The Importance of Credit. The Myths and the Realities.

Caeli Ridge hosted this episode on 3/7/2023

You need to know what is a myth and what is a reality when it comes to your credit. Listen to find out from Caeli how to know what is fact from fiction. 

Open conversations about this topic and more...

Check out the video with the screen share and the documentation in the Community.

You can join these live each week by following this link to join the call:
https://community.ridgelendinggroup.com/events/live-with-caeli-each-tuesday-beginning-at-430-pm-et/list

As always, give Ridge Lending Group a call if you have any questions at 855-747-4343 or email us at info@RidgeLendingGroup.com

Copyright ©2023 Geneva Financial, LLC, DBA Ridge Lending Group

NMLS #42056  |  BK #0910215  |  CA License #CA-DBO9556 | Massachusetts Licensed Lender #ML42056 | An Equal Housing Lender  |  All Rights Reserved

Privacy Policy |  Legal Disclosure |  Consumer Access | Texas Mortgage Notice

Transcript

1
00:00:01.840 --> 00:00:21.090
Larry Bailey: There we go! Welcome everyone to another. Live with Caeli. My name's Larry Bailey and Caeli did awesome. Last week. I listened to all 50 min. Congratulations, Caeli, for getting that done, and today we're going to be going through a very important topic. Caeli has brought it up many, many, many times before.

2
00:00:21.090 --> 00:00:27.200
Larry Bailey: and that, of course, is the importance of credit separating the myths and realities.

3
00:00:27.240 --> 00:00:42.640
Larry Bailey: That's what we're going to be talking about. If you have any questions at all during the Webinar, and next week we will be moving this back to meeting. We promise. We figured out there are so many people that are joining this every week and reserving a spot. Caeli is going to speak to this

4
00:00:42.640 --> 00:00:47.370
Larry Bailey: and Caeli. We actually got a poll ready, so we're ready to get it a poll when you're ready.

5
00:00:47.410 --> 00:01:06.120
Larry Bailey: But enough about me. This is all about you. Thank you very much for joining everybody. If you want to talk to you. Send me a note in chat, or send me a note in Q. A. We'll get you so we can unmute your so we can unmute you, and you can ask away, Caeli. Thanks very much for leading us along this conversation about the importance of credit

6
00:01:06.150 --> 00:01:08.090
Larry Bailey: and separating the myths and realities.

7
00:01:08.170 --> 00:01:11.020
CAELI RIDGE: Thank you, Larry Bailey. Hi, guys.

8
00:01:11.180 --> 00:01:30.060
CAELI RIDGE: Okay. So I I asked Larry I if you were here when we first started before we started recording. I asked him to hit record first, so that I could make this fun announcement for all to hear those that come back and watch later. I made the fatal mistake. You guys of eating just before this, because I haven't eaten today a kale salad.

9
00:01:30.100 --> 00:01:30.910
CAELI RIDGE: Okay.

10
00:01:31.070 --> 00:01:35.450
CAELI RIDGE: this happened. And guess what else? I'm out of dental foss. So

11
00:01:35.850 --> 00:01:40.470
CAELI RIDGE: and it's my worst PET peeve. At least it's in the top 3 for sure of just having stuff in my teeth.

12
00:01:40.870 --> 00:01:51.600
CAELI RIDGE: So you're going to be seeing me throughout the next 30 ish minutes. Be kind of messing around. I'm: so sorry i'm so embarrassed. But what can I do? What can I do so for all of you that are with us today and watching later.

13
00:01:51.780 --> 00:01:52.770
CAELI RIDGE: Please enjoy.

14
00:01:54.250 --> 00:02:01.280
CAELI RIDGE: Okay. And if there's if there's like mass and green things in my teeth, it's not because I've got 4 hygiene. It's because I'm

15
00:02:01.790 --> 00:02:18.770
CAELI RIDGE: Larry's going to give me such a hard time about this later. Thank you for coming. Thank you for being with us. Let's get this underway, you guys really, quickly. Larry mentioned that we're going to take a poll. We? I like the meeting format better than the Webinar, the Webinar. I can't see, you guys, there's not that in that engagement, etc.

16
00:02:18.970 --> 00:02:31.550
CAELI RIDGE: But as a result there was some, and the good news is that we're getting so much demand for you guys to want to be here with us, and the registration has gone up so much. We had to change our our subscription deal thing with with Zoom.

17
00:02:31.690 --> 00:02:38.160
My question for you guys, is how inconvenient would it be if you had to register every week

18
00:02:38.210 --> 00:02:39.100
CAELI RIDGE: for

19
00:02:39.180 --> 00:02:57.300
CAELI RIDGE: the the meeting. Okay? And the reason I ask this is is that if someone registers the way that we have it now, you register once and then you're done it, it's it doesn't have to happen again. However, what we're finding is that there are people that have chewed up a registration spot or slot that have never attended any of our meetings that Haven't listened to any of the recordings after the fact.

20
00:02:57.300 --> 00:03:11.000
and it's right. It's just kind of a dead spot. So I wanted to get with you guys. I certainly don't want the level of entry to be cumbersome or a pain in the you know what. But if you guys will tell us what you think. If registering once a week would be okay with you. That's what we're trying to figure out

21
00:03:11.000 --> 00:03:22.860
CAELI RIDGE: and what changes we need to make as a As a result of that, so is registering weekly a big, massive hassle. Will it prevent you from being with us, or is it no big deal? And you'd happy, happily do it every week. Thank you for that.

22
00:03:23.140 --> 00:03:38.100
Larry Bailey: So we got to pull running on the screen of a live thing. Everybody can kind of change their vote. I let it go in the beginning because I wanted to see what people would do off the gate, which, of course, is register once for all right. But then, but then this idea of fairness

23
00:03:38.180 --> 00:03:49.570
Larry Bailey: is is a bound. So we'll give us. We've got out of 25 folks. Looks like everybody's answered, actually, so go ahead and end the poll and

24
00:03:50.300 --> 00:04:02.650
Larry Bailey: share the results. You should be seeing them on screen. So so you know, the the reality is, yeah, it is really convenient to register once for all. The question is, how do we maintain that forever?

