The Ultimate Guide to Credit: Expert Tips from Credit Ninja Sue Buswell

Mike Mills (00:00:13) - Hello. Hello, everybody. How are we doing today? So I got a question for you. Do you lie awake at night wondering if your credit score is secretly plotting against you? Sometimes. Are you ready to unravel the secrets of a credit and uncover the tricks to unlocking the perfect credit score? Well, folks, fasten your seat belts because we've brought in the ultimate credit mastermind for this milestone 70th episode. So welcome to the Texas Real Estate and Finance Podcast, where we unveil the keys to financial empowerment one episode at a time. I'm your host, Mike Mills, a mortgage banker in the heart of Dallas-Fort worth. And today we are diving deep into a topic that affects every aspect of your financial life your credit score. Now, before we end the hidden hacks of your credit report, a quick reminder if you find value in these conversations, please don't forget to hit the subscribe button on your podcast platform. Or you can check out my YouTube channel at Mike Mills Mortgage and Finance for more content. Subscribing guarantees that you never miss out on an information that could help you take your real estate business to the next level.

Mike Mills (00:01:12) - Now, our guest today isn't just a credit expert. She is a bona fide credit ninja, Jedi master, or whatever superlative you want to use. She's got a staggering 35 years of experience in the mortgage credit arena, and she is here to share with us her wisdom and reveal the hidden treasures of the credit scoring universe. I'm thrilled to welcome Sue Buswell to the podcast. Sue, how is life treating you today?

Sue Buswell (00:01:37) - Hey Mike, it's great. Am kind of wondering, though, if there's somebody else supposed to be joining me with a cape on because don't have one. So thanks for the great.

Mike Mills (00:01:44) - Hey, I got a, I got a I got to hype you up. You know, we got to make sure that everybody look, I promise you, you're your Jedi ninja master skills or a thousand times more than the average person that's going to be listening to this. So you're going to help out everybody with this. And I think this is one I'm really excited about because I think you got a ton of information that my audience will really find valuable.

Mike Mills (00:02:05) - So now you sent me a bunch of great information, and we're going to go through how it affects mortgages and the changes with maybe with the Fhfa and all that stuff. But I want to get started with some simple stuff. First. We're just going to kind of ease our way into this a little bit. How did you become a credit ninja? So was it like a Bruce Wayne thing, like Batman or something similar? Like how did you get to where you're at?

Sue Buswell (00:02:27) - Yeah. So I was actually going to pull out my my copper judo medal from when took third place at state just to share that, you know, I do have some, some background in martial arts, but really it started back in 1985. And yeah, we didn't have Fico scores at that point. But I learned about the credit system because I went to work for a TransUnion bureau, and that TransUnion bureau back in those days did a little bit of everything. So I was hired into their mortgage department, learn the business from the ground up.

Sue Buswell (00:02:55) - And in 90, you know, 95, when Fico came into our market, I was ready to to learn about the system, but no one else understood it, and there was still no explanation. So, you know, me being someone who's not afraid to ask, what the heck does that mean? I picked up the phone and I called Fico and I said, I need to understand this because I can't keep telling my customers nobody gets it. You just have to have it. Right? Right. So anyone who was in the market back in those early days, they remember that they're like, I had this guy approved two weeks ago. He doesn't have a score. I can't do a loan. Right. Those were tough days. Yeah. So I learned it from the ground up and I learned it from, I like to say, the inside out. And I've always been a strong proponent of empowerment through education. So I try to I taught my team, you know, we were credit expert came in the market in the 2000, but we were analyzing credit reports and helping people make the right choices to, you know, pay down debt or dispute something or whatever they needed to do to improve their score before we had such a great tool as the credit expert tool.

Sue Buswell (00:04:00) - So anyway, that's it. You know, I say 35 years, but out of a few more on there mic, I was 12. I'll just let all your work know. I was 12 when I started. It was forced child labor.

Mike Mills (00:04:13) - You were a credit scoring. You were credit scoring creative or credit scoring expert before it was cool. Right? You have everybody else got there. Yes. Yeah. Um, so all right, so you were on you know, I don't want to say the enemy side because trains unions not an enemy. But it certainly, you know credit. No it's nobody's like favorite topic as far as like, you know, diving into. But it is something that we all need to have and that we all need to know. And that's, that's the, the important thing is that everybody needs to be conscious of what they have and what they're doing. And and that's why I really want us to kind of highlight some basic stuff when it comes to credit. So so let's start with if you were, you know, a parent, if you were talking to a kid that was starting out with credit, you know, we'll start.

Mike Mills (00:05:00) - From a clean slate and what kind of work to if things go sideways, what we can do. But what would you suggest to? I'm a parent, I have two kids. I have a 16 year old and a 14 year old. And you know, we're going to start we've already started financial education. You know, we work through budgeting and saving money and accounts and all that kind of stuff. But when it comes to credit, what would you suggest would be some best practices starting off to kind of build build your credit up?

Sue Buswell (00:05:25) - Well, it's kind of interesting. So when when I was raised right, my mom was a bookkeeper, so she knew about budgeting and managing money. My dad owned a business. So what we had was what we call a chore board, right. So. So if kids are doing chores in your house, they can choose which job they're going to do and how much money they're going to earn from it. That was my first experience. But if I found, you know, a precious that was more than I had earned that week, then I could do extra work, or I could get an advance to buy whatever the item was that I needed to have.

Sue Buswell (00:05:56) - But then I had to work to pay it off. I didn't get another allowance right? So I think those were really, really early lessons for me. When you're nine years old, you know, when you've bought your little precious whatever it is that you had to have, and then you can't get anything for another two weeks because you're basically in debt and they've got their handout going. No, you owe me. You know, you owe me for that. So take that to today's world. Right? We're grown ups. We've got to have you know, that was how I learned about credit. I had to have something or thought I had to have it. So those lessons can start really early. And then there's a lot of things out there now. There's apps. There's think it was something called a green card or chime card. I don't remember what it was I saw, but, you know, these are apps that help parents work with their kids. Like, here's your you you did this chore, you raked leaves in the yard.

Sue Buswell (00:06:47) - So you're going to earn 50 bucks. Now. Want to buy a bike? Okay. Well now that's an opportunity to teach. You're fortunate because you're in the finance space. So you know, to teach your kids that. Yeah. But we really have to make sure that we're serving all the people who aren't in our space and don't understand those lessons. Where do I go to get it right? So TransUnion, Equifax and Experian have great sessions and sections and information on that and think those are great places, but your schools aren't teaching it. That's unfortunate. We're not getting it in school. We don't, you know, think I learned how to write a check, but I already knew how to do that for my mom. So mean with your kids. Where are you looking? Besides what you know, what do you see as a parent that's helping you teach your children?

Mike Mills (00:07:32) - Well, we actually have. I started this several years back. I've done a couple videos on it, actually. There's an app called Busy Kid, and what it is is very similar to what you were saying.

Mike Mills (00:07:43) - I go in as the parent and I create certain amount of chores and I assign a dollar value to those chores. And actually, when they were young, what I did was I would give it a like if they were brushing their teeth, for example, which is something that you got to teach your kids to do when they're young. They would get $0.25 for brushing their teeth that morning. Now it was stuff that they need to be doing, but they're young and so but the idea was, is that they would have a task that they would have to complete. They would then complete that task, but then they also had to go into their app on their phone or iPad. At the time, most of them, they didn't really have phones. They had iPads. They would have to go into their iPad on the app, and they would have to check the box that they brush their teeth that morning. So it was giving them a level of responsibility to not only do the task, but then also acknowledge that they did the task.

Mike Mills (00:08:28) - And then at the end of the week they would get, you know, paid out essentially into their account. And they had at that time or they still do have debit cards. But when they were little, we didn't really do the debit card thing because there was, you know, they're not rolling to the grocery store, needed to buy something. So but they could see how much money they had in their account. So if they wanted to buy something at the store or get a candy or a toy or something that we didn't, you know, wasn't our responsibility as parents to provide, essentially that was anything extra that they wanted, and they had their own money to spend. So they had to learn what what the cost of things were and how much. Well, I only got 20 bucks this week and I just spent $5 on this. That doesn't leave me a whole lot of money left over. And the other cool thing about that app is it has three sections to it or it has your spend, it has your savings, and then it has like an investing section where they can actually buy stocks and stuff if they want to.

Mike Mills (00:09:16) - So, so it's really cool because it teaches them a lot of good habits. It doesn't really get into, you know, I guess you don't want to you know, we were talking about this before we got on. You know, debt is not something that we want to encourage people to get into, right? Because credit is really all about applying for debt. And if you're applying for debt, we're going to look at your score. What is your history of paying debt? Right. What have you done in the past. And so we don't really want to encourage our kids to get debt, but at some point it is a necessary evil. You know, like we were talking about with houses, especially with what we do. You know, people don't just have $400,000 under their mattress that they can just drop down on the house. Most don't. So there is a there is a point where you necessarily where you do need it. But do you think as. A 18 year old 19 year old because I ran into this in college when I first went to college to Texas Tech, and it's been a long time, but it was like 1997 when I showed up there at the freshman orientation.

Mike Mills (00:10:12) - There were literally I mean, I don't know if there were hundreds, but 20 or 30 booths with Mastercard, visa, every single credit, credit card you could possibly imagine. And they were all giving away t shirts and gift cards like, you know, just encouraging you to sign up. So do you think and I think we've gotten away from that as a society. But do you think nowadays if I take my daughter and, you know, should I get her a credit card at 18, or should, you know, and teach her how to manage it and use it, or what are your thoughts on that?

