15 - What You Need to Know About Credit

In this episode of the podcast, we talked to Stef Beltran del Rio from 360 Credit Consulting about the basics of credit for first time home buyers.

We discussed different credit myths, tips for building and maintaining a good credit score, what to look out for when dealing with creditors, and more.

Get your free credit consultation at: 360 Credit Consulting - FREE consultation

Stef's contact info:
Stef Beltran del Rio
(720) 210-9987
Stef@360creditconsulting.com

Full Article:
https://fthbpros.com/what-you-need-to-know-about-credit/

Transcript

Phil: 0:00

Welcome to the first Time Home Buyers Podcast. On today's episode, we're gonna be discussing your credit. Good, bad, or maybe you don't even know. We're gonna go over it with you. Today I have with me Stef Beltran Del Rio, who's gonna be answering some of the common questions that I get from first time home buyers. She's the regional manager for 360 Credit Consulting, so welcome to the show.

Stef: 0:31

Thank you so much. Excited to be here and talk about the most exciting topic in the world. Credit

Phil: 0:36

We all love credit. I wanna just jump right in. What should people know about their credit when getting ready to buy a home?

Stef: 0:44

Yeah, absolutely. Let's jump right into it. You know, credit is so important. Credit really can be the deciding factor between the kind of a loan that you can get approved for, as well as the interest rate that you're gonna end up paying. It's so important that you educate yourself on credit prior to even getting that first hard pull from a lender. The first step is to just view an online report so you can see what is reporting on there. As always, be mindful because the score you see online is probably going to be higher than the score your lender will see. So we'll dive into that a little bit later. But really important to know that credit takes time. If you do not have excellent credit, it does take some time to repair that credit. So it's better to start early than to lose some points right up front with that hard pull.

Phil: 1:28

What are like the top two or three mistakes that first time home buyers make with their credit?

Stef: 1:34

I would say probably the first one that first time home buyers make with their credit is thinking that there is a shopping window. The shopping window concept surrounds with clients believing that their credit can be pulled multiple times within a two week window, and that they won't be negatively impacted. This however, is really not the case. TransUnion is the only credit bureau that has a shopping window, however, Pretty meaningless because when a lender pulls a report, they're gonna pull with all three credit bureaus anyways, so the consumer's going to get impacted either way. So we recommend to just stick with the first lender who pulled your credit, because odds are your score will not change a whole lot from one company to another if you are trying to shop around. And then the second one that I would say is that consumers have no idea what their credit score is., but they go and get their credit pulled by a lender. Anyways, a lender poll will actually cost you as a consumer point. If their credit is not where it needs to be, it will have really been for nothing, right? That credit poll would've been for nothing, and now it's taking away points. So again, this is why it's so important to monitor your credit and know what's reporting on there. And a lot of first time home buyers kind of just go in blindly and hope that their lender will be able to give them good direction on what to do when that's not necessarily the case. the first thing that they should do is really know where their credit's at as far as the consumer score goes.

Phil: 2:57

And where do you suggest is the best place to start off with getting that most accurate credit score?

Stef: 3:04

So the most accurate credit score, according to your lender, is going to be the mortgage pull that they use, right?. So, and that's gonna kind of bring us into the vantage scoring model versus the FCO scoring model. So the scoring. online monitoring platform that we use here at 360 Credit Consulting is called 360 Credit Health. The reason why we use it is because we know exactly which algorithm they're using, and what kind of accounts is incorporated in that algorithm versus what kind of accounts are incorporated in that FCO algorithm. So those online reports that you use to monitor your credit, that's never going to be an accurate reflection of what the FCO score is gonna be. But what it does do is it gives you a window into what is reporting on your credit report, because otherwise, the only time you would ever get to see that is with a hard pull buy lender. So Smart Credit is an awesome tool. That's what we use. 360 Credit Health. Those are all really awesome tools that we would highly recommend for our clients to monitor their credit.

