March 11, 2025 • 48 mins
For mortgage professionals, staying informed about current developments in credit reporting is crucial for providing excellent service. In this episode of Mortgage Connects, Mike Olden from American Reporting Company shares expert insights on trigger leads, credit score modernization, medical debt, and student loan forgiveness - plus strategies to help borrowers optimize their credit profiles.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Alexis Panaro (00:06):
Welcome to Mortgage Connects by MGIC,
bringing you the latest insightsfrom top mortgage professionals
around the industry.
I'm your host, Alexis Panaro,and today I'm happy to bring you
a very special guest, alongtime partner of MGIC, Mr.
Mike Olden.
Mike is VP of Sales andEducation at American Reporting
(00:26):
Company, otherwise known as ARC,and we frequently had him on
some of our webinars, but today,Mike and I wanted to sit down
and discuss some of the hottopics that we're hearing about
in the credit world.
So, Mike, how are you doingtoday?
Welcome.
Mike Olden (00:42):
I'm doing well.
Thank you so much, Alexis.
It's always a pleasure and wehave had a long partnership with
MGIC, going back to about 2007.
And my good colleague and yourco-worker, Dean Dardzinski, and
I started this partnership backat that time and I think it's
(01:05):
developed really well.
We share a lot of clients and Iwas just with one of your
account managers, Steve Beagles,earlier this week.
Today is February 28th that I'mspeaking to you and we have an
early spring day in Seattle.
It's sunny and about 60 degrees, so I'm delighted for that.
Alexis Panaro (01:30):
About the same weather here in Milwaukee.
So it is nice because we've hadsome cold weather, so it's nice
to have a little warmer weatherthan we've been having.
And I can always count on you,Mike, to give me the year that
our partnership started.
I could never remember so 2007.
Mike Olden (01:47):
Right, it's a long time, yeah, long time, but
really one of our favorite andbest industry partnerships here
at ARC.
Alexis Panaro (01:58):
Yes, we appreciate it and thank you,
yeah, for setting some timeaside today.
As Mike mentioned.
I do want to note the date itis February 28th 2025, the day
that we're recording this, justin case some things may change
after that, but we want to makesure we're giving you that date
and I know here at MGIC, we heara lot from LOs about credit
(02:18):
confusion.
So you know what are triggerleads, how can we prevent
trigger leads?
What's going on with medicaldebt?
What's to come with creditscore modernization and so on,
and we are not the experts.
So, Mike, I'm happy you canjoin us today to kind of go over
some of these frequently askedquestions that we've been
getting.
Mike Olden (02:37):
Well, thank you, and I am delighted and we receive
the same questions.
We answer these almost on adaily basis and I'm happy to
share it because this is ourfield of expertise.
This is our profession withinthe mortgage, banking and real
estate finance industry, butsome of the information we're
(02:58):
going to share with thelisteners today transcends any
industry, because we're allconsumers and I know you and I
have talked about our ownpersonal experiences and
journeys in regards to creditand credit scores, so we're
always really happy to share ourknowledge with our colleagues
(03:20):
and peers in the industry.
Alexis Panaro (03:23):
Great, great.
Well, let's get into it here.
I have a list of questions, soI'll just kind of shoot them
over at you and we'll go througheverything here.
So one thing I know we getasked about is how you know how,
as a lender, can we bestprepare our borrowers before we
pull their credit report.
Mike Olden (03:40):
Exactly, and we get that question a lot here at ARC
as well, and I think there's afew items that we as
professionals can inform,educate and encourage borrowers
to do before they even sit downwith the lender and especially
(04:01):
before the lender pulls thecredit report.
So when and I talk to borrowersabout all of these items,
especially when I do home buyerclasses number one review your
personal credit report, and it'sreally easy today because
annualcreditreportcom, which isthe official free site for
(04:23):
consumers to view their personalcredit report, in spite of the
name annual, we can view ourpersonal credit report once per
week for free, and it changedfrom annually to weekly right
after the pandemic, so it's veryeasy for consumers to do that.
(04:47):
I recommend that you pull yourpersonal credit report.
Annualcreditreportcom is theofficial site.
You could also go directly tothe three major credit bureaus
FICO, credit, karma.
Those are all soft hitinquiries, so no impact on our
scores.
(05:08):
But what's most important is tolook at that report and then
determine are there any creditreporting errors that we need to
address, and a great site tohelp with going through that
process is the Federal TradeCommission, ftcgov, and we're
(05:31):
going to provide a resourceguide with a lot of the items
that Alexis and I are talkingabout today, but there's even a
template letter there.
They've done all the work onhow to you know, when you want
to dispute something with thebureaus or a creditor, I think
determine do you have any highcredit card balances?
(05:53):
If you do, do you have theability to pay those down before
your lender pulls the creditreport?
That will help you optimizeyour credit score.
Also, opting out Alexis, youmentioned trigger leads and
we'll talk more in detail aboutthat.
But if we opt out, we areprotecting ourselves.
(06:15):
When our lender pulls thecredit report, we're not going
to get inundated with dozens,with dozens, sometimes scores,
of inquiry calls or textmessages or items coming through
the mail and then, just beforethe lender pulls the credit
(06:41):
report, if a borrower has acredit freeze or a credit lock
on their file, they want totemporarily remove those.
If they don't and our lenderaudience today pulls the credit
report, they're not going to seeall of the borrower's
information and that's going toslow down the process.
So I think those items for aborrower review your personal
(07:01):
credit report, determine ifthere's any credit reporting
errors.
Do you have a plan for highcredit card balances and to
lower those.
Make sure you opt out and thenlift any freeze or lock just
before your lender pulls credit,and that's going to make things
(07:22):
far more efficient, not slowdown the process.
Alexis Panaro (07:28):
Right, you mentioned paying down balances.
Is that something that youwould recommend borrowers do to
possibly increase their scores,or any tips to kind of increase
their scores before that reportis officially pulled by a lender
?
Mike Olden (07:47):
I do and determining if there's any credit reporting
errors, especially items thatare negative that may be
impacting the score.
Since they're on the creditreport, the score is being
calculated.
But if they're reported anerror, we want to help borrowers
get those taken off through theproper channels and then, if a
(08:11):
borrower does have high creditcard balances, work to pay those
down as much as possible.
But when we've spoken with FICOthey have stated a good rule of
thumb is below 20 to 25 percentof the credit limit, doesn't
necessarily have to be zerobalance and certainly don't pay
(08:35):
that off and close the account.
That's not a good short termstrategy closing accounts but
work to do your best to getthose below 20 to 25% of the
credit limit and I feel thatborrowers should start focusing
on these items 30 to 90 daysbefore they're ready to talk to
(08:59):
a lender.
Sometimes it's not possible todo that, but as best we can
encourage borrowers start thisprocess 30 to 90 days before the
lender's going to pull credit.
Alexis Panaro (09:15):
Great, and we do have.
Mgic has a infographic abouthow a credit score is made up.
So we have X amount of thatscore kind of comes from credit
utilization, x amount comes fromthe history of accounts and so
forth.
So all of these resources thatMike mentions or that I
mentioned, we will put on thepodcast episode page.
(09:36):
So just keep an eye out forthat Trigger leads.
Let's go back to that a littlebit, can you talk about what a
trigger lead is, and you knowwe're hearing about opting out
and how can we do that and anyupdates on trigger leads.
Mike Olden (09:51):
Sure, and there's a couple different types of
triggers.
There are acquisition triggers,which that's typically when
we're receiving those creditcard solicitations in the mail.
Those creditors are purchasingaspects of our credit file.
(10:14):
They can't see the creditreport because we haven't given
them permission, but they doknow that we're in a certain
geographic area, typically a zipcode.
They know that our scores fallbetween this range and that
range.
We don't have any late paymentsor bankruptcies in the past 12
months, Whatever the attributesthey're looking for for that
(10:37):
target audience, and they sendout those solicitations.
