UltraFICO®An Initial Discussion

While this new alternative “credit” algorithm is not set to roll out until sometime in 2019, included below are my initial thoughts based on the BIAA press release and the below referenced articles from the Wall Street Journal, Consumer Affairs and USA Today.

Experian, FICO and Finicity Launch New Ultra FICO Credit Score

With Ultra FICO® Score, a consumer grants permission to contribute information from banking statements, including the length of time accounts have been open, frequency of activity, and evidence of saving, which can be electronically read by Finicity and combined with consumer credit information from Experian to provide an enhanced view of positive financial behavior.

Experian, FICO and Finicity estimate this new score has the potential to improve credit access for the majority of Americans and is particularly relevant for those who fall in the grey area in terms of credit scores (scores in the upper 500s to lower 600s) or fall just below a lender’s score cut-off. Consumers who are relatively new to credit with limited history or those with previous financial distress that are getting back on their feet stand to benefit the most.

This new system will roll out next year. Initially, the most likely use will be for beginner credit cards. The UltraFICO® is an add-on feature some lenders will offer to enhance a prospective borrowers credit profile and score.

The prospect must provide access for a one-time snapshot of their banking/bill paying account. The data analyzed will be regular payments of rent and utilities. The expected average balance in the account should be $400 or more. There should be no overdrafts or NSF checks in recent months. It’s expected there will be more income than outgo to the account. Discussed is that the checking/bill paying account must be established for some undefined time.

The above referenced WSJ article captures the essence of what the new credit score enhancing tool is expected to be. It will not, in the immediate future, be used by mortgage lenders. I expect that it may be used by some auto dealers.

UltraFICO® score takes into account how much money you have in the bank

According to the Journal report, the new UltraFICO® would be a tool for consumers whose credit scores are not that great. If they have a few hundred dollars in the bank and have had the bank account for a number of [undisclosed] years without overdrawing they might see their credit standing rise.

But in practice, the new formula is likely to be of greater benefit to consumers who already have high credit scores because they are the consumers most likely to have accumulated some cash in the bank. Consumers with low credit scores are often in that situation because they lack the extra cash to meet an unexpected expense.

Based on practicality and experience, I believe this Consumer Affairs writer is off-base in his analysis of who this will help the most. Someone with >760 FICO® Scores has no need for a bump of a few points whereas someone with a 620 score most definitely has the need. We’ll soon figure out just how many months one must have $400 or more in their account to gain the bump.

New FICO system could lift credit scores by including checking and savings history

Finally, from the above referenced article from USA Today: “...it remains to be seen how fast lenders will adopt this supplemental scoring system. For instance, FICO’s latest credit score – FICO 9 – was released four years ago, but the previous version of the score – FICO 8 – remains the most widely one used.

Consider the fact that neither FICO 8 or 9 are used in the mortgage lending industry. UltraFICO® may be used by certain credit card issuers as well as some vehicle lenders. We’ll know more next year.

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | October 29, 2018 | October 30, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

What Are the Costs of Aging in Place?

According to an AARP study, 90 percent of people age 65 and over would prefer to stay in their own homes as they get older — and not go to a nursing home or assisted living facility.

But if you or your parents are buying, building or renovating a home to accommodate the needs of a loved one, what kind of costs can you expect to incur?

Source: What Are the Costs of Aging in Place?

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | August 17, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

Free Credit/Security Freezes – All 3 Bureaus – Free Unfreezing

Thanks to a new federal law – the Economic Growth, Regulatory Relief, and Consumer Protection Act – consumers will be able to contact each of the three major credit reporting agencies and direct them to place a free freeze on the consumer’s credit file. By restricting access, a credit freeze makes it harder for identity thieves to open new accounts in consumers’ names.

Not only will it be free for consumers to freeze their credit, but they can lift that freeze for free, too. And the law requires the credit reporting agencies to do it in a hurry. If a consumer asks for a freeze online or by phone, the credit reporting agency has to put the freeze in place no later than the next business day. If the consumer wants to lift the freeze…that has to happen within an hour.

This new law is effective September 21, 2018. Click here for more.

The New York Times published good article on the subject. “Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.https://nyti.ms/2Mw01rU

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | August 16, 2018 | Updated September 16, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

FHFA, FICO & Political Gibberish = Economic Risk

FHFA on credit score delivery: forgotten lessons

Multiple versions of a credit model may lead to added cost and complexity

  • While FHFA states that new scores provide “only marginal benefits,” they go on to say that there are “compelling reasons” to change. It is not clear how that conclusion is reached.

  • They ask market participants for cost estimates, and state that the GSEs will require 12-18 months to implement changes, but do not provide cost estimates for the Enterprises.