Phil: 4:03

And I. Make sure you look at your different credit cards and things like that. A lot of them will give you some free credit monitoring. At the very least, you could see a general overview and get an idea of trends. I've always said, you know those Credit Karmas vantage score, even though your lender isn't using that exact model, at least you can see I'm trending up, I'm trending down. I've got this. Something on my report, I need to take care of that or something fell off, and those kinds of things are what you want to be looking for.

Stef: 4:34

Yeah, exactly. You couldn't be more right? If you're not monitoring your credit, you're not gonna be alerted if anything new comes up or if something else is impacting your credit that you didn't know about. The only way to have that is really to monitor your credit score consistently. And yeah, like you said, those, a lot of those credit card companies have a lot of those resources, but even if you don't have those resources, there's a lot of other great ones out there and I'm happy to dive in deeper, you know, if anyone needs a little bit more information as well.

Phil: 5:02

Okay. I have a question for you. You ever heard a credit boost? Is that worth it? Is that something that everyone should just sign up for?

Stef: 5:11

No, no, no, no. Credit Boost is created by the credit bureaus and so is a vantage scoring model. So the only time you are gonna see a benefit from Credit Boost is going to be on those online scores. So when you're. Lender pulls your credit report. They're not gonna see credit boost on there because that's not incorporated into the FCO scoring model. It's only incorporated into the Vantage, which is those online scores or those apps that consumers have access to. So no, by no means is Credit Boost actually impacting your credit score positively when your lender pulls it.

Phil: 5:50

And just so you guys know, credit Boost takes things like your utility bills and other kinds of like your Netflix subscription bill and adds it to your credit report. And guess what? That's stated that the credit bureaus are using. So it's not something that the lenders care about, but it's something that the credit bureaus can take that information and. Give you ads or they could sell that information because you're giving it to them. So, it doesn't really do anything for you, but it does a lot for those credit bureaus, which if you want to give them more information, by all means, but it doesn't help you get into a home by doing that.

Stef: 6:28

Yeah, exactly. Data's just the new currency and you're really just feeding it to them by adding yourself onto those websites. So I would definitely stay away from those if at all possible.

Phil: 6:38

Now, you had mentioned that some things take upwards of a year to work on. How soon should someone actually start working on their credit when looking to buy a home?

Stef: 6:50

It really is going to depend on every individual's situation. Now, I know that's like the worst answer ever, but there are certain timeframes that we want to stay within when looking to buy a home. For example, a client with no credit card is missing out on. 30% of their overall credit score, and it's going to take anywhere from three to six months for that credit card to actually benefit the credit score. So if you don't have a credit card, you're gonna wanna be in and looking for credit help at least six months in advance. In some cases, it's beneficial to start working on your credit about a year before you are seriously wanting to apply for that home loan. If you're someone who has neglected or just never really paid attention to your credit, you are gonna wanna. really paying attention to that credit about a year prior. If you've been constantly monitoring your credit, then you should probably revisit your credit in about six months prior to applying for a large purchase, just to ensure that we can really maximize all of your positive credit, because that really is the largest portion of your overall credit. So unless you're at like that seven 20 or seven 50 mark, you really should be looking to get some kind of advice from a credit consultation to see how can we take you From good credit to great credit.

Phil: 8:04

I think that's a great point. You could still get a house with good credit, but when you have great credit, all of a sudden it opens up more opportunities, it gives you more buying power, gives you better interest rates, and it just makes you a better qualified buyer that the lenders wanna work with and sellers wanna sell

Stef: 8:21

Yeah, I absolutely, I couldn't agree more in the amount of money that you. Save. Having a better credit score is just immense over a life of a loan, and it really does make an impact on that credit score. And I feel like that's a really largely misconception amongst people is thinking that credit isn't that big of an issue when you are looking to buy a home, when really it can be the difference between $6,000 over the life of an auto loan.

