Loan Officer Training - 01/09/2024 - Mastering Credit Simulations and Rapid Rescores

In this episode of Loan Officer Training, we dive deep into the powerful tools of credit simulations and rapid rescores—game-changers for loan officers looking to help clients improve their credit scores quickly and efficiently. Learn how to analyze credit reports, leverage simulation tools to create actionable plans, and navigate the rapid rescore process to achieve better loan outcomes. Whether you’re working with first-time buyers or clients with challenging credit, these strategies will elevate your expertise and empower you to close more deals. Tune in and take your credit mastery to the next level! 🎙️💼✨

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Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of over 350 licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as access thousands of mortgage programs using Alternative Income Documentation such as Bank Statement Mortgages, P&L Mortgages, Asset Based Mortgage Programs, No Ratio CDFI Loan Programs, DSCR Investor Mortgages, Commercial Mortgages, Fix and Flip Mortgages and thousands more!

Our Mortgage Loan Originators are trained to be loan consultants to guide borrowers throughout the entire loan process. A licensed Loan Officer is only a phone call o

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Catch all the episodes of the Loan Officer Training Podcast at https://themortgagecalculator.com/Page/Loan-Officer-Training-Series-Podcast

Loan Officers for Unlimited Free Non-QM Leads & Trainings Join The Mortgage Calculator at https://themortgagecalculator.com/join

The Mortgage Calculator is a licensed Mortgage Lender (NMLS #2377459) that specializes in using technology to enable borrowers to access Conventional, FHA, VA, and USDA Programs, as well as thousands of Non-QM mortgage loan program variations using alternative income documentation!

Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!

Our team of licensed Mortgage Loan Originators can assist our customers with Conventional, FHA, VA and USDA mortgages as well as acc...

