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Hi, I'm Ella Gurfinkel, your host of the AskElla Show and senior loan officer at Fairway Independent Mortgage. On my podcast, I cut through the noise to bring you honest conversations about real estate, mortgages, and financial planning.
I interview industry experts to tackle everything from homebuying basics to complex topics like reverse mortgages, trusts, and market trends. With decades of experience, I'm passionate about dispelling myths and providing clear, actionable advice.
Whether you're buying your first home, refinancing, or planning for retirement, I'm here to help you make informed decisions. Join me for straightforward talk about real estate and beyond!
You may think you're sitting pretty and then you have a nasty surprise. In every area, your credit is invaluable. Amen, sister. You don't freaking qualify because there is something on your credit. They have DTI issues. There's things on their credit report that they can't get through underwriting. If your credit is shot, your insurance will go through the roof and that adds to the cost of owning a home potentially. The lower your credit score, the worse your interest rate's going to be. Honestly, that's one of the worst scenarios unless you're absolutely freaking squeaky clean. I know. Exactly. If you don't know the rules, you won't win. Disputes can create a false score. And that's where the games begin. What does the bad credit cost to a consumer?
Welcome to another installment of the Ask Ella Show. And today's conversation about something that is near and dear or scary AF to pretty much anybody and everybody. And that's credit. It's how credit affects you, how you can fix credit, and what things to stay the hell away from because what you don't know does and will hurt you. And with that, I'm really happy to introduce finally. This has been coming and in the making for about a year. Mhm. Beverly with Ukqual. And Ukqual is actually an interesting concept. They're not just a credit repair company. They're also a credit coaching company. And I will actually let Beverly talk to that a little bit and then we'll roll with our bigger conversation. Yes. Thank you, Ella. It's really nice to see you again. Um, yes. Um, UKquil is a loan readiness company. So, we're focusing on getting clients ready for their home mortgage. We're we're mortgage centric, but credit is credit. So, people that need help, it really doesn't matter. But most of the people that come to us have either credit issues, they have DTI issues. Um, there's things on their credit report that they can't get through underwriting. Um, and so we're here to help get them loan ready, get their DTI dialed in, make sure that credit report looks pretty. Uh, so that when you pull it, you don't have any issues and you can close their their loan. That is awesome. And that's the reason I have you on and that's frankly the reason we're talking today is because of course there's credit repair companies and they're good ones and they're not so great ones. There are certain companies to stay the hell away from for the sake of liability. I'm not going to bring up any names, but if you call me privately, I will probably tell you. Most likely, I will tell you. I'm that blunt and direct, but at the end of the day, it's not often it's not enough to just fix your credit. Like Barely said, getting mortgage ready is a big thing that I work with a lot of my clients on. Getting mortgage ready is getting the credit ready, getting the DTI stands for debt to income ratio, getting that in line, getting that ready. So maybe paying off some debts and planning for that. Maybe repositioning what you were planning to spend in the down payment on paying off the debts and reducing the down payment but getting you in a better position when it comes to buying a home. Maybe it's getting your income in line because that's a big piece sometimes and people don't realize they have an income problem, not just a credit problem. So it's really a big big puzzle wrapped in a package that we wrap in more wrapping with a bow on top of it. And the one thing that most people don't realize is the cost of bad credit. So what does the bad credit cost to a consumer? Well, in every area, your credit is invaluable. Amen, sister. Yes. So if you're buying an automobile, um the lower your credit score, the worse your interest rate's going to be. Um sometimes insurance. Um obviously a mortgage. A lot of times insurance actually there is multiple states in the country that will rate the insurance based on your credit. They will. So if your credit is shot, your insurance will go through the roof and that adds to the cost of owning a home potentially and it will suppress or reduce what you can actually qualify for because your insurance is part of your payment 100%. And and also jobs, a lot of companies will look at your credit. I know in the mortgage industry, you have to have good credit to keep your license active. And so, government jobs, law enforcement jobs, lots of things. They want to make sure you're squeaky clean, you can't be bought off, you can't be bribed. It's huge. It is huge. So, don't realize that. So, having good credit puts you in a position, too, where you don't have to worry about if you want to do something or you need to move or you need to get a new car. your credit is already set, already dialed in. So, that's just uh just a really good feeling to know that you can just go and do what you need to do without having to worry about the credit component of of life. So, so it's a big one. I think you mentioned to me that the average cost of bad credit to a consumer is upwards of $30,000. It can be for mortgage loans, auto loans, especially um you know, your payments. Credit cards. Oh, credit cards. Yeah, those are fun. the 30 something percent interest, you know. Um, but yeah, I mean, it's very it's just critical for every every area of your life. You really need to focus on your credit. If you're not focusing on it now, really start thinking about it and talk to someone to to help. It's a part of a long-term plan. It is essentially. And what I always tell my clients, and I think this is where you and I have had this conversation multiple times, is that not that we don't love all of our clients, but the clients we love the most are the ones who come to us saying, "Hey, I am getting ready. What can you suggest? What do you advise? What do I need to do? Because I'm looking at buying six months down the pike, but I want to get my ducks in a row now." And that's the best type of approach, right? Because God forbid there's any issues, God forbid there is something buried that you as a consumer, you as a buyer have honestly no clue about. And there's no judgment when I say that. Like literally, there are so many people that come to me that have no idea what's on their credit. And then you didn't do the pre-planning. You found the perfect home. You're all happy. You come to me and I'm your loan officer and I have to break the really horrific news that guess what? You don't freaking qualify because there is something on your credit. And that's where I always tell as many people as I can, as many buyers as I can, start early. Talk to us 6 months before you get ready to buy. At least three months. If six is not possible, if you don't know that far ahead that you're planning to buy a house, make it a three months. Don't just dive into it from the deep end of the pool, right? And don't just go to an open house and fall in love and then call Ella. That's like honestly that's one of the worst scenarios unless you're absolutely freaking squeaky clean. I know. Exactly. And I'll tell you a story. I actually had a client and it's been many years and it taught me a lesson. Um because I went along