Sue Buswell (00:10:41) - Yes, I think you should. But think just like you've taught them responsible management of money. This is just an extension of it, right? So take those lessons that you're teaching them about responsible management of money. And now you can do it with credit. So let's say we get a $500 credit card okay. And they've they're going to go out and put $500 on it. Right.

Sue Buswell (00:11:00) - They need to understand the interest. They need to understand that every time they make a $50 payment, $30 of that payments going to somebody else, it's not paying off. They borrow the money from. It's going to someone, especially at today's rates. It's going to somebody else. So here's how I like to think about credit. It's a necessary evil. You have to have it. And you can't get it unless you have it right. So right can't get it unless you have it. So we have to understand the rules of the game, and then we have to learn how to play the game so that we're the winners, not the creditors. Right. So someone's offering me a credit card and it's 0% interest. I'm probably going to take advantage of that if I have credit card debt, okay. That I need to manage. But I'm not just going to flip my credit card over there without having a significant look at my budget. Right. Something you and I were talking about earlier and saying, am I simply buying time? Am I taking on debt to get out of debt? Does that even make sense when you say it out loud? Right? I'm in debt.

Sue Buswell (00:12:05) - I need help getting out of debt. So I'm going to take on more debt for the hope that I get out of the debt. It's like, no. Right. And you had a conversation with an applicant where, you know, you were treating them as a human and having a real conversation with them, saying, this may not be in your best interest. You know, I think in our industry right now. That's what we need to do. It's difficult because everyone's hurting in this industry with the drop in business, but if we do that in the right way, we're not only helping someone right now, we're teaching them lessons that they maybe can teach their entire family. So credit is necessary. You have to have it. But if you are playing the game in the right way, then you're getting the benefit of the credit and the people at the top of the credit pile. They're using other people's monies to build their fortune. Yes they are. Once you learn that trick that that's what you can do with credit is use someone else's money to build your fortune, then you can do that successfully.

Sue Buswell (00:13:10) - Yeah.

Mike Mills (00:13:10) - So so these days, credit monitoring systems or softwares or all the rage, all the rage, whether it be free credit report or, you know, my Fico or whatever, there's there's a bunch of different ones out there. So what are your thoughts on those. And is it important for someone to have that. What companies would you recommend. And then also you know, what type of habits or practices would you advise into regularly checking on that to monitor it?

Sue Buswell (00:13:41) - So we all know during the pandemic, during Covid there's annualcreditreport.com. If you don't know that, you should know that website, right? So Annualcreditreport.com you can go there. It used to be to every year and get a free credit report from TransUnion, Equifax and Experian. Don't buy the score. You don't need the score, right? You need your credit report. So now they're offering you a free credit report every week. Oh, is it every week? It's every week now.

Mike Mills (00:14:09) - I knew they had changed it during Covid, but I didn't know if they switched it back okay.

Sue Buswell (00:14:12) - Yeah. No they're back to every week. So it's it's no charge. I honestly don't want to look at my credit report every week. I don't think it's necessary. I did sign up for, you know, credit monitoring or credit journey and did a credit card on one, which is vantage 3.0, 3.0 and then did my credit union on the other, which is interestingly, it's Fico Auto Score eight. So it's but my point, you know, my score is one point off on those two models. So, you know, get something that lets you know what's on your credit. If you've never pulled your credit report before, start with annualcreditreport.com, pull your credit report and just review it. Are your creditors on their right? Is your name, address and social correct? Right. Those types of things. Look at the basics and then look at whether or not your creditors are reporting information in the right way on you. And that means that the date you open the account is accurate in the balance, and all those things are accurate.

Sue Buswell (00:15:10) - And then look at it, you know, I would say once a quarter, what I used to recommend is in the spring pool, one, you know, in summer pull another and then in the fall pull the third one. That's when we only got one free from each of the repositories. Right? I'd say the majority of creditors are reporting to all three agencies at this point, which, you know, future conversation that we're going to have about the changes coming. But there are areas and, you know, if you live in a rural area, you know that there are types of creditors, there are probably not reporting to all three bureaus. So, you know, use Annualcreditreport.com, it's free. Get it. You can get your credit report right online. And as far as credit monitoring, if that's what your move to do. I've never monitored my own credit after 38 years. I just simply picked this up. This was like, oh, let me see what this is about. Let me see how different my scores are across the spectrum, because don't think they're that different.

Sue Buswell (00:16:05) - And they weren't they're not. Um, so think that's one thing people should do. The other thing is take advantage of credit. Right. If it's 0% interest on something and you know you can pay it off in that time, then use that money to purchase whatever it is you're looking at purchasing and take advantage of that money. But don't keep taking on debt to get out of debt. Like I said earlier. Yeah.

Mike Mills (00:16:32) - Now on the monitoring piece, you know, I get this as a mortgage lender because I pull people's credit every day and they will say, okay, well, on free credit report or Credit Karma, my credit score is a 6.95. And then I pull their credit score and it's a 650, okay. Or 640 or something along those lines. Can you explain to people the differences between credit modeling and scores based on what type of industry is pulling? Because I think there's some confusion there. When they see their credit score online, I call it their consumer credit score. I don't know what you call it.

Mike Mills (00:17:06) - And then the other ones that kind of fall into place too.

Sue Buswell (00:17:09) - Yeah. So back in the day, I used to call it the difference between a Fico and a Fico, but we can't really do that anymore, right? Right, right. I can say I used to say that. Don't say that. But there are big differences and there's differences within the models. And here's the one thing that I think most people don't understand is mortgage lending exist in a completely different credit world than most other kind of lending. So there's that. There's two major players in the credit scoring world. There's Fico, which varies a company and there's Vantagescore. So those are the two. Now every lender has some sort of an in-house credit scoring system. And then there's a few other credit modeling systems out there. But the two that you're going to run into are either Fico or Vantagescore, and Vantagescore and Fico are similar but not the same. And what happens with the Fico score in the mortgage space these models originated in 95, were updated in 98, and had their last, I would say major reconstruction, if you will, in 2004.

Sue Buswell (00:18:08) - So we're using very old credit score models, which is why our mortgage industry is going to be upgrading their credit score models. Yay 2004.

Mike Mills (00:18:19) - That was the last time they upgraded the model or updated the model.

Sue Buswell (00:18:22) - Yes. So well, you know, they make little tweaks to it, but those models are over 20 years old. That's correct. Yeah. So they make little tweaks like things that happen within national consumer assistance where all the, you know, public records had to come off. And then we've had the changes with medical debt. All of those changes that have happened have been written into that. But then there's another thing that Fico scores that they do. Experian has their own model trains, Union has their own model, and Equifax has their own model. So what does that mean? You've got Fico scores that have differences. Is at each of the repositories, which is why in our mortgage market now we pull a try merge, right? We toss out the high, we toss out the low, we go with the mid score.

Sue Buswell (00:19:09) - Trying to be fair, right? But if I were trying to explain to a consumer that pulling my credit report today is not going to impact their credit report. But then they also go and talk to someone about a block that's going to use a Fico eight. That's going to be the same conversation that we started this question with, which is, you know, got a 695 or 650. Because the models are different, they weigh information differently. They put different amounts of importance on things. So in the mortgage market, mortgage inquiries are ignored for the first 30 days that they're on your file. And then there's two different periods of what we call deduplication, which means the same if it's a mortgage inquiry, meaning it's a mortgage company, it's going to be either 14 days with Experian or it's going to be 45 days with the other two with you and Equifax, where it's duplicated the same type of inquiry. Right. But a keylock inquiry is not a mortgage inquiry. So if the borrower did both in the same week, they'd have two hard inquiries.

Sue Buswell (00:20:14) - Gotcha. So it's the model. It's the difference in how it's calculated. And it's the difference in the level of importance that's placed on information in that credit score. So in our current Fico models and stop me if I'm going too fast for you here, Mike. But in our current Fico models and in most of the models, 35% of your score is your payment history. Like, what have you done and how have you done it? Right? And there's also a what have you done lately component because it's looking at your entire history, but the more recent to the date of the credit report, the date of the delinquency or the issue is going to carry weight in the score. So that's that's number one, 35% is what have you done and how have you done it. 30% is how much debt are you carrying specifically on your revolving accounts? Installment loans are in there. They're factored smaller, but 30% is what your balance to limit. Most people want to say 30%. That's relative to the next category, which is the length of time you've had credit.

Sue Buswell (00:21:15) - That's 15% of your score. Okay, you and I chatted about that a little bit before the call and said, you know, I'm at this. This is the benefit of aging guys, right? Your score goes up if you do things right. So stick around.

Mike Mills (00:21:27) - Your score will get higher.

Sue Buswell (00:21:28) - Yeah. Sometimes there's just nothing else you can do but just have a birthday, right? Yeah, yeah, yeah, it goes up. Right. So I've got a Vantagescore 3.0 of 829 and a Fico score of 830. Right? Right. So you know, that's just bragging rights when you get.

Mike Mills (00:21:45) - Right. Yeah. Your badge of honor. Yes.

Sue Buswell (00:21:46) - That's right. Right now in my 20s, it wouldn't have been that way. Right? Right. That would have been okay. Not at all. Yeah. So that 15% category, that can really be a deal breaker. So let's go back to your college. You know, age kids get a card and mortgage underwriters don't listen to this.