25
00:04:03.010 --> 00:04:03.640
CAELI RIDGE: Okay.

26
00:04:04.300 --> 00:04:10.700
I got you. We hear you. We'll make, you know. Obviously let you guys know well in advance of any changes that in that regard. But

27
00:04:10.830 --> 00:04:15.780
CAELI RIDGE: in any case cool. Thank you guys, for taking the time to do that tail.

28
00:04:16.410 --> 00:04:26.430
CAELI RIDGE: Okay, credit. So i'm going to start like I usually do with a few definitions before before I get to that, I'm just going to tell you guys, I'm going to be talking kind of fast today. I want to get through quite a bit

29
00:04:26.470 --> 00:04:31.440
CAELI RIDGE: of of landscape here, so I expect a lot of you will want to come back and and re listen to some of this

30
00:04:32.670 --> 00:04:44.460
CAELI RIDGE: and much of what the teachings will be about today are actually part of our certified power buyer program that we offer free of charge one on one time with yours truly

31
00:04:44.610 --> 00:05:02.720
CAELI RIDGE: for clients that have applied and are actively pursuing real estate, investing it's a really deep dive into underwriting guidelines as they apply to the individual the individuals qualifications. The individuals needs, taking all of that information and teaching. You guys how to optimize your qualifications.

32
00:05:02.730 --> 00:05:22.590
CAELI RIDGE: because, remember, as real estate investors, our debt to income, ratio or credit our assets. None of those things are straight lines. They are not static. They're going to move. They're going to change as we buy, and we sell, and we refinance, and we 1031, exchange our properties. All of those qualifying variables or criteria, are going to be subject to change. So understanding.

33
00:05:22.990 --> 00:05:40.580
CAELI RIDGE: how does it apply when we, when we look at you in underwriting? What does that mean As things change? And how do I teach you how to keep them at their optimal levels. So today is really going to be about credit and dispelling some of the bad information that's out there. And I'm also gonna give you guys a little snippet about how to optimize credit.

34
00:05:40.580 --> 00:05:52.890
CAELI RIDGE: And further, some of the strategies that we impose inside that we do for our clients and keeping an eye on these things to make sure that we are setting them up for success, not failure. We'll get there.

35
00:05:53.230 --> 00:05:54.080
CAELI RIDGE: Okay.

36
00:05:54.240 --> 00:06:04.010
most individuals guys. I'm just gonna start all the way from the beginning. And and if you have been through the certified power buyer, some of this is going to sound familiar, but I think it bears repeating anyway.

37
00:06:04.140 --> 00:06:22.790
CAELI RIDGE: So most individuals will come to us with 3 different credit scores. Okay, these credit scores are derived from places that we call repositories with an R. You guys are going to know them more commonly as equifax trans union and experience. Right? Most of you listening are going to be familiar with those names

38
00:06:23.940 --> 00:06:38.150
CAELI RIDGE: for the purpose of qualifying for mortgage-related finance we're going to take the middle of those 3 credit scores and, by the way, if you're applying jointly with a partner or a spouse, or whatever the please know that in that case we're going to take the lower of the 2 middle.

39
00:06:38.210 --> 00:06:49.380
CAELI RIDGE: So if Mr. Jones has a 720 medal, and Mrs. Jones has a 716 middle, we're taking the 7 16, the lower of the 2 middle credit scores. Okay. So

40
00:06:49.600 --> 00:06:58.130
the other things I want to share with you guys. Let me go back to some of the misnomers, and I I had an outline, but I don't have it with me, so i'm kind of going from memory.

41
00:06:58.520 --> 00:07:14.210
CAELI RIDGE: There's bad information out there when people come to us, and some of the first conversations that I that I have. they say, Well, I don't want to have my credit run. I don't want a hard inquiry. Can we do a soft inquiry? Well, absolutely. We can do soft inquiries. The reason I I, when I do a little bit more fact finding.

42
00:07:14.210 --> 00:07:31.220
CAELI RIDGE: But I learned people don't want that part inquiries because they think that it's going to damage the actual score. I've heard anything from it's gonna it's going to take my credit score down 5 Points just for one inquiry down to 20 points and everything in between. That is a misnomer that is not accurate information.

43
00:07:31.240 --> 00:07:42.530
CAELI RIDGE: The way in which an inquiry just on its own is going to impact a credit score is when an individual has gone out there and tried to secure credit for a multitude of reasons.

44
00:07:42.530 --> 00:07:52.850
CAELI RIDGE: So they bought a brand new motorcycle, maybe a flat screen, TV, a new washer and dryer, they applied for a mortgage. They opened up a department, credit, score, or credit credit card, whatever it may be.

45
00:07:53.040 --> 00:07:58.380
CAELI RIDGE: When inquiries are shown from all of those different varieties.

46
00:07:58.650 --> 00:08:08.810
CAELI RIDGE: the algorithms, the ones and the zeros within those repositories that I mentioned. What it's telling. It is that that individual is about to become likely over extended

47
00:08:08.840 --> 00:08:19.690
CAELI RIDGE: right. They're they're applying for all of this different credit. They're about to become overextended. That's when we notice that inquiries will have a damaging effect on an individual's credit score.

48
00:08:19.720 --> 00:08:23.400
And further, it's important to note that an individual

49
00:08:23.630 --> 00:08:32.480
CAELI RIDGE: for the purpose of mortgage-related finance exclusively, has a certain window of time in which to have their credit pulled as many times as they need to

50
00:08:32.640 --> 00:08:33.549
CAELI RIDGE: to shop

51
00:08:33.700 --> 00:08:50.130
CAELI RIDGE: terms and rights, or whatever without it adversely affecting the score. So please keep that in mind when you guys are are thinking that somehow a hard inquiry is going to be damaging to the point that it may either preclude you from qualifying, or it could adjust an interest rate.