with a client and did not follow my normal my usual protocol or my usual way of doing things where we look at income. We look at credit to issue a pre-approval. And that was way before the soft credit pools were a thing. And soft credit is something that we do now where it doesn't ding your credit. It doesn't cost you points but we get the full picture. we get the scores and we can start advising you on what needs to be done. So, back in the day, no soft pulls is an option. They were hellbent on not pulling credit until they found the perfect home. Well, they found the perfect home. They were selling a house on Cali. They were making a ton on the sale in San Francisco. So, they were buying this beautiful, beautiful basically mansion in Lake Asiggo, Oregon. And we're in contract on this beautiful mansion and I pull credit and there is a mortgage late in the last 6 months. No, exactly. And it was one of those just freaking kill me now moments where I'm like literally just right put me out of my misery because that blew us out of the water on the top tier loan that we were shooting for because they were hella positive that they had beautiful credit scores and everything on their credit was intact. They had no idea that late was there, right? and that can really hurt your credit. And sometimes the score can dip below what you need it to be to qualify. Sometimes you can still have an okay score that you can qualify with, but the loan guidelines and underwriting isn't going to like a mortgage late in the last 12 months. So, it's not just always about the score, too. You know, people think that you got to look at the whole entire report. That's such a bummer. So, like the reason I I share that story is just to make a point that you may think you're sitting pretty. You may think you're perfectly fine. A ton of money coming in, sale of the home, huge down payment, gorgeous home you found, your income is just peachy, and then you have a nasty surprise. And that's where the games begin. Yeah, that's right. So, you don't want to be in that position. You don't want to be scrambling. And that's where my expertise comes in on the front end, running credit, advising you what needs to be done and introducing you to my business partners like Beverly because it's a team effort at the end of the day. It takes a lot of times more than just one professional to get you across the finish line to buy a home. So, no surprises is kind of my motto. The only surprise I like is maybe a surprise birthday party. Hey, there we go. But as far as my life and finances go and your life and finances go, hell no. No, we don't want those kind of surprises. We really don't. So, as somebody wants to get ready and let's say I pull their credit and the scores are not where they need to be, the scores are not what will qualify them. And typically, we're looking for 580 for FHA, VA, 620 for USDA. technically 620 for conventional. Yeah, sometimes maybe even though Fanny Freddy recently dropped the minimum credit scores, it doesn't mean they're going to get approved. So, there is that. So, again, I pull credit and there is stuff on it. Yeah. Typically, when I start talking about getting somebody's credit fixed, the first question that comes out of a client's mouth is how long is it going to take? Right. Right. And that's not an answer that we can a great question. Let me get my crystal ball. I think I have it in my in my purse. No. Um, it is really really hard to say how long it will take because it's going to depend on so many factors. What's going on on their credit history right now? How many derogatories do they have? Um, do they have revolving credit that they can pay down? Do they not have revolving credit? Like what is going on with the score? If I see a credit report and there's 15 derogatory items, those are dragging that score down like an anchor. I tell people all the time, you want to go sailing on your cute little boat, but your anchor is way too heavy and you're not going to get anywhere. So, um, we need to analyze that credit report in detail to see what can we work with. What can the sumer consumer get removed from the credit history? Do they need to open a new credit card? How it takes 30 to 45 days for a new trade line to report? So they have to at least have that amount of time. So it's just going to depend on a lot of factors. And I think that analyzing the credit report, we can't really give them the full picture. But what I love about what we do is we can kind of go month by month in the program and see once they enroll what's been removed um what positive changes have they made on their credit cards and that kind of thing. and then do a soft pull every 30 days in the program so that when the client logs into their portal, they can see what's been removed. Um, how has my score changed? Hey, I got 40 points. Awesome. I got 100 points. Awesome. You just never know what it's going to be. But that first 30-day window is important. And then once we have a conversation with them after that, then we see, okay, what are the next steps we need to do? This has been resolved. These need to be resolved. what what do we need to do next? And it's just a great way to regroup at that 30-day mark. So, it's it's going to depend on what's going on with them. So, the old rule used to be that the bureaus whenever you're trying to remove something, I'm not using the word dispute because disputes are a whole other conversation and we're going to have part of it. Yeah. But when we try to remove something off of a client's credit, and I say we because this is really more of a team effort, we as in as the team as the team, typically it used to be that it was a 30-day rule. If the bureau didn't get the information back within 30 days, it had to be whatever the item was, it had to automatically come off because the information didn't get verified. Then during COVID, didn't it change to 45 days? I don't remember 45 days, but So, are we still are we back to the 30 days or are we? Yeah, it's as far as I know, it's always been 30, but you know, when CO hit, they did all kinds of things putting people in deferment on student loans and stuff that they had no control over. So, who knows? But right now, it is a 30-day window that the creditor So, they the client will actually launch the dispute through our platform. They launch it. Um, but the creditor does have a 30-day window to review that. And if they don't, it does get removed. Um, but a lot of times people get confused about disputes. They think, well, it is mine. Okay, well, maybe it is yours. Maybe it isn't yours. It probably is most of the time, but there are errors on the credit report. It's not uncommon to have a similar name or something like that where things get slapped on there or you're a a junior or a senior. And I was just going to say that all the time like the credit gets mixed and and gets kind of messed up. social security numbers are off by, you know, one number, but um yeah, so those those need to be verified for is it accurate? Is it verifiable? Is it complete? Did the client was the client aware of the collection before you put it on their credit report? Like there there's guidelines that creditors have to follow. And when they don't, you know, then that's where things get resolved. And it's amazing to see some of the things that that can come off of a credit report. So, um, if it doesn't come off in that first 30-day window, our system will automatically relaunch another dispute and try it again. And sometimes they come off round two, sometimes round three, but, uh, we're not quitters. So, they keep firing them back over there. So, through the through the platform, it's very cool. One of I to me, one of the biggest myths that I run into with consumers, with clients, is, well, I filed a