The trigger leads that arereally a flashpoint in our
industry for the past year or sois when a borrower applies for
a mortgage loan and thattriggers a notification to other
(10:59):
lenders that Mike or Alexis orDean are looking for a mortgage
and then, if we have not optedout, we're going to get
solicited, oftentimes heavily,by multiple lenders, and the
best way to avoid that isencouraging borrowers to opt out
(11:24):
.
Opt out pre-screen is for mail,do not.
Callgov is for phone, and thosecan go into place very quickly.
There are some exemptionscertain nonprofits who are
trying to raise money, that typeof thing, companies that you
(11:44):
already have a relationship withbut for the most part.
That will eliminate probably90% of those inquiries from
other lenders.
So for our lender partners thatare listening today, I encourage
you send out that reminder,often to your database, to your
(12:12):
realtor colleagues so they canshare it.
Then when that borrower comesto see you, hopefully they've
already opted out and you canpull that credit report with
confidence, knowing that yourcompetitors are not going to
inundate your borrower with awhole lot of activity.
(12:32):
We're also going to share atemplate communication that you
could send out to your databasereminding them, encouraging them
to opt out here.
And you know, last year, in2024, there were multiple pieces
of legislation proposed at thefederal level to control,
(12:57):
restrict the use of triggerleads.
Unfortunately, all of thosefailed to go through.
I'm going to be thoserestrictions on trigger leads.
So I think we'll have moreinformation to share with our
(13:32):
audience toward the middle orend of April on those efforts.
Alexis Panaro (13:37):
Great, and Mike and I were just discussing
beforehand that we'd like tohost a live webinar around that
time.
So keep an eye out for that.
It'll be posted at mgiccomslash training where you can
find either the live session orthe recording of that session.
So hopefully again end of April, maybe early May.
Mike Olden (13:56):
I'd like to point out too, that I'll sound the ARC
trumpet here.
We don't sell trigger leads andwe never have.
We feel it would be a detrimentto our partnership with our
lending partners.
But I encourage the listenerstalk to your credit reporting
providers.
Ask them that question directly, if they sell those or not.
(14:20):
It is a source of revenue.
It's legal for the bureaus orother third parties to sell them
, but we don't.
We would rather take theapproach of helping our clients
educate their borrowers on howto avoid them.
Alexis Panaro (14:35):
We appreciate that.
I don't think I've heard anyonesay that they are in favor of
trigger leads.
Mike Olden (14:40):
Exactly.
Alexis Panaro (14:42):
You mentioned that pulling your own credit
report fromannualcreditreportcom creates a
soft hit.
So can you just kind of go overwhat a soft hit inquiry is
versus a hard hit?
And then I know some otherquestions that come into the
hard hit inquiry is you know howmany times can my borrower shop
(15:05):
around for a rate, let's saywithin a certain time period,
without that affecting theircredit score?
Mike Olden (15:13):
There are two primary types of inquiries.
There's soft inquiries and hardinquiries.
A soft inquiry is when we lookat our own credit report.
Maybe it's directly through thebureaus or
annualcreditreportcom, creditKarma etc.
No impact on our credit score.
Other uses of soft inquiriesare when we are applying for
(15:39):
rental.
Maybe we're going to rent anapartment.
That's typically a soft hit.
Insurance, employment those aretypically soft hit reports.
If we have an existing accountwith a credit grantor, they may
periodically pull a soft hitcredit report for the purpose of
(15:59):
account review and it'simportant to remember when we're
opening new accounts.
Somewhere in the disclosure ormaybe you get an annual privacy
notice from your credit grantors.
Somewhere in there it says wereserve the right to
periodically review your creditand that is going to be a soft
(16:24):
hit credit report.
So all of those categories noimpact.
We've also seen in the pastyear in our industry lenders
beginning to use soft hit creditreports on the front end,
especially with Fannie Mae andFreddie Mac, to get a
(16:44):
pre-approval for their borrower.
It's a soft hit.
The primary goal there is toeliminate the trigger lead
action and protect thatrelationship.
However, both Fannie Mae andFreddie Mac, prior to closing,
do still require a hard-hittri-merge credit report.
(17:06):
Fha and VA on their streamlinedrefinances will close that
refinance on just a soft-hitcredit report.
So those are certainly somebenefits.
In our industry A hard hitinquiry is typically when we as
(17:27):
consumers apply for theextension of credit.
We're applying for a mortgage,an auto loan, a credit card,
even a student loan.
Those are typically hard hits.
Even a student loan.
Those are typically hard hits.
They may impact our creditscores.
How much depends on the overallfile.
(17:51):
But in our conversations withFICO and we're going to share a
great piece on inquiries fromthem on average less than five
points, so not as significant assome consumers feel on there.
The other part of your question,alexis, was in the mortgage
industry, can we have multipleinquiries for the purpose of
(18:13):
that action?
And we can.
Several years ago the bureausand FICO put their heads
together and said let's notpenalize consumers for interest
rate shopping.
As consumers we want to findthe lowest interest rate
possible.
One of my former colleaguesgave me a great definition of
(18:37):
credit.
Credit is the cost of money,which is the interest rate, and
the higher our scores, typicallythe lower the interest rate,
the more we can borrow, manymore opportunities etc.
So in the mortgage industry youcan have multiple inquiries
within a 14 to 45 day period.
(18:59):
They're all grouped togetherand scored just once.
That's the same formula in theautomobile industry and also in
the student loan industry.
Now we can't co-mingle thoseinquiries.
Each one is a different bucket,different bucket.
(19:27):
And why is it 14 to 45 days?
That's because Experian isstill using the oldest version
of FICO scores, fico V2.
That's a 14-day deduplicationwindow on mortgage inquiries
window on mortgage inquiries.
Transunion and Equifax areusing versions four and five
respectively.
That's a 45-day period.
When we get into FICO 10T theirmost recent version, it will
(19:55):
always be a 45-day deduplicationwindow.
Alexis Panaro (19:59):
I was going to say 14 to 45 days.
That's quite a large range, but, as you mentioned, it sounds
like if let's say there is adouble hit on there, it
shouldn't affect a credit scoretoo dramatically maybe five
points or so.
Mike Olden (20:16):
Right or so Right, and so if you have a borrower
come in to your office today andthey're concerned because last
week they went to two otherlenders you're certainly within
that 14-day window and much moreinto that 45-day window you can
(20:37):
speak confidently to them andstate well, we're in this 14-day
window, so a third inquiryisn't going to impact your score
any further, because in themortgage industry we can group
those together.
They're deduplicated.
But the piece we're going toshare from FICO goes into much
(21:00):
greater detail and it's reallyan excellent piece.
I would encourage our lenderlisteners today share that with
your borrowers, becauseborrowers that is a major
concern of theirs today areinquiries and how they impact
their scores.
Alexis Panaro (21:17):
Yep, I know I'm always nervous to put my social
security number in to pullbecause I'm like is this going
to pull a?
Is this a hard hit or a softhit, or what's going to happen
here?
So again, that resourcematerial that Mike is mentioning
will be in the podcast episodepage in the notes there for you
All.
Right, switching gears a littlebit.
(21:37):
Credit reports are getting alittle costly.
Mike Olden (21:49):
So are there any strategies for lenders to reduce
their costs on credit reports?
In FICO scores to trended datawhich shows the past 24 months
trends in consumer payment, arethey carrying high credit card
(22:13):
balances throughout that timeand only making the minimum
payment, for example, to justgeneral increases from the
credit bureaus?
So right now we're seeingcredit reports easily in the $80
to $100 range.
What can lenders do to helpreduce that?
I feel one of the best toolsavailable to lenders in the
(22:38):
mortgage industry is to use acredit cascade.
So the concept there is thelender will identify some
parameters or attributes thatthey want met minimum standards.
So, for example, no scoresunder 600, no bankruptcies in
(23:02):
the past 24 months, no mortgagelate payments in the past 12
months and so forth.
There's many attributes thatcan be chosen.
Then when that credit report ispulled, the first bureau if it
doesn't meet those minimumstandards, the process stops.