52
00:08:50.130 --> 00:08:55.070
CAELI RIDGE: Okay, I won't. Get into the connection between rates and and scores. Today we can make that for another call.

53
00:08:55.160 --> 00:08:56.790
But just Fyi.

54
00:08:58.250 --> 00:09:05.440
CAELI RIDGE: Okay. So let's go back to underwriting guidelines. So credit as a means of qualifying. Now.

55
00:09:06.050 --> 00:09:24.910
CAELI RIDGE: let's focus on conventional Really, quickly. Most people usually start by falling in that that range, anyway. Most of you know we've got 10 golden tickets right. 10, Fanny, Freddy loans. But what a lot of people Don't realize is that of the 10 there are 2 very distinct books. I like to call them, of underwriting guidelines

56
00:09:25.020 --> 00:09:34.840
CAELI RIDGE: that, as it's applicable to credit can change what the score requirement is. The first book of underwriting. Guidelines applies to the individual that has one through 6 finance properties.

57
00:09:34.950 --> 00:09:47.670
CAELI RIDGE: and then there's a second set or second book of guidelines that we have to subscribe to for those that are going to be in the 7 through 10. Okay, in one through 6. There's no hard and fast rule for credit qualification. We've got clients that have

58
00:09:48.150 --> 00:09:48.870
CAELI RIDGE: kale.

59
00:09:51.160 --> 00:09:53.980
CAELI RIDGE: It's fun for everybody. We have clients.

60
00:09:54.290 --> 00:10:03.780
Larry Bailey: If you if you end up needing a break, we we do have a question, but it's not natural. It's not natural, for now just i'll keep going. I'll keep going.

61
00:10:03.990 --> 00:10:04.960
CAELI RIDGE: so

62
00:10:05.160 --> 00:10:13.840
Larry Bailey: it's so embarrassing. This is going to haunt me for years to come. I absolutely know it. I You see, i'm on our social media platforms coming up very soon.

63
00:10:14.440 --> 00:10:26.050
CAELI RIDGE: Okay, one through 6. No minimum credit score required no hard and fast rule. We have clients that might have a 6, 50 credit score get approved for conventional financing, because they have what we call compensating factors.

64
00:10:26.050 --> 00:10:37.030
CAELI RIDGE: This is going to be low debt to income ratio. When we talk about dti, it's the lower, the better or strong assets, the more assets, liquid and and even retirement accounts, the more assets we have.

65
00:10:37.040 --> 00:10:53.800
CAELI RIDGE: the better right. So if we have both of those things strong comp sitting factors. A lower credit score won't necessarily preclude the individual from qualifying. Now I know, I said, I wasn't going to really get into this, but a lower credit score. Keep in mind. It will affect your interest rate. A lower credit score is going to yield a higher interest rate.

66
00:10:53.810 --> 00:10:59.510
CAELI RIDGE: Don't get hung up on the interest rate guys, for all the reasons that I continue to harp on. I'm going to move past that

67
00:11:00.790 --> 00:11:18.740
CAELI RIDGE: one through 6. We've covered that 7 through 10. There now is a fast, hard, and fast rule. You must maintain a minimum 720 or greater credit score to qualify for any of the remaining or golden tickets. Okay, if you came with a 719, and

68
00:11:18.980 --> 00:11:30.370
CAELI RIDGE: you know you were in the middle of a transaction. We close one, and you've got to close the second one, and the credit report is expired. I'll tell you how long. They're good for in a second, and we have to pull another one, and it dropped 1 point below the 720. You are not getting

69
00:11:30.540 --> 00:11:33.270
CAELI RIDGE: a conventional mortgage 720

70
00:11:33.330 --> 00:11:36.780
CAELI RIDGE: minimum, absolutely no, no way around it.

71
00:11:37.010 --> 00:11:43.630
CAELI RIDGE: And that leads me into a good segue into the optimization of credit. So

72
00:11:43.880 --> 00:11:47.380
CAELI RIDGE: the credit report is valid for 120 days

73
00:11:47.420 --> 00:12:07.000
CAELI RIDGE: before a new report is required. These are Fanny Freddy rules. Other investors are going to have different rules about how long a report is valid before another one is required. For example, the all in one is a 90 day window. From the day that we pull before a new one is required if it had expired. Okay, but we have 120 days conventionally to utilize

74
00:12:07.000 --> 00:12:20.470
CAELI RIDGE: the credit and the score within that credit report before we have to pull another one. So let's talk about an individual that may be purchasing multiple properties, or has multiple transactions that are going on within a small-ish window of time.

75
00:12:20.520 --> 00:12:29.500
CAELI RIDGE: Let's let's call it they're purchasing 2 properties, and maybe refinancing another one in a 4 month window of time. Okay.

76
00:12:29.730 --> 00:12:36.950
CAELI RIDGE: what could happen now? I've seen this happen where an individual has 800 credit scores high, high high credit scores.

77
00:12:37.050 --> 00:12:55.830
CAELI RIDGE: But within the acquisition of mortgage debt, and these are high ticket items. Right? This is not a credit card or a car. These are this is mortgage debt. The algorithm Again, the ones and the zeros within the credit reporting is gonna see this massive amount of debt being loaded to that individual's profile, and it could temporarily.

