Credit Conversations with ARC's Mike Olden

Thanks for listening to Mortgage Connects, an MGIC podcast. If you have questions, comments, or want to get involved, send an email to mortgageconnects@mgic.com.

Looking for even more expert insights? Check out our mortgage industry content portal, Mortgage Connects knowledge hub. Subscribe today so you don't miss out on the latest! Subscribe

Transcript

Concepcion Guerrero (00:04):
Welcome to Mortgage Connects by MGIC, bringing you the latest insights from top mortgage professionals around the industry. I'm your host, Concepcion Guerrero. Today's podcast is a little different. Recently on a special MGIC webinar, my colleague Alexis Panaro had a conversation with American Reporting Company's Vice President of Sales and Education, Mike Olden, where Mike's insights were so good that we wanna share the highlights of that conversation with you today. You'll hear about credit related topics like the difference between soft and hard increase, medical collections and student loans amongst others. So without further delay, let's take a listen.

Alexis Panaro (00:47):
So let's start with the basics here. How important is it to discuss your borrower's credit before pulling a credit report?

Mike Olden (00:53):
Well, I, I feel it is. And again, this is, uh, you know, this question comes up, uh, a lot from clients, uh, ARC's clients and colleagues and such. I feel it is important to get an idea of what you're looking at before you pull the credit report. And I also recommend to consumers, before you start working with your loan officer and your realtor, take a look at your own credit first and, and be familiar with what's reported at that time. Uh, last Saturday, I just, uh, uh, I, I joined, uh, a client, uh, at a, uh, uh, here in Seattle for a state bond home buyer class. And we always asked the question at the beginning, how many of you have seen your own credit report in the past 12 months? Well, out of about 20 students, there were only, I think, three that had looked at their credit in the last 12 months.

Mike Olden (01:54):
And why I feel it's so important for consumers, uh, to, to, to review their credit and for professionals to ask a few questions about it, is so we avoid surprises. Nobody wants a surprise, especially on a purchase where there might be multiple offers. And here in Seattle still multiple offers. We don't wanna see your, uh, your client kind of get pushed down the line because of something that's, that's not anticipated. So, uh, I think, uh, the best place to go for your clients to look at their report for free is annual credit report.com. And we're gonna provide a, a list of resources for you, uh, following this, uh, including that site. The name implies it's annual, but because of the pandemic consumers, and we're all consumers, we can look at our, our credit report for free every week through the end of the year. So that's a, that's a great, uh, uh, a great resource for all of us as consumers.

Alexis Panaro (03:07):
Awesome. Thank you. Um, so again, that's annualcreditreport.com. I know that that question comes up a lot. It does. Uh, I did not know it was weekly, so that's awesome. All right, well, speaking of credit scores, what factors make up a credit score

Mike Olden (03:20):
That here, here, here at ARC, the, there are a couple questions we receive almost on a daily basis from our clients and even from borrowers, and we receive a lot of borrower calls after our clients pull their credit report. Why did I get these scores? How can I improve them? Those are the two most asked questions. But let's take a step back and understand what, what are the factors that impact our scores? And whether we're looking at FICO scores, which are used universally today in the mortgage industry, or vantage scores, which are used in some other lending arenas, and just last fall, were approved for future use in our industry. They're pretty much the same. Number one, are we making our payments on time each month, which means never more than 30 days past the due date balances? Uh, and, and in particular, uh, credit card balances.

Mike Olden (04:24):
You know, what's the proportion of balance to credit limit inquiries for new credit, length of credit history, uh, how long have we been using credit? And then the mix of credit. What types of accounts are on our file, mortgage installment, auto loan, student loan, credit card. Those are the five key factors. And on the follow up to this slide deck, we're gonna include, uh, a, a terrific, uh, graph, uh, from FICO, uh, and an overview, uh, a link to, to their educational site. Uh, it goes into far greater detail than we have time today about those five key factors. But I think what we want to educate borrowers about, I feel our are three, make our payments on time each month, never more than 30 days past the due date. Keep balances as low as possible, uh, especially credit card balances. And a good rule of thumb is below 20 to 25% of the credit limit. And then once they start working with you and barring an emergency, no additional applications for credit, uh, let's just focus on that mortgage transaction and get that completed. Uh, we don't need borrowers driving up to the signing date in their new car or going out and buying new furniture before you've closed their loan. Many of you know, you might pull a, uh, a, a refresh credit report prior to closing. You're looking for inquiries, new accounts, higher balances, a negative item, a missed payment. So, uh, we want to focus on, on those key factors.

Concepcion Guerrero (06:17):
Hope you gained some valuable insights from the short clip. And if you're interested in listening to the full recording, visit mgic.com/training. Now, I wanna thank you all for listening. For the latest industry insights, subscribe to Mortgage Connects on Apple, Stitcher, Google Podcast, Spotify, Amazon Music, or go to mortgageconnects.com.