Sue Buswell (00:22:04) - You guys just like put it on mute for a minute. Use an authorized user account to get that length of credit history to establish your credit, and then start building your own history and profile, because that 15% can be a huge deal breaker. And we've got two other categories, but want to stop and make sure I'm not rolling too quickly. You have a chance to ask any questions.

Mike Mills (00:22:26) - No, no. The way that I the way that I explain it to people and you can tell me if this is because I always have, you know, like, again, doing mortgages for 13 years, you know, we talk, we have a spiel. It's all the same stuff. We say. So one of the things that I tell people when I get that question, because I pretty much get it every single time, just about is when you look at the consumer credit score, which is what you get from my Fico or even from directly from because they'll say, well, no, I get it from Equifax.

Mike Mills (00:22:49) - I'm like, well, you're getting it from Equifax, but it's still your consumer score. It's just kind of like a a rough estimate of where you're at, right? You know, at a given period of time based on your accounts that you've had, you know. And what I do tell them is like, look, somebody is paying for that score, okay? It may not be you, it might be your bank, it might be some other service, but somebody is paying them for that score. So if they're getting paid for that, I would think that they they want to give you a more rosy picture of where you're at. If you think that you're a 640 credit person and my Fico is telling you you're a 660, then you're like, all right, I'm doing great. You know, like it's positive reinforcement to continue to pay for a service. But when you look at cars and credit cards and automobiles or in mortgages, you're going to get different scores with each one. And the reason being part of the reason is obviously the models matter.

Mike Mills (00:23:38) - But in simplicity or for simplistic terms, what I tell them is like, look on a car. For example, if I pull you, if somebody pulls your credit score on a car, it's probably going to be higher. If you haven't had a bunch of, you know, repossessions and late payments on cars because it directly affects the industry more. But if it's just been your average type report, then your score for a car is probably going to be higher than your. Where would be if I pull a mortgage? And part of the reason for that, or the justification for it is, is with an automobile, if you don't pay that debt, if you don't, if you don't pay for your car, the bank or creditor can just come take it and they can pull up in your driveway. They can hook it up to a tow truck and they can drive away. Right. So the ability for the creditor to reclaim that asset is relatively easy, because if you don't make the debt payment, then they can take their asset back.

Mike Mills (00:24:24) - Asset being in quotes for a car. But for a house, if I pull your mortgage, score for a credit for for a for a mortgage, if I pull your credit score for a mortgage, that score is going to be probably lower than your car. Because in order for the lender to reclaim that asset, if you don't make your payments, it could take years. It could take lots of money through the foreclosure process. And so the risk level to the to the credit or to the the bank is at a much greater level. So therefore the report scoring is maybe weighed a little bit heavier because they want to really be sure that, that you're, that they're safe essentially to, to lend this money in this situation. Is that what do you think of that explanation. Is that good for me?

Sue Buswell (00:25:07) - Simplify it a little bit. But you hit on something really, really great. You know, number one is this is a risk predictor. That's all a score is. It's an empirical number assigned to what is the likelihood that we're going to get paid back.

Sue Buswell (00:25:21) - Now this might be like mind blowing to your viewers, right. Our mortgage models do not put a focus on mortgage payments okay okay. All right. That's coming in the new models okay. Our mortgage models today are looking at the likelihood that you will default on any account in the next two years. Okay.

Mike Mills (00:25:45) - So that's kind of the. Are you going to default? That's really the question. Are you going to default.

Sue Buswell (00:25:50) - And it's not focused on mortgage, which is why we have all of those other underwriting guidelines. And all those things in the score is kind of our litmus test. It's where we're gonna place you. Right? The barriers of everything else has to come into play to make it work. So. Right. Very strange. Right? When you think about that, that there is no one looking at specifically, it looks at all debt, but it's not specifically looking at mortgage debt. So Vantagescore 4.0 will be doing that. And the content with the trended data, we're going to see a little bit more.

Sue Buswell (00:26:21) - We're going to see more predictive scores, which is going to when you increase the risk factor for your lenders, you lower the cost of credit. Right. That's one of the reasons why we have higher interest rates right now is it's a very risky market. Interest rates are going to rise with risk and they will lower with risk. So think our new score models will provide a better risk predictor because could anyone have predicted that someone with a 775 score in our, you know, 2008 year would just stop paying on their house and do a strategic default, right.

Mike Mills (00:26:56) - No, no.

Sue Buswell (00:26:57) - No, our score models were not going to look. They did that.

Mike Mills (00:27:01) - Right.

Sue Buswell (00:27:01) - A lot of a lot of them did. Yes. And we're hoping we don't see that ever again. But that's the thing I mean guess that's kind of some of the secrets that we talked about. The secret sauce, right, is our current score models in the mortgage industry are really pretty basic, right? Is what have you done over the last two years to determine what will you do in the next two years? And then there's those ten scorecards, right.

Sue Buswell (00:27:23) - So it's not just three scores, three models, three customizations. There's these ten scorecards. And if you do this you could move from that scorecard to this scorecard. Right. Right. There's more there's more behind the curtain in that. But when we come down to it, at the end of the day, what everyone's looking at is make your payments on time, right. Keep your balance to limit low. If you don't have a length of credit history. I don't mean did this for my little brother. He was moving into an apartment. I put him on. An authorized user made sure the creditor reported he doesn't get a card. This is who knows the score. She's not sending him a credit card, right?

Mike Mills (00:27:59) - You're not giving him the ability to charge you just say, yeah, I'll give you a little bit of my history and everything.

Sue Buswell (00:28:04) - You didn't mind, did you? Right. No, we're not doing that. But he got his own, you know, got into the apartment, had a great credit score.

Sue Buswell (00:28:10) - Now he's gone on to establish his own credit. So he's now building his own credit. And, you know, we were talking about your kids. This is a 50 year old. This is someone who never learned the lessons of credit growing up with a sister in the credit system, but that's a whole family thing. We won't get into that one on today's call.

Mike Mills (00:28:27) - Well, hey, look, it's like it's kind of like you can, you can you can tell your friends all kinds of stuff and, you know, you can tell your clients, but good luck trying to tell your family or your spouse anything, because that's right.

Sue Buswell (00:28:37) - They're going to go and take it from a stranger before they ever listen to you. But now we're on the right path and getting him ready for that homeownership. So you know, when he's ready to buy, when interest rates have normalized and home prices have come down to where he can afford them, because we have those affordability conversations a lot, he'll be ready credit wise, because he's making all the right steps to build this credit and think you've said this at the beginning of our conversation.

Sue Buswell (00:28:59) - It's about empowerment, right? Yes. If we can empower people from from teenage right, from grade school into college, into adulthood. I was at the next mortgage events in Dallas just a few weeks ago and had a little impromptu, like, when did you learn about credit? And here are some of the smartest women in mortgage banking with me at this event. I'm not outing anybody, but almost everyone there didn't learn about it until they had to learn about it through the school of hard knocks. Like, how do we pull ourselves out of that college debt? Right? So we have to do better as an industry and as a society on how to teach people about credit. It really starts with pull your credit report, you know, understand the scoring systems.

Mike Mills (00:29:44) - Well, it I think it's a generational thing to some extent because and I've had this conversation with people over the years many, many times. But you know, I'm Gen X growing up. And so my my parents are boomers and and you know, we've kind of gone through when, when I was growing up as a kid.

Mike Mills (00:30:01) - Look, I had everything that I needed as far as, like I had a roof over my head. I had food on the table, you know, all that kind of stuff. I got taken to school. There wasn't, you know, life wasn't hard, okay? Like it was. It was pretty good, but there wasn't very much. It was kind of like if I were to ever ask my mom how much money she made at her job, she would look at me like, it's none of your damn business. Like, why would I ever tell you that? Or if I were to, you know, what's your credit like? There would be. There was zero conversations about finances, zero conversations about money. And the only conversations were, you can't have that. It's too expensive. Stop asking. You know that that was about the extent of it. And and really what I you know, because people from my generation that complain about that, I go, well, look at what their parents did because their parents just put them in the corner and said, shut up, don't say anything.

Mike Mills (00:30:45) - And we'll get to you if we need you. But otherwise you don't get to have a say. Be lucky that you have food, right? So we're progressing as a society. We're moving along. And now these days, like with my kids and I think a good chunk of the population, or at least, you know, and I hate to say the educated population, but college graduates, people have been through the system. Essentially, we are trying trying to educate our kids as much as we can on the financial system. And especially since 2008, when everything came crashing down, you see a whole wave of millennials that were, you know, in their teens at that point and saw their parents go through the struggles of dealing with their losing their 401 or losing their jobs. And then they had this lifestyle with these McMansions and all these cars and stuff, that there was all debt to the hilt. And they looked at it and they went, I am not doing that. Like, whatever it takes, I'm not going to do that.

Mike Mills (00:31:34) - So I do feel like overall that it's getting better. Right? It's not it's not where it needs to be, but it's certainly getting better. And I think those factors have had an impact just generally, generationally speaking. And then being the fact that we went through that Great recession back in 2008.

Sue Buswell (00:31:50) - Yeah. Think you're think you're right on there. I think that we've got technology right that we didn't have. Mean you and I talked about this early, you know, in advance of the cast. But you know, back in the 80s, it took 15 days to get what they call the residential mortgage credit report out of my office and into lenders hands. So, you know, hey, Mike, can you give me a prequel letter? Yeah. You know, come back in a month, right? Keep your letter. Right.

Mike Mills (00:32:13) - Yeah, yeah. Well, that's how everything was back then, you know, that's just how it is. We can't imagine that you got.