  • They acknowledge that there are risks associated with the proposed changes but do not provide a structure for ameliorating these concerns, or a cost estimate of implementing it.

  • They ignore the potential risks associated with the credit loosening implicit in the new VantageScore model that stem from more relaxed trade line histories and increases to systemic risks associated with its adoption by lightly-regulated nonbanks.

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |April 30, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

JUMBO Reverse Mortgage Facts

JUMBO Reverse Mortgage Facts

  • Borrower(s) minimum age of 62
  • SFR and 2-unit properties – minimum loan amount $850,000.00
  • Condos valued over $500K – spot approval on a case-by-case basis if not FHA approved
  • Maximum loan amount is $4 million
  • No upfront or monthly mortgage insurance premium
  • Mandatory Counseling required – specified agencies only
  • Available for both refinance and purchase transactions
  • Financial Assessment underwrite performed on all applicants

Examples by Age and Purchase Price of the Proprietary Purchase Reverse Mortgage

SFR & 2-Unit | Purchase Price Age Down Payment HomeSafe® Proceeds
$ 850,000 (Min) 62 $ 589,594 $ 260,406
74      493,799      356,201
80      445,342      404,658
88      389,674      460,326
$4,000,000 (Max) 62 $2,841,978 $1,158,022
74 2,419,353 1,580,647
80 2,206,203 1,739,797
88 1,959,978 2,040,022
Condominium
$500,000 (Min) $4M (Max) 62 $ 372,490 $   127,510
74     316,140       183,860
80     287,720     212,280
88     254,890     245,110

These examples are for illustration purposes only.

  • The borrower(s) may retain up to four additional FINANCED properties
  • New-builds must have the Certificate of Occupancy issued prior to closing

This Proprietary Purchase Reverse Mortgage is not associated with the FHA reverse mortgage (HECM) program

NOTICE: This is not an offer to extend credit

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | April 9, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

New Credit After Chapter 7 Bankruptcy

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New Credit After Chapter 7 Bankruptcy

This post is written specifically for those who’ve recently been granted a Discharge from a Chapter 7 Bankruptcy. Chapter 7 is type of bankruptcy where the debtor does not make periodic payments to a bankruptcy trustee for 3 to 5 years.

The first step is to establish new credit in a strategic manner. Of course, you must also use your new credit in a responsible manner. In some cases, it is necessary to get your credit reports corrected to establish new credit. We’ll address both steps below.

Step One

First, when establishing new credit. Ignore well-meaning advice to get a $300/500 secured credit card from just any bank that will open an account for you. Start with joining a credit union. With most credit unions, there are no fees. Also, there are no annual fees and no-cost to use many ATMs all over the USA. Take a moment and read my post on credit unions.

In searching for the credit union (CU) to be the fit, do your homework. Call or stop in and ask about secured credit cards (this will lead you to someone that can answer or can get answers to your questions).

Now that you have found your CU, open your Share (savings) account. Save $1,000.00 or more. Secure this savings against a Visa or MasterCard issued by your credit union. To build good and excellent credit scores, use no more than 20% of your credit limit. Ever. For example, on your $1,000.00 credit limit, never have more than $200.00 in use. For best results, payoff the balance monthly. Your higher credit scores get you rewarded with lower interest rates on home and auto loans, insurance, credit cards and better employment opportunities.

Most credit unions will offer an unsecured card after you have established your good credit management practices for one-year. At this time, your savings securing your card will be released and another card issued. Your credit history will follow the new account.

Next, open 2 or 3 lower limit credit card or other revolving accounts (department stores, Internet stores, gas cards, etc.). The key is to have 3 to 4 revolving accounts open and in use occasionally. Do know that credit is a use it or lose it commodity.

On selecting the credit accounts, don’t bother applying to any creditors which were listed in your bankruptcy. Perform a Google Search such as this: “secured credit card + bankruptcy”. In your screening process, avoid those with an annual fee.

After about 9-12 months of opening the accounts as above discussed and using them as above discussed, you should have actual lending scores (FICO® Scores) in the 700-720 range. These techniques have helped many clients over several decades.

Step two

Not everyone will need to take step two. All should read the info in step two.

In order to build new credit after bankruptcy, you may need to get corrections made to one or more of your three credit reports to reflect only accurate information. By accurate information what we mean is to make sure that all your bankrupted accounts reflect a zero-balance due.

Understand that a bankruptcy discharge does not remove your previous credit history from your credit reports. Time does. Seven years from the date of last activity (last use or last payment), the account will be removed from your credit report.

Keep in mind that the older a negative item on your credit report is the less it counts against your credit score. Also, the longer you have information reporting on your credit report, the better it counts for your credit history which results in a better credit score.