(23:23):
So you're only paying for asingle bureau rather than all
three.
That's one strategy in thatcredit cascade.
We have some clients at ARCthat pull two bureaus, because
if you pull two bureaus, youknow that one of those scores is
(23:43):
going to be your mid score andthat's what's most important in
our industry.
What's the mid score out of thethree?
So you could, in those twoscenarios you could be saving
66% or at least 33% of yourinitial investment on a credit
(24:04):
report.
So I think that's an excellentstrategy there.
We have some clients that arepulling a single bureau soft hit
credit report that has norequirement of a firm offer of
credit.
You're really just taking asnapshot of that borrower so
(24:25):
from a compliance standpoint youmay not have to issue an
adverse action letter or make afirm offer of credit there.
It really is just kind oflifting up the sheet of paper
and looking underneath.
How does this look?
Some clients ask us well, canwe really get a good picture
(24:50):
from a single bureau?
And I believe you can.
In my experience in thisindustry, probably 85 to 90% of
the time what shows up on onebureau shows up on all three.
There's always going to be theoutlier, the collection agency,
that only reports to one bureau,or even a creditor that only
(25:13):
reports to one bureau.
But for the most part you'regoing to get a really good
indication.
Those reports are typicallythat single bureau soft hit,
typically under $20.
So it can be a very economicalsolution for lenders provider
(25:41):
about these products andstrategies, and if you don't
hear from them, you can call me,and my contact information will
be at the end of the broadcast.
Alexis Panaro (25:46):
All right.
Big news in the last few weeksabout student loan forgiveness
and medical debts.
What can you tell us about that?
Where is it going to go?
What can we expect?
Mike Olden (25:57):
Yeah, those are two items that have been in the
spotlight nationally over thepast couple weeks.
I'm sure we'll hear more whenI'm back in Washington next
month, but last week it appearedthat there were some.
(26:19):
I think I recall a federaljudge who stated that the
proposed student loanforgiveness proposed by the
previous administration wasoutside of their authority and
that many of those student loansthat have been on hold since
(26:39):
the pandemic will be back online.
And there was some anticipationthat there could be quite a few
delinquencies because thestudent borrowers maybe haven't
prepared for that or werecounting on the forgiveness of
those student loans and took themoney that they would have made
(27:01):
on payments and used it forother items.
So I think that's probably arealistic possibility.
I think any of our listenerstoday who have borrowers maybe
they even have family members orthey have student loans to be
prepared that those loans willnot be forgiven, that appears to
(27:27):
be a strong likelihood.
Medical debts we may recall,back in January the CFPB came
out and said even though thereare existing rules on the
reporting of medical debt to thecredit bureaus, we're going to
go one step further and we'regoing to prohibit all medical
(27:49):
debt from being reported.
Well, over the last two weeks,we've seen where, where the CFPB
first went on a self-imposedfurlough of doing anything, and
now today it appears the entireagency may be wound down to
(28:12):
nothing.
So that rule is really in limbo.
The good news for consumers,though, today is, as of 2023,
there are two primary areasconcerning the reporting of
medical debt.
Number one all medicalcollections under $500, paid or
(28:38):
unpaid, are prohibited frombeing reported to the credit
bureaus.
Number two any medical debtthat is over $500 and sent to a
collection agency has a 12-monthcooling-off period before the
(28:59):
collection agency is allowed toreport it to the credit bureaus.
The reason for that is and I'vegone through this, I don't know
, maybe you have Alexis or ourlisteners oftentimes there are a
lot of clerical errors betweenthe insurance company, between
the insurance company, theprovider, the doctor, the
(29:21):
hospital, the clinic and thepatient.
Where things don't get postedin time, they don't get posted
at all.
Items are transposed, they'redeleted in error, whatever the
(29:42):
situation may be.
Many consumers face that, and Ibelieve I recall last year a
statistic came out that about43% of credit reports had some
type of medical debt on there.
Alexis Panaro (29:49):
That's crazy.
Mike Olden (29:50):
Yeah, now we don't see that after these updates in
July of 2023.
How did this come about?
There were several states'attorneys general who banded
together and reached asettlement agreement with the
(30:11):
bureaus to implement thesechanges.
So they're not technically laws, it was a settlement.
But I think those states'attorneys general had quite a
bit of leverage with the bureausand they reached this agreement
.
So today we don't see, for themost part, any medical
(30:35):
collections on credit reports,and the majority of those were
under $100 when they werereporting.
A lot of them that I saw wereunder $30, like a copay, a
radiology bill, something veryminimal, easy to overlook and
forget.
(30:55):
And then 60, 90 days later,uh-oh, it's on my credit report
and my score drops 50 to 100points, and that's not an
exaggeration.
We did see scores drop by thatmuch for a $25 medical
collection.
So that's the good news.
The bigger picture will allmedical debt be prohibited?
(31:18):
I don't know.
We're going to have to see howthings shake out with the CFPB,
but our current administrationis certainly an advocate of less
regulation and oversight, evenin our industry, so only time
will tell.
Alexis Panaro (31:39):
Great.
Thank you, and again justreiterating that we will
hopefully have a live webinarfor you at the end of April,
early May, that we might havemore updates on this, but we'll
see.
Mike Olden (31:53):
Yeah, exactly.
Alexis Panaro (31:55):
What can you tell us about credit score
modernization, moving to buymerge reports or anything on
that topic?
Mike Olden (32:04):
Back in October of 2022, director Thompson at FHFA,
who's the agency that overseesFannie and Freddie, came out
with an announcement at theNBA's annual convention that
year that finally we were goingto see credit score
modernization.
(32:24):
We mentioned a few moments agothat the current generation of
FICO scores used in our industryis about 20 years old and, as a
reminder, experian uses version2, transunion version 4,
equifax version 5.
In other lending arenasautomobile credit card they're
(32:50):
typically using FICO version 8or 9.
The most recent version, ficoversion 10T and again the T
stands for Trended Data, whichlooks specifically at payment
patterns on credit card accountsover the past 24 months, and
(33:27):
it's currently a Fannie andFreddie underwriting requirement
, but it doesn't impact thescores in those older versions
of FICO scores.
When FICO 10T comes online, itwill be calculated as part of
the score.
The other portion of that isVantage score, and Vantage
scores are the primarycompetitor to FICO scores.
They are owned collectively bythe three major credit bureaus
and Vantage scores have beenaround about 15 years.
(33:49):
Both scores FICO and Vantagehave the same score range 300 on
the low end, 850 on the highend.
They both have the same fiveprimary attributes that
determine the scores, but wewant to remember they are
(34:09):
different score models and onemajor difference is if you have
a borrower, you pull a creditreport and they don't have any
score, they don't have anycredit, and that is a reality
for many consumers.
If they opened up a new accounttomorrow, say a new Visa account
(34:33):
, to generate a FICO score, ittakes six months.
To generate a Vantage score, itonly takes one month.
Now I've spoken to some of ourunderwriting colleagues.
They prefer six months ofhistory over one month, but it
does generate that score a lotquicker.
(34:54):
Originally, those two scoreswere scheduled to be implemented
in the fourth quarter of thisyear, to be implemented in the
fourth quarter of this year.
That's now been updated to TBD,so we're not sure.
Alexis Panaro (35:08):
Love that TBD.
Mike Olden (35:11):
Kind of, we all know how things move in our industry
and there's always the greatheadline, the excitement, the
enthusiasm and then the realityof implementation sets in the
second part of your question onbuy merge credit reports.
That was part of this overallcredit score modernization
(35:34):
announcement where a lendercould have the opportunity to
pull just two bureaus ratherthan what we have today, a
tri-merge all three bureausmerged into one.
That seems to be in the sameTBD mode as the actual credit
(35:57):
scores and I've spoken again tomany underwriters what their
preference is.
Most of them say theirpreference is a tri-merge report
, so they see the full picturerather than a bi-merge report.
But we'll see how this goes.
(36:17):
Today Fannie and Freddie arestill in conservatorship with
FHFA.