Sue Buswell (00:32:17) - All this great technology and we've got more information.

Sue Buswell (00:32:20) - We have TikTok and we have YouTube, and we have X, and we have all these great places and Spotify where these podcasts will go that we are informing the next generation and think they did see that. Right. I'm seeing a lot of people in that Gen Z group coming out and saying, I need to know this and I need to know how to what I was saying earlier, how to play the game with someone else's money. So I'm not living in debt, right? Yeah. I mean, the best feeling I've ever had is when my husband and I were able to say, we're debt free, right? We we use our credit cards for points. They're paid in full every month. And, you know, God willing, we'll never have to worry about making another house payment, car payment, what have you. We're not rich by any means. Yeah, but it was homeownership and it was continually moving up through homeownership. My first home was like 16% interest. So, you know, don't be afraid.

Mike Mills (00:33:12) - Also $70,000.

Sue Buswell (00:33:14) - That was a little more than that. But you.

Mike Mills (00:33:15) - Know.

Sue Buswell (00:33:16) - Yeah, but you know what I mean. Yeah. So today, if you're looking at 400,000 and an 8% interest, are you going to have a little bit of pain? Yeah, you probably will trying to make that payment. But you have to look at whose pocket is the money going into. And every opportunity that you get to put the money in your own pocket from strategically using credit, that's a smart move. And think that comes with us telling people like, how, how do these things work, right. So a great question, and I'm going to go in and just say that just paying credit, you know, your credit card and full every month help or hurt it helps. And when our new score models come out, especially in the mortgage market guys, they're going to be using trended data, right. So if you're in the mortgage space, you know that trended data was something that as a as a mortgage lender, Mike, you had an option to see it, um, or to not see it or to, you know, underwriters might want to see it or what have you, but they're now going to put that trended data into the score model.

Sue Buswell (00:34:14) - So what does that mean with revolving credit if you're a trans actor or revolver. Right. So what does that mean? Right? A trans actor is someone who's paying their credit card in full every month. Right? So I look at my credit card balance probably every week. And my full statement balance is painful every month. Now on my trended data that's going to show and think about this in the way of American Express, right? Everyone in the mortgage industry stresses over American Express because those are business cards. They might be 20,000 limit and a 20,000 balance every month, but they're paid in full every month, right? Yep. Today that could be an issue in our credit score. Not with the new models, because trend data is going to be showing that you're paying them. Yeah it might be 2020 right. High to limit that ratio. You'll notice in the Vantagescore and think I sent you that chart. But Vantagescore puts credit utilization at a different level than Fico models do. So that's our Fico score.

Sue Buswell (00:35:12) - That's kind of what we were talking about with the 35, 30, 15, ten and ten. But with our trended data, Viggo keeps this all the same. It doesn't change. But you're going to notice that in your amounts owed and in your payment history, those types of things that trended data is going to start being calculated. Vantagescore slice the pie six times, if you will, and they put more emphasis on late payments or payment history. Think it's 41%. Of our Fico score of our vantagescore is history, and then credit utilization is lower than 30%. But that trend data, if you're a revolver, you could be paying on time every single month. You're only paying the minimum payment. Your transactions are going to have a higher score than your revolvers. And that's something that comes into play with our current models of Fico. So we talk about that 10%. There's two tens in our current Fico models, and they'll be in the new Fico models in the 20. One of those is inquiries.

Sue Buswell (00:36:18) - We'll save that one. The other one is types of credit. And this is overlooked a lot. And Mike I've had conversations with guys in your desk. You know this guy's got great credit. He's got great credit. How come you score isn't higher. And I'm looking at the credit report with you. And it's because he has all tier two credit.

Mike Mills (00:36:37) - Okay. What's tier two credit? Right.

Sue Buswell (00:36:39) - Tier two okay. Tier one is bank credit union. Major Mastercard. Visa. Discover. Amex. Okay okay.

Mike Mills (00:36:48) - Tier one the big boys.

Sue Buswell (00:36:50) - The big boys. Tier two. Finance company credit okay. Department store credit cards. You can be making all your payments on time. Low ratio. But if you put a tier one credit next to a tier two credit borrower, all things being the same, tier one will have a higher score every time. Really, you need a mix. You need both. You need both finance company and major credit cards. So let's take a look at the same question.

Mike Mills (00:37:19) - Another question. Go ahead read that off.

Sue Buswell (00:37:21) - So paying the credit card every month but someone pulls your credit with a big balance. Um, so it depends on the model. Brad, that's a great question. When we get vantage 4.0 in the market, vantage 3.0 is already calculating it this way. So I know you can get vantage 3.0. There's some fin locker is one that that's what they're using. And they support the mortgage industry. They support credit counseling. They support a lot of industries with their system. But that big balance could hurt in relation to your credit report because today's score models are a moment in time. It's what is what's on your credit score at the moment the score is pulled. Let me give you a better example of that. We can do it with credit cards, but I'd like to do it with a derogatory item. Okay, so I had a lender contact me. His customer was prequalified last month. Um, Mr. credit card, they've moved. Mr.. Credit card payment 30 days delinquent.

Sue Buswell (00:38:18) - Brand new. Right. So when we talk about that 35%. The biggest chunk of our Fico score, right? It takes in your payment history and delinquencies are big. And when you look at delinquencies, there's three words behind delinquent that you have to be aware of. And that's recency frequency and severity okay. So how recent was the late. How severe was the late and how often how frequent is this consumer like okay so this was a brand new late date. They pulled the credit report the the middle of the month. Timing is important. This is a really great nugget, guys. Really the time that you pull the credit report is important. They pulled this credit report in the middle of the month. The late date was already reporting and it hit his score. The date reported on that particular late date was the same month the credit report was pulled in. So October 2023. Date reported October 2023. I told the lender, pull the credit report on November 1st. He's like, why? I said, because they won't have reported yet.

Sue Buswell (00:39:26) - They're not reporting this information until later in the month. So if the late date is genuine and it cannot be removed, and there's not a courtesy deletion option or any of those types of things right happening, then pull that credit report the 1st of November. What will happen is your credit report date is November, your delinquency date is October, and you will have a score increase because of that. Okay. So timing timing is huge. And I don't think that we talk about that enough.

Mike Mills (00:39:55) - No I didn't know that at all. Yeah.

Sue Buswell (00:39:57) - And you can see on your credit report you should be able to see the month in the year that someone reported. So let's go back to this question Brad had about the balance. Same thing. Right. If the balance got paid off but it just hasn't reported yet. Just pull the credit report the next month because right now our scores are very much tied to that moment in time when the trend data comes in. We're going to get a little more grace with that, right? So if it's a big balance, but it's always a big balance, it's paid off.

Sue Buswell (00:40:25) - You'll get Grace because of that trend data.

Mike Mills (00:40:27) - So I was always under the impression too, though, that the credit credit card, speaking of credit card specifically, that if if you're if your bill shows up at your house on, say, the 10th, right. Well, then the credit card company probably reported it to the three credit bureaus on, say, like the eighth or the sixth or whenever they mailed it out, essentially. You know, it's kind of so so if you pay it off in full, they're only going to report once a month. So if you recharge it again and then pay it in full, so every single month you're going to show a balance. Because every time they report because they only report once a month, right. Just just one time, most.

Sue Buswell (00:41:04) - Of them do. Some of them report more than once a month. Yeah. So okay. So and you can see that. So you can actually see that on your credit report. And if you use the credit expert tools which is specific for mortgage.

Sue Buswell (00:41:16) - So for those people that are tuning in that maybe aren't aware of that, that's a tool that's available to the mortgage industry, you can actually see the date of the reporting. So you can see that it's October 13th that they last reported, which means the next time they'll report is likely November 13th. Right. So that date is important. But until we get that trend data component into our credit scores, carrying a balance can affect you if that balance is impacting your ratio. So let's talk a little bit about that. Right. Because 30% of our score is balanced to limit specifically on revolving accounts. And I've been hearing this for years. Just keep your balance below 30%. Yes.

Mike Mills (00:41:58) - Hear that all the time.

Sue Buswell (00:42:00) - That's okay. That's okay. Right. But let me give you a couple of scenarios, okay? I have limited credit history and I have all tier two credit. All right. It's a risk predictor because I have tier two credit. I'm already in a higher risk class than someone who has tier one credit.

Sue Buswell (00:42:20) - And let's say I'm carrying 30% balance to limit. I'm likely going to have a score hit from it because I have limited credit. And I have tier two credit, so I might need to have my balance to limit at 10 to 15%. Hey, Wanda. So that's something that's really important, is that your score is personal to you, to the type of credit that you have. So don't get caught up in the, you know, the generalities. There are guidelines to follow. And that's what I'll call them. There's guidelines to follow. But every guideline has a what if and you're an individual. The way you pay your bills is something that's individual, the type of credit you have as individual. So we're going to go back to Annualcreditreport.com and say pull your credit report. Look at it. Who are your creditors? Are they tier two. That's okay. Don't think you have to panic because you've got a 0% entrance finance loan on your auto. That's okay. That's using someone else's money to your benefit.

Sue Buswell (00:43:23) - But make sure you've got a Mastercard or a visa thrown in there right now.