Transcript

Restream recording Jan 09, 2025 • 05:04:03 PM: 0:13

So what exactly is a credit simulator, right? A credit simulator is a tool that allows the NLO or the borrower to simulate different credit scenarios. and generates a simulated credit score. This is a great tool to use, uh, just so that you all know at the mortgage calculator included with whatever credit report we pull is a free score navigator credit simulation. So, uh, what exactly is score navigator? And actually let me back up a second and let me, uh, explain the importance of credit simulations. Not only To add value, you know, to for you to add value to the transaction, but also you never know when something's going to happen and you may need a couple of extra points in the credit score. Maybe you do qualify for a better program. Or just to qualify at all, you know, um, the file gets underwritten. Um, the, um, income drops for example, and now you need a higher credit score to maintain your approval, right? Because now the DTI is higher, right? So higher DTI, if you're doing automated underwriting. It's going to look at the credit score and either approve you or not for that higher LTV loan. For example, it might get that 95 percent LTV. Uh, and, uh, you have, uh, 48% DTI, you're gonna need a good credit score, right? You're gonna need 700 or above. So you know, you may have thought the DTI was good, right? But now all of a sudden they hit you with, hey, they cut your income overtimes now what you thought it was. And now all of a sudden your borrower is not qualifying for that, um, high DTI loan because their credit score is below a 700. So, it's always a good idea to explore credit simulations in the beginning of the process with the borrower once you have the credit, uh, report. Identify opportunities and see if it may, uh, be something that the borrower wants to participate in. And then you, as the mortgage loan originator, obviously have to give the important points of having the highest credit score possible. Okay. It's not the first time that I've seen a deal fall through exactly for the reason that I stated and no credit simulation was ever attempted in the beginning and then all of a sudden they want to do a credit simulation and a rapid rescore with 10 days left to close because of the income. That got dropped, right? So, um, you know, don't wait for the last minute. Uh, I would keep it as a best practice, uh, to do it. You know, it's included in, in what we in the credit reports. Like I stated, you just have to know how to use the tool. So score navigator is the credit simulation tool. That we have a score navigator has a couple of different, um, tools within it, right? You have the money simulator where in the money simulator, uh, you can enter how much money the borrower has to pay down on debt. And then the, uh, uh, system will, um, tell you what needs to be done to with that amount of money. What's the best. That can be done, right? So it's, it's, it's an algorithm. So for example, um, bar has 3, 000 to pay down debt. Okay. You put 3, 000 they have available. The program gets to work and it, and it basically lets, you know, okay. With the 3, 000. This is the best case scenario for the borrower. So that that's one of the credit simulators that we have within score navigator. The other one, uh, another one, not the other one, another one is target score simulator. Now, if you all remember, uh, we used to have a couple other systems before one was wayfinder and, and the other one was what if so the target score simulator. Is the, uh, wayfinder version where it, you, you, you basically state what is the score that, that you're targeting. And the system calculates, uh, what needs to be done to reach that score if it's even possible to reach that score. So it basically provides the most efficient path to reach the desired target score goal by utilizing the fewest number of accounts. Uh, the results that you're going to receive. Now, this is pretty cool here. Now, the results you're going to receive will include the estimated credit score increase. the cost to the borrower for following the recommendations, the maximum achievable score, and this is the cool one, and the best estimated day of the month to pull the credit. Believe it or not, it does matter. Obviously, the system is going to calculate, is going to look when the accounts. Cycle, right? So that the credit is pulled, uh, when the payments are made. Now, another tool is the smart score simulator, which is a manual simulator. This is similar to the old, uh, what if credit simulator that we used to have? Uh, this is one of my favorites because with this one. You can actually play around with the balances, play around with the accounts to see what happens, right? Uh, this is the true, uh, real interesting one, because for example. You can change the balances to see what happens to the credit score and different accounts, because you all know when the balances are all loaded up to the close to the limit, it's going to affect the credit score, right? Uh, so you definitely want to bring down those balances. Now, one thing about balances I am going to make note of is that the only balances that are going to affect your credit score. Are going to be revolving credit, credit cards, not installment balances, right? Installment loans. Actually, if an installment loan is paid off and the account is closed, it can actually reduce your credit score. So never tell your borrowers to, uh, why don't you finish paying off that car? Why don't you finish paying off that personal loan? That's an installment loan. Because you may actually decrease their credit score because you're going to increase the credit utilization, right? Credit utilization is what we're talking about here, the balances. The, the lower the credit utilization, the higher the credit score. If you eliminated installment account of 5, 000, you just eliminated 5, 000 of available limit, and the borrower still has the same overall balances on their other accounts. What's going to happen is their credit score is going to drop because the utilization has increased. So in the Smart Score Simulator, we can change balances. We can delete an authorized user. On good accounts to to see what happens or bad accounts. I mean, a lot of times you you see an authorized user account that the bar is on and it's maxed out, you know, you know, eliminate that account or you see an authorized user account, uh, that has a derogatory on it, you eliminate that account, but you can again. Check on it in the system to delete it and see what would happen to the credit score if you were to delete that account. Now, another option, um, is to remove disputes, right, and see what happens, because sometimes, you know, you, you, you're doing a DU and it says remove this dispute to try to get the, the automated approval, but then if you go and you click to remove the dispute, 50 points. So at that point, you may not want to remove the dispute, you. And you may actually want to go with the manual underwrite route and keep the credit score where it is, right? You don't want to remove, again, removing a dispute is a double edged sword. Uh, now you can also click to remove a late payment to see what happens to the credit score in case the borrower can somehow figure out some kind of documentation to get, um, to get that, uh, late payment removed via a rapid rescore. Or you can see what would happen to the credit score if the, um, late payment was removed. Uh, Smart Score Simulator also lets you see the best day to pull credit, and it also lets you see the best estimated date to pull credit, right? To, they sound the same, but they're different, uh, components there. Now the other, um, tool, uh, which I think is sort of blocked out there in the bottom there is the mortgage action plan MAP. The mortgage action plan provides suggestions on ways to increase the score in the long term. So in other words, a mortgage action plan is not something you borrower for the long term. To do a rapid rescore to increase their credit score and three to five days, which is what the rapid rescore does. The mortgage action plan is just another way. For you to add value to the transaction, uh, by providing the borrower, uh, some goals for the long term so they can increase their credit score. If, for example, they're not planning on doing anything right now, maybe they're going to do it in six months, uh, you can give them that type of a consultation. Now, all of this that we're doing here with the credit simulator, again, right, adding value to the transaction, But we're also preparing the borrower for a rapid rescore right now. What exactly is a rapid rescore? A rapid rescore is a process whereby the, the new balances on the accounts are pushed to the credit bureau. Um, and updated within 3 to 5 days. Probably if you do a rush, it's 3 days. If you don't do it, or maybe that's a rush, could be 1 to 3 days. The regular process 3 to 5 days. So, obviously, if you're in a loan, uh, loan application comes in credits, credit report comes in and you identify opportunities, uh, for the borrower to be able to qualify. So get, bring that, uh, get that five 80 up to a six 40, for example, or get that five 50 up to a five 80 so you can. Hopefully get and approve eligible for an FHA loan with 3. 