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Tulsa Mortgage : Podcast 41 – Part 2

Tulsa Mortgage Steve: What they’re doing is, they want to make sure you don’t call us and get a lower rate. [laughs] I use that example, because that someone has good credit. Someone who has bad credit is more likely to believe that, because here’s this situation when you have bad credit or borderline; “Hey, man, I barely got you approved, so don’t go getting your credit pulled by a bunch of other people, because your score might drop and then you can’t buy.” It’s a fear tactic. Car dealers, sales people do that. Mortgage people have done in the past. There’s actually laws that have been passed that allows consumers to shop for big ticket items like cars and mortgages. What Tyler was alluding to is they’re going to take our inquiry and whatever inquiries.
You don’t want to go apply for auto loans with 15 different car dealers, and apply for a credit card, and a personal loan, and a mortgage times six, necessarily. If Tulsa Mortgage you applied with three different mortgage companies this week in 30 days, they’re going to take all three those inquiries, they’re going to lump them together and count them as one. Boom. Little known fact; People didn’t know that. Just be aware of that. That people use that as a sales tactic to make sure that you don’t shop and find out that there may potentially be a better rate, or better terms, or a better deal out there. I’m going to talk a little bit about specifically the thing that we see the most on credit is credit cards and what we call your revolving account information.
One of the things we see a lot is we have somebody that maybe is limited on credit, maybe they have not the best credit scores, maybe they don’t have a lot of established credit and they don’t have any credit cards. If you don’t have any credit cards, then revolving credit, department store accounts, your Visa Master Card, credit cards represent 30% of your score, right, Tyler?
Tyler: Right.
Steve: 30% of your score and so, if you have a car payment which is considered an installment loan and maybe you’ve got another personal loan which is also going to be considered an installment loan, and maybe even you’ve got a mortgage, then you’re going to get a score. You pay on time, your credit scores are going to be what they are, but if you don’t have revolving, I tell people this all the time, it’s equivalent of “I’m in school. I’m trying to get a 4.0, but I didn’t take Tulsa Mortgage math.” There’s no way you are going to get 4.0, because you don’t have the subject. It’s not there, so it’s the same thing with credit scoring and with revolving credit or credit cards.
Credit cards aren’t bad. They use them to determine your score and it actually represents 30% of your scores, so what we do many times to get somebody a boost in their credit score is just to establish a credit card, right?
Tyler: Right.
Steve: Open up a card, because here’s the thing, that 30% is derived from, Tyler, your available credit versus your balance. So if you have a $1000 limit on all of your cards and you have a $300 balance, your ratio is 30%. The ideal number is, write this down, 21-23%, 21-24% of your available credit. So what that means is, if you have $1000 limit, you don’t want to carry a balance higher than $240, and that will give you the optimum score.
Now, if you have a balance of $500, you’re still going to get some credit score for having revolving credit, you’re paying it on time, but if you pay that balance down from $500 under 240, you will get a boost in score. We just had a — [unintelligible 00:11:38] right now? The guy’s got a score in the low six hundreds. We had him actually pay off, and I would never advise doing this unless you talk to a lender and talk to an expert like myself or Tyler, is I had him pay off two credit cards. They were collections. They were actually past due, but when I did a — we have a — we call it a [unintelligible 00:12:03] simulator, and when I did the [unintelligible 00:12:04] simulator, it told me if he took the balances on those accounts to zero, that he got a 89 point boost in his credit score.
Tyler: That’s big.
Tulsa Mortgage Steve: 89. He is in the low six hundreds and he goes from the low six hundreds, and he ended up — One of the cards didn’t report appropriately, so he ended up going from the low sixes up to almost a 660. Just from paying these two cards, and he settled them, so he actually — One of them he owed five grand on the other one he owed four grand on. He paid about 1,500 bucks for each one of them, so a total of about three grand. He got them paid and he got about a 50 point jump in his credit score just by paying those credit cards off.
You can be very specific and you can use those revolving accounts to really get a boost in score if you need it and so, if you’re border line on credit and you’re not sure, then there’s one or two things might happen is you might not have any revolving credit in any credit cards or you may not be utilizing it correctly.
We see it all the time. How many credit cards do we pull in a day? A bunch, but I bet you, if I went in — maybe we ought to do this, and we’ll talk about it in our future podcast, is keep a tally of how many times we pull credit and it says two things. “Too many enquiries in the last 12 months,” which is crap and everybody’s credit report says that. 99% of credit reports say. You’re using your credit, so I don’t know how you’re not supposed to have an enquiry.
Then the other thing is “lack of recent revolving account information,” or “proportion of balance to credit limits on bank revolving accounts is too high.” How many times do you see that, Tyler?
Tyler: Every day.
Steve: Every day. It’s not bad. It’s just that, when you’re in the process of applying for credit, buying a house, car, or whatever it is, there’re just things you can do if you want to optimize, as I would call it, your credit score, because it‘s not necessarily that you’re not going to qualify. It’s just your credit score is going to, in many cases, although on your government loans or FHA it’s not as sensitive, but on a conventional loan it makes a big difference.
Now, the way that a lot of lenders, if you are getting your mortgage in Tulsa Mortgage from Steve Currington, you will find we just locked a girl yesterday, two days ago, right? She closed on Friday and she has a perfect credit, score and she’s doing FHA, and she — we really reward the people that have high scores. Every lender does, because it’s a low risk.
So she got an incredible interest rate, because of her high credit score, but it’s less of an impact on your rate if you doing FHA versus conventional. Now, if you’re doing a conventional loan, the lower your credit score is — What happens, Tyler?
Tyler: The higher the rate.
Steve: The higher your rate. It just is what it is, so you want to get educated depending on what type of loan you’re getting and what that means for your credit score, and what that means for your rate. If your credit score is in the lower range, you can really get focused on getting with your Tulsa Mortgage lender and find out what needs to happen in order to get that score to where it needs to be.
You can find more information about credit scores, and myself, and Tyler, and what we’re good at, at our podcast which you’re listening to now, but if you got to our podcast page, which is stevecurrington.com, you can find it on there and you can find lots of resources there. You can also go to tylerwhyburn.com. You can go to getqualified.com. That’s all we’ve got for you today, folks. Thanks for listening to The Steve N’ Tyler Show.
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