dispute. Yes, you did. I see it on the credit report as the whatever item, let's say ABC collection that you're disputing it and a chosen dispute, but in reality, it really doesn't do any good. Sometimes it doesn't. It's a very, you know, those are general disputes, the ones that people do. Um, our system does specific disputes. So, we're targeting a very specific reason or a reason code when we uh when they get submitted through our through our system. So, it's very it's a very different process. Thank you for saying that because like I said the the disputes that we see on the credit reports that are self-filed by consumers unfortunately when it comes to getting a mortgage do more harm than good because in many instances and that's part of the mortgage universe not the real life. If it's a collection account that's in dispute, unfortunately, that can possibly downgrade you to manual underwriting, which means that you would qualify for less money because manual is more constricted or more restrictive on the amount you can qualify for. Or a lot of times if a dispute with a balance is still there, it needs to be taken out of the dispute. If it's taken out of the dispute, it can drop your credit score. So essentially, you just shot yourself in the foot by just doing the generic or general dispute. So I always urge everybody to talk to a professional, a qualified professional. And it's a drum beat of mine where you want professionals working for you. You want professionals on your team. Yeah. You don't need to try to figure it out yourself. Credit, I always say, is a dumb game with dumb rules. And if you don't know the rules, you're you won't win. And um yeah, we always feel like um you know, it's just better to talk to a professional, have someone help you because you're right, disputes can create a false score. Yep. It tells the algorithm, hey, calculate my score, but don't count this item, this item, this item because I'm disputing those and those maybe don't belong to me. And then, like you said, the dispute gets removed and the score tanks. So part of our process is even though the client is disputing items through our platform before we let the loan officer repull credit, we confirm where the scores are. We make sure the disputes are removed so that you don't have any underwriting issues because we want that credit report to be so pretty. Oh, I can't tell you how many times I've seen those. I know the angels are singing right now. Yeah, it's very very important because the goal is to get that client loan ready, not just score ready. All of it needs to happen. Um the mortgage laid, if that's holding them back, we got to fight that one and see if we can get that done. So, yeah, it's a lot to make sure that they're 100% ready. And to be honest, um, and this will probably come as a huge shocker to so many people. Just because you have a stellar score doesn't make you mortgage ready. Correct. So that's that's a whole big gray area that so many people have no idea about because you may have a great score, but funny enough, and I see it every day and I'm sure you see it. Yes, mortgage ladies will kick you out of the running. Yes, mortgage lads don't drop your score by a lot, but the credit card leads do, but the mortgage lead, a recent one, will cause a possible loan denial. Mhm. It can do that, but a credit card lead won't. But it's going to affect your score. Right. Exactly. So, there's a lot of little nuances and factors that go into how that credit algorithm calculates things, and it can be pretty brutal sometimes for people. they can have really great scores and they have one collection pop up that was a $50 from their dish network that they thought they turned in their equipment um and they can lose, you know, 100 points, 75 points. It's crazy how it is all the time, which actually begs the next question and the next topic of discussion and that's the hidden deal killers. And we just touched on a few of them, but there is wait there is more. There are there's quite a few different things that are hidden deal deal killers. Um a firm and um CLA those can be hidden deal killers. And the reason is is because um when you open up one of those buy now pay later. We have a lot there's a lot of clients 40 something% of the people that get those end up with late. And so yeah it's crazy. And so it's a buy now pay later. But what happens is you still have to pay. You still have to pay. Yeah. It's a buy now pay later, not a buy now pay. But um that can be a score killer because what's happening is let's say you're buying a $50 item, right? And you're doing the buy now pay later. You're you're opening up an installment loan for that one item. And an installment loan um you pay it and as soon as it's paid in full, it closes. So, you ding yourself by opening and then you ding yourself by closing. And if you don't pay them on time, then you get the triple ding because you've got um you know a late on there. So, I recommend just stay away from the buy now pay later. Um because you just don't realize and if you end up with a whole bunch of them, you could have I had a girl I was just telling you before we started the show, she had like 20 of them on her credit report that she had opened up. And what she doesn't understand is that can kill her debt to income ratio. Yep. So just brutal. Yeah. So there's just a lot of different things that you have to be careful of um when you're doing credit. My recommendation is don't open any new trade lines. If you don't have to, don't do it. We tell clients that going in from the from the beginning. Does everybody listen? No. No. Cuz we want what we want when we want it. That's just how it works. Well, we are a consumerdriven and consumption driven society driven. So, one of the things that I wouldn't necessarily call it a deal killer, but I will definitely call it a mood killer is when I talk to a new client and I always ask them, "What do you know about your credit? What do you think your credit scores are?" But the one thing that literally not so much gets my blood boil but like just wants me go take a very long walk of a very short period
score is 700. Right. Right. So what people don't understand is they hear the word FICO and they think there's just one and they don't realize there are multiple. I don't even know how many. There could be 30 of them. Who even can calculate how many there are out there? But they're all different and they all take different things into consideration. I call them, you know, akin to a math formula. So there are different basically different formulations. It absolutely is. So you put in different components, you get a different result, right? For example, on your like a credit karma score, they are not going to calculate any medical collections in the score. It'll still be on the report, but it's not calculated in the score. So it's got to be a big score. Awesome. But when you pull on the mortgage side, the two fours and sevens or two fours and fives that you pull. Yep. All everything's calculated. A full seven-year history is calculated in that score. And that's why it can be so brutal because even though underwriting doesn't care about medical collections so much, it still drags your score down. Score. Yeah. For for mortgage scores. Yeah. Weren't you telling me that um Credit Karma only shows the last two years of history? Yeah. Which also affects the score. Mhm. Yeah. It's about a 2-year history. Um and there's some other little things in there, too. The way they calculate credit card utilization, like on the mortgage scores, um 30% of your credit score is your credit card utilization. Exactly. Which is huge. That's a big chunk. And so you have to be really careful on your balances and that kind of thing. We'll probably hit that subject as well, but um