Mike Mills (00:43:28) - Um, disputes. So one of the issues that we deal in with mortgages regularly because of the different guidelines, depending on if you're doing an FHA loan or a VA loan or a conventional loan is when it comes to disputes on credit. And in my experience in dealing with people in their credit reports, what typically happens or what I see happen a lot. And this is what I tell people. And we'll get to credit repair here in a minute. But but people that go to some of these credit repair companies, the trick or the the move is and again please, I've been telling people this for years so I hope I'm right. But these credit report or credit repair companies, they go into your report and they take every negative item, late payment collection, whatever, and they put them in dispute. And then once they put them in dispute, when I pull your credit, if those accounts are held in dispute, well, that dispute, all it does is it freezes the account.

Mike Mills (00:44:20) - And so therefore the the score is inflated in some cases, and the score looks higher than it would actually be if those disputes were removed and that that report was included. So like when I do an FHA loan, if I have an account that has an over $1,000 balance on a collection and it's in dispute, I have to remove that dispute or I have to do it as a manual underwrite. And so conventional is a little bit different. So, you know, a lot of times just because this account is put in dispute, it doesn't mean that that's helping your score. And there's other little tricks that they do to kind of get you in and pay your monthly fee and whatever. But then the other side of that is, is that sometimes I have to remove the dispute and that could cause your score to go down. But then what the dispute is, and I think this is where people get a little sideways on this is they say, well, I've disputed that because, you know, charter I return the box and they said that I didn't blah, blah, blah, blah, blah.

Mike Mills (00:45:10) - And I say, well, that's great, but Experian, Equifax and Trans Union are not going to litigate who did what, when and where all the dispute is from. What I understand is, is this you and your account? If it is you and your account, then it's a valid account. Whether or not the situation was right or not. That's something that you have to work out with the creditor. But at the end of the day, the dispute is nothing but saying, that's not me. Well, if it is you, then the dispute isn't helping you. What? What do you say about all that?

Sue Buswell (00:45:38) - Yeah. So I'd say 100% right, giving them the guidance that you're giving them. I will say yes, 100% right. Yes. If you are applying for a mortgage, disputes on your credit report are not something you want to have. So those will need to be removed the majority of the time. Right. People dispute items on their credit report because quite often they're given the wrong advice, right? And having a negative item with a dispute comment on it in some of the score models means that that item is being ignored by the score.

Sue Buswell (00:46:09) - That's how they inflate the scores. Okay, so remember back at the beginning of the conversation, I said I started working with TransUnion. Well, they had a consumer dispute department and you would get just bombarded with these letters from these agencies that would dispute the name should have a middle initial. So it's not just that they dispute an account or negative information. The trick is to dispute everything on the credit report. There's 30 days for a creditor to respond. And keep in mind that these disputes start with the credit bureaus. But the only one who can change your information is the creditor. Okay. So the information comes in to to you in this letter. And sometimes it's that whole story about the box. Right. And they're just trying to figure out like what are you disputing. Right. So the dispute letter comes in, the comment goes on the credit report, the creditor is given 30 days to respond. And everyone knows that the creditor has 30 days to respond. If they don't respond, then the information has to come off the credit report.

Sue Buswell (00:47:07) - But did you know that there's also a re insertion clause in the Fair Credit Reporting Act? And are these agencies that you're paying this money to telling you that if at any time, at any time after the expiration of the 30 days that they come back and say, nope, that's right, it'll get put right back in your credit report.

Mike Mills (00:47:26) - And it's like a new collection to at that point, right? It's not even like a collection.

Sue Buswell (00:47:30) - Date reported, a brand new date of last activity. You've got all kinds of stuff that's going to carry weight in your score and think that's another important thing. You know, we talked about time a little bit about timing of the debt and timing of the credit report pull. But your date of last activity and your date reported those two dates on that creditor. Information on your credit report is what makes that account important or not as important to your score. So that's something to think about. If you reactivate something that's negative, that's old, it will pull your score down.

Sue Buswell (00:48:02) - Is it being looked at your score today? Yes. But you know, always think about what have you done for me lately. Right. It's a great little song. Right. So when I'm looking at a credit report and I see that old stuff on there, I'm like, we're not going to do that. Janet said, do not right, do not bring that current. So we're not. Well, that's the.

Mike Mills (00:48:21) - That's the problem that happens. A lot of people get taken advantage of with these credit credit repair companies is that they go in and dispute everything because that's the game that they play, and then they'll take an account that hasn't reported on their credit for a year, you know, a collection that just kind of it was a $50 medical collection that they just kind of gave up on and stopped reporting it. And then they send it to him and they're like, oh, you're back. Well, yeah. Then this is absolutely you.

Mike Mills (00:48:43) - Not only do you.

Sue Buswell (00:48:43) - Owe it, but we're going to add all these interest and fees to it.

Sue Buswell (00:48:46) - So it's not 50 anymore. It's now 500 and it's now, you know, going to take your score by 100 points. Yeah.

Mike Mills (00:48:52) - Yes. Yes.

Sue Buswell (00:48:53) - Absolutely. Do not want to do that.

Mike Mills (00:48:54) - So and that's why.

Mike Mills (00:48:55) - Advise people I'm like look I understand what you're doing with the disputes. I understand the concept of it and what you're trying to accomplish. But more often than not really. I think more often than not it works against you rather than it works for you. When you go in and do that.

Sue Buswell (00:49:08) - It can mean there are legitimate disputes.

Mike Mills (00:49:11) - Sure, sure. Absolutely.

Sue Buswell (00:49:12) - A quick story of a legitimate dispute. So this happened to a coworker of mine when was still with that bureau. She and her husband were getting relocated to Hawaii. So they're buying a home. There was information the home that they owned in Las Vegas was a home that had previously been in foreclosure, but they purchased it, and one of the repositories kept reporting it as a foreclosure in their name. Now, this was happening right after the amendments had been passed for a credit reporting act that allowed people to sue for inaccurate information on their credit report.

Sue Buswell (00:49:43) - They had a stack this high dispute resolution, dispute resolution, dispute resolution. They hired an attorney, and they were able to sue this repository for the cost of the home in Hawaii that they've been denied, which was over 500,000. Because of this inaccurately reported information, it never got reported wrong again. But they also had a home free and clear in Hawaii. So there are legitimate disputes. And there are, right, I will say agencies that will do it right, that will do it to your benefit. And then they're also going to help you build your credit back. If what's happened is truly credit mismanagement and it happens, I did it. Everybody does it. At some point we were talking about that these mortgage professionals that didn't learn about credit until they had to fix something really in their own world. So we all learn about it. But let's try and learn about a little bit earlier. I think that's what your podcast is going to do. So you can you know, I'm a big proponent of if I can take my dirty laundry into a laundromat, have someone take care of it for me, I should be able to hire someone who is reputable and doing business the right way to help me build my credit back and think.

Sue Buswell (00:50:55) - To do that, you want to start with the National Foundation for Credit Counseling and see what options they have. I'm not trying to put anyone out there out of a job that's in the, I'm going to say, credit business, but think that there are places that are better suited for getting people set up back onto a good financial footing, because we don't get into credit issues, typically without some financial empowerment that we need. Let's use that word. Yeah, we need some financial empowerment. So the National Foundation for Credit Counseling is always I say start there because they have great resources.

Mike Mills (00:51:30) - Well that's good. And that least gives you a place to go start because I just think. Someone finds a credit repair company online, calls them, and then they promise the sun and the moon. And more often than not, when they're doing the disputes there. And it's not the individual that's doing it. It's often these credit repair companies. They're doing it for the sake of improving the credit score, not for the sake of correcting something that's that's not correct on the report, which, you know, that's you're doing it for the wrong reasons.

Mike Mills (00:51:54) - If it's if it's something that you're trying to fix because it's incorrect and absolutely disputes, you know, make a big difference. But if you're doing something, you're disputing an account that's absolutely yours only for the sake of trying to boost your credit score up, it can work against you in a negative way often.

Mike Mills (00:52:08) - Yeah.

Sue Buswell (00:52:08) - And someone who who? Okay, here's got a great question about medical bills. As long as you're making middle payment. Well they've changed all of that Brad. So medical collections are are really have been changed significantly. And we're seeing those changes already on credit reports. Yes. So medical collections under $500, paid or unpaid are no longer reported. Medical collections that have been paid under $500 have been have been removed and medical collections or medical accounts that could go into collection have a year waiting period before they can go into collections. So they've done a lot. Now here's another advantage for Vantagescore. And now don't work for Vantagescore. But they found they did a study. There's no predictive risk for medical collections, so they have already removed all medical collections from their calculations in the 4.0, and I'd have to double check, but think the 3.0 has also removed all the account if it's reportable.

Sue Buswell (00:53:05) - Could be on there, but it's not part of the score.

Mike Mills (00:53:08) - So. Well, that makes sense. Yeah, that makes sense.

Mike Mills (00:53:11) - Just because like you were saying, it's it's a predictor of if you're going to default like your credit score is basically predicting, are you going to default on something in the next two years? Well, if you have medical collections because it's such a broad, you know, category, I guess just because it could be disputes with insurance, it could be something not claimed correctly on how it's set up. So all of those things could impact, you know, in a negative light, something that you had no control over. So, I mean, I think that's at least a good change that they made, because we do see that as well in the mortgage side of things. I mean, obviously to some extent it's reflected in the score. But outside of that, if it's if you have 50 medical collections on your credit report, we don't care. It makes no difference on on your ability to get the loan.

Mike Mills (00:53:52) - It doesn't impact if it's a medical collection. We essentially just pretend like it doesn't exist.