78
00:12:56.190 --> 00:13:12.430
CAELI RIDGE: Okay, this is a temporary thing. Drop a credit score below a 720 threshold. So if our example individual is kind of inching out toward that 7 through 10. Maybe they're at Number 5. They're closing on a 6, and they're doing a cash out refinance

79
00:13:12.430 --> 00:13:20.110
CAELI RIDGE: on the seventh, 3 months later, or something to that effect. It's kind of all mixed in within that window. It could be very devastating not to have

80
00:13:20.110 --> 00:13:36.270
CAELI RIDGE: your support team that really understands what we're looking at. Be looking out for your best interests. Okay, I'll give you a I'm going to keep my explanation going, my example going, and and tell you how we can have the forethought and what we would strategy, what the strategy would be to maintain the best results.

81
00:13:36.350 --> 00:13:41.420
CAELI RIDGE: So I pulled your credit on the fifteenth of February.

82
00:13:41.430 --> 00:14:00.830
CAELI RIDGE: Okay, so we've got 4 months within that time to use that credit report. All right. The credit score is optimized. There's nothing and it's it's perfectly high. We just closed on 2 purchases, and we have another purchase that's coming down the line after the 4 month window of time. Okay? Well, I want to avoid having to re pull that second credit report

83
00:14:00.830 --> 00:14:16.650
CAELI RIDGE: after the expiration date. At that point these other 2 mortgages are going to hit, and could have a negative impact on the individual scores such that they can no longer qualify for Fanny Freddie. So i'm going to come back and say, Mr. Jones, I want to pull your credit on day 74

84
00:14:16.910 --> 00:14:29.000
CAELI RIDGE: of that 120 day cycle and what i've done there is. I've kind of manipulated the system because I bought us a new 120 days before that last set of mortgage debt has hit us before there's any negative impact.

85
00:14:29.360 --> 00:14:44.910
CAELI RIDGE: So thinking about it from that perspective, we are doing another hard inquiry. Okay, big deal whatever. But we're doing it now from a strategic perspective to buy us a new 120 days at the optimized higher credit score to ensure that we don't have any issues

86
00:14:45.180 --> 00:14:52.240
CAELI RIDGE: as we're coming up against that 7, 20 minimum for this borrower. Because, like I said a second ago, if you're under contract for something.

87
00:14:52.700 --> 00:14:58.990
CAELI RIDGE: and you're you're kind of right on that precipice, or, you know, maybe you've got a 740 or 760 kil.

88
00:15:00.270 --> 00:15:02.550
CAELI RIDGE: Then we would

89
00:15:03.000 --> 00:15:12.320
CAELI RIDGE: have an opportunity to keep the score high before there's any negative impact and make sure that we're closing at the more optimized rates and terms that the Fanny Freddy loans would allow us

90
00:15:12.320 --> 00:15:29.410
CAELI RIDGE: if we miss that boat or that window, or let's say you had other things going on on the side that you did not communicate to Ridge, and we didn't know you'd secured other mortgages or other things that that weren't disclosed during the time that we were working together, we couldn't be there to provide that inside of that strategy for you. Then we're coming to try and get this done.

91
00:15:29.410 --> 00:15:44.560
CAELI RIDGE: we have to pull another report right at that point in time that it's expired whatever, and it's dropped. Guess what guys you're either potentially losing earnest money right? You're outside of any contingency, or we're having to to switch which I guess in in

92
00:15:45.530 --> 00:16:02.480
CAELI RIDGE: overall terms. It's a benefit that we have the options to switch you into something else like a debt service, coverage, ratio or non qm product. But the terms are going to be as favorable. So it's really really important, I guess the takeaway, and that comment would be communication with us, and making sure that it's. It's good and clear, and we know everything that's happening

93
00:16:02.480 --> 00:16:07.570
CAELI RIDGE: in between the different transactions. We may do it be doing together, Larry, why don't we get to that question?

94
00:16:07.850 --> 00:16:10.800
Larry Bailey: Yeah, great timing. So the question is from Jag.

95
00:16:10.850 --> 00:16:17.090
Larry Bailey: Jack wants to know which it happens a lot right. So if if somebody else runs a credit report.

96
00:16:17.660 --> 00:16:30.240
Larry Bailey: and then they come to Ridge Landing, and they're like, hey, listen! What can you guys do for us? And we say, Well, we have to run your credit report. Why is that happening? Why can't one underwriter Just use the same credit report for any borrower?

97
00:16:31.040 --> 00:16:38.120
CAELI RIDGE: That's actually a good question, and and to be fair, I don't know that the answer is going to satisfy anybody listening.

98
00:16:38.290 --> 00:16:52.570
CAELI RIDGE: I know. And, Larry, you may be able to give so a little bit more insight the report itself, because, as the lender, we are going to be underwriting and funding, and then packaging and reselling right. These mortgage back securities in the secondary market.

99
00:16:52.610 --> 00:17:11.130
CAELI RIDGE: The package that we are going to then deliver has to include credit that was run from our company. We will not be allowed to take an outside company's credit report, and utilize that, not to mention. If it's pulled through our system, it's all automated, so that there's no manual typing in of liabilities or trade lines.

100
00:17:11.130 --> 00:17:25.510
CAELI RIDGE: right? So if we took somebody else's credit report, and you had 10 different trade lines in order to get all of that into our Los Loan operating software system. To then figure out that to income ratios and things, and what liabilities you had, and Yada Yada

101
00:17:25.829 --> 00:17:27.540
CAELI RIDGE: we'd have to manually do that.

102
00:17:27.569 --> 00:17:29.360
and that's not.

103
00:17:29.880 --> 00:17:40.090
CAELI RIDGE: That's not efficient, and and certainly not what lenders would be willing to do so. Those would be the 2 answers that I give Larry that I miss anything that would be important to mention to the to the group here.

104
00:17:40.230 --> 00:17:43.540
Larry Bailey: No, I think you nailed it? It's actually

105
00:17:43.870 --> 00:18:00.330
Larry Bailey: this is a little bit deeper that most people don't talk about, but contractually one lender cannot release a credit. Report to another lender. That's that's more about money than it is anything else. But the reality is jail. I I I would have said the same exact thing.