the scoring modules are very very different. Um so we always tell people just, you know, don't take it too seriously. Let's let's talk to your loan officer about what your what your actual mortgage scores are so that way we know what to what to work with from there. I'd say that Credit Karma is probably the worst offender in terms of the credit score gap between what they show and what we end up pulling on the mortgage side because what we pull is a mortgage specific score and like Beverly alluded to there is multiple credit score formula well credit score versions therefore credit score formulas for different purposes. I often tell clients that on the same day you can go apply for a car loan, a mortgage loan and a credit card. Mhm. And the credit scores you will get from each of the applications are going to be vastly different because different scoring models are being put into play. And if that's any indication, then what's on Credit Karma is usually as misleading. Yes. As can be. And usually it's elevated or inflated compared to the mortgage scores that we do. Correct. And you have to be careful with companies like Credit Karma because their whole goal is to sell you credit. Yes. So you might see your credit card and they'll say, "Hey, a new credit card would really help boost your score." Well, I'm sorry, Mr. Credit Karma. I already have eight credit cards, so another one probably is not going to do me any good and I don't. It's going to be a new inquiry, so it's going to Yeah, you'll get a new inquiry and it's a new trade line, so new credit is 10% of your score. So that's a little ding there. So, you have to be careful with companies like that because they just want to sell you credit. They're really not there to help you and guide you and and direct you even though they pretend to. They do. And this is there's a lot of those out there that are kind of like that, right? So, since Credit Karma is not really the thing to really pay attention to. I mean, it does give you an idea kind of sort of, but not really. Mhm. It can be as much as a 40 to 60 point gap easily from the real credit scores versus the simulated credit karma. The one thing I recommend to all my clients is checking their credit once a year themselves through the annualcreditreport.com in stereo. That is the best place. They won't give you scores. You can buy the scores, but they're useless, too. Yeah. They're they're not going to be the same. But what I like about that is you can do each bureau. Yep. um once a year. So I recommend kind of almost a quarterly thing or every four months maybe go Experian in April, you know, maybe in the summer hit Equifax and maybe in the fall hit TransUnion. That's actually a great idea because that allows you to check it through throughout the year instead of just once a year. And it eliminates surprises when you don't know who's collections, for example, and if it's a correct one. And sometimes that, you know, it is tricky because there are some collection companies that might only report to two bureaus and not three or one or one. Um but they do that just enough to mess you up so you have to pay them. But um so you do have to kind of keep an eye on that. But um if you're staying on top of your bills, um you shouldn't have any surprises if you have on-time payments. um if your medical collections are the ones that were kind of the biggest surprise um sometimes for people because they thought their insurance company was going to pay it and didn't and they didn't know and then poof there's a there's a collection. But um for the most part there shouldn't be a lot of surprises if you're paying attention to your finances, if you're using good budgeting tools. We have budgeting tools in our um s in our program for clients that they can kind of see what's going on and see each category like they can see their food and dining. They can see auto expenses. They can kind of see all of that. Excuse me. That's how I knew that I was spending too much money at Starbucks. Like I already knew, but I didn't know. No. And then um when I I did the budgeting tools and I was like, "Wow." I mean, two people, coffees every day, you know, out and um you know, it's car payment. So, you get yourself a really pretty uh espresso machine, a really beautiful one that I got and you make your coffees at home. Now, that doesn't mean you don't go out and have fun or you don't um No, I mean, the only time I go to weekends or traveling or something like that. Totally. The only time I go for coffee is usually for business because it's not that I don't enjoy a great cup of Right. cappuccino latte. But yes, we've owned an espresso machine for ages. Yeah. And frankly, it kind of eliminated on its own. It eliminated the need to go out for coffee unless again unless it's a social thing or um but you know, it's one of those things that you're trying to buy a home and you want to save for a home and you need down payment money, you need closing cost money, but yet you're throwing all this money out. At least take a break from it and come up with a plan. And then you know or you know the little monthly subscriptions for all kinds of crap and duplications of subscriptions is the and we can see all those in our in our platform too with client enrolls. They can see all of that stuff. That is amazing. M that takes us actually to a little bit to budgeting because that's probably besides credit, the lack of budget is the biggest issue I see with so many clients. And getting into that mindset, right, that you're buying a house, right? It's a huge responsibility. Let's make no mistake about it. Let's get real. It's the biggest purchase of your lifetime. Whether it's your first home or whether it's your 21st home, it's still the biggest ticket purchase in your life, right? It is absolutely budgeting is is so important and I there's a saying um 10% of personal finance is math. 90% of personal uh personal finance is behavior. And so if we just can really stop and look and see where is our money going and you know it's okay to go and have fun and go on vacation and have date nights and go to concerts and have some fun, but you also want to do it in line with what works for your budget. And like you said, especially when you're trying to buy a home, that's when you need to just really stop and pay attention to what you're doing. So so that you're you're ready and you don't have to worry about it. Once you own your home, you want to and your finances are good, you can you can loosen up your budget a little bit. But it's very helpful to have one. A lot of people I get a lot of clients that say, "Well, I'm I make all this money, but I don't understand why my credit's like this. I don't understand, you know, where my money goes." Like, I do. Let me look at your little report and I'll tell you. Um, fun fact, I think that doctors and lawyers notoriously have the worst credit. It's interesting. They uh they just don't pay attention to they're busy cards and they don't pay attention to payments and all that. It does happen. They make damn good money and they're busy. Yeah. And I get it. But in general, people I think that sometimes, not all, but I think it's a there's a good chunk of people that just aren't paying attention because it's the money is just there and they just spend and they don't Yep. but they throw it on their credit cards and they don't realize. You might people like that have a $100,000 credit limit on their credit card and they owe $90,000. Why don't you just get your debit card out, you know, do that instead? Yeah, you think you think so. Yeah. So, anybody can learn, you know, um about credit and how to budget and how to make it work for them in their situation. No matter what their funds are, you can figure it out. Absolutely. One of the more