® Score 8 and may differ from other credit scores. —- and other lenders may use different scores and other types of information in credit decisions. The information we provide is updated monthly and may not reflect the most current data on your credit report.”

Joe’s FICO 8 score is consistently between a 750 and a 760. He has learned from online banking sites that being above a 740 will get him the better pricing on his loan. He is sure the mortgage process will be easy and pricing will be low. As the time rolls around for him to apply he contacts his banker who pulls his credit. The banker comes back to him explaining that since his score is a 720 he will not get the best pricing. Joe is confused and his banker refers Joe to my company for clarity. After speaking with Joe he finally understands that a FICO 8 is not the same version as the score his mortgage banker is using. Unfortunately in Joe’s case the FICO 8 was much higher than his mortgage score and due to deadlines he had to refinance immediately and could not wait for his credit score to improve.

In another case, Janet is about to begin the process of shopping for a house. Her credit card score has been above a 765 for the past 5 months. She meets with a banker at her realtors request to get a mortgage pre approval letter which is required by sellers. The banker pulls her credit and her middle score comes in at a 640. Janet is shocked and after reviewing a copy of the credit reports she sees a few collection accounts on her credit. As she researches further she learns these accounts were only on her TransUnion and Equifax. Because the credit card issuer only provided the Experian FICO 8 she was only seeing 1/3 of her credit scores. Since the mortgage banker takes the middle number score even if her Experian FICO mortgage score was a 765 the other two were 640 and 630. Her middle score would remain at a 640. Most collection agencies only report to two of the three credit bureaus since it is less costly and still has a great impact on the middle score. After understanding how the three scores work in regards to a mortgage she felt frustrated by the one score provided to her by her credit card issuer. Fortunately we were able to improve her scores by the time she found a home and she did wind up receiving excellent pricing on the loan.
Having the correct information and insight about credit scores can lead to reaching goals successfully and huge savings for individuals. The site that offers the closest version of the lending FICO score to consumers is myfico. Please share this information with your clients, friends, and family.

CREDIT TO:
www.northshoreadvisory.com
914-524-8300
info@northshoreadvisory.com

I am often challenged with why use DML Mortgage. Whereas we have in house underwriting and over 27 years experience in business there is a defined reason I never became the Banker (although maybe mom wanted me to be the Banker).

A good mortgage broker with strong back office support can be more flexible, more service-oriented than the Banker who is in a never ending cycle to figure out which product line they want to offer and the never ending changes they must battle, both corporate and regulatory.
Mortgage Broker can pursue the best program and product that fits their borrowers needs better than the banker who may be subject to specific corporate pricing that hinders their ability to compete that given day, week, month or year.

Broker is better positioned to navigate the never ending sea of changes as we are leaner, meaner and more on top of our game.

It is often that we see our price better than competition for no other reason that today we may have Investor “A” with best rate and tomorrow Investor “B” or “C” so we can confidently maneuver and keep are customers happy.

Support, service, price, flexibility. The Broker model not only works for me (sorry mom) but for the thousands and thousands of customers we have assisted and continue to serve.

TRID is an acronym for TILA- RESPA Integrated Disclosure (also referred to as the TILA-RESPA Rule) and applies to most closed-end Borrower credit transactions secured by real property. The rule does not apply to HELOCs, reverse mortgage, and a dwelling not attached to real property (i.e. mobile homes).

Basically we have eliminated the GFE (Good Faith Estimate) and the early TIL (Truth-in-Lending Disclosure) and have replaced with the Loan Estimate (LE).

We have also eliminated the HUD Closing statement and replaced with the Closing Disclosure (CD).

Potentially, this will add a few extra days to the already trying process of getting your loan closed.Summary of the new timelines Rule require that the consumer be given or mailed:

• Loan Estimate (LE) within 3 business days of application.
• Borrower must acknowledge the LE by signing and returning the “Intent to Proceed With Application”.
• Closing Disclosure (CD) must be given to borrower at least 3 business days prior to closing so they have time to review all numbers.
• An additional 3 business days must be given to review a revised CD if the consumer or lender make certain changes to the annual percentage rate (APR) or loan product after the initial CD is received.
• There must be at least 7 business days to review the paperwork between the time the consumer receives an LE and closing!

At some point next year it will be business as usual. For now we will be digesting the nuances of coordinating closings while determining that closing numbers are close to exact PRIOR TO CLOSING.

Stay tuned and if you or your office needs further tutelage and understanding, give me a call and we can set up a presentation.