106
00:18:00.340 --> 00:18:12.280
Larry Bailey: Everything in the file needs to be made to the lender, from credit to appraisal, to title everything. So if it has anybody else's name on that credit report, it will be unacceptable.

107
00:18:13.340 --> 00:18:27.540
Larry Bailey: I think I see another question from Jack Yam: yeah. So there's a there's a follow up here, perhaps, and it's it goes along the same lines of of credit. Myths right. So why? Why would one lender, perhaps a hypothetical question here

108
00:18:27.540 --> 00:18:36.290
Larry Bailey: like if I had a credit report? Ron and one lender says no. But then you literally call up another lender, and they look at the same credit report, and they're like, yeah, I can do that loan like what's that?

109
00:18:36.620 --> 00:18:42.120
This is one of my favorite questions, because it makes us look so good. It's something called Overlays gang.

110
00:18:42.320 --> 00:18:51.270
CAELI RIDGE: So in our industry an overlay is an added layer of risk to underwriting guidelines.

111
00:18:51.390 --> 00:18:57.080
CAELI RIDGE: so I usually stick with with kind of the Fanny Freddy guidelines. There's something called a seller's Guide

112
00:18:57.200 --> 00:19:15.560
CAELI RIDGE: the Seller's Guide is about a 1,400 page document that with ridiculous detail we know exactly what needs, what conditions need to be satisfied within this loan file in order for it to be insured or purchased, insured by the United States Government. Okay, so we'll focus on that.

113
00:19:15.560 --> 00:19:28.530
CAELI RIDGE: An overlay is going to be something in addition to what those guidelines say i'll pick on. Who should we pick on? B of a. Okay, historically, B of a. Would say when Fanny and Freddie brought it back up to that 10 limit

114
00:19:28.590 --> 00:19:47.630
CAELI RIDGE: B of a. Would say, No, I don't care that Fanny Freddie allows 10 finance properties per qualified individual. We're going to cap it at 4. That would be an overlay similar to credit score. For example, if that's what we're talking about. They may have their own risk. Tolerance overlay that says, No, we're going to cap it here. This is the minimum for us, even though

115
00:19:47.670 --> 00:20:00.510
CAELI RIDGE: Fanny and Freddy will ensure beyond or or whatever the the A. Us. Might say. I'm not going to get into a us. That's probably a rabbit hole. We don't need to go down, but that would be the answer. Other overlays can include

116
00:20:00.540 --> 00:20:10.710
CAELI RIDGE: experience of being an investor right. Sometimes they want to see a 2 year history of being a real estate investor, while that's not necessarily a a guideline for Fanny Fred. It's not in the Seller's guide.

117
00:20:10.770 --> 00:20:28.730
CAELI RIDGE: Sometimes they won't give you credit for rental income that otherwise could be per this, the the purest form of the Seller guide, and precluding your ability to qualify right if you can't have the income from those those rental properties that have mortgages on them, and they won't give you any credit for that rental income that's going to screw up a debt to income ratio.

118
00:20:28.740 --> 00:20:32.070
So that's the answer to that, Jack. Good question. Thank you for that.

119
00:20:32.800 --> 00:20:33.820
CAELI RIDGE: Any others.

120
00:20:34.250 --> 00:20:42.080
Larry Bailey: that is all the questions. Now for anybody just joining. We're working over here with Chile Rynch, she's going through the the realities and the myths of credit.

121
00:20:42.160 --> 00:20:48.740
Larry Bailey: and if you have any questions, feel free to use either the chat, or to use the Q. A. Here in the Webinar.

122
00:20:49.060 --> 00:20:59.660
CAELI RIDGE: Thank you, Larry. Let's see. So let's talk about optimization for credits. Some other tricks that that I talk about regularly with my clients, that you guys can just do organically on your own.

123
00:20:59.730 --> 00:21:13.890
CAELI RIDGE: and by no means, guys. I I like to preface and say, i'm not a credit expert. I've been around the block a few times. I know what I know. There's. I'm sure advancements are things that you maybe people on this call can teach me. I'm always interested in hearing.

124
00:21:13.890 --> 00:21:29.070
CAELI RIDGE: but just simple tricks for e expanding or increasing credit scores or keeping them very, very high. No more than 4 revolving credit cards is is really the the cap or the max that you want to have, and of those 4 you want to keep the ones that are the oldest

125
00:21:29.090 --> 00:21:47.000
CAELI RIDGE: right, that depth and that history of credit is important for your purposes. Clearly you want to keep the ones that have the lower interest rate, so that might not always align. But in any case there's that. Utilization is a big one. Guys utilization means, and this is stay staying on the revolving accounts, the credit cards

126
00:21:47.260 --> 00:21:58.800
CAELI RIDGE: other than a mortgage, and i'll. I'll come to that in a second. Nothing can hurt or help a credit score more than utilization within your revolving accounts. Your credit card accounts

127
00:21:58.820 --> 00:22:16.860
CAELI RIDGE: ideally for optimal results. You want to have utilization at 30% or less, and I should have defined utilization. So utilization is the percentage of balance to credit limit. So if you had a $10,000 credit card limit and you had a $3,000 balance.

128
00:22:16.940 --> 00:22:33.670
CAELI RIDGE: Right? You're gonna be at 30% utilization. 30% less is optimal. 50% below is still very good. When you start inching above 50% in utilization. That's when credit scores really start to take a hit and you get up into the 60, 70, 80, the higher from 50 up

129
00:22:33.670 --> 00:22:47.730
CAELI RIDGE: that you get utilization, the more it's going to impact your credit score. Even if your history of of on time payments is perfect. That's really gonna you know somebody that would otherwise have 7, 8 800 credit scores that could get them down to to 700. It's a big hit.

130
00:22:47.790 --> 00:23:04.650
CAELI RIDGE: Obviously judgments, collections, bankruptcies, things like that are going to have an impact on a credit score mortgages like I said a second ago. Nothing can hurt or help a credit score more or less than a mortgage.

