What is a Trigger Lead

When your credit is pulled, the credit bureaus have a record of the credit inquiry, and unfortunately, they sell this information to bidders in the form of “leads”.  This generated “lead” is sold to lenders, letting them know you’re in the market for a mortgage.  They sell this data with complete disregard for your privacy or your desire or lackthereof to talk with any lenders or loan officers.  Seem unethical?  Trigger leads are a hot topic in the mortgage industry and are one of things most consumers don’t fully understand.  Lenders don’t have any ability to stop the data being sold, as it’s sold from the credit bureaus.  Worse, the data is often sold to numerous lenders, which results in many phone calls after credit is pulled for a mortgage.  But there are steps consumers can take to eliminate these calls, or at least slow them down.

What You Can Do 

1. Opt-Out of prescreened offers.
2. Register with the Do-Not-Call Registry, donotcall.gov.
3. Contact the Federal Trade Commission.
4. Contact Congress.
5. Stop other forms of direct marketing by visiting the Direct Mail Association’s Web site at: dmaconsumers.org/consumerassistance.html.

Since many “trigger lead” lenders are not reputable, it’s best to ignore these calls and the mail that is likely to show up in your mailbox as well, and to pay attention to the fine print – many times the mail sent is designed to look like it’s from your current lender, with only the fine print showing who the real sender is.  These mail pieces often contain “too good to be true” loan terms, and again, in the fine print you’ll usually be able to see enormous fees and other loan terms that are not borrower-friendly.

It’s important to know that your loan officer or lender doesn’t initiate these calls, and it’s not the credit pull itself that causes these calls, but the credit bureaus selling information after the credit pull and them placing you on a prescreened list.  One piece of good news to keep in mind as well is that these additional calls and mail do NOT mean your credit was run again – while a hard credit inquiry by your original lender will appear on your credit report, any other companies calling do NOT have access to your credit report or history, so the calls you’ll receive do not mean any of your personal private information was compromised.

Think this practice should be put to a stop?  You’re not alone!  Many others feel trigger leads are unethical, and the best way to change this practice is by voicing your concerns for your local congressional representatives (you can find them by calling 202-224-3121) or by contacting the FTC at ftc.gov.

The post Why Do So Many Mortgage Companies Call? appeared first on Mason-McDuffie Mortgage Corporation.

If you’ve shopped around for a mortgage loan, one of the things you’ve likely seen is that credit scores lenders pull tend to be different (sometimes by quite a lot) from what you see when tracking your own credit scores.  Why is that?  It comes down to how credit information is reported, which scoring models a lender uses, and how the algorithms work within that scoring model.  Seem confusing, and maybe a little bit more than a little complicated?  It can be!

How Information Is Reported

Most people know that there are 3 major credit bureaus – Experian, Equifax, and Transunion, but many people don’t realize that scores vary, sometimes by a large margin, between the 3.  The biggest reason is that not every creditor reports to every credit bureau.  For example, if you have an account go to collections for non-payment, it’s  possible a collection agency might report to 1 credit bureau.  Assuming your credit is otherwise in good standing, this could result in 1 bureau (the one with accurate collection data) providing a score much lower than the other bureaus.  This can be a benefit in situations where a lender uses a middle score where really 2 of 3 scores are important.  It can also be a problem in situations where a lender pulls just one bureau, and they happen to pull the worst score, leaving out higher scores completely.

Which Credit Scoring Model Is Used To Determine Credit Scores?

Most lenders in the mortgage world rely on Fair Isaac Corporation’s scoring algorithms and resulting scores when running your credit.  You may know them by the acronym FICO.  FICO, however, charges others to use their proprietary algorithms, and for that reason, many credit monitoring services and consumer “perks” they get with credit cards for example, use their own, separate algorithm to generate a score.  These scores are often more difficult to predict, and can be very close to a FICO score or sometimes very far off.  For example, some lenders use a “Vantage” score instead of a FICO score.  To make things more confusing, scores can use completely different metrics to determine if someone has good or bad credit, too.  For example, some industry-specific scoring models use a score range up to 900, while mortgage lenders traditionally use scoring models that go up to 850.  For this reason alone, someone may believe their credit is better (or worse) than it actually is, with the only difference from what they and their lender see being the model being used.