As a rule of thumb, by the time the case is Discharged, several months following the filing of the bankruptcy case, most creditors will have reported the accounts as included in bankruptcy. In some instances, a creditor fails to update their record with the credit reporting agencies (CRA).

So, in these instances, let’s talk about getting the incorrect items corrected. Often, the dispute process is neither quick or easy. Understand the CRAs are not your friends. Use caution with what you say or write to a CRA. For specifics on how to dispute information on your credit reports, I suggest you read my blog titled: Credit Repair/Dispute Basics.

A word on entering comments to clarify some situation or another; such comments do not do anything positive for your credit scores or your credit history. It is of no benefit to you to make comments. Everything you say can and will be used against you. This is one of those times to consider the Miranda Warning along with the idiom less is more. When and only if necessary, you may address individual items as requested by your loan officer for an underwriter. Open or unresolved disputes on your credit report(s) can keep you from gaining credit approval.

To begin correcting your reports, you need to get a copy of each of your credit reports. There are three credit reporting agencies: TransUnion, Equifax and Experian. You can get a copy of your three credit reports once a year for free via the Official Site authorized by Federal law: http://www.annualcreditreport.com. It does you no good to only review one or two reports. Review all three of them annually.

For mortgage approval (purchase or refinance), two (2) years following your Discharge, you will be eligible to apply for an FHA, VA or Rural mortgage loan. Four (4) years following your Discharge, you will be eligible to apply for a conventional mortgage loan.

Contact me below or via Quora with specific questions.

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |April 6, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to post and link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

Changes to Credit Reporting

Credit Reporting Changes – Effective by June 8, 2018

Pursuant to a 2015 settlement between the New York Attorney General and the three credit reporting agencies, important changes are on the way to consumer credit reports.  An additional agreement between the three credit reporting agencies and another 31 state attorneys general ensure the changes will be nationwide. The changes are being made in three phases with the most significant and final phase which must be implemented by June 8, 2018.

The most momentous impact for the largest number of consumers concern medical collections:

  • The credit bureaus – Experian, Trans Union and Equifax must reject any report of a collection that is not at least 180 days old. Thus, giving the insurance company or consumer time to pay the bill before it is reported as a collection account.
  • Medical collections which are paid, or which are being paid through insurance will be removed or suppressed from credit reports.
  • Collection accounts which have not been updated on the report for six months must be removed or not factored into the scores.
  • The credit reporting agencies will remove any collection that did not arise from a contract or agreement to pay by the consumer. This includes, among other items, collections for traffic and parking tickets or library fines.

This will have a substantial impact on a consumer’s credit scores. Any collection account will negatively impact a consumer’s credit score by at least 100 points. Not having those collections factored in or having them removed provides opportunities for many consumers that could not previously qualify for home or vehicle loans as well as credit cards. This will also help consumers obtain lower insurance premiums, allow for greater employment opportunities* and possibly even better romantic matches.

Authorized user(AU) accounts are also affected. The credit bureaus will not allow AU accounts to be reported unless the date of birth of the AU is provided by the creditor. So, going forward, anyone adding an AU to their credit cards will need to supply the user’s date of birth before it will be reported on their credit report.

The bureaus must now communicate with each other regarding mixed files. If one of the credit reporting agencies receives a dispute from a consumer that their file is mixed, the credit bureaus must now use specially trained staff to communicate and globally correct the problem.

The credit reporting agencies can no longer reject a consumer’s second dispute of any account because they had a previous dispute of the account in the last three years. This does not apply to disputes made by credit repair organizations (CRO) on the behalf of a consumer. CROs are infamous for entering multiple disputes for consumers on the same accounts monthly.  All but the first dispute made by a CRO will be rejected.

All changes will be implemented on all scoring models and must be in place by June 8, 2018. These changes are long overdue and will have positive impact on thousands of consumer reports.

Observation from Realtor.com August 15, 2018: “…the [credit bureaus] agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company.”

*Colorado prohibits the use of credit reports in determining employment eligibility with certain exceptions.

UPDATE from the NY Federal Reserve

A Cleanup, Not a Purge
All in all, the changes in credit reporting prompted by the National Consumer Assistance Plan have resulted in an $11 billion reduction in the collections accounts balances being reported on credit reports. A total of 8 million people had collections accounts completely removed from their credit report. However, collections accounts do indeed align with other negative events and the cleanup of collections accounts had the largest impact on the borrowers with the lowest scores. These borrowers will certainly benefit in the long run from the cleanup of their credit reports, since higher scores are associated with better access to credit, to the job market, and even to the rental housing market. But the immediate impact of the removal of collections will be muted if the beneficiary’s credit record continues to be tarnished with other negative information.  Click here for the full report.

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Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | February 19, 2018 | Update September 12, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.