5 percent down, which requires a minimum of a 580. That's something you would do up front. Or if you get the unforeseen circumstance, like I mentioned, your income drops, DTI increases, now you don't qualify and you got to increase your credit score. The Rapid Rescore allows you to get the credit score updated, uh, within a short period of time so that hopefully the borrower can close. Now, you got to understand there's three credit bureaus, right? TransUnion, Equifax, and Experian. They have different algorithms, so whatever change is done on one bureau isn't necessarily going to have the same result. And it's really important to know that you only want to rescore the bureaus that need to be increased. You don't have to do all three. Right? So what do I mean by that? Okay, let's say, for example. You need at least a six 60 credit score for A DSE for a, let's say, a non QM loan to get a 80% LTV. But, uh, your borrower has a six 40, a 6 55, and a 6 55 and a six 40 Equifax, 6 56 55 Experian, and 6 55 TransUnion. If you need a middle score of at least a 660, you're going to have to do the Equifax and the TransUnion. You're going to have to rescore both bureaus that are 655, so that your middle score ends up being at least a 660. You do nothing by rescoring just one of them to a 660. Now he's going to have a high score of a 660, and you do nothing by rescoring all three. Bureaus when you only need and this is very important because the cost for a rapid rescore can is anywhere between 40 and 50. to 50 per trade line per euro, uh, 40 more if you're doing the regular process, 50 if you're doing it as a rush. Uh, now this is important because let's say you have to rescore three credit cards or four credit cards, and that's four times 40. That's 160 for one bureau, right? If you do all three bureaus, that's 480, right? So, and maybe you didn't need to do them or if you only need two bureaus, that's 320. So you, and this is really important because remember, uh, remember that the borrower can never pay for the cost of the rapid rescore. The rapid rescore is, uh, considered like a credit repair type function. Okay. So, you know, the, I mean, that's something that can only be ordered by the lender. A borrower can never order one and a borrower can never be asked to pay for it. As a matter of fact, if you go to the our credit vendor and you input the borrower's credit card, um, to pay for the rapid rescore. It's, it's gonna, it's gonna deny it because you're going to have to put the borrower's name as the owner of that card and all that kind of stuff. The system is going to pick up. Hey, that's our borrower is going to let you know you can't charge the borrower and it's going to cancel the order. So, remember when you are looking at, you know, the potential for rapid rescore, remember that in the end. The full cost of the rapid re score is going to be paid by the MLO. So if you are doing a rapid re score, You better make sure that deal, uh, is a deal that can close, right? Don't, don't do like a wishful thinking kind of a scenario because you could find yourself three, four,$500 in the hole. I mean, if you're only rescoring one or two accounts in one bureau, that's not a really big deal. But I mean, I've, I've had'em where they get into the hundreds of dollars and, uh, it's not a pleasant experience. If the deal doesn't close and you're out that money, so remember, borrow can never pay for the cost now for automated underwriting approval to pick up any of the changes to the balances to the score to disputed accounts, uh, that are removed from the system, like for a conventional loan that you got downgrade to manual underwrite, because you have disputed accounts. Remember that, uh, the only way that DU is going to pick up the, um, the new score, the, the disputed accounts removed, uh, the balance is lower, whatever it is that you need, or the payment's lower, if it's a DTI issue, whatever it may be, um, the disputed account, you know, all of the information needs to be updated via a rapid rescore. Disputed accounts removed via Rapid Rescore, account balances updated via Rapid Rescore so you can get the new credit score to be picked up by a DU or LP or to get the fact that the accounts that were previously disputed are no longer disputed. Rapid Rescore is the only way to get that done. So like I mentioned, it can take up to five days to complete. A rush fee can be paid to try to do it between one and three days. Now, be very careful. There is a no doc option, because to do the rapid rescore, the borrower has to provide, has to pay down the balances, if it's paying down the balance, and then has to request a letter from the, uh, credit company stating the new balance. The letter has to clearly identify the account holder, the, uh, the, uh, the account number, has to be on, on their letterhead. And it has to state what the new balance is. They can fax it to them. They usually don't email. And if they send it through the mail, that's the least desired option is going to take, uh, uh, two weeks to receive. So. Once you get that letter, then you're ready to order the Rapid Rescore to update the balance. Now, if the borrower says there's no way I can get that documentation, uh, there is a no doc option, but with the no doc option, you run the risk of an extended review period of up to 30 days if they cannot quickly verify the information. Then they would go to the credit. Company for verification and you know, they have up to 30 days to provide a reply. So no doc is really not a preferred option. It's like a last resort. And it is absolutely impossible to get the documentation. Um, and, um, I already mentioned borrowers cannot order the rescore. And most importantly, now when you do pay for the rapid rescore, they will include for the cost of a new credit report that will need to be ordered so that you can obtain the new credit scores. That's the only way to get the new credit scores is for a new credit report to be generated. So very good tool here to differentiate yourself from the masses, from the application takers out there and make sure you use it. It's already included in the services that we pay for. Are there any questions on, uh, credit simulations or rapid rescore? Okay, well, I'll give it another minute to see if anyone, uh, has any questions. But again, like remember, it is a very good tool to use even if the rescore doesn't get completed. It's good. Uh, to offer the credit simulation to the borrower, the cost of the services already included in the credit report, and it will, if the borrower is shopping around for different loan quotes, and you're the only one that starts talking about how we can, you know, offer credit simulation to see what they can do. That may be the deciding factor for them to use you. Instead of everyone else who they may have spoken with because everyone else is just trying to get alone and you're actually trying to help them out. So I don't see any questions here. I hope, uh, everybody clearly understood that. And if not, please do reach out and we will provide additional details. Everybody have a great day.