Phil: 8:48

And it's interesting. You, you talk about an auto loan and I think people have this conception of, well, I can get zero or 0.9% interest rate. You know, that doesn't happen in homes. You, you have. Five and a quarter percent with really good credit, or you're at maybe five and a half or 6% with okay credit. It's not that huge of a difference, but if you have bad credit, you're at seven and a half, maybe 8%. When you're talking about a percent difference on a, you know, five,$600,000 house, that's a hundred thousand dollars. You're paying an interest over the life of the loan. You're never getting back.

Stef: 9:22

absolutely. And not to mention, right? That's not the only thing that your bad credit is incorporating as well. That's why I bring up an auto loan that's not even including the insurance on that auto loan, right? All of this is impacted by that bad, or even just good credit score that you do have is you are losing money in so many different areas of your life that you could be saving just by spending a little bit more time and effort into improving your credit.

Phil: 9:49

Yeah. No, I think that's a great point. Are there any things that you look at on a credit report that right off you go, this is gonna keep you from getting a house?

Stef: 9:58

Yeah, I mean, definitely we see stuff like bankruptcies or we see stuff like recent mortgage lates, and I know that's not totally pertinent to first time home buyers, but the more recent a derogatory is reporting on that credit report. The more it's going to be impacting your credit score. So if you have brand new lates, brand new collections, brand new charge offs, that is going to be something that your lender is instantly going to throw up a red flag and be like, all right, let's get this figured out. As well as unpaid collections. We see unpaid collections on there all the time, and many, many lender. Will tell us, Hey, I can't approve you for this loan if you do have that collection on there. But as a credit repair company, there's really nothing that you know scares us from going after on consumers credit reports. Like there is no situation that is so bad that we're not going to be able to help you get that credit increased. And the reason why is because the majority is that positive credit, right? That 35% are those derog. But the rest of the 65% that incorporates how to calculate a credit score is that positive credit as well. So don't ever feel like you know there's something on there that is an end all be all for you as a first time home buyer.

Phil: 11:13

So when should I actually work with a credit consultant?

Stef: 11:18

Yeah, I mean, I would say if you are anywhere under a seven 20 credit score, you should be talking to some kind of credit advisor. And this just brings it back to, you may have good credit, but you don't have great credit. Right. And like our company always does a free initial client consultation. So just talk to someone and see, Hey, is there anything that I could do to benefit my credit by even just. Because that's going to be the difference of a lot of money for you over the life of the loan as well. So if you are not at a seven 20 or higher, I highly suggest talking to some kind of credit consultant and see if they can steer you in a positive direction as far as, Hey, maybe if you paid this down, or maybe if you did X, Y, and Z, your score would go up a little bit higher, right? Because if you just settle for what you have, then the only person that you're hurting is yourself at the end of the day. So I think it's always just worth it, having. Free initial client consultation. Just going over your current credit situation to see where you could eventually end up.

Phil: 12:18

we're talking to first time home buyers, but don't forget, if you're, like you had mentioned shopping for a new car or something like that, maybe you're still a year or two out before you actually want to buy a home. Your rent is going to run your credit. Utilities run your credit, all kinds of different places, run your credit. this could save you a lot of money over the long run by just having increased your credit beyond a certain point.

Stef: 12:42

Yeah, exactly. It helps you in so many different aspects of your life, including credit cards, right? We have so many clients that are going and applying for credit cards all the time, and they don't realize the impact of having great credit on that interest rate on that credit card as well. So in every single day, life credit really does matter.

Phil: 13:02

Who do you think is the ideal person for credit consult?

Stef: 13:06

I think anyone who isn't 100% confident on how to maximize their credit score is an awesome person to speak with a credit consultant. And honestly, I graduated from college with a finance degree and not once did they teach me a single thing about credit, which is crazy, right?. So until I started working here, I didn't really know a whole lot about credit, and it just showed me, had I not just taken the step to talk to someone about it, I was settling for good when I could have had great. So I honestly think if you don't consider yourself a credit expert, talk to someone who is and inform yourself, because we also wanna educate., all of our consumers that come to us because this isn't just a one time situation. Credit is important throughout your entire financial life, right? So anyone who doesn't consider themself a credit expert, Come and talk to us, and it's a no obligation conversation, right? We just wanna talk to you and see how we can help you or what questions you have, because I'm sure you have Googled a question about your credit before and gotten like 50 different answers to that same question, right?. So we want to ensure that you can call in and all of us here are FCO certified experts, and we'll give you one true and correct answer.

