Episode 51: Listen Up Home buyers – Credit Triggers

Episode Summary

Episode Notes

Victoria Ray Henderson (00:00)
Hi, this is Listen Up Homebuyers podcast and I’m Victoria Ray Henderson, the host. And I am
joined today by Ramez Fahmy of the Fahmy Mortgage Team. He is a lender with First Heritage
in the Greater Washington DC area. And the reason I want to talk to you today, Ramez, is
because I’ve had some clients ask me questions about something when they make an
application for a loan with a lender. And I thought you could talk a little bit about credit triggers. What are they and why do people receive these credit triggers?

Ramez Fahmy (00:35)
Sure. So these annoying calls that customers are receiving are coming as a result of a lender like myself who’s in the middle of or in the beginning process of getting you pre-qualified or pre-approved for a mortgage. At a certain point in the process, I need to pull your credit report. And what happens is, is the credit bureaus and those credit bureaus being Equifax, TransUnion, and Experian will sell that data to other lenders who are trying to market their services to you. So you receive these unsolicited calls because those other lenders know that a mortgage company pulled your credit and so they assume that you want a mortgage and they’re going to try solicit you and you know it could be coming from anywhere.

Victoria Ray Henderson (01:14)
Yeah, yeah, yeah. So how is something like this legal?

Ramez Fahmy (01:19)
Well, as of today, the Fair Credit Reporting Act allows these unsolicited offers to occur. And they’re basically called like pre-screen offers. There is legislation in Congress right now to try and get rid of that. That’s been going on for the last couple of years, but seems to hit roadblocks sort of towards the end of the process. And most recently, it was unanticipated that that would

Victoria Ray Henderson (01:39)
you

Ramez Fahmy (01:44)
be passed but it did get passed at a Senate level but it looks like it’s stuck in the House ofRepresentatives and may never get passed there.

Victoria Ray Henderson (01:50)
gosh. Okay, so what is it? Is there anything that people can do so that they don’t get these annoying phone calls and yeah.

Ramez Fahmy (01:58)
Sure. Yeah, there are a couple of things that customers can do to limit or minimize these calls. The first thing is what’s called an opt out pre-screen. We’ll put a link in the link below here with some information on where to get that done. There’s also what’s called the National Do Not Call Registry. Now, both of these things, if you do them online, will

Victoria Ray Henderson (02:12)
Mm-hmm.

Ramez Fahmy (02:19)
sort of save you this hassle for the next five years. Otherwise it needs some written authorization for it to happen.

Victoria Ray Henderson (02:26)
written authorization from, you mean from, Congress.

Ramez Fahmy (02:29)
No, you as a consumer would have to fill out a form and mail it in versus completing a form
online to do so. Yeah.

Victoria Ray Henderson (02:35)
I see. Okay. Okay. is there anything, you know, when, this process begins, which it begins with you, a lender, is there anything that someone can do like, like you so that the, the, the client doesn’t receive this stuff?

Ramez Fahmy (02:52)
Yeah, so it’s interesting in that some customers will call us and say, hey, you sold my information to this other person. And when you think about it, why would a lender want to create more competition for themselves by selling off this information? And when I tell you calls come in, you could receive from the moment that I pull your credit within about 10 seconds, 50 to 100 phone calls.

Victoria Ray Henderson (03:04)
Right. Yeah.

Ramez Fahmy (03:20)
I’ve had people that I know who are friends of mine. I warn everyone say hey listen I’m about to pull your credit You’re gonna receive a lot of phone calls as a result of this So just hold on to my number and save it in your phone and these calls that you get for the next day or two Now it could last for up to a year, but like the first basically 24 to 48 hours People’s phones literally are ringing off the hook

Victoria Ray Henderson (03:21)
That’s crazy. you So a second, so back up, but there’s a way to avoid that. And the way to avoid it is get on that do not call registry list.