recent deal killers that kind of reared its ugly head is the student loan lates. favorite subject right now and oh god I have one right now actually that I was trying to rescue and my heart breaks because the the client literally didn't know the deferment was over right and that's a good one ended up and because the student loans unfortunately or fortunately a they don't call you when you're late unlike your credit cards b they don't report to the bureaus until you're past the 90-day mark. So, you go from 0 to 90 and that takes your score right there. And for underwriting, that's a potentially kiss of death because you go from 90 to 120 to 150 days late to collections, too. Bingo. Right. Right. And now he's in collections. And if you're in collections and you're trying to get a government guaranteed or insured loan, FHA, USD,VA, you're dead in the water because if you're not paying government debt, which the loans are, they're not going to issue you a mortgage. Yeah. And it's really interesting. There's about 9 million people that got affected by So in 2020 when COVID hit, you know, the Department of Education, they were trying to help people by taking their student loans and putting them in deferment. People were struggling. They were having a hard time paying their bills. Um, and that was that was great, very very good. They weren't charging them interest. They were just everything was just kind of on hold. But then what happened is um they decided that they were going to take them out of deferment and they said, "We'll take them out of deferment. We still won't charge you any interest, but you really need to get current. Reach out to us and let's get current." And then the Biden administration was like, "Well, we're just going to cancel all the student loan debt." And I can't tell you how many people I talked to. I said, "You've got to get this student loan out of collections. You've got to get in a student loan rehab program or something to get that out of there." Oh, no. I'm It's going to be forgiven. And I got a letter like, "Yeah, well, show me the letter." Yeah. Like literally, show me the letter. Yeah. And um so it was very confusing for c for clients and borrowers. And then what happened um uh it was in 2024, they said, "Okay, we're done. Student loans are coming out of deferment. You're going to start paying interest. You have one year to get current with us or we're going to start reporting you late." And so what happened last February, uh, a lot of people just didn't know. Like you said, the government, they're not going to reach out to you and say, "Hey, where's your where's your money? Where's your money?" They believe that it's your responsibility to keep up. And technically, it is. And it is, but a reminder does not freaking hurt. No, it doesn't. And with all the confusion of what was going on, you can't blame people for not knowing and not not knowing. I mean, back in, you know, two years ago, there was so many people that I was talking to, potential clients, who were absolutely 100% positive that their student loans were going to get forgiven. It's like, how? Yeah. Show me the paperwork. Yeah. And I know some did randomly here and there, but it was super random and super few and far between. Yes. And so now we have all of these people. There are people out there that don't know you have student loan lates right now. So if you have student loans and you haven't made payments, please call your student loan provider and get current with them. Okay. They offer workouts because Yeah. So what we do is when we have clients like that, the very first thing we do is we want to talk to them. We want to see what stage the student loans are in. If they're late, we want them to reach out to the Department of Education or AV, you know, Naviant or whoever it is and find out a couple things. What is it going to take to get current? Yep. Can I get back in deferment or can I get back back on an income driven repayment plan? Yep. All of those things will get you current. And you have to get current. You've got to stop the bleeding. But if your collections that limits your options for workouts because with this particular client, I actually hopped on a three-way call with the department of ed and that like I said, the options are at that point. Yeah. Your options at that point are a are a uh student loan. Um they call it a rehabilitation rehabilitation. They got to do the rehab. they have to do the rehab or they can do um in his case they offered him a consolidation because there was more than one. Yes. Which would basically serve the same purpose as uh rehabilitation, right? So you can do the rehabilitation, it's nine months consecutive payments and then they'll take the collections out or you can do the consolidation if you can get someone to work with you on that and and that is very helpful too. So we want to guide clients on all of those kind of things that's going on. Um, but we have seen once we know that they're like the ones that are just late right now. Um, we've seen a lot of student loans get deleted through our platform. Um, and it's case by case. I had someone that got all of them deleted. It took almost 90 days. I had one yesterday. We pulled her credit report and she had seven of them. They're all gone in 30 days. So, you just never know how long it's going to take. Sometimes we see a few of them come off and then a few don't. and one bureau will remove and the other bureau won't. But, you know, um we are seeing some really really good success with that. So, if you do have student loan lates, it all hope is not lost. We just need to come up with a plan to get you um back in good standing with them and get some of those things removed. That is good to know. That is really good to know because very helpful. The the unknown student loan collections, go back to annualcreditreport.com. Mhm. Yeah. Yeah, you'll see them on there. That will freaking kill your loan options. Mhm. Yeah, absolutely. And potentially actually, you know, not be able to save a deal. And like you said, because they don't report a 30-day late, they wait till it's 90. You have six student loans and you on each one you have a 30, a 60, a 90, maybe now a 120. I don't know how far how far it is, but I mean, you can lose 150, 200 points on your credit easily. And and it's actually another dirty secret of student loans. And I was just as much unaware originally because I had student loans like most people. Um, every quarter or every semester depending or every trimester depending which school you go to and you get student loans, they go per term. Mhm. So as many terms as you've gone to school and gotten student loans, that's how many student loans will report on your credit report. So even if you are making payments you can and you're making one payment many of them it doesn't like I was making one payment because they were all under the same program. Mhm. But on my credit report it showed up as nine different student loans. Mhm. Yeah. So it was even though it was one payment, right? But you don't know that stuff. Exactly. So if you're late report Yeah. it completely screws you over. Mhm. And then what's even worse is something that again and this is where financial education, financial literacy, so much is needed in this country at any level, high school, college, post college. When you're in forbbearance, this is a personal pet peeve because been there, done that, got stung big time. when you're in forbbearance, the normal forbearance, not the COVID one, for example. You're still acrewing interest on the student loan. So, when I went into forbearance after the '07 collapse, unfortunately. Mhm. What I owed was, I can't remember, something to the tune of maybe 24 2,600 bucks. hardship and all, a few years later, I'm back to trying