Sue Buswell (00:53:59) - Well, and that's a great thing about the new score models that are coming into mortgage. You guys no longer have to ignore them. They're not going to be calculated in the score, right? So they just won't they might be on the credit report if they're reportable. Again, these are some of the things that are coming up under the Ncap, which is part of that suit that removed the the public record information. One thing on the medical collections, the majority of people that saw a score increase from the removal of medical collections already had high scores. The majority of people who didn't see a lift and are still having medical collections are the people that are sub 620 anyway, right? So we have an entirely different conversation around that where it's, you know, the disparity in the scoring system and in the financial capabilities of the people that fall on those certain spectrums of the scale.

Mike Mills (00:54:50) - Now, if somebody is actually had let's say that, you know, my credit's pretty darn good, but I did actually have a late payment for whatever reason.

Mike Mills (00:54:57) - And many times, you know, we get this a lot with or we used to I haven't seen it quite as much lately, but just a good example of it is student loan debt. Right. So I lived in an apartment in Lubbock when I went to Texas Tech, and I had my mail sent there, and when I filled out my student loan application stuff, it would have my apartment address for my address in Lubbock. Well, as soon as I didn't graduate from tech. So as soon as I left tech, it went somewhere else then. Now when the bill comes due, once I've graduated from college and now I'm having to pay those, well, that bill gets sent to the address that they have on file. Well, that address on file is my previous college address that I don't get mail at anymore. So and if I am a young college student and I'm stupid, I don't set up a forwarding address and all of those things. Right. I understand the responsibility of it. But point being is just that the bills getting sent to the wrong place.

Mike Mills (00:55:45) - So maybe it was what kind of actual, you know, recourse do I have to either? Should I call the credit bureau? Should I call the creditor and say, hey, please, this isn't normal? Like, what would you do in that instance to to try to make sure that you can at least try to get that squared away.

Sue Buswell (00:56:00) - Well, had it happened. So I'll tell you what, I did this. So we had heavy and I both had tier one cards. Right. We're using the credit to our benefit. So his bill came in I paid it, my bill came in. I'm like, oh this is duplicate. And I tossed it. Okay, so here's a score with a late date on her credit report. And I don't call the bureau to complain about it because they're not the one that reported it. It was pier one that reported it. So whoever it was, it was underwriting pier one. When they were in business. I called them and was like, look, here's what happened.

Sue Buswell (00:56:27) - Had two bills. I didn't pay it. It was completely my fault. I'll pay it in full right now. Fall on the sword. Call your creditor. Ask for a courtesy deletion if you've never been late in the past. If it was an address issue, you know the best thing to do when you have something happened to your credit that you weren't aware of or or you overlooked, it is. Call the creditor. Don't dispute it. Don't go to the bureaus about it. Pick up the phone and call the creditor and explain to them. And you can often ask, I've done that successfully with mortgage lates where we've had a courtesy deletion because they look back and they said, you know what? This is one time out of five years that you've been late, obviously it was a one off. And you even have creditors today that won't even report a 30 day delinquency. They won't report until it becomes 60 days and think on student loans. They're typically at least 60 to 90 days before the report.

Sue Buswell (00:57:23) - The delinquency.

Mike Mills (00:57:24) - Really. Okay.

Sue Buswell (00:57:24) - So the best thing you can do before you get into an issue, or if you've just gotten into an issue, is talk to your creditor the last thing they want to do is not get paid right. They have no benefit in you not talking to them.

Mike Mills (00:57:39) - Right.

Sue Buswell (00:57:40) - So they're going to take your call and they're going to try to find a way to help you.

Mike Mills (00:57:44) - Yes. Well, and you have to communicate with people. Right. You have to. The more you open communications and don't stick your head in the sand and hope it goes away, then the more likely it is that you're going to, they're going to work with you and help you out. Now, if you've had 25 late payments across your credit report and you've missed there 5 or 6 different times, and now you're deciding you're going to communicate with them, they're probably not going to be as willing to help you out in that circumstance as they would otherwise. But but we all have missteps and we all make mistakes.

Mike Mills (00:58:10) - And, you know, the best thing, like you said, and I 100% agree, is pick up the phone and call them and talk to them. And that's what I advise people. And we've done it multiple times. I've I've looked at people's credit report and they had like a, you know, a home equity line of credit that they were carrying and they had a late payment on it because the husband told the wife to pay it. And she and then they just totally forgot about it. And then it showed up and I pulled. I was like, hey, do you know, even late payment back in April? They're like, what? How did that happen? And I'm like, they're like, oh gosh, we forgot. I said, just call them, call them and talk to them and say, hey, look, here's what happened. We didn't even know about it because we just figuring this out because, you know, don't tell me you're applying for a mortgage. But, you know, they just went and did this thing.

Mike Mills (00:58:46) - And so so then they'll go look and see. And then I've had I mean, really I've had it multiple times. And especially recently it seemed like it's even been even a little bit better where creditors are really actually willing to work with people if you communicate with them.

Sue Buswell (00:59:00) - Yeah, exactly. And I was talking to someone recently. Someone was and I said this in my video yesterday was like, I'm in debt. I'm going to take on more debt to try to get out of debt. That's not the process, guys. That's not what we need to do. So if you're in debt, call your creditor. Ask them to reduce your interest rates. Ask them to lower your payments most of the time. And I mean, 99% of the time, they will work with you to lower your monthly payment. They might give you six months or so. They will not hit your hit your score, they will not show you late, but they will if you don't talk to them. So with all things credit, the best thing you can do is start with pulling your credit report.

Sue Buswell (00:59:37) - Look at what's there. If you don't understand it, get with someone who does understand it and help you understand what's going on with your credit. If you're trying to build it, go to the and look for some of those resources that I mentioned. National Foundation for Credit Counseling. There are just great agencies out there. They're not wanting to put you in a debt repayment plan that's not there. That's not their goal. They do offer that, but just a lot of options out there. But start with understanding and start with knowledge and then you'll grow from there.

Mike Mills (01:00:05) - So you made a video about this? I saw some the other day, and you might have even mentioned it in that one too. But so right now in the United States, we have more credit card debt than at any point in the history of our country. It's insane. And delinquencies on credit cards are rising. Delinquencies on car payments are rising, bankruptcies, bankruptcy filings are going up. All these things are starting to kind of pile up on us.

Mike Mills (01:00:30) - So this is not good things, but these are things that are happening and you need to be aware of it. So my question is, is when someone gets to a point where they are able to start paying down some of this debt, okay. And you may not be able to do it today, but that needs to be the plan from your point of view. And dealing with credit all these years, what would be a good route to start? Like what would your path be? Everybody knows the Dave Ramsey thing of, you know, start with the highest interest and, you know, roll it, snowball and all that kind of stuff. Like, you know, I think a lot of people that have seen that and understand and I think there's benefits to that for sure. But from your point of view, when you consider what's going to have the least impact or best impact on my credit score, and then also what types of debt are better to pay off overall so it doesn't negatively impact you on your score?

Sue Buswell (01:01:14) - Yeah.

Sue Buswell (01:01:14) - Think you know part of Dave Ramsey? I don't suggest that you start with the highest interest rate. I suggest you start with the smallest balance, because the most discouraging thing you can do is take, you know, try and start at the top of the mountain and climb up to the, you know, this is so let's start. Let's start at something small because then you can see the progress. So if you have a balance of $1,000 on a credit card and you're paying a little bit extra on everything, put all the extra on the $1,000, because then you're going to see that paid off, right? Don't close it, just pay it off and then take all that other extra and put it on the next one. Right. I have had friends do this over the years, and they're they're astonished that in two years, in two years, thousands of dollars of credit card debt is paid off. Right now, if they did it the other way, the highest interest rate, I get it.

Sue Buswell (01:02:01) - You're you're you know, you're removing that interest. You're not paying extra on the interest. You can negotiate your interest. So and you want to see the you want to see that you're making a difference in what you're doing. So that's my recommendation. Start with the smallest balance first paid off. Put everything else on the next balance. Pay it off. Revolving debt to me is the is the best place to start because, you know it's difficult to fast track a car loan, right. They're already $700 a month. You know, God never got an extra 700. You probably wouldn't have credit card debt, right? So start with a small ones. And then once all of those are resolved, then do the same thing. Right. But you can't take that extra money and go, oh, I paid that off. I'm going to go do something else. You've got to stay on this path, and then you'll start to see that your credit score will improve. It's not going to be immediate, but it wasn't immediate that it went down either.

Sue Buswell (01:02:50) - Right. It didn't go down in one day.

Mike Mills (01:02:52) - Yes. Well, sometimes.

Mike Mills (01:02:53) - You get that late payment, it'll hit you.

Mike Mills (01:02:55) - And it'll. Yeah. That's it. That whole reason. Yeah.

Mike Mills (01:03:01) - You did say don't close the account. Now I kind of understand where you're coming from on that, but but explain the first off explain why. And then also, you know, someone's carrying ten credit cards versus someone that's carrying three credit cards, you know, where's that, where's that balance of how many accounts you want to open, even if they don't have a balance?

Sue Buswell (01:03:19) - Okay. So I'm not going to talk about count yet. I want to talk about length of time. Accounts have been established. So I have a credit card I've had for over 20 years. The only thing that's on that credit card is Netflix. $16.77 a month gets charged $16.77 a month gets paid. That's all that goes on that card. Right? Okay. And so I have 20 years of credit. That's part of my 830 score.