We don't know the path of thecurrent administration, how
that's going to play out, but Idon't think we're going to see
either piece, probably beforethe end of this year.
Alexis Panaro (36:36):
All right, let's talk about credit repair.
I think borrowers sometimes seethese opportunities to repair
their credit, or you know creditcounseling or whatnot, and I
think there's been a lot ofcredit repair scams, so you know
, can you remind us again aboutthe dangers of these scams?
Mike Olden (36:54):
Yes, and there are a lot of dangers there.
Go to the Federal TradeCommission site, ftcgov.
Just type in credit repairscams and you'll see pages there
of either ongoing or past cases, even the CFPB site.
(37:14):
Both of those organizations andthe bureaus are very diligent
about credit repair companiesand what they're offering.
What they're implying bait andswitch.
Is the consumer being requiredto pay money before any services
(37:35):
are rendered?
Is the credit repair companyasking a lender for a copy of
the borrower's credit report?
We've heard from our clientsthat these companies will call
them and say just send over acopy of your borrower's credit
report, we'll analyze it forfree and set up a program.
(37:58):
I would ask all of our listenerstoday if you avoid anything,
avoid that.
That is not within the terms ofthe contract with the bureaus,
and the bureaus do have theauthority to shut lenders off
from accessing credit from anysource.
(38:21):
If you violate that, thatcredit report that you pull on
your borrower is, for you andyour successors, a fancy name
for your investors.
It's not even for your borrower.
If your borrower wants a copyof the credit report, the
(38:43):
bureaus leave that up to you,other than any specific state
regulations and there are someof those.
But if the borrower wants acopy of the credit report you
pulled, your credit reportingprovider should be able to
provide a companion creditreport that is specifically for
(39:07):
your borrower the consumer copyand it's the same credit
information but it's formatteddifferently.
There are special messagesprinted to the consumer.
There are truncated accountnumbers.
The social security numberisn't listed.
(39:27):
That's the version that youshould be sharing with the
borrower if your company has thepolicy to do that.
At ARC, most of our clients andwe have many financial
institutions and independentmortgage bankers that are
(39:48):
clients their policy is they donot provide a copy.
In that case their borrowercontacts us, provides a copy of
their government issue ID and wesend that out.
Or our client calls us and sayscan you send out a copy of the
consumer version to my borrower?
(40:08):
So we do that.
But talk to your own creditreporting provider.
That capability should bewithin their hands.
But back to the credit repairscams.
I encourage lenders stay awayfrom those companies.
The bureaus, the FTC, the CFPBthey're watching and they're
(40:33):
waiting for a mistake.
If your borrower needscounseling, go to HUD's website,
hudgov, and search for aHUD-certified counselor and you
can look.
Every state in the union hasthem.
Here in Washington State, wherewe're located, there are many
(40:58):
of these organizations that havegone through the HUD
certification.
That's the best place for aconsumer to go, or maybe it's
the Consumer Credit CounselingFoundation, something that has
legitimate designations,authorization to provide that
(41:18):
type of help to a consumer.
Alexis Panaro (41:20):
Great, thank you.
Mike Olden (41:22):
You're welcome.
That's my soapbox for today.
Alexis Panaro (41:27):
Mike, can you speak to?
You know borrowers going out toget their credit score from
Credit Karma, let's say, andthen you know getting their
credit score from their lenderand seeing a big difference.
You know it's much less thanwhat they saw in Credit Karma.
Seeing a big difference.
You know it's much less thanwhat they saw in Credit Karma.
Can you speak to why that isand what the discrepancy is
(41:48):
there?
Mike Olden (41:49):
Yes, that is probably in the top three or
four questions we receive at ARCfrom our clients and their
borrowers who call us withquestions.
Borrowers who call us withquestions you know places like
Credit Karma, or oftentimes youcan get your FICO score or a
(42:11):
credit score from your creditcard issuer, your financial
institution.
Oftentimes, if not most of thetime, those are different score
models than what we're using inthe mortgage industry.
So again, we talked.
The two major score models areFICO scores and Vantage scores.
Credit Karma uses Vantagescores and our industry uses
(42:35):
FICO scores.
I've got a couple credit cardissuers.
I log onto my account site andthere might be a little
thermometer there that says, hey, your credit score is good,
click here to see your specificcredit score.
Or there's just a button thatsays see your credit score here,
(42:55):
whatever it is, fico, vantage,whatever it is.
And then we think, oh well,that's my score.
And then they go to theirmortgage lender and they pull a
credit report and it's different, Sometimes it's lower, and they
ask their loan officer what didyou do to my credit?
Well, they didn't do anythingand there could be multiple
(43:19):
reasons why those scores aredifferent.
They were pulled at differenttimes and not every creditor
reports on the same day to thebureaus, or even the same week.
It could be some report thefirst week of the month, some
report the last week of themonth, so there could be a lot
of dynamics happening on whenyou pull the credit report.
(43:41):
So the timing could be a reason.
But also it could be adifferent score model.
And even though FICO and Vantage, the two major scoring models
in use today in the UnitedStates, are very similar same
score range, same primaryattributes that determine the
(44:03):
score they are different scoremodels.
So for our lender colleagues onthe line today, if you're faced
with that situation, ask theborrower where they received
that credit score from, creditscore from, and it should
(44:29):
identify somewhere in the fineprint where that score model
generated.
Is it a Vantage 3.0, vantage4.0, fico 8, fico 10T or in the
case of our industry, it's goingto be FICO 2, 4, or 5.
And just one item there for ourindustry even though our
(44:49):
industry is still usingbasically 20-year-old versions
of FICO scores, fico stillsupports those scores fully.
It's the same base FICO score,the same score range.
We shouldn't be really worriedabout whether today's version is
(45:12):
dramatically different thanFICO 10T, but the optics of it
are my gosh.
Why is the mortgage industryusing 20-year-old FICO?
Alexis Panaro (45:21):
scores.
Mike Olden (45:23):
Well, I think we all want to see the most recent
version, but we've got to gothrough a lot of the protocol
that we've discussed earlier.
Alexis Panaro (45:37):
I also wonder if it's a if it ain't broke, don't
fix it, kind of thing.
If it ain't broke, don't fix it, kind of thing.
Mike Olden (45:43):
Well, you know some of that could be.
Certainly there's going to becosts involved of recalibrating
(46:03):
Even.
You know for you folks at MGIC,you know building in, you know
the new credit scores forpricing engines, los, everything
is going to have to take a stepback and re-implement those.
But we'll get there and there'ssome great advantages for
borrowers who really don't havemuch if any traditional credit
today, really don't have much ifany traditional credit today.
Those newer versions of scores,if those items are reported,
(46:32):
they'll be calculating those inthere.
So a lot of positives down theline.
But it'll probably take sometime before we get there.
So speak to your legislators,speak to your senators, advocate
to them on the trigger leads,advocate to them to expedite
using more modern versions ofcredit scores.
Alexis Panaro (46:51):
Great Well, thank you, mike, for your expertise
today and answering some of thehot topics.
Again, just a reminder that anyresources that we touched on
will be on the podcast episodepage.
Look for a webinar, a livesession, for end of April, early
May, where we'll go over justsome updates when it comes to
(47:15):
credit reporting and creditscores.
And, mike, anything you want toadd to close out with.
And Mike, anything you want toadd to close out with.
Mike Olden (47:22):
Well, just to thank you, Alexis, and everybody at
MGIC for inviting us to join onthe platform here.
You folks have one of the besttraining sites I've seen in our
industry.
Education is very important toARC, so we're always happy to
(47:44):
join these broadcasts and sharethe information.
And again, I would encourageour viewers today if you have
follow-up questions, send me anemail, give me a call and we're
always happy to help you.
Alexis Panaro (47:59):
Great.
Thank you so much, mike.
We look forward to speakingwith you in a month or so.
Sounds great, thank you.
Thanks, have a great one.
Mike Olden (48:08):
You too.
Alexis Panaro (48:09):
And this brings us to the end of our episode.