to repay it. And that balance more than doubled. Yeah. And the higher your interest rate is on the student loans, the more that balance goes up. So when I pull credit and I see that your original balance was 20,000, and now you owe 40 plus. Yeah. Tell me it's not heartbreaking. I I see those videos all the time of people showing how their student loans went up and I'm just yelling at my my phone while I'm watching it. It's because of all the interest because you were in forbearance. It's not because you they're just charging you all this extra interest because they want to. There's a sign on the dotted line. Exactly. They don't just throw the forbearance at you. Read the fine print. But it's something to be aware of because that is another silent deal killer. very big mystery to a lot of people that their student loans. Oh, I'm in forbearance. I don't have to pay. Or I'm in deferment. I don't have to pay. You're still acrewing interest. And if you're acrewing interest, we have to consider that on the payment and you're qualifying. And now you don't qualify for what you wanted because you got student loans that are not on a payment plan. So you're always better off going on a payment plan. Income driven, workout, whatever. driven is great because it doesn't break your bank, right? You know, it's very very helpful for people and the application for it is online and takes all easy. Yeah, it's very very easy to do. But the forbearance is what will eventually and in many cases disqualify you from being able to buy a house because now that balance has become again 40 plus. If we have to count as 1% of outstating balance for qualifying purposes, just because you're not paying it doesn't mean we don't have to figure out a payment. Exactly. It still gets that's a payment to your debt to income. That's a car payment essentially that we just added to your debts. So check that out. Yeah. Seriously, it's the known unknowns that usually hurt people the most. And it's the tricky stuff, not the normal, I have an auto loan, I make my payment on time, or I have a credit card, I keep my balance low. Those are more tricky those things that kind of happen to people and they they're just not aware. So, exactly. Yeah. Something that we need to talk about that is another unknown is the medical collections and how those changes play out because so many people misunderstand that it's not that the medical collections are not getting reported. It's they're not reported within a certain period of time. Correct. Correct. So, if you get a medical collection, um, they can't report it for 12 months as a collection. It gives you time to work with them to get it paid down, come up with a an agreement on an amount. You can settle those things for less. Spend to insurance. Absolutely. There are a lot of times when medical offices just somehow didn't build insurance. Sure. Oh, and it's just the biggest mess. Um, you don't know. You don't You thought everything was done and squared away. one trip to the hospital, how many different bills do you get from this doctor and that doctor and everything else? It's crazy. And so, um, that's one thing that gives you time to get that resolved before it hits your report. Medical collections that are $500 or less are not reported on your credit history. So, that's helpful. Now, the CFPB was trying to last year they were trying to get all medical collections removed from the credit report. Um, but that didn't happen and so they're still going to be on there. Um, but the nice thing with medical collections is if you pay them, they have to delete it from your credit history. They don't there's no you don't have to worry about, well, will they or won't they? if you settle with them and pay it, they will remove it from your credit history and that's very very helpful for people. So they can get on a payment plan if they want to um just whatever they need and you can settle from what I understand for pennies on the dollar, right? Sure. Yeah. It can be very significant depending on the creditor and if they the collection companies sometimes buy them pretty cheap. So you know it can be 50% it can be who knows you just have to it's little case. Yeah. Be really good. You literally have to. This is one time where you really want to get good at haggling. Yeah. Yeah. That's And those of us who are not great at it. It's not fun. But I will tell you this. When a collection company is calling you, they are the meanest people in the universe. Yes. They're harsh. They're brutal. Oh, no. No. Let's use I mean, I know you're being professional and it's kind of like it's my party and I will cry if I want to say it. I'm just gonna say they're [ __ ] Correct. With a capital A. Exactly. Um, but I'll tell you this. When you call them to settle or to pay something or bring some money to the table, they're super sticky sweet. Not all of them. Well, most of the time in comparison to them calling you. Yes. Yes. Um, it's just a much better scenario because it puts you more in the power seat of talking to them. Just don't tell them you're trying to buy a house. Thank you. That's Don't tell Say I just want to get this squared away. If you tell them you're buying a house, they've got leverage. So, by you know where and they're not loosening the grip. As a matter of fact, they're going to keep twisting. Exactly. They just bad visual, but hey, there is a purpose behind it. Yes. Exactly. So, it's good to know actually that the medical collections can be deleted once paid because like I said, that's probably another biggest mystery to the regular Joe on the street. Yeah. Yeah. That's been really helpful. I think that went into place in like 2022. See, even I didn't know about him. Yeah. Well, damn. You're not a credit nerd like me, so sorry. Well, I kind of am, but I guess not to the extent a little bit. Yeah. That's why I rely on professionals once again. I try to stay a breast of all the newest and best and latest and greatest and all the changes. You're so sharp. No, thanks. But there's still things that do change and I mean things change daily to be honest in this industry and credit is really more of an adjacent one to be honest. And while I'm decently versed in it, I never claim to know it all. And that's why this conversation is happening. Correct. I can share a professional opinion. Yes. Thank you. Let's talk about the dos and don'ts of credit because that's another drum that I keep beating and sometimes I feel like it's more of a dead horse that I keep keep on kicking and not getting anywhere. Right. Yeah. There's a lot of things to consider. Just as a a regular old consumer, it's okay to have a mixture of credit on your credit report. You could have student loans, an auto loan, a mortgage, couple credit cards, you know, that's okay. The main thing is you want to always make sure that your payments are on time. if you need to set up autopay for some of that stuff, if you're one of those absent-minded people, just, you know, set up the autopay and and make sure that um you're not having any lates because that can be really brutal for you. Um the other thing is credit cards. People don't understand the power of your credit card and how valuable it is and how much it impacts your score. We said 30% of your credit score is your revolving credit. Yep. So, you have a credit card and you have a $1,000 limit. The closer your balance is to that limit, the worse your score is. So, when you pay them down, every time you pay them down, your score moves up up. Yep. The A lot of people say the rule of thumb is to keep the balance at 30%. Um, that's good, but it's not optimal. If you're really starving for credit points, $10. Just have a $10 balance. You don't want it at zero because the way the credit card the way the algorithm works for credit cards