Sue Buswell (01:03:41) - That's the biggest reason I have that score right. I have to keep that card active. Right. I've got a couple other cards that I've had for 11 years or maybe seven years. Right. They're all major bank. They're all tier one. Okay. I also have a department store card. I use that maybe twice a year just to keep it active. Again, that's a length of time. How many credit cards should you have? So around 5 to 8 is what I've heard. That's a lot of debt to be balancing, but I have Netflix on one. That's the only thing that goes on there. I have points cards that have like my power bill and my cell phone bill. Right? So everything gets paid on my credit cards, and then my credit cards get paid in full every month because my credit's working for me. I'm not working for my credit. Right. So the number of cards should be about five. You should have a mix between major bank and credit union and department store cards and keep them active.

Sue Buswell (01:04:43) - You don't need ten, but if you have some, keep your oldest cards. Don't get rid of the newest cards.

Mike Mills (01:04:51) - So keep the older ones, keep those going. But anything that's new, once you get over.

Mike Mills (01:04:56) - That.

Sue Buswell (01:04:56) - But you're still going to. Right? So credit utilization is the entirety of how much credit you have. Your your, you know, limits. If you will. Right. And then how much of those limits that you're using having $200,000 worth of available revolving credit is not going to increase your score more if you had 100,000 instead.

Mike Mills (01:05:16) - Yeah.

Mike Mills (01:05:17) - Okay. That makes sense. So so Brad had another question, but we kind of answered this in the beginning. But just go ahead and just restate just for anybody that missed that part.

Mike Mills (01:05:24) - So if they yeah.

Sue Buswell (01:05:26) - If they add a child to a credit card. So you know, it's the difference between mortgage underwriting and credit scores. The two do not exist in the same world together. Right. So we have our credit score and then we have underwriting to deal with the things that people do with their credit scores.

Sue Buswell (01:05:41) - So yes, I am a fan of an authorized user to establish credit for a child. Okay. Is it weird for a seven year old to have a credit report? Of course it is, right? But they're not going to be able to get their own credit until they reach legal age. And most people, especially in the mortgage space, are going to say, you know, you can't count that that's not their debt unless you can show that they've actually been paying on it. But the point of an authorized user, just like I did with my brother, is you get them a start. Yes, they get a start. And from that start they can then get their own account. And that's exactly what he's done.

Mike Mills (01:06:18) - Yeah, yeah. No. Having those authorized user and didn't know. Can you add like a ten year old to as an authorized user to your account.

Mike Mills (01:06:25) - They won't report it.

Sue Buswell (01:06:26) - Because they don't have a credit report yet. But I've heard people say that they've added, you know, I've actually seen it where you've got credit established under a child.

Sue Buswell (01:06:34) - Some of that is in a fraud space. Yeah, yeah. But you know, you're adding your, your college age student to it. There might be 17, um, you know, to that card. Can you do that? Yeah you can. They're an authorized user, but they're not going to report it. And if you want them to report on that person's credit report, then they're going to need their name, address and Social Security number. And then they'll start reporting it. Not every creditor will report on an authorized user. So if you're looking at that to help someone get a start like I did, make sure you ask the creditor before you do it. Do you report. And if you do, what do you need to report the information on their file? And if the if they don't have a file, it will be created through this process of them creating a credit report for them.

Mike Mills (01:07:20) - Okay.

Mike Mills (01:07:21) - All right. Well another way to get them started. You got to get them rolling early because again necessary evil you have to do something with it.

Mike Mills (01:07:27) - You can't just just ignore it. Last thing I want to get to. Well two things. One is I do want before we get off because we're already over an hour. So I want to be respectful of your time. But, you know, this has been great. Um, the let's get back to the credit repair companies or whatever. Just because I want you to give kind of your if someone was looking or trying to get their credit repair. And I know you mentioned the I can't remember the name of the company or the the advocacy.

Mike Mills (01:07:52) - Group Foundation.

Sue Buswell (01:07:53) - Of Credit Counseling. Yep.

Mike Mills (01:07:55) - Yep.

Mike Mills (01:07:55) - National Federation of Credit Counseling to get information there. So I want you to talk about that. And then also, if they reached out to the local credit repair company, what kind of questions would you ask as a consumer to them to say, hey, what are you doing here? How are you doing that? And then reasonable costs basically for that because sometimes, you know, I always tell people you get what you pay for.

Mike Mills (01:08:15) - So if you're paying 100 bucks a month, then you're probably getting 100 bucks a month worth of service, and that's not going to benefit you much. And then we'll get to the FHA for peace here at the very end. But but talk about the credit repair companies for a minute.

Sue Buswell (01:08:28) - Yeah. So again, I think that there's a place for reputable credit, I hate to call it credit repair. I'm going to say, you know, credit building agencies okay.

Mike Mills (01:08:37) - So counseling how about that.

Sue Buswell (01:08:38) - Credit agencies please change your name from credit repair credit building okay. So there's there are some. And what I would do my recommendation is the Cfpb actually has a website that talks about these agencies. They just find a couple who are doing it wrong. And they actually have some questions to ask. If you're thinking of using those agency and they have some referral sources. So I don't want to be a referral source in other than the National Foundation for Credit Counseling. But think if you go to the Cfpb, you can get those answers really easily.

Sue Buswell (01:09:13) - And it's simple to search their site. You just Cfpb credit repair and then they'll let you know what you should look for. There are restrictions about, you know, charging for a service that they have not received. So that was what got some of those very large million billion dollar fines to those other agencies is that they were doing something against the letter of the law. So it is something that is allowable under the letter of the law. But there are significant rules for those agencies to follow. So is my referral for that. And what was the other follow up question, Mike.

Mike Mills (01:09:46) - Well, okay. So then that's that's just basically on the credit repair or credit counseling side of things. So we got the questions that we wish we should ask them when we get on there. We can find that on the Cfpb website. Is there is there something that you think is a not maybe necessarily a reasonable cost, but is there a. Um, you know, like, if you were going to if someone was telling you, hey, this is only $100 a month, would you be like, uh, probably stay away from that one.

Mike Mills (01:10:12) - If someone's like, no, this is actually 1200, here's what we're going to do. Here's how we're going to do it. You know, how do you gauge what makes the most sense for someone that just doesn't know any better?

Sue Buswell (01:10:21) - Yeah. Think again, I would say check with the Cfpb because they do have guidance on that. There cannot be a charge in advance of services and there cannot. So there's a lot of rules around there. And I'm not as well spoken on those rules. So don't want to give anyone wrong advice. And that's why I'd say if someone's going to charge you something for something you haven't received yet. Um, always be suspicious of that, okay?

Mike Mills (01:10:46) - Yeah, just straight.

Sue Buswell (01:10:47) - Up, like, give me 1200 bucks and I'll fix your credit report.

Mike Mills (01:10:51) - No, don't do that.

Sue Buswell (01:10:52) - Yeah, no, don't do that. Don't sign up for a monthly service when you have no idea what you're receiving. So if something sounds too good to be true, probably is.

Mike Mills (01:11:02) - Probably is.

Mike Mills (01:11:03) - All right. Last thing is we you'd mentioned several times the scoring models specifically for the mortgage industry are changing. Do you know when this is going to occur. And then what is happening specifically with the Fhfa on what they're what what are they adjusting specifically? And I know we've mentioned a few things, but just to recap some of that.

Mike Mills (01:11:21) - So they're making.

Sue Buswell (01:11:22) - Some major changes for our industry. The first one is and they've not yet now haven't checked the website since the NBA, which is when they announced all these changes was last year at the NBA. But there's two major changes coming our way. We're going from a tri merge to a bi merge. And when you go from a tri merge to a bi merge, you're going to be calculating your scores differently. It's going to be an average. Now that's today's thought process. But what has done and I'm I'm on these calls is they have opened and other people can join these calls. I did a post on it. I'll send you the information Mike, if you want to add it to your feed.

Sue Buswell (01:11:59) - But they are asking for stakeholder feedback. And it's not just the company, it's individuals. Right. So first and foremost the changes are coming. They were supposed to start Q1 2024 with the move from the tri merge to the BI merge.

Mike Mills (01:12:12) - Real quick on that.

Mike Mills (01:12:13) - The trimer should the BI merge. So if somebody's getting left out.

Sue Buswell (01:12:17) - That's that's lender choice right now.

Mike Mills (01:12:19) - Okay.

Mike Mills (01:12:20) - So so we have three credit bureaus Equifax Experian Trades Union. So you're saying that the lender, whoever that is gets to decide which of the two that they're going to choose to merge.

Mike Mills (01:12:32) - Yep.

Mike Mills (01:12:33) - Wow. So somebody's going bye bye. Right.

Mike Mills (01:12:36) - Well maybe not right away but so think that's.

Sue Buswell (01:12:39) - Yeah there's a lot of controversial conversations around that. Let's say that. And then there's been some studies that I've seen that have been recently um, dropped let's say, that have said that if you go from a tri merge to a bi merge, you just took about 2.1 million people out of the housing pool. So that's one thought.

Sue Buswell (01:12:58) - Well, think about it. So rule America. Yeah. And when I lived in Texas, I was traveling all over Louisiana. Some of the areas that had only finance companies, very small banks who may.

Mike Mills (01:13:11) - Only report it. Yeah.

Sue Buswell (01:13:14) - Right. So if my credit is only being reported to, let's say to you in Equifax, but you pull Experian into you. Am I going to get a fair shake? No. So what? I've been asking lenders to do so that we can start to to weigh these changes, like real life in our offices is take four credit reports. What's your current mid? What's your mid with two. And do those options right. Because your average that's what they're going to look at. They're not going to do a mid anymore. You're going to have two. So what your average score. Yeah the idea has been and what's been published by Fhfa is that the score differences between a try merge to a buy merge is no more than ten points. But that's not actually 100% accurate because there is a large population where it's more than 30 points.