For quick access to relatedcontent, visit
MortgageConnectscom andsubscribe to email alerts so
that you can be the first toknow about new episodes and
resources.
Thanks so much for tuning in.
Welcome to Mortgage Connects by MGIC,
bringing you the latest insightsfrom top mortgage professionals
around the industry.
I'm your host, Alexis Panaro,and today I'm happy to bring you
a very special guest, alongtime partner of MGIC, Mr.
Mike Olden.
Mike is VP of Sales andEducation at American Reporting
(00:26):
Company, otherwise known as ARC,and we frequently had him on
some of our webinars, but today,Mike and I wanted to sit down
and discuss some of the hottopics that we're hearing about
in the credit world.
So, Mike, how are you doingtoday?
Welcome.
Mike Olden (00:42):
I'm doing well.
Thank you so much, Alexis.
It's always a pleasure and wehave had a long partnership with
MGIC, going back to about 2007.
And my good colleague and yourco-worker, Dean Dardzinski, and
I started this partnership backat that time and I think it's
(01:05):
developed really well.
We share a lot of clients and Iwas just with one of your
account managers, Steve Beagles,earlier this week.
Today is February 28th that I'mspeaking to you and we have an
early spring day in Seattle.
It's sunny and about 60 degrees, so I'm delighted for that.
Alexis Panaro (01:30):
About the same weather here in Milwaukee.
So it is nice because we've hadsome cold weather, so it's nice
to have a little warmer weatherthan we've been having.
And I can always count on you,Mike, to give me the year that
our partnership started.
I could never remember so 2007.
Mike Olden (01:47):
Right, it's a long time, yeah, long time, but
really one of our favorite andbest industry partnerships here
at ARC.
Alexis Panaro (01:58):
Yes, we appreciate it and thank you,
yeah, for setting some timeaside today.
As Mike mentioned.
I do want to note the date itis February 28th 2025, the day
that we're recording this, justin case some things may change
after that, but we want to makesure we're giving you that date
and I know here at MGIC, we heara lot from LOs about credit
(02:18):
confusion.
So you know what are triggerleads, how can we prevent
trigger leads?
What's going on with medicaldebt?
What's to come with creditscore modernization and so on,
and we are not the experts.
So, Mike, I'm happy you canjoin us today to kind of go over
some of these frequently askedquestions that we've been
getting.
Mike Olden (02:37):
Well, thank you, and I am delighted and we receive
the same questions.
We answer these almost on adaily basis and I'm happy to
share it because this is ourfield of expertise.
This is our profession withinthe mortgage, banking and real
estate finance industry, butsome of the information we're
(02:58):
going to share with thelisteners today transcends any
industry, because we're allconsumers and I know you and I
have talked about our ownpersonal experiences and
journeys in regards to creditand credit scores, so we're
always really happy to share ourknowledge with our colleagues
(03:20):
and peers in the industry.
Alexis Panaro (03:23):
Great, great.
Well, let's get into it here.
I have a list of questions, soI'll just kind of shoot them
over at you and we'll go througheverything here.
So one thing I know we getasked about is how you know how,
as a lender, can we bestprepare our borrowers before we
pull their credit report.
Mike Olden (03:40):
Exactly, and we get that question a lot here at ARC
as well, and I think there's afew items that we as
professionals can inform,educate and encourage borrowers
to do before they even sit downwith the lender and especially
(04:01):
before the lender pulls thecredit report.
So when and I talk to borrowersabout all of these items,
especially when I do home buyerclasses number one review your
personal credit report, and it'sreally easy today because
annualcreditreportcom, which isthe official free site for
(04:23):
consumers to view their personalcredit report, in spite of the
name annual, we can view ourpersonal credit report once per
week for free, and it changedfrom annually to weekly right
after the pandemic, so it's veryeasy for consumers to do that.
(04:47):
I recommend that you pull yourpersonal credit report.
Annualcreditreportcom is theofficial site.
You could also go directly tothe three major credit bureaus
FICO, credit, karma.
Those are all soft hitinquiries, so no impact on our
scores.
(05:08):
But what's most important is tolook at that report and then
determine are there any creditreporting errors that we need to
address, and a great site tohelp with going through that
process is the Federal TradeCommission, ftcgov, and we're
(05:31):
going to provide a resourceguide with a lot of the items
that Alexis and I are talkingabout today, but there's even a
template letter there.
They've done all the work onhow to you know, when you want
to dispute something with thebureaus or a creditor, I think
determine do you have any highcredit card balances?
(05:53):
If you do, do you have theability to pay those down before
your lender pulls the creditreport?
That will help you optimizeyour credit score.
Also, opting out Alexis, youmentioned trigger leads and
we'll talk more in detail aboutthat.
But if we opt out, we areprotecting ourselves.
(06:15):
When our lender pulls thecredit report, we're not going
to get inundated with dozens,with dozens, sometimes scores,
of inquiry calls or textmessages or items coming through
the mail and then, just beforethe lender pulls the credit
(06:41):
report, if a borrower has acredit freeze or a credit lock
on their file, they want totemporarily remove those.
If they don't and our lenderaudience today pulls the credit
report, they're not going to seeall of the borrower's
information and that's going toslow down the process.
So I think those items for aborrower review your personal
(07:01):
credit report, determine ifthere's any credit reporting
errors.
Do you have a plan for highcredit card balances and to
lower those.
Make sure you opt out and thenlift any freeze or lock just
before your lender pulls credit,and that's going to make things
(07:22):
far more efficient, not slowdown the process.
Alexis Panaro (07:28):
Right, you mentioned paying down balances.
Is that something that youwould recommend borrowers do to
possibly increase their scores,or any tips to kind of increase
their scores before that reportis officially pulled by a lender
?
Mike Olden (07:47):
I do and determining if there's any credit reporting
errors, especially items thatare negative that may be
impacting the score.
Since they're on the creditreport, the score is being
calculated.
But if they're reported anerror, we want to help borrowers
get those taken off through theproper channels and then, if a
(08:11):
borrower does have high creditcard balances, work to pay those
down as much as possible.
But when we've spoken with FICOthey have stated a good rule of
thumb is below 20 to 25 percentof the credit limit, doesn't
necessarily have to be zerobalance and certainly don't pay
(08:35):
that off and close the account.
That's not a good short termstrategy closing accounts but
work to do your best to getthose below 20 to 25% of the
credit limit and I feel thatborrowers should start focusing
on these items 30 to 90 daysbefore they're ready to talk to
(08:59):
a lender.
Sometimes it's not possible todo that, but as best we can
encourage borrowers start thisprocess 30 to 90 days before the
lender's going to pull credit.
Alexis Panaro (09:15):
Great, and we do have.
Mgic has a infographic abouthow a credit score is made up.
So we have X amount of thatscore kind of comes from credit
utilization, x amount comes fromthe history of accounts and so
forth.
So all of these resources thatMike mentions or that I
mentioned, we will put on thepodcast episode page.
(09:36):
So just keep an eye out forthat Trigger leads.
Let's go back to that a littlebit, can you talk about what a
trigger lead is, and you knowwe're hearing about opting out
and how can we do that and anyupdates on trigger leads.
Mike Olden (09:51):
Sure, and there's a couple different types of
triggers.
There are acquisition triggers,which that's typically when
we're receiving those creditcard solicitations in the mail.
Those creditors are purchasingaspects of our credit file.
(10:14):
They can't see the creditreport because we haven't given
them permission, but they doknow that we're in a certain
geographic area, typically a zipcode.
They know that our scores fallbetween this range and that
range.
We don't have any late paymentsor bankruptcies in the past 12
months, Whatever the attributesthey're looking for for that
(10:37):
target audience, and they sendout those solicitations.
The trigger leads that arereally a flashpoint in our
industry for the past year or sois when a borrower applies for
a mortgage loan and thattriggers a notification to other
(10:59):
lenders that Mike or Alexis orDean are looking for a mortgage
and then, if we have not optedout, we're going to get
solicited, oftentimes heavily,by multiple lenders, and the
best way to avoid that isencouraging borrowers to opt out
(11:24):
.