is that it's going to calculate utilization. If it's too high, bad. If it's zero, how can they calculate a utilization? There isn't any to calculate. So, the smallest balance you can put, and I always tell people, make it something fun. Like if you're especially if you're working on your credit, go on a coffee date, spend 10 bucks or whatever, however much it is, and then when you get your statement, pay it off, and then immediately go buy a cookie. I had a a lady, she said, "I like banana splits." Well, go buy a banana split, then whatever, whatever. You know, you can do something like that. I mean, you can also do like uh maybe an account that you have like your Amazon Prime or something like that. you can have it on that card, pay it off, and then it comes back on. But if you're building credit, I just feel like it's kind of nice to make it a little bit fun. Um, just because of the just the brutalness of, you know, not only do I want to get a loan, but my credit's not even dialed in right now. Like, I am so I'm not even on the first rung of the ladder and I'm so stressed out because I'm here and how am I going to get to there? And so I try to tell people if do do something just a little bit fun but keep a very small balance just on one of them. It doesn't even have to be all of them. The flip side I tell people too it's like I have quite a lot lately of clients who are doing the right thing financially. They're paying off their credit cards every month. Awesome. Yeah. But guess what? when you're paying it off every month and that well that payoff corresponds to the reporting to the bureaus that's a whole other trip right then it basically shows your card always at zero so the bureaus are not picking those scoring model rather is not picking it up as activity because it's always at zero yeah so there is no activity you lose points where you think you're doing well by paying it off so I started people started I started telling people a couple years ago that hey when you want to pay that card off. Stop it. Leave five bucks. Leave 10 bucks. Leave something. I get it. You don't want to pay interest. I freaking get it. It's fine. Fight that urge. Yeah. How much interest are you going to acrew on five bucks or 10 bucks? Exactly. Like really something small. So just let it roll. Use up the card. Pay I mean up again, you know, below the 30% threshold. Roll it down to 10 bucks and let it roll. Do not pay to zero. a lot of people that utilize their cards a specific way to get the points. So, they put everything on the card and then when they get the bill, they pay it all off. So, yeah, you want to try to leave a $10. If you're doing the method where you're keeping the balance small all the time, then like I said, you don't want it to be zero when you pull credit. So, if you pay it off that day, you turn around and you go charge something to it. That way, you'll never have that that zero. You'll always have something small. It's amazing when I run the credit simulators because it's a professional tool that we have access to. Uh consumers don't. Loan officers do. I don't know about all loan officers, but I know we do specifically. You'd be surprised when I show when I get on a screen share with a client. Mhm. Showing the credit simulation and showing them zero versus 10 bucks. What a difference in the score it makes. I've had people just It's amazing. We created a plan, put $10 on your card. They're like, "Huh?" Yeah. I know your plan didn't It's not logical. Yeah. You don't have to pay anything. You have to add something. And the other thing I want to say about credit cards that I think is really important that people don't understand, when you pay off a credit card, don't forget that there's interest still sitting in the background waiting to be added back on. So, you owed $300, you paid it all off, but there was maybe $15 in interest that didn't get added. Always go back and check the next month to make sure that that's paid off because I can't tell you how many times people say, "I paid that off." It's the statement balance versus current balance. Exactly. When you can test that by calling in Mhm. into any automated service on any of the credit cards and it will literally tell you when you if you go into the automated payment system, it will pay tell you what do you want to pay. Do you want to pay the minimum balance? Do you want to pay the statement balance, which is basically last month's money? or do you want to pay the current balance or any other amount? And there's always a difference between the statement balance and the current balance because that's that's that little interest kind of sitting there waiting to come back on. Something else and that's a great point actually and something else that came up recently on multiple occasions. So it's another trend that I'm not liking. Like not every trend is your friend, right? um is now I've had multiple people tell me that on the cards with the charged annual fee. Mhm. They thought their cards were zero. Yeah. They weren't even looking at was and especially now with the paperless BS. And to be honest, I get the idea behind paperless and now I I know you have to pay now for paper statements. It's like a buck something a month or whatever, a buck 50 a month. So it adds up especially if you have multiple accounts, right? But with paperless, it's so easy to not see a statement, to miss an email notification where your annual fee hit, right? You had no idea you missed the notification. You didn't pay it, and now you have a 30-day late or a 60-day late based on that annual fee on a card that you thought you were at zero at. Yeah. Because you haven't used it for a long time. It's been zero, right? Exactly. But then you had your annual fee credit one. Not to be specific. Not to be But yeah, they're famous for that. And they won't they won't um wave those fees. They're there. No, they won't wave them. And one of the things that I've seen people fall into the trap of they will call the creditor. They will call the credit card company. And the credit card company will do like a onetime forgiveness and basically wave the late fee, but they will not remove the reporting. Right. And on the mortgage side, I mean, I get it. You get hit with like a 20, 30, $40 late fee. It it's kind of significant. Mhm. So, you know, hearing that you're going to get that credited back to you, woohoo. But it does not negate, does not remove the reporting to the bureau, which is more detrimental to your credit score than that 30, 40, 50 bucks that you get back as a refund of a late fee. Exactly. And that's the piece that most people don't understand. So, I often instruct clients when you call to ask for a removal, don't ask for a removal of a late fee. Mhm. It doesn't always work, but it's worth a shot. It's always If you don't ask, you don't get. So, I am a big fan of asking. Just find out. If they say no, I always say, you know, move up the food chain if you can a little bit too because sometimes when you call in those call centers, those people don't have any authority or any ability to do anything over and above maybe accept your payment or wave a fee. So, if you really if you feel like it was really an error, you know, on their part, ask to speak to a supervisor and just kind of move up the food chain until you get somebody that maybe can help you. No guarantees, but I mean, if it's worth the fight, it's also worth asking for a supervisor if you ended up with a call center somewhere overseas. Mhm. No names. Yeah. No, no authority whatsoever. That and they also don't they really don't listen to what you're asking them. They're reading a script. They have a script. They they just read the script on the screen. So to actually have a semi- intelligent conversation, just ask for a supervisor