Phil: 14:23

a minute to take. and what would you say are some of the top like credit myths that are out there?

Stef: 14:30

Yeah, that's a good question. I guess one of the biggest ones that we hear all the time is you should pay off all of your collections.. And the reason why I bring this one up is because I work with a lot of lenders and they advise their clients to do this. But what a lot of us don't realize is if you pay down that collection, you are updating the date of last activity. And as I mentioned earlier, the accounts that have the highest impact on your credit report are the newest ones, right? So if you pay off a collect., you really just made that a brand new collection on your credit report. So in some cases it's actually not the best idea for you to actually pay off that collection. So again, that's really when it's important to speak with a credit advisor. So they can give you that kind of advice on how best to not mess up your credit. So, , the other thing I would say is I hear a lot of people. apply for more credit cards, like apply for more and more credit cards. I actually saw video recently and they were like, just keep applying for credit. Fannie and Freddie, they love that stuff. And I'm like, I, I messaged him right away. I'm like, that's not true. And the reason why I bring this up is because 15% of your overall credit is your length of credit history. So if you've had a credit card opened for 20 years and you go and you apply for a brand new credit card, , you just cut your length of credit history in half because it's the average length of credit history. So instead of having 20 years, now you only have 10. So that I would say is a myth as well. If you have one longstanding credit card, that is amazing. Keep writing it, making small payments every single month on time and never being late. And I would say those are two of the most consistent ones that I really do.

Phil: 16:19

And then any tips for people who are just trying to increase their credit on their own? I usually tell them set up autopay, so it at least takes care of the minimum payment every month in case you forget, or any reason you know that's taken care of. Any tips that you've got that you could share with the listeners

Stef: 16:36

Yeah, I love that one as well. You know, it's really important to have a credit card even to begin with. I know a lot of people are like, no, I don't believe in credit cards. I don't want a credit card at all. Right. Well, having a credit card is 30% of your overall credit score. So if you don't have a credit card at. You are missing out on 30% of your overall credit score. So yes, applying for a credit card is step number one. And with that credit card, like you said, I'm sure all of you guys have a Netflix, a Hulu in Amazon, some kind of subscription that you're paying month after month after month, and it's a small amount. Put that on your credit card, right? It's very consistent. You're not paying late and it's a small amount. Keeping that credit card utilization at a 30% or. So balance to limit ratio. Keep it at a 30% or lower, if you can get it to 10% or lower, even better. Um, the next thing I will say is if you are someone who's, you know, a younger person who hasn't had credit established for a very long time, getting added as an authorized user is an awesome resource for you. We have a lot of people that just don't. Have a lot of credit. Maybe they're like 20 years old. Right? So an authorized user is really when you get added onto someone else's credit card and you are gaining all of their length of credit history. So making sure that this person's had a credit card opened for at least five years. They have that credit utilization down under 30% and they have no late payments. That's an awesome person to get added on to as an authorized. And a lot of people ask me like, well, what if I pay late? Or is this going to impact their credit? They don't even have to give you a copy of that credit card, so in no way does this negatively impact them. And if this person gets a late payment on their., you are not liable for that derogatory, so you can simply call them and have them remove you as an authorized user and that's no longer negatively impacting your credit. So that is an awesome solution for people who just don't have a lot of credit or haven't had it open for very long. Another portion that I don't know if I've mentioned yet is credit. credit mix is about 10% of your overall credit score. Now, a lot of people know that, okay, I need a credit card. So they have credit cards, but what they don't have are installment loans. Installment loans are anything like mortgage loans, auto loans, student debt loans. Right now, if you don't have any of those, that doesn't mean that you should go and apply for an auto loan.. There are resources out there for you. One that we like to use is called Self. The website is called Self dot Inc. And what this is is it counts as an installment loan, but what it is, is you're really just lending money to yourself. So you go to the bank, you say, I want to start a loan to myself for $200, and now you're just paying yourself a fixed monthly rate over anywhere from 12 to 24 months. and you're just gonna pay that back. And at the end of the day, it's like a savings account for you, . So it's like a win-win. So that will maximize that credit mix section for you. So you can have an installment and you can have a revolving. That one-to-one ratio is really what's gonna maximize that credit score for you. And that's something that I didn't know before working here, but a lot of our clients have really benefited from.