Ramez Fahmy (03:56)
Get on the do not call registry list and the other thing is called an opt out pre-screen and like I said, we’ll drop that information below. You typically want to do that at least 24 to 48 hours before you have someone complete it. But I still don’t know that I would guarantee that you’re not going to get any phone calls, but my guess is it will reduce the call volume greatly.

Victoria Ray Henderson (04:03)
Okay. Okay. So if somebody doesn’t receive that information, the opt-out information, you could certainly ask a lender, hey, could you provide this for me? OK. OK. So when these phone calls start rolling in, other than ignoring them, is there something that people can do? I mean, I guess just block them.

Ramez Fahmy (04:25)
Yes, yes, yep. Yeah, I mean, you could just not answer the call if you don’t recognize the number or you can just kind of politely tell people that you’re not interested and, know, and then, like I said, consider getting on to the that do not call registry and that pre-screen for future.

Victoria Ray Henderson (04:37)
Mm. Yeah. Yeah, I would seriously consider that because that is, I mean, I couldn’t imagine how annoying it would be to get that many phone calls that quickly. And it would be confusing if you had no idea, you know, how that happened.

Ramez Fahmy (05:02)
Yes, yeah, and most of the time these lenders who are buying these leads are not your sort of like traditional reliable lenders. are kind of, I don’t want to use a negative term, but kind of bottom feeders who are trying to reach out to consumers and just kind of throw a number in their heads and look, it creates a lot of additional discussions with us and we have to kind of.

Victoria Ray Henderson (05:09)
Yeah. Got it. Sounds like it. Yeah. Yeah.

Ramez Fahmy (05:27)
Explain to customers why you would want to use someone like myself versus someone who’s
calling you unsolicited.

Victoria Ray Henderson (05:33)
Yeah, that was so annoying, so annoying. Okay, so while I have you a couple other questions that have to do with this process of applying for a loan. So I have a lot of people ask me, what is the difference between a soft pull inquiry and a hard pull inquiry? Tell me about that.

Ramez Fahmy (05:49)
Sure, so this is a big question that comes up. I think people in general make a bigger deal about it than it is, but a soft credit pull is sort of like a pre-qualification kind of credit pull. Or if your employer is doing like a simple background check, where a hard inquiry is when someone is applying for credit. So a soft pull generally gives you most of the same data that a hard pull does. It doesn’t necessarily pull from all three credit bureaus and cannot be used to make a final credit decision on a loan as of today.

Victoria Ray Henderson (06:02)
Mm-hmm. Okay.

Ramez Fahmy (06:23)
What it does is, because it doesn’t create an inquiry, one, is it limits those calls that we talked about as far as the credit trigger calls, but then it also doesn’t kind of ping you with what people believe is a negative.

Victoria Ray Henderson (06:30)
Mm-hmm.

Ramez Fahmy (06:39)
thing on your credit. What I tell people all the time is, is if you have excellent credit, you can have your credit probably pulled as much as you want and it’s not going to impact your ability to get a loan or the terms you’re going to receive.

Victoria Ray Henderson (06:40)
Right. Now when you say pulled, are you talking soft pull or hard pull?

Ramez Fahmy (06:54)
a hard pull. When a hard pull, you know, people think that, OK, it’s going to ding my credit and my credit report is going to drop by five or 10 points.

Victoria Ray Henderson (07:03)
Okay.

Ramez Fahmy (07:04)
I don’t necessarily believe that to be the case in every scenario. I tell people this all the time. If you went to Macy’s last week and you got a 10 % off because you opened up credit, and then you went down the road and got a car dealership to pull your credit, and then you came to me and you had me pull your credit.

Victoria Ray Henderson (07:06)
Mm-hmm. Okay. Mm-hmm. Hmm.

