Hello everybody.
Thank you for coming to this week's video blog here at California Realty Training, my
name is Robert Rico.
Hoping to bring some great information for you, that you can take on to your career,
make some money, because I know we all want to make some.
Hey listen, today's topic, not a big deal, today's topic is how important is a credit
score when it comes to buying a house?
Is it important?
Well, it actually really is important and I'll explain that in a minute.
When it comes to getting a house, most buyers don't have all cash.
They shop around, they say, "I'd like to buy that house."
Well, they need a loan.
Most buyers don't carry around a million dollars, or $700,000, or half a million dollars to
buy a house cash.
So, what do they need?
They need to go get a loan.
This is the deal.
When it comes to getting a loan, you visit a bank.
Bank says, "Hey, how you doing Mr. Buyer?
Would you like a cup of coffee?"
"Yeah, I want a cup of coffee."
You have a cup of coffee, you chat with the lender, with the loan officer, you start chatting.
Then, they'll start asking you a few questions.
They want to make sure that you qualify for a loan.
They want to make sure that you can get pre-approved for a loan.
You tell the lender, the loan officer, "Hey Mr. Loan Officer, Hey Mr. Lender, this is
good coffee, and by the way, how much money do I make?
You know what, I make a million bucks a year.
This should be no problem for me getting a loan right?
I make a million bucks a year."
And the lender asks him, "Well, how long you been at your job?"
Well, I've been at my job for 10 years.
Well, that's great, so make good money, and you've been at your job for a long time, that's
pretty solid.
Then, the lender says, "Hold on a minute, we want to make sure that your financial character
is good.
We want to make sure that your financial character, we want to make sure you have a good financial
history."
So what do they do?
That's right, they run your credit report.
And on that credit report, you're going to have three agencies that are going to give
you a score.
Experian, Equifax, and TransUnion, and there going to give you a score.
The difference, you may get a 700 from one, a 725 from another, and then a 729 from another.
You got a 700, 725, and 729.
What the lender does, is they pick that one that falls in the middle and that's your FICO
score.
So, if it's a 700, 725, and 729, which one would be your FICO score?
That's right they're going to use the one that falls in the middle.
In this case, it would be 725.
They don't just use Experian.
They don't just use Equifax.
They don't just use TransUnion.
They use all three and the one that falls in the middle, the score that falls in the
middle is the one that's going to be used.
Now, why is that important?
That's hugely important.
Ready?
Because lenders, when they provide the loans, these loans are on a, what we call, they're
based on a formula, on a lender's formula.
Now, what does that mean?
It means if you want to get this certain loan, let's talk about FHA loan.
If you want to qualify for a FHA loan, you must have a minium 580 FICO score to have
a 3.5% down payment loan.
Most people who want to buy a house, first-time home buyers, they go for the FHA loan, why?
Because it's only 3.5% down payment, if you have a 580 minimum FICO score.
What if you have a 575?
That's so close, what if you have a 575, that's so close to the 580, can't they just give
you the loan?
No, they can't, because the criteria is a 580 FICO score.
The question here is this, is a FICO score important?
It's crucial and if you fail by one point, if you fail by one point, you don't get that
loan.
How can we raise our points immediately?
How can we raise our score quickly so that we do qualify?
Let's assume you want to, a certain loan and you got to have the, well, an FHA loan you've
got to have that 580 FICO score.
Doggone it, I got a 579, how can I raise it by one?
How can I raise it by one point?
How can I get these three credit agencies that they will help me by raising it one point?
You speak to the loan officer and the lender, going to offer you a cup of coffee, you accept
it and you chat and you say, "Hey, Mr. Lender, Mr. Loan Officer, how can I get my FICO score
up one, two, three, four, five points, so that I do quality for this loan?"
And they're going to analyze your situation.
They're going to look at your credit report.
They're going to look at all your debts that you had in the past and so on.
And they may recommend that you, "Hey look here, back three years ago you had a cellular
phone bill that you never paid and that might be giving a negative report on your whole
FICO situation."
Hey, he might recommend go pay this one off.
Go pay this one little old debt that you never bother with, go pay it off.
We'll do what's called a rapid rescore.
We'll run your credit again quickly.
After they've changed on the three credit bureaus, after the change that you've paid
off that one little bill, they may change their scores and if they change their scores,
just this much, it might be just enough for you to get that 580 to get your loan.
You get the loan, you get the house.
Hope that makes sense.
Is a credit score important?
That's right, because the lenders, those are their qualification standards, but that FICO
score is extremely important.
Hope you learned something today about FICO scores and how important they are, and don't
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