Phil: 19:59

One thing I wanted to ask you while we were kind of talking about this and, and it got me thinking when you said adding an authorized user, I think a lot of our first time home buyers. Maybe they're also a first time home buyer in their entire family, so they don't have this sort of generational home buying and kind of scenarios. What kinds of things can parents do to help set their children up for success with their

Stef: 20:22

Yeah, that's an awesome question. I think, you know, as a young person in the financial world right now, what I would have wished that my parents would've done for me is at 18 years old opened a credit card, right? Or opened a credit card with me so I can start gaining. that length of credit history, because until I started working here, I didn't have a credit card. So I wasted all of those years and when I could have been starting to gain that credit history. The other thing is, you know, . A lot of us were young consumers at one point, and we paid late on credit cards. We maxed out our credit cards. So educating your children on how much of an impact it will have on them in the long run by being, you know, that not so smart 20 year old who's maxing out their credit cards and paying late on their credit cards, reminding them of how important it is to always pay on. I think that's the number one thing that parents can really do as well as if they are 18 years old, they can get added as an authorized user on, or they can add their child onto their credit card as an authorized user so they can gain that length of credit history as well.

Phil: 21:33

And it's not a bad idea to also look into the credit monitoring for your children because that I think is one of the highest number of stolen identities right now is for people under 18 and they wait till they turn 18 and. Can use that credit information. No one's monitoring it. No one even realizes that they've opened credit cards. And then when you go to buy a house or anything, even just get a cell phone, something like that, they run your credit and all of a sudden you find out, no, you don't have no credit, you have

Stef: 22:03

Right . Yes. And we just see identity thefts and identity fraud increasing year over year, over year, and it's really becoming an issue now. So ensuring that you have to. Some kind of identity fraud insurance, which a lot of monitoring platforms do provide for you guys, such as the Smart Credit and the 360 credit health I mentioned earlier. It'll cover you and your entire family, so ensuring you've opted into some of that stuff with the way technology's advancing, it's more important now than ever to ensure that you guys are protecting yourselves.

Phil: 22:36

I think that's great. Can you tell us just a little bit more about the kind of program that you guys have, what people can expect from it?

Stef: 22:42

Yeah, absolutely. So 360 Credit Consulting is a credit repair and education platform. We're not called 360 Credit Repair. We're called 360 Credit Consulting. So as you guys have kind of heard me mention throughout, Podcast. Really it's 35% is the derogatory items. So what we're gonna do is we're going to investigate those items and we're going to send them to the credit bureaus and say, Hey, if you can't verify that all of this information belongs to this client, according to the Fair Credit Reporting Act, you are going to have to remove it. Now, I'm sure many of you guys. Have looked at your credit reports and you have a medical collection, and under the original creditor it says na, or it just says medical right. The credit bureaus have to verify that information with the original creditor.. But if the original creditor no longer exists, what are the odds that they're really able to verify that information? Right? So these are kind of the legs that we stand on in order to be able to remove those derogatory items for our clients. As well as we have a lot of junior and seniors, right? They have the same name and they have each other's accounts reporting on each other's credit reports. So for these kinds of accounts, we have attorneys. Staff that are going to help us pursue these cases. If the credit bureaus don't remove them, our attorneys are gonna take that one step further. So we really want to ensure that anything that's really not supposed to be on your credit report is going to come off. So we're going to work month after month after month on trying to get those derogatory items removed off of your credit report. Now the other portion of it is our education and our counseling and our advising, because that's really what your credit score is made up of. We want to advise you on, Hey, you should be paying this down, or you should be applying for this, or you're not maximizing this section of the FICO pie chart. We are very educat. on making sure that we are going to be able to get your score up to the point that it needs to be. It's not all about deletions. It's really not. The majority of what your credit score is, is that positive credit. So if we can teach you and help you get that positive credit, at the end of the day, we're going to be able to assist you into getting into that home loan, because that's what we all want at the end of the day, is to help get you back to your.