Ramez Fahmy (07:22)
then it looks like you’re appearing to make multiple types of credit that you’re opening. And maybe your credit profile already has maxed out credit cards or things like that. That person is impacted more negatively than someone who might have a perfect credit score who’s just shopping for a mortgage. One other thing to consider in that is if a mortgage company pulls today and a different mortgage company pulls tomorrow,

Victoria Ray Henderson (07:31)
I see. I see. Mm-hmm.

Ramez Fahmy (07:47)
it’s going to be treated generally as the same inquiry. It’ll show up, but as far as like how it impacts your credit score potentially, if at all, will be treated as a single poll.

Victoria Ray Henderson (07:57)
Is that because of how close they’re being done in time or because of the nature?

Ramez Fahmy (08:02)
I think it’s combination of things. One is it’s yes, because it’s being done in a short window of time, but it’s also you’re not likely looking to buy two separate homes. Whereas like the scenario that I mentioned before that, you have a situation where someone is looking, like I said, as a retail credit card, know, car dealership, mortgage company, we’re all coded for the type of business that we’re in.

Victoria Ray Henderson (08:07)
Thank Got it. it. Right. Got it. Well, you know, is it safe to say that you would advise people not, when they’re getting ready to buy a house and apply for a loan, not to go out and open up lines of credit and try to get a car and all these kinds of things? It sounds like it probably isn’t a good idea.

Ramez Fahmy (08:41)
Yeah, yeah. Absolutely. And I would also tell them not to close a bunch of accounts as well, because the credit score algorithm looks at the length of time you’ve had accounts open, how well you pay those accounts, the frequency by which you pay them, and the proportion of balances to credit limits on both individual accounts, as well as the totality of the available credit that you have. So closing accounts that have been paid on time can be a negative

Victoria Ray Henderson (08:54)
Mm-hmm. Mm-hmm.

Ramez Fahmy (09:11)
of impact as well. So I think you’re I

Victoria Ray Henderson (09:12)
Wow. That’s really good to know.

Ramez Fahmy (09:14)
think you want to make sure that you’re talking to a reputable lender who can give you good
advice on the best ways to sort of you know present yourself in the best credit light.

Victoria Ray Henderson (09:18)
Right. Have we covered everything that you wanted to cover today?

Ramez Fahmy (09:28)
Yeah, I mean the one thing that I would maybe mention is ultimately a lender is going to need to pull a hard pull. So when I have a customer come to me and they are kind of ready to go looking like they’re going to buy a house in the next 30 to 45 days, that’s when I will send them that I’ll always send them the email. I even have it in my email signature now for this opt out pre-screen to minimize these credit triggers. In that case, I would tell them, let’s go ahead and pull the hard credit. Right.

Victoria Ray Henderson (09:34)
Mm-hmm. Good. Good.

Ramez Fahmy (09:57)
That credit report is good for 120 days. So as long as you close on your mortgage within 120 days of when we pull your credit report, we won’t need to pull a new credit report. If you call me today, like I’m having a lot of calls in the beginning of the year, everyone’s New Year’s resolution is to buy a house this year, but you have some people who are in lease situations and they’re not looking to buy it for six to eight months, I would probably suggest that person to just do the soft pull and we can do most of the work that we need to.

Victoria Ray Henderson (10:00)
Okay. Okay. Right. Okay.

Ramez Fahmy (10:26)
You know to prepare that person for home buying with that softball

Victoria Ray Henderson (10:29)
Okay, so soft pull is if you’ve got the long-term goal of maybe, you know, past three months, maybe six months, maybe longer looking for a house, and the hard pull will last for three months, and that’s when you’re really ready to go and you can buy a home within that
three-month period, and then you won’t have to have your credit pulled again. Okay. Okay.
Okay.

Ramez Fahmy (10:48)
Yeah, mean, generally that’s accurate.

Victoria Ray Henderson (10:52)
All right. All right. Ramiz Fahmy with the Fahmy Mortgage Team at First Heritage Mortgage. It is always a pleasure to talk to you. I really appreciate you coming on Listen Up Homebuyers. Thanks so much for joining me.

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