131
00:23:05.170 --> 00:23:34.770
CAELI RIDGE: and when we were talking about some of the the education about the the credit score and new mortgage, debt, etc. I didn't mention this, that, typically speaking, I did say that it would be a temporary drop in a credit score right when we have all of this mortgage debt that we front loaded, and then we're trying to do something new, and then it sees it, and then it's going to take a credits for what's happening there? Is it's loaded all of this debt. But what's not happened yet is that the on time mortgage payments themselves.

132
00:23:34.770 --> 00:23:36.840
The time has not allotted enough

133
00:23:37.130 --> 00:23:47.230
CAELI RIDGE: to show that those on time mortgage payments are reporting yet. So there's a little bit of a disconnect. So, generally speaking. It's a 30 to 60 day window past the last acquisition.

134
00:23:47.550 --> 00:23:57.040
CAELI RIDGE: the last mortgage transaction, or maybe purchase that you did before we start to see those credit scores rebound back to where they started, maybe even higher. As a result.

135
00:23:58.800 --> 00:24:16.060
CAELI RIDGE: installment accounts, student loans, car payments those things that are regular, close-ended payments. Those are fine. You know the the time that you have those, the longer the better, because it shows that you can. You can maintain credit and make those those regular on time payments.

136
00:24:19.570 --> 00:24:34.680
CAELI RIDGE: Authorize users. Be careful of this guys. It could. It could end up hurting you more than it's helping, depending on on who you're an authorized user with right? If you're an authorized user I've had to sometimes where parents will put their kids on their cards

137
00:24:34.680 --> 00:24:47.120
CAELI RIDGE: as authorized user and not really understand. They have perfect credit. They've never made any late payments, etc., not understanding that for the time in which that's that card itself is utilized high. It's 70, 80%,

138
00:24:47.170 --> 00:24:57.290
CAELI RIDGE: and their their kid is going out to to get credit somewhere a mortgage, perhaps, whatever the day in which we pull credit that snapshot that picture is taken.

139
00:24:57.320 --> 00:25:17.190
CAELI RIDGE: It doesn't matter that his or her father is going to pay that credit card off at the end of the month at the time in which we're pulling credit for the youngster over here. It's going to impact their score. If they're an authorized, user it's a fairly easy fix. We can have them removed as the authorized user and and do a what if scenario and and make sure that that'll bring the score back up.

140
00:25:17.190 --> 00:25:27.030
CAELI RIDGE: so there's lots of things that we can help in that way. But that would be something else. Why, don't we go back to questions now where we've got a ton. You really you really did a great job on getting questions out of folks.

141
00:25:27.100 --> 00:25:42.290
Larry Bailey: I want to take a couple of these and put them together, because the question from Alexander and Jack, although different questions, do do talk about things similarly, which is, if you have something on a credit report.

142
00:25:42.480 --> 00:25:53.670
Larry Bailey: and it is just for the moment when the credit report runs, but maybe is, is soon paid off down to 0 afterwards. How does that affect

143
00:25:53.780 --> 00:26:09.260
CAELI RIDGE: utilization? How does it affect credit score? What's your what's your vibe on that? It's a very another really good question, You guys. So the what you need to find out is, when does the creditor report that information? The data tape to the repositories?

144
00:26:09.430 --> 00:26:23.530
CAELI RIDGE: Okay. So if you charged up 8 grand on a $10,000 limit card. and then paid it off the next day. The day in which you charged it may still be reporting by the time I pull credit a week and a half later.

145
00:26:23.560 --> 00:26:37.070
CAELI RIDGE: So if that's the case, you're going to want to have the communication with us that says, Well, first of all, what you're going to need to do is call the creditor and say, Amex, what days, day, or days of the month do you report this information to the repositories.

146
00:26:37.090 --> 00:26:45.260
CAELI RIDGE: If we have that information, then we can time it appropriately to pull credit on the day that we know we're going to have that lower or paid off balance.

147
00:26:45.350 --> 00:26:57.790
CAELI RIDGE: and and you know, ensure the highest credit score possible. That, said Guys don't get too too wound up in this, because if you have an 800 credit score, and you have a and there's a little something different than an an Amex.

148
00:26:58.240 --> 00:27:08.960
CAELI RIDGE: The open structure, Amex, that shouldn't actually hurt your score there really shouldn't be any impact because it's structured so that it knows it's paying off at the end of the month.

149
00:27:09.000 --> 00:27:22.320
CAELI RIDGE: So in that case I wouldn't worry about those, but anything else that's just open ended revolving that that balance can continue to grow or shrink, or whatever that's when that utilization thing is going to have a play.

150
00:27:23.340 --> 00:27:30.850
Larry Bailey: and that leads us into Edwin Edwin as well. You know what. If you have a Home equity line of credit, and You've maxed it out

151
00:27:30.870 --> 00:27:35.100
Larry Bailey: because you're doing something with it. Have you seen that negatively impact the credit score

152
00:27:35.200 --> 00:27:39.860
CAELI RIDGE: as long as it's, reporting as it should be as a mortgage.

153
00:27:40.260 --> 00:27:52.540
CAELI RIDGE: Okay, it can say he lock, but as long as it says mortgage a maxed out he locks should not adversely, and I think that They're all set up now, guys, so that it does report that way. There was a time. I don't even know how long ago it was.

154
00:27:52.540 --> 00:28:07.120
CAELI RIDGE: but there was a time where a helock would just be reporting as revolving, and it wouldn't necessarily identify itself as a mortgage, in which case, yes, I did see that that utilization could damage a credit score. But any more, I think that the

155
00:28:10.950 --> 00:28:24.710
CAELI RIDGE: What's the abbreviation, Larry, for who oversees credit? I'm totally spacing so the Cfpb. I think that over the years has come up with ways in which that can they can protect the consumer, which is top of mind. Right? That's that's their whole.