Phil: 25:02

No, I think that's, that's amazing. Can you give us maybe a success story that you've had recently? I'd love for people to hear kind of what others have experienced.

Stef: 25:11

Oh yeah. You know, we actually have something that we call our wall of fame, and we have all of our clients who get approved for their home loan or their auto loan, or maybe it's solar panels, whatever it was that they were able to get approved for, they'll send us a picture of it. So we have all of these pictures. They're online, , they're on our website. They're on our social media. Of all of these different clients that we've been able to get approved for home loans. Now every single one of our clients has been different as far as where did they start with us and what was their end goal score. But at the end of the day, we have helped. People get into all of these different homes and get approved, or if it's not even trying to get approved for a home loan, we've helped people get their score from Good to Great, right? So yeah, we have clients that increase 100 points from the first month that they started, and that may just be because they actually applied for a credit card, right? It doesn't always have to be because of these deletions, but we do help people every single day, and I do encourage. Check out our social media platforms because the proof is in the pudding, right? I can talk to you guys about it all day, but at the end of the day, it's the people that have been in our program and that have shared those experiences that will give you guys an accurate reflection of what it is we've been able to do for our clients.

Phil: 26:25

Well, I really appreciate that. How can we go ahead and, uh, contact you and your group? I'll go ahead and put all this information on the show notes and the website as well.

Stef: 26:35

Cool. Yeah, that would be awesome. So my direct line is (720) 210-9987. And then you guys can also email me directly at Steph, stef@360creditconsulting.com. We also have a website. We also have social media that handles just 360 credit consulting. You guys can look us up on any of that good stuff as well. But definitely, you know, mention Phil and the podcast because we want to give credit to this as well. But yeah, you know, I'm, I'm excited and I do hope that you guys take advantage of the opportunity that we do give free credit consultations. They're entirely no obligation. We just want to help educate people and point you guys in the right direction because we don't want you settling for good. We want you guys to really be great with your credit.

Phil: 27:26

Just as a slight disclaimer, I used your guys' services for about a year or so to help just get me from good to great., this was a few years back and had an excellent experience and actually learned a lot of what I know now about credit, more so from you and seeing those direct results than from anything on the lending side. So thank you for that

Stef: 27:50

Well, thank you. Yeah. You know, we're happy to help and it makes me, it warms my heart to hear those kinds of stories because we really do wanna try and make an impact and make a difference.

Phil: 28:00

If anybody has any other questions, please feel free to reach out. Uh, you can also go to our website @ fthbpros.com. We've got our articles, podcasts, resources, a newsletter, all kinds of things. And we'll also have the resources here for you guys to get directly in touch with Steph and the team over there at 360 Credit Consulting to go ahead and. You know, take advantage of that free initial consultation because they're gonna be able to lead you in the right direction. And also find out if you do or don't need any help. So, but we could always use a little help because you can always work on your credit.

Stef: 28:37

Yeah, that's absolutely right. Well, thank you so much. I'm happy to answer any questions. Feel free to use me as a resource if you have no idea what your next steps are. I'm happy to answer any questions. It's not all about getting you into the program. It's really about what is the best next step for you as a client.

Phil: 28:56

All right. Well, again, thank you for coming on the podcast today.

Stef: 28:59

Yeah, absolutely. Thank you so much for having me. This was so fun.