out of the gate. Don't waste your energy. Don't get aggravated. Been there, done that. That doesn't help. Nope. It doesn't help. So escalate. Ask for a supervisor. And 90% of the time, you will be transferred to somebody states side that that will actually have some authority to be able to really answer your question or at least understands what you're asking, is not reading the script back at you. Exactly. I know we talked a lot about the negatives and the fixes to the negatives, but what are the credit quick ones that somebody could score if they knew what they were doing or if they knew what to ask for? Oh, to build credit a little bit. Build, fix, raise, build, fix. Okay. Well, one thing you can do is if you have some credit cards, you can always reach out to the creditor and see if you can get the credit limit increased. that will help your utilization. So, let's say you have a $500 credit limit and you owe 400, ask them if they'll increase it. If they increase it to $1,000, you went from 90% utilization to 60% utilization or 40%. So, you know, things like that can help. If you're very limited on credit that you have, maybe you have just one credit card, you haven't had it very long, you can talk to a family member about getting added as an authorized user, but I want to say it's one of my favorites, but there's so many caveats. It is it's a great way. Now, you're not responsible for the payment. Yay. You get the benefit of being able to use the card if they send you one or somebody's established credit history with a caveat. Exactly. you get you get their credit history and if it's good that's awesome and you've got some great credit history but if they have a late that's going to hit your credit too. So, I tell people, or if their utilization is high, same thing. It's not going to help you. It's going to hurt you. If you're going to get added, I always say make sure the card is a few years old, make sure it has a perfect credit payment history, and make sure that the balance is low compared to the credit limit. That's a perfect scenario. Make sure it's somebody that you trust, a family member, your spouse. Maybe you pay the bills at home and you'll pay the your wife's credit card or whatever. you know, just make sure it's somebody that you can really really trust um to do that and that will definitely help build your score. And then after you close on your loan, you can get removed from that if you want to because at that point u you're not itching for credit points. Your credit should be pretty dialed in by then. Um so that's something you can do after you close on your loan if you're scrambling for credit points. So those are a couple helpful things. medical collections, you can always call and settle those. Um, you have to be really careful about other types of collections. You don't want to just pay collections. People think, "I'm just going to pay everything that's on my report." I roll. Yeah, I know. And so, but what they don't understand is collections don't care what the balance is. They don't care if it's a zero dollar. They don't care if it's a million dollars. They go by, the date of last activity. And so if you have a collection, maybe it's been on your report for two years, they haven't reported it for two years. It's just sitting there just kind of numb doing nothing and you and 200 bucks, right? You think, I'll just pay that and that's no big deal. I can do that. You pay that, it changes to zero, and then all of a sudden it reports to your credit history as a zero balance collection and it just makes it newer and that and basically it starts the clock ticking. So it it treats it like it's a whole new treat. So, your scores take literally for about 6 months. So, there's no if if it's not a collection company that will delete from the credit history, then just leave it. It's not going to do you any good. And it's hard to say to people because they don't understand. They don't. It's like, but I did a good thing. I paid it off. Oh, God. You just screwed yourself over. Yeah. Exactly. By doing a good thing. Yeah. And that's part of like what I like about like our program at UCLA and what we do is instead of people having to dig a bunch of money out of their pocket to settle and pay and do all of this kind of stuff, get on board with us and let's see what can get deleted through our our process, the dispute process that they launch because what if I I did have a girl who was going to pay a $6,000 collection and I said, "Why don't you wait? Let's see if it gets removed first." and it got removed and she was so happy that she didn't have to dig that out of her pocket to pay that. So that is amazing. If you have a lot and you have a lot going on, if you have one thing, pick up the phone and just do it. But if you have a lot of stuff going on, you need to you need more help than just one phone call because you you don't want to try to figure all that out yourself. It's hard. I mean, I can say from personal experience because yes, I've had my share of credit issues, especially after the downturn where I was trying to dig out of a hole desperately. And those conversations with collection people, God, they're not fun. And even though I know the game, I know how to play the game. Mhm. It is so hard with the emotions involved and the embarrassment and the shame and the frustration that it is hard to stay calm. It is it is hard to actually stay reasonable because they are pushing your buttons right big time and I think that's part of their process and that's one of the huge downsides of trying to DIY it. I mean, I can, but anybody can if they if they want to, but you know, and you mentioned something, too, that I I want to touch on about it can be embarrassing, right? Because here you are, you're an adult. Yep. And you've got all these issues. I will say, and I say this to clients all the time. Look, the rearview mirror is little for a reason. Look at the windshield. Look out front. We don't need to keep looking from what's behind us because that's not helping us any. People get into credit situations for all different reasons. A medical situation, a loss of a job, a loss of a loved one. Things happen to good people. Absolutely. Maybe our job is not to j to judge. Our job is to help. Absolutely. And that's what I tell people all the time. I say, "Let's just let's forget about what happened. Learn from it." Yep. But don't dwell on it and keep dwelling on it. Let's put one foot in front of the other now and let's change some of the behaviors. Let's change some of the issues around the credit. And once you get dialed in, because they'll learn you they'll there's an education process that goes along with this and you'll learn and you'll if you're if you stick with it, you'll never be back in that situation again and you'll never have to stress about your credit again. But you got to pay attention to what's going on. Exactly. You got to you got to do it. So yeah, Beverly, thank you so much for this conversation today. Thank you for flushing so much amazing information out that I've learned every time I talk to you I learn something new. Credit while it is part of doing mortgages the intricacies all of the behind the scenes is not necessarily my lane per se and that's where you and you call come in and love working with you guys. Thank you. And really appreciate the expertise and the professionalism behind it. Thank you. Thanks for having me today, Ella. This was really fun. Thanks. Absolutely. My pleasure. And I'll see you in the next one. And don't forget, if you want your credit looked at if you want qualified advice, send us a message, leave a comment. We will respond and we'll put you in touch with the right professionals to help you out in private without judgment. Correct? See you on the next one.