156
00:28:25.030 --> 00:28:28.360
CAELI RIDGE: The reason that they even are a thing.

157
00:28:28.370 --> 00:28:38.660
CAELI RIDGE: So it it, as long as it says mortgage, and I haven't seen one in in a many, many, many years that doesn't attach itself as a he lock mortgage. It should not impact your score now.

158
00:28:38.790 --> 00:28:56.120
Larry Bailey: just following up on that, Jack, as if I question and outs are, and good to your question next. But so, John? Yes, what about home improvement, loans and and naturally you're talking about, Shaley. The difference between a revolving or or some type of line of credit versus a fixed home Improvement Loan.

159
00:28:56.120 --> 00:29:07.700
CAELI RIDGE: Yeah. Great questions, Jack. Thank you. The Home Improvement Loan will be a fixed, closed-ended loan, in which case it's just going to show up as a mortgage. So as utilization goes, it's not going to a negatively impact a score.

160
00:29:09.050 --> 00:29:20.330
Larry Bailey: and Alex just wants to round us up. Where does the 30% utilization rule apply only to revolving like credit cards? Or is it the average of all of your liabilities.

161
00:29:20.500 --> 00:29:33.850
CAELI RIDGE: It's just going to be the revolving it. It's not going to include the the utilization, or it's not going to include an installment loan or a mortgage loan. It's just those open-ended revolving accounts different than an Mx.

162
00:29:33.860 --> 00:29:47.190
CAELI RIDGE: Open 30 day account. If if you guys know what that is for those of you that know what that is that's mandated. You have to pay off whatever the balance is at the end of the month, in which case it does not fall within the utilization revolving algorithm for

163
00:29:47.290 --> 00:29:48.440
CAELI RIDGE: credit scoring.

164
00:29:49.040 --> 00:29:57.540
Larry Bailey: You know it's been a while, Kelly, since I've seen one of these. But back in back in the day when we got our first credit, you know, stores would have like a 30 day charge account.

165
00:29:57.560 --> 00:30:07.060
CAELI RIDGE: which is kind of the Amex model. I don't even know if that still exist. Do you come across that at all? Where it's a

166
00:30:07.920 --> 00:30:13.270
CAELI RIDGE: now? I probably no. I'm going to say No, I can't recall the last time I saw something like that.

167
00:30:13.570 --> 00:30:19.950
and if somebody wanted to get a copy of their credit report, what are their options, especially with the scores.

168
00:30:20.070 --> 00:30:33.250
CAELI RIDGE: Yeah. So obviously, guys, there's all kinds of online stuff that you can get. I would comment that what you're pulling online through a credit. Karma, or whatever the other ones are, is not necessarily going to be the same as what we pull on our end. We pull what's called a try merge.

169
00:30:33.370 --> 00:30:50.720
CAELI RIDGE: and I I find regularly. I don't know if I would give it a percent. But regularly I find that our scores end up being a little bit higher than what you guys pull on your end. Maybe if it's even just a couple of points. So you can do all this stuff online and get the free stuff. It may not be. It give you the same result that we would have.

170
00:30:50.720 --> 00:31:03.640
CAELI RIDGE: and it certainly is not going to be as easy to read as a mortgage credit report the ones that people will send me to say, hey, can you take a look at this which nowadays I just say, no, i'm gonna. I gotta pull it. I'm not gonna look at what you have on online because it goes. They're like

171
00:31:03.700 --> 00:31:17.220
CAELI RIDGE: 50 pages, and there's just so much information there that you don't need. Otherwise I would tell you to get with us. Apply. We'll run your your credit report if you insist, after everything that you've heard here today on the soft poll. We have the capability to do that

172
00:31:17.250 --> 00:31:21.420
so we can check that out for you. Otherwise, yeah, those would be the 2

173
00:31:21.590 --> 00:31:23.570
CAELI RIDGE: obvious ways that you could get a copy.

174
00:31:25.710 --> 00:31:40.380
Larry Bailey: This is just to align with. You know the the facts from the myths you've gone over. Is there anything that you want to leave the the with today in terms of what what should be the biggest takeaway that you think most people think is real, but it's actually just a myth.

175
00:31:40.950 --> 00:31:52.940
CAELI RIDGE: Honestly, it's the it's the inquiry thing. People get really hung up on that that inquiry. And then, if you have a hard inquiry that somehow it's it's really going to damage the score by some some great number, and that's just not the case.

176
00:31:54.750 --> 00:32:06.490
Larry Bailey: You have. If anyone has any final questions here before we close out for the day again, feel free to use the chat, or even raise your hand in the zoom part there, and we can. I can click the blue button, says a lot of talk.

177
00:32:06.580 --> 00:32:24.830
Larry Bailey: or through an open question, and thanks again for those that participated in our survey at the beginning of the show. We want to make sure that we make it as convenient as possible, but making sure that nobody gets boxed out from registering for these as well. It looks like Jag is going to throw one more at you, Chili. You ready?

178
00:32:24.900 --> 00:32:33.340
Larry Bailey: I'm ready. What stage should we come to you, Chile, for the investor? Look over program.

179
00:32:34.760 --> 00:33:01.500
CAELI RIDGE: He means the certified power bar, of course. How embarrassing if if you're if you think you're going to be purchasing or refinancing something in the next week month, even the next year? It probably isn't a bad idea to get on board with that now, because there's so much good information, you guys, today's was more of an abbreviated version of what really goes into the credit side of of the certified power buyer.