Opt out pre-screen is for mail,do not.
Callgov is for phone, and thosecan go into place very quickly.
There are some exemptionscertain nonprofits who are
trying to raise money, that typeof thing, companies that you
(11:44):
already have a relationship withbut for the most part.
That will eliminate probably90% of those inquiries from
other lenders.
So for our lender partners thatare listening today, I encourage
you send out that reminder,often to your database, to your
(12:12):
realtor colleagues so they canshare it.
Then when that borrower comesto see you, hopefully they've
already opted out and you canpull that credit report with
confidence, knowing that yourcompetitors are not going to
inundate your borrower with awhole lot of activity.
(12:32):
We're also going to share atemplate communication that you
could send out to your databasereminding them, encouraging them
to opt out here.
And you know, last year, in2024, there were multiple pieces
of legislation proposed at thefederal level to control,
(12:57):
restrict the use of triggerleads.
Unfortunately, all of thosefailed to go through.
I'm going to be thoserestrictions on trigger leads.
So I think we'll have moreinformation to share with our
(13:32):
audience toward the middle orend of April on those efforts.
Alexis Panaro (13:37):
Great, and Mike and I were just discussing
beforehand that we'd like tohost a live webinar around that
time.
So keep an eye out for that.
It'll be posted at mgiccomslash training where you can
find either the live session orthe recording of that session.
So hopefully again end of April, maybe early May.
Mike Olden (13:56):
I'd like to point out too, that I'll sound the ARC
trumpet here.
We don't sell trigger leads andwe never have.
We feel it would be a detrimentto our partnership with our
lending partners.
But I encourage the listenerstalk to your credit reporting
providers.
Ask them that question directly, if they sell those or not.
(14:20):
It is a source of revenue.
It's legal for the bureaus orother third parties to sell them
, but we don't.
We would rather take theapproach of helping our clients
educate their borrowers on howto avoid them.
Alexis Panaro (14:35):
We appreciate that.
I don't think I've heard anyonesay that they are in favor of
trigger leads.
Mike Olden (14:40):
Exactly.
Alexis Panaro (14:42):
You mentioned that pulling your own credit
report fromannualcreditreportcom creates a
soft hit.
So can you just kind of go overwhat a soft hit inquiry is
versus a hard hit?
And then I know some otherquestions that come into the
hard hit inquiry is you know howmany times can my borrower shop
(15:05):
around for a rate, let's saywithin a certain time period,
without that affecting theircredit score?
Mike Olden (15:13):
There are two primary types of inquiries.
There's soft inquiries and hardinquiries.
A soft inquiry is when we lookat our own credit report.
Maybe it's directly through thebureaus or
annualcreditreportcom, creditKarma etc.
No impact on our credit score.
Other uses of soft inquiriesare when we are applying for
(15:39):
rental.
Maybe we're going to rent anapartment.
That's typically a soft hit.
Insurance, employment those aretypically soft hit reports.
If we have an existing accountwith a credit grantor, they may
periodically pull a soft hitcredit report for the purpose of
(15:59):
account review and it'simportant to remember when we're
opening new accounts.
Somewhere in the disclosure ormaybe you get an annual privacy
notice from your credit grantors.
Somewhere in there it says wereserve the right to
periodically review your creditand that is going to be a soft
(16:24):
hit credit report.
So all of those categories noimpact.
We've also seen in the pastyear in our industry lenders
beginning to use soft hit creditreports on the front end,
especially with Fannie Mae andFreddie Mac, to get a
(16:44):
pre-approval for their borrower.
It's a soft hit.
The primary goal there is toeliminate the trigger lead
action and protect thatrelationship.
However, both Fannie Mae andFreddie Mac, prior to closing,
do still require a hard-hittri-merge credit report.
(17:06):
Fha and VA on their streamlinedrefinances will close that
refinance on just a soft-hitcredit report.
So those are certainly somebenefits.
In our industry A hard hitinquiry is typically when we as
(17:27):
consumers apply for theextension of credit.
We're applying for a mortgage,an auto loan, a credit card,
even a student loan.
Those are typically hard hits.
Even a student loan.
Those are typically hard hits.
They may impact our creditscores.
How much depends on the overallfile.
(17:51):
But in our conversations withFICO and we're going to share a
great piece on inquiries fromthem on average less than five
points, so not as significant assome consumers feel on there.
The other part of your question,alexis, was in the mortgage
industry, can we have multipleinquiries for the purpose of
(18:13):
that action?
And we can.
Several years ago the bureausand FICO put their heads
together and said let's notpenalize consumers for interest
rate shopping.
As consumers we want to findthe lowest interest rate
possible.
One of my former colleaguesgave me a great definition of
(18:37):
credit.
Credit is the cost of money,which is the interest rate, and
the higher our scores, typicallythe lower the interest rate,
the more we can borrow, manymore opportunities etc.
So in the mortgage industry youcan have multiple inquiries
within a 14 to 45 day period.
(18:59):
They're all grouped togetherand scored just once.
That's the same formula in theautomobile industry and also in
the student loan industry.
Now we can't co-mingle thoseinquiries.
Each one is a different bucket,different bucket.
(19:27):
And why is it 14 to 45 days?
That's because Experian isstill using the oldest version
of FICO scores, fico V2.
That's a 14-day deduplicationwindow on mortgage inquiries
window on mortgage inquiries.
Transunion and Equifax areusing versions four and five
respectively.
That's a 45-day period.
When we get into FICO 10T theirmost recent version, it will
(19:55):
always be a 45-day deduplicationwindow.
Alexis Panaro (19:59):
I was going to say 14 to 45 days.
That's quite a large range, but, as you mentioned, it sounds
like if let's say there is adouble hit on there, it
shouldn't affect a credit scoretoo dramatically maybe five
points or so.
Mike Olden (20:16):
Right or so Right, and so if you have a borrower
come in to your office today andthey're concerned because last
week they went to two otherlenders you're certainly within
that 14-day window and much moreinto that 45-day window you can
(20:37):
speak confidently to them andstate well, we're in this 14-day
window, so a third inquiryisn't going to impact your score
any further, because in themortgage industry we can group
those together.
They're deduplicated.
But the piece we're going toshare from FICO goes into much
(21:00):
greater detail and it's reallyan excellent piece.
I would encourage our lenderlisteners today share that with
your borrowers, becauseborrowers that is a major
concern of theirs today areinquiries and how they impact
their scores.
Alexis Panaro (21:17):
Yep, I know I'm always nervous to put my social
security number in to pullbecause I'm like is this going
to pull a?
Is this a hard hit or a softhit, or what's going to happen
here?
So again, that resourcematerial that Mike is mentioning
will be in the podcast episodepage in the notes there for you
All.
Right, switching gears a littlebit.
(21:37):
Credit reports are getting alittle costly.
Mike Olden (21:49):
So are there any strategies for lenders to reduce
their costs on credit reports?
In FICO scores to trended datawhich shows the past 24 months
trends in consumer payment, arethey carrying high credit card
(22:13):
balances throughout that timeand only making the minimum
payment, for example, to justgeneral increases from the
credit bureaus?
So right now we're seeingcredit reports easily in the $80
to $100 range.
What can lenders do to helpreduce that?
I feel one of the best toolsavailable to lenders in the
(22:38):
mortgage industry is to use acredit cascade.
So the concept there is thelender will identify some
parameters or attributes thatthey want met minimum standards.
So, for example, no scoresunder 600, no bankruptcies in
(23:02):
the past 24 months, no mortgagelate payments in the past 12
months and so forth.
There's many attributes thatcan be chosen.
Then when that credit report ispulled, the first bureau if it
doesn't meet those minimumstandards, the process stops.
(23:23):
So you're only paying for asingle bureau rather than all
three.
That's one strategy in thatcredit cascade.