Sue Buswell (01:13:57) - So how do we manage that? How do we manage that? So that's part of the conversations. They want feedback. They want information. But we're supposed to be getting some of the data that they did, the research that they did on vantage 4.0 and is supposed to be released in Q3. So I'm I'm hunting for it daily to see if I can find it and then share it. Right. So that's one change by merge to try merge same score models. Now here comes the next change. I don't want to be a mortgage lender explaining this one. Here comes Fico, here comes Vantagescore. Your credit report will display and will provide an explanation a score disclosure notice for three scores. You'll still be using the old models until 2025.

Mike Mills (01:14:44) - But you're doing it by merge.

Mike Mills (01:14:46) - But then you're showing all three by merge.

Sue Buswell (01:14:48) - But each bar will have three scores. So yes.

Mike Mills (01:14:52) - So yeah, that's going to be a difficult conversation.

Mike Mills (01:14:55) - Yeah. So hey Mike, it's.

Sue Buswell (01:14:57) - Not just that my you know Fico eight scores 659 or my Credit Karma score 659.

Sue Buswell (01:15:02) - But my vantage is 700, my Fico is 658, and my 20 year old Fico model is what you're going to write my loan on. I'm not happy with that.

Mike Mills (01:15:13) - Yeah. Let me ask you a question on that then. Two is there a is there a scenario because it sounds like there would be where somebody say, let's say you're a lender and they call you right, and you're using Equifax and TransUnion as your or your by merge score. Okay. And then and they have a whatever 700 okay. And they call me and I'm using Experian and Equifax as my BI merge score as a separate I'm a different mortgage bank. Right. And when they call me their credit score is 730. Okay. Well that 30 point difference moves them to the next tier. And now they're going to get a better interest rate because I'm using the different scoring model than you're using, because right now.

Mike Mills (01:15:56) - You're using the.

Sue Buswell (01:15:56) - Same score models, but you're using different repositories.

Mike Mills (01:16:00) - Different.

Mike Mills (01:16:00) - Bureaus. I'm sorry. Yeah, different bureaus on that.

Mike Mills (01:16:02) - So right now it's a level playing field. Like if you from at least from what I understand, if someone has their credit pulled with me today and they have their credit pulled with you today, we're going to have the exact same three scores, you know, assuming there is anything reported in that. Whatever.

Mike Mills (01:16:16) - Yeah. Tiny. Tiny. Yeah.

Mike Mills (01:16:18) - So but now if this change occurs, then depending on what bank on the bank that decides to use which repositories they decide to average, they could have a higher score with one bank than the other. Is that is that right?

Sue Buswell (01:16:31) - That's true. And there's been a lot of thought process about well, just pull up. Pull this off Bureau. Pull up, pull up. Prequel soft right. Pull all three. Pull a prequel soft and then pull the two on your hard that are the highest. Oh, so.

Mike Mills (01:16:45) - You could as a lender, you could have either model or three different. How many models would there be? One? Two like.

Mike Mills (01:16:51) - Three.

Sue Buswell (01:16:51) - Hard, right? If you pull three, if you do a regular standard mortgage pull, which is a hard inquiry, you pull all three bureaus, you'll be forced to use those three bureaus. And the old way, okay. Yeah, but there's some conversation around. Maybe just pull this off, pull all three bureaus, figure out who's the two highest, and that's who I pull. Okay. Yeah. Now, that's that's a great strategy. If I was still originating, that's what I'd be doing 1,000%.

Mike Mills (01:17:14) - What I would do if that was.

Mike Mills (01:17:15) - Like.

Sue Buswell (01:17:15) - You're going to be in your prequels all set up tomorrow, I know it. So now there's some thought process though. But what if. Because score models were supposed to remove any idea of, you know, prejudice.

Mike Mills (01:17:28) - Right?

Sue Buswell (01:17:28) - So what if somebody goes, okay, got my prequel soft. But yeah, I'm going to use these other two and they don't pull the two that are the best to the consumer. Now why would a lender do that.

Sue Buswell (01:17:39) - Don't know. But that's some of the conversations that in questions is being posed to and saying how do we monitor this.

Mike Mills (01:17:47) - Yeah. How do we.

Sue Buswell (01:17:48) - Ensure that the consumer because these changes are supposed to be for the benefit of the consumer, right. How are these changes going to benefit the consumer? How are we going to know that lender one, lender two are giving the best option? The other thing that Fhfa has said and has been very, very adamant about in these changes is that these changes are to force competition, competition amongst the repositories.

Mike Mills (01:18:17) - Which I think is great. I think that's fantastic. Yeah.

Sue Buswell (01:18:19) - Who's got who's got the most the bigger data because that's really where these guys compete. Who's got the most data right. So who's got the most data? Um, who's got the the best system for delivering information and data. Right. Yeah. And then we're talking about competition amongst mortgage lenders. I'm simply happy that we're going to have two score models coming out in 2025, because we've had since 1995 a choice of one.

Sue Buswell (01:18:46) - Yeah. And that's the only thing in our mortgage industry that we have only one choice on.

Mike Mills (01:18:54) - The whole credit games. It's it's a racket, you know.

Mike Mills (01:18:58) - And it is it is.

Mike Mills (01:19:00) - Great that we have people like you Sue that that are came from the inside that, that know all this stuff because it is it's so incredibly confusing. And it's unfortunate because it plays such a, it has such a heavy weight on everything that we do, especially because, I mean, good or bad, we are a debt based society. That is what we are. Our government operates at a deficit. Most people operate in a deficit. I mean, yeah, yes. I mean, it's again, I'm not saying it's good. I'm just saying it is what it is. And it's one of those things that your credit report and your credit score and all that that impacts has so much, you know, just impact on our life. When I made the promo video for this, I was talking about how like, this is something that literally can save you thousands of dollars a year in interest that you pay to your debt if you have it managed correctly.

Mike Mills (01:19:50) - And that's, that's, you know, for some people, that's a that's a month's worth of pay or more. So, so it's just it's so impactful to people. And yet it's such a complicated thing. Very few people fully understand it. And, you know, those of us that work dealing with credit every day, you know, I do mortgages, but obviously I deal in people's credit report every day. So I need to know this stuff because I have to be able to explain it to people because we're the ones on the front lines really kind of explaining this. They don't get to talk to you, you know, and have a conversation with you and people like you all the time. So loan officers and even real estate agents who are, you know, my primary audience here, these are things that that we have to know because we have to be the ones on the front line educating our buyers and educating the borrowers on what they need to do and what impacts your score and how to go about it so they don't have to go pay some, you know, person that's probably not looking out for their best interest, to give them bad information and do bad things.

Mike Mills (01:20:42) - It's really ultimately going to hurt them. And, you know, it's incumbent on us to get as much information, as much knowledge as we can, because we're the ones that are that are the primary educators. And most of these things when it comes to the consumer.

Sue Buswell (01:20:54) - It's true, Mike, and I think, you know, it's funny, there is nothing interesting about having a credit conversation, right. Unless you need credit, that's the only time that it's interesting, but am working on creating some resources and some places where people can go and easily grab information and data that as a real estate agent, they can provide that as a loan officer, they can provide that. So, you know, look for kind of the next the next step of Sunosi score is to, you know, kind of expand a little bit out of LinkedIn. I've had a number of mortgage professionals that have said, I need I need to have something that, you know, is easily explained in the way that I try to deliver information as easy as I can to make a complicated situation easy.

Sue Buswell (01:21:40) - So look for that coming up. Hopefully in the next 60 days I'll have that information up and running and you guys can grab what you're looking for, like how do I explain inquiries?

Mike Mills (01:21:50) - That's awesome. I really, really appreciate it too. You know, we're a whole hour and 20in. It was the longest one I've done in a little while. Just because it's chock full of information. We could probably go on for another hour or two. So I definitely want to have you back some time in the near future to kind of revisit once some of these scoring models kind of really come into play and see how they're impacting things. And then of course, once you get all your stuff ready to go and get it out there to to professionals like us so we can really educate ourselves further, so then we can carry on that education to our buyers. Because especially with interest rates being through the roof right now, you know, maximizing your credit score is really going to make a big financial difference in a lot of people's lives.

Sue Buswell (01:22:26) - So absolutely. And it can do it in less than 30 days.

Mike Mills (01:22:29) - So there's hope.

Sue Buswell (01:22:31) - You just got to know the rules of the game. Yep.

Mike Mills (01:22:33) - That's right. That's right. Well thank you so much Sue. Thanks for coming on and being with us today. I appreciate everybody that stuck around. Thanks for all the great questions. We will. I'm actually changing up my publishing schedule a little bit. So this will actually go on to Spotify and Apple tomorrow. I'm doing a I do a weekly update now for the market. News is generally that I publish on Monday these days, so I'm kind of switching things around. But this will be published on Apple and Spotify tomorrow. So if you want to check it out, download it on those platforms and relisten to this because you're probably gonna need to go through this. I'm going to have to go through this a couple more times, make sure I get all my notes correctly, because there's just a ton of information in this one. So, so thank you so much for your time, Sue, and thank you for everybody that stuck around.

Mike Mills (01:23:13) - And we will see you next week.

Mike Mills (01:23:15) - Thanks, Mike. All right.