180
00:33:01.500 --> 00:33:21.340
CAELI RIDGE: those of you that want to learn and and have that look under the hood. I don't think that any delay is appropriate, and, in fact, more often than not, especially if you're just getting started there. There could be things that we discover inside the certified power by or review of your application. Initial documents that you weren't aware of

181
00:33:21.340 --> 00:33:30.400
CAELI RIDGE: right that needs some some massaging or some handholding to get. you know, optimized. If if you know it improved your

182
00:33:30.860 --> 00:33:41.400
CAELI RIDGE: rate, or your ability to qualify for more, or the all in one or some other product? Or what have you? So I would say that the delaying is is not to anyone's advantage necessarily

183
00:33:42.530 --> 00:33:50.840
Larry Bailey: 2 2 last questions here. So Leah asked just for a little clarification, chile for the you, for the 30% utilization.

184
00:33:50.880 --> 00:33:59.980
Larry Bailey: Is it of the total credit balance? Or is it also including each credit, card or each credit line of credit, that kind of a thing

185
00:34:00.320 --> 00:34:18.159
CAELI RIDGE: so it'll be a weighted average, I think, Leah, but they're going to look at the individual trade line. So your chase card or your be a bay card, or your your capital one or your city card, whatever they're going to look at each one individually. But there is going to be an overall revolving debt

186
00:34:18.409 --> 00:34:20.110
CAELI RIDGE: utilization. It'll take

187
00:34:20.219 --> 00:34:33.489
CAELI RIDGE: all of the limits, and all of the balance is added together, and and that will play a role, too. And that's probably more impactful than the individual is probably the overall sum of the revolving accounts, balances versus limits.

188
00:34:35.100 --> 00:34:51.040
Larry Bailey: Gotcha and Katya Lawrence. I I see your your point there, we'll make sure that you've been helped appropriately. Jayle you on. Follow up with Katya for the certified power buyer. Okay. And so, Katie, thanks very much for bringing that to our attention.

189
00:34:51.040 --> 00:35:09.920
Larry Bailey: And then last one here for the day looks like, and if you have any questions, of course, following this, you're listening to this on the community, feel free to use the chat in community, or give ridge, lending a call directly, honestly, and that's 8 5 5, 74 Ridge, or you can email to info@ridgelendinggroup.com

190
00:35:09.920 --> 00:35:13.790
Larry Bailey: any time about any of this stuff. So James wants to know

191
00:35:13.810 --> 00:35:19.390
Larry Bailey: the great question of pre-approval right? James is thinking about buying a house.

192
00:35:19.480 --> 00:35:26.920
Larry Bailey: It's not really decided on it yet, but he wants to know what's going on. What would the inquiry. How would the inquiry harm the score? What your James do, Charlie

193
00:35:27.520 --> 00:35:45.280
CAELI RIDGE: James? No one. An inquiry, sir, is not going to be the deciding factor on on whether you can qualify or not, I can almost guarantee it, except for under the the precipice that I I, by explaining, if you've had your credit pulled hard credit inquiries pulled by a variety of different creditors mortgage.

194
00:35:45.310 --> 00:35:47.590
CAELI RIDGE: a department store.

195
00:35:48.010 --> 00:36:04.090
CAELI RIDGE: new credit card, a flat screen, TV, a new car, all of those different things. That's when multiple inquiries are going to harm you in a way that it could damage your ability to qualify. Otherwise, sir, I would say, no. There, there really shouldn't be anything. And and the other thing you guys real quickly.

196
00:36:04.170 --> 00:36:14.630
CAELI RIDGE: you know, if you have an 800 credit score, if you start with an 800 credit score. And let's just say that you did take a 2020 point hit, and now you're at 780. Guess how that impacts

197
00:36:14.850 --> 00:36:23.170
CAELI RIDGE: your qualification all, and or the the that you have access to 0. There's 0 impact whatsoever.

198
00:36:23.180 --> 00:36:28.360
CAELI RIDGE: 7, 60 and above tends to be the threshold for optimizing an interest rate.

199
00:36:28.500 --> 00:36:44.950
CAELI RIDGE: But I I guess we'll talk about interest rates again. The difference in rate and or payment between a 760, and say a 740 is negligible. Maybe if it's anything, it's an eighth of a percentage point, and an eighth of a percentage point on 100,000 or 200,000 is what 3 6 bucks a month.

200
00:36:44.990 --> 00:36:54.960
CAELI RIDGE: So you know, credit's important. We want to keep it good, but I feel like similar to it to interest rates. There's a psychology attached to a credit score that a lot of people get tied up in. Anyway.

201
00:36:55.030 --> 00:37:01.390
CAELI RIDGE: I would say, Apply now, James, let's pull your credit. Let's look at it and let's start creating our roadmap together, planting those seeds, man.

202
00:37:01.680 --> 00:37:06.080
Larry Bailey: and trail. I sent you the link for Katie's information, so I can make sure we take care of them.

203
00:37:06.390 --> 00:37:14.430
Larry Bailey: Got it, Ron, says Kelly, you Rock, thank you to you and your team for sharing your knowledge and expertise with us.

204
00:37:15.350 --> 00:37:23.310
Larry Bailey: Jaylee, we're gonna do this in a meeting next week. We're gonna get this thing worked out. We've got the we got the floodgates open, and we're gonna work with our zoom

205
00:37:23.340 --> 00:37:27.910
Larry Bailey: folks over there to make sure this is is done. Any final words.

206
00:37:28.080 --> 00:37:38.390
CAELI RIDGE: I will not be eating tail tomorrow, 5 min before our or not tomorrow next week, 5 min before our our 1 30 meeting. Thank you guys for for putting up with that. That was horrible.

207
00:37:38.710 --> 00:37:39.900
CAELI RIDGE: my worst nightmare.

208
00:37:40.900 --> 00:37:42.600
Larry Bailey: and so many names to come.

209
00:37:43.220 --> 00:37:45.470
CAELI RIDGE: I can't wait, Larry. I can't wait.

210
00:37:46.420 --> 00:37:51.610
CAELI RIDGE: Alright, guys. Thanks for being. I'll see you next week i'm gonna go find some peace.