How Algorithms Determine Credit Scores

Algorithms are used by all of the credit scoring models, but each model uses different algorithms that put different weight on the multiple factors that determine a credit score.  For example, one algorithm out there will ignore any and all collection accounts with a balance of $250 or less.   If a consumer pulled a score through that model they might believe they have excellent credit, while a lender using the FICO model might see low scores as a result of collection activity.

While the algorithms weigh factors differently, they all have some things in common.  Of course, an on time payment history is very important to all of the scoring models.  Having a long credit history, regularly using credit, having various types of credit (mortgage, installment loans, credit cards), and keeping credit balances low compared to credit limits are generally habits that all credit scoring models reward consumers for.  Maxed out credit cards, late payments, and major derogatory events like bankruptcy or foreclosure are penalized pretty much across the board as well.

We Can Help Answer Your Questions

Your MasonMac loan officer can help answer any questions you may have about your credit, and fill you in on your FICO scores when you apply.  FICO scores are one of the major factors in determining what loan options you’ll have, and the pricing/rates you’ll be offered when applying for a loan, so it’s important to understand how the scoring works to avoid any surprises.  Just as important is knowing that while your consumer-access scores that you get on free credit monitoring services can be a great gauge of the direction your credit is headed and where you stand, the scores your lender will pull are likely going to be a bit different.

With more information and a more in depth explainer, Andrew Yamilkoski of Heartland Credit Restoration put together this helpful video with more insight:

The post Why Credit Scoring Models Show Different Scores appeared first on Mason-McDuffie Mortgage Corporation.

Experian, one of the 3 major credit bureaus, has recently rolled out a marketing campaign to highlight their ‘Boost’ product – one which a customer can use to report accounts that traditionally do not get reported to the credit bureaus, to increase their credit scores.

Sounds great, right?

Well to see a higher score, it is great, but to get a loan or approval through a lender, it may cause problems for consumers who don’t understand how the program works or the impact it can have.

Experian boost links to a consumer’s financial institution to see bills being paid, and uses this data to “boost” credit scores based on timely monthly payments.  While on the surface this sounds great, the lack of transparency in what’s being reported can cause issues for lenders, and on the mortgage side of things, “boosted” scores can’t be used for qualifying or for the purpose of getting a better rate or any other benefit to a loan program.  And lenders won’t overlook “Boosted” credit.  There are obvious markers showing a report that’s been updated with boost:

Boosted tradelines will show lenders that the information is “self reported”

In fact, consumers can actually be inconvenienced when using Boost because to get their loan processed, a borrower must first actually remove the boosted accounts from their credit reports.  So in these cases, Experian Boost makes the loan process more inconvenient for a borrower, and offers no benefit at all.  In fact, even Experian acknowledges this, at least somewhat, on their site.  On the Boost landing page, they include the disclosure:

“Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.”

“Not all lenders” means any mortgage lender using conventional or government financing, as MasonMac already confirmed with HUD and FannieMae that Experian Boost credit scores will not be considered in financing offerings from them.

Another potential downside to consumers is that even with an Experian Boost score, most lenders use averaging or more often, the middle score of the 3 credit bureaus.  In the latter case, if a consumer has 3 scores – a 550, 575, and a 750 (higher than the other 2 assuming that’s the Experian Boost score), the middle score will still be 575, so the boosted score offers no benefit.

So what could Experian Boost be beneficial for?  Well, for anyone looking to establish credit with limited credit history, Boost could provide a ….. Boost!  Sorry, we couldn’t help ourselves.  Also, while we’re mortgage experts, we aren’t experts across every field that uses credit scores, so there may be potential benefits elsewhere to using the boost product.  That said, though, it’s important to weigh the positives and negatives, and be informed that if you’re looking for a mortgage loan, Experian Boost is going to cause you more headaches than it’s worth.

Have questions about Experian Boost, want helpful tips for boosting your credit profile prior to getting a loan, or anything else from the mortgage world?  Ask an expert here!

The post Does Experian Boost Work? appeared first on Mason-McDuffie Mortgage Corporation.