We have some clients at ARCthat pull two bureaus, because
if you pull two bureaus, youknow that one of those scores is
(23:43):
going to be your mid score andthat's what's most important in
our industry.
What's the mid score out of thethree?
So you could, in those twoscenarios you could be saving
66% or at least 33% of yourinitial investment on a credit
(24:04):
report.
So I think that's an excellentstrategy there.
We have some clients that arepulling a single bureau soft hit
credit report that has norequirement of a firm offer of
credit.
You're really just taking asnapshot of that borrower so
(24:25):
from a compliance standpoint youmay not have to issue an
adverse action letter or make afirm offer of credit there.
It really is just kind oflifting up the sheet of paper
and looking underneath.
How does this look?
Some clients ask us well, canwe really get a good picture
(24:50):
from a single bureau?
And I believe you can.
In my experience in thisindustry, probably 85 to 90% of
the time what shows up on onebureau shows up on all three.
There's always going to be theoutlier, the collection agency,
that only reports to one bureau,or even a creditor that only
(25:13):
reports to one bureau.
But for the most part you'regoing to get a really good
indication.
Those reports are typicallythat single bureau soft hit,
typically under $20.
So it can be a very economicalsolution for lenders provider
(25:41):
about these products andstrategies, and if you don't
hear from them, you can call me,and my contact information will
be at the end of the broadcast.
Alexis Panaro (25:46):
All right.
Big news in the last few weeksabout student loan forgiveness
and medical debts.
What can you tell us about that?
Where is it going to go?
What can we expect?
Mike Olden (25:57):
Yeah, those are two items that have been in the
spotlight nationally over thepast couple weeks.
I'm sure we'll hear more whenI'm back in Washington next
month, but last week it appearedthat there were some.
(26:19):
I think I recall a federaljudge who stated that the
proposed student loanforgiveness proposed by the
previous administration wasoutside of their authority and
that many of those student loansthat have been on hold since
(26:39):
the pandemic will be back online.
And there was some anticipationthat there could be quite a few
delinquencies because thestudent borrowers maybe haven't
prepared for that or werecounting on the forgiveness of
those student loans and took themoney that they would have made
(27:01):
on payments and used it forother items.
So I think that's probably arealistic possibility.
I think any of our listenerstoday who have borrowers maybe
they even have family members orthey have student loans to be
prepared that those loans willnot be forgiven, that appears to
(27:27):
be a strong likelihood.
Medical debts we may recall,back in January the CFPB came
out and said even though thereare existing rules on the
reporting of medical debt to thecredit bureaus, we're going to
go one step further and we'regoing to prohibit all medical
(27:49):
debt from being reported.
Well, over the last two weeks,we've seen where, where the CFPB
first went on a self-imposedfurlough of doing anything, and
now today it appears the entireagency may be wound down to
(28:12):
nothing.
So that rule is really in limbo.
The good news for consumers,though, today is, as of 2023,
there are two primary areasconcerning the reporting of
medical debt.
Number one all medicalcollections under $500, paid or
(28:38):
unpaid, are prohibited frombeing reported to the credit
bureaus.
Number two any medical debtthat is over $500 and sent to a
collection agency has a 12-monthcooling-off period before the
(28:59):
collection agency is allowed toreport it to the credit bureaus.
The reason for that is and I'vegone through this, I don't know
, maybe you have Alexis or ourlisteners oftentimes there are a
lot of clerical errors betweenthe insurance company, between
the insurance company, theprovider, the doctor, the
(29:21):
hospital, the clinic and thepatient.
Where things don't get postedin time, they don't get posted
at all.
Items are transposed, they'redeleted in error, whatever the
(29:42):
situation may be.
Many consumers face that, and Ibelieve I recall last year a
statistic came out that about43% of credit reports had some
type of medical debt on there.
Alexis Panaro (29:49):
That's crazy.
Mike Olden (29:50):
Yeah, now we don't see that after these updates in
July of 2023.
How did this come about?
There were several states'attorneys general who banded
together and reached asettlement agreement with the
(30:11):
bureaus to implement thesechanges.
So they're not technically laws, it was a settlement.
But I think those states'attorneys general had quite a
bit of leverage with the bureausand they reached this agreement
.
So today we don't see, for themost part, any medical
(30:35):
collections on credit reports,and the majority of those were
under $100 when they werereporting.
A lot of them that I saw wereunder $30, like a copay, a
radiology bill, something veryminimal, easy to overlook and
forget.
(30:55):
And then 60, 90 days later,uh-oh, it's on my credit report
and my score drops 50 to 100points, and that's not an
exaggeration.
We did see scores drop by thatmuch for a $25 medical
collection.
So that's the good news.
The bigger picture will allmedical debt be prohibited?
(31:18):
I don't know.
We're going to have to see howthings shake out with the CFPB,
but our current administrationis certainly an advocate of less
regulation and oversight, evenin our industry, so only time
will tell.
Alexis Panaro (31:39):
Great.
Thank you, and again justreiterating that we will
hopefully have a live webinarfor you at the end of April,
early May, that we might havemore updates on this, but we'll
see.
Mike Olden (31:53):
Yeah, exactly.
Alexis Panaro (31:55):
What can you tell us about credit score
modernization, moving to buymerge reports or anything on
that topic?
Mike Olden (32:04):
Back in October of 2022, director Thompson at FHFA,
who's the agency that overseesFannie and Freddie, came out
with an announcement at theNBA's annual convention that
year that finally we were goingto see credit score
modernization.
(32:24):
We mentioned a few moments agothat the current generation of
FICO scores used in our industryis about 20 years old and, as a
reminder, experian uses version2, transunion version 4,
equifax version 5.
In other lending arenasautomobile credit card they're
(32:50):
typically using FICO version 8or 9.
The most recent version, ficoversion 10T and again the T
stands for Trended Data, whichlooks specifically at payment
patterns on credit card accountsover the past 24 months, and
(33:27):
it's currently a Fannie andFreddie underwriting requirement
, but it doesn't impact thescores in those older versions
of FICO scores.
When FICO 10T comes online, itwill be calculated as part of
the score.
The other portion of that isVantage score, and Vantage
scores are the primarycompetitor to FICO scores.
They are owned collectively bythe three major credit bureaus
and Vantage scores have beenaround about 15 years.
(33:49):
Both scores FICO and Vantagehave the same score range 300 on
the low end, 850 on the highend.
They both have the same fiveprimary attributes that
determine the scores, but wewant to remember they are
(34:09):
different score models and onemajor difference is if you have
a borrower, you pull a creditreport and they don't have any
score, they don't have anycredit, and that is a reality
for many consumers.
If they opened up a new accounttomorrow, say a new Visa account
(34:33):
, to generate a FICO score, ittakes six months.
To generate a Vantage score, itonly takes one month.
Now I've spoken to some of ourunderwriting colleagues.
They prefer six months ofhistory over one month, but it
does generate that score a lotquicker.
(34:54):
Originally, those two scoreswere scheduled to be implemented
in the fourth quarter of thisyear, to be implemented in the
fourth quarter of this year.
That's now been updated to TBD,so we're not sure.
Alexis Panaro (35:08):
Love that TBD.
Mike Olden (35:11):
Kind of, we all know how things move in our industry
and there's always the greatheadline, the excitement, the
enthusiasm and then the realityof implementation sets in the
second part of your question onbuy merge credit reports.
That was part of this overallcredit score modernization
(35:34):
announcement where a lendercould have the opportunity to
pull just two bureaus ratherthan what we have today, a
tri-merge all three bureausmerged into one.
That seems to be in the sameTBD mode as the actual credit
(35:57):
scores and I've spoken again tomany underwriters what their
preference is.
Most of them say theirpreference is a tri-merge report
, so they see the full picturerather than a bi-merge report.
But we'll see how this goes.
(36:17):
Today Fannie and Freddie arestill in conservatorship with
FHFA.
We don't know the path of thecurrent administration, how
that's going to play out, but Idon't think we're going to see
either piece, probably beforethe end of this year.
Alexis Panaro (36:36):
All right, let's talk about credit repair.
I think borrowers sometimes seethese opportunities to repair
their credit, or you know creditcounseling or whatnot, and I
think there's been a lot ofcredit repair scams, so you know
, can you remind us again aboutthe dangers of these scams?
Mike Olden (36:54):
Yes, and there are a lot of dangers there.
Go to the Federal TradeCommission site, ftcgov.
Just type in credit repairscams and you'll see pages there
of either ongoing or past cases, even the CFPB site.
(37:14):
Both of those organizations andthe bureaus are very diligent
about credit repair companiesand what they're offering.
What they're implying bait andswitch.
Is the consumer being requiredto pay money before any services
(37:35):
are rendered?
Is the credit repair companyasking a lender for a copy of
the borrower's credit report?
We've heard from our clientsthat these companies will call
them and say just send over acopy of your borrower's credit
report, we'll analyze it forfree and set up a program.
(37:58):
I would ask all of our listenerstoday if you avoid anything,
avoid that.
That is not within the terms ofthe contract with the bureaus,
and the bureaus do have theauthority to shut lenders off
from accessing credit from anysource.
(38:21):
If you violate that, thatcredit report that you pull on
your borrower is, for you andyour successors, a fancy name
for your investors.
It's not even for your borrower.
If your borrower wants a copyof the credit report, the
(38:43):
bureaus leave that up to you,other than any specific state
regulations and there are someof those.
But if the borrower wants acopy of the credit report you
pulled, your credit reportingprovider should be able to
provide a companion creditreport that is specifically for
(39:07):
your borrower the consumer copyand it's the same credit
information but it's formatteddifferently.
There are special messagesprinted to the consumer.
There are truncated accountnumbers.
The social security numberisn't listed.
(39:27):
That's the version that youshould be sharing with the
borrower if your company has thepolicy to do that.
At ARC, most of our clients andwe have many financial
institutions and independentmortgage bankers that are
(39:48):
clients their policy is they donot provide a copy.
In that case their borrowercontacts us, provides a copy of
their government issue ID and wesend that out.
Or our client calls us and sayscan you send out a copy of the
consumer version to my borrower?
(40:08):
So we do that.
But talk to your own creditreporting provider.
That capability should bewithin their hands.
But back to the credit repairscams.
I encourage lenders stay awayfrom those companies.
The bureaus, the FTC, the CFPBthey're watching and they're
(40:33):
waiting for a mistake.
If your borrower needscounseling, go to HUD's website,
hudgov, and search for aHUD-certified counselor and you
can look.
Every state in the union hasthem.
Here in Washington State, wherewe're located, there are many
(40:58):
of these organizations that havegone through the HUD
certification.
That's the best place for aconsumer to go, or maybe it's
the Consumer Credit CounselingFoundation, something that has
legitimate designations,authorization to provide that
(41:18):
type of help to a consumer.
Alexis Panaro (41:20):
Great, thank you.
Mike Olden (41:22):
You're welcome.
That's my soapbox for today.
Alexis Panaro (41:27):
Mike, can you speak to?
You know borrowers going out toget their credit score from
Credit Karma, let's say, andthen you know getting their
credit score from their lenderand seeing a big difference.
You know it's much less thanwhat they saw in Credit Karma.
Seeing a big difference.
You know it's much less thanwhat they saw in Credit Karma.
Can you speak to why that isand what the discrepancy is
(41:48):
there?
Mike Olden (41:49):
Yes, that is probably in the top three or
four questions we receive at ARCfrom our clients and their
borrowers who call us withquestions.
Borrowers who call us withquestions you know places like
Credit Karma, or oftentimes youcan get your FICO score or a
(42:11):
credit score from your creditcard issuer, your financial
institution.
Oftentimes, if not most of thetime, those are different score
models than what we're using inthe mortgage industry.
So again, we talked.
The two major score models areFICO scores and Vantage scores.
Credit Karma uses Vantagescores and our industry uses
(42:35):
FICO scores.
I've got a couple credit cardissuers.
I log onto my account site andthere might be a little
thermometer there that says, hey, your credit score is good,
click here to see your specificcredit score.
Or there's just a button thatsays see your credit score here,
(42:55):
whatever it is, fico, vantage,whatever it is.
And then we think, oh well,that's my score.
And then they go to theirmortgage lender and they pull a
credit report and it's different, Sometimes it's lower, and they
ask their loan officer what didyou do to my credit?
Well, they didn't do anythingand there could be multiple
(43:19):
reasons why those scores aredifferent.
They were pulled at differenttimes and not every creditor
reports on the same day to thebureaus, or even the same week.
It could be some report thefirst week of the month, some
report the last week of themonth, so there could be a lot
of dynamics happening on whenyou pull the credit report.
(43:41):
So the timing could be a reason.
But also it could be adifferent score model.
And even though FICO and Vantage, the two major scoring models
in use today in the UnitedStates, are very similar same
score range, same primaryattributes that determine the
(44:03):
score they are different scoremodels.
So for our lender colleagues onthe line today, if you're faced
with that situation, ask theborrower where they received
that credit score from, creditscore from, and it should
(44:29):
identify somewhere in the fineprint where that score model
generated.
Is it a Vantage 3.0, vantage4.0, fico 8, fico 10T or in the
case of our industry, it's goingto be FICO 2, 4, or 5.
And just one item there for ourindustry even though our
(44:49):
industry is still usingbasically 20-year-old versions
of FICO scores, fico stillsupports those scores fully.
It's the same base FICO score,the same score range.
We shouldn't be really worriedabout whether today's version is
(45:12):
dramatically different thanFICO 10T, but the optics of it
are my gosh.
Why is the mortgage industryusing 20-year-old FICO?
Alexis Panaro (45:21):
scores.
Mike Olden (45:23):
Well, I think we all want to see the most recent
version, but we've got to gothrough a lot of the protocol
that we've discussed earlier.
Alexis Panaro (45:37):
I also wonder if it's a if it ain't broke, don't
fix it, kind of thing.
If it ain't broke, don't fix it, kind of thing.
Mike Olden (45:43):
Well, you know some of that could be.
Certainly there's going to becosts involved of recalibrating
(46:03):
Even.
You know for you folks at MGIC,you know building in, you know
the new credit scores forpricing engines, los, everything
is going to have to take a stepback and re-implement those.
But we'll get there and there'ssome great advantages for
borrowers who really don't havemuch if any traditional credit
today, really don't have much ifany traditional credit today.
Those newer versions of scores,if those items are reported,
(46:32):
they'll be calculating those inthere.
So a lot of positives down theline.
But it'll probably take sometime before we get there.
So speak to your legislators,speak to your senators, advocate
to them on the trigger leads,advocate to them to expedite
using more modern versions ofcredit scores.
Alexis Panaro (46:51):
Great Well, thank you, mike, for your expertise
today and answering some of thehot topics.
Again, just a reminder that anyresources that we touched on
will be on the podcast episodepage.
Look for a webinar, a livesession, for end of April, early
May, where we'll go over justsome updates when it comes to
(47:15):
credit reporting and creditscores.
And, mike, anything you want toadd to close out with.
And Mike, anything you want toadd to close out with.
Mike Olden (47:22):
Well, just to thank you, Alexis, and everybody at
MGIC for inviting us to join onthe platform here.
You folks have one of the besttraining sites I've seen in our
industry.
Education is very important toARC, so we're always happy to
(47:44):
join these broadcasts and sharethe information.
And again, I would encourageour viewers today if you have
follow-up questions, send me anemail, give me a call and we're
always happy to help you.
Alexis Panaro (47:59):
Great.
Thank you so much, mike.
We look forward to speakingwith you in a month or so.
Sounds great, thank you.
Thanks, have a great one.
Mike Olden (48:08):
You too.
Alexis Panaro (48:09):
And this brings us to the end of our episode.
For quick access to relatedcontent, visit
MortgageConnectscom andsubscribe to email alerts so
that you can be the first toknow about new episodes and
resources.
Thanks so much for tuning in.
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