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This week Bruce Norris is joined once again by Philip Tyrone. Philip has been an entrepreneur from the start, buying and selling gold and silver in elementary school. He later established a car audio resale business in high school. As a mortgage broker he created 720creditscore.com to help his clients increase their credit scores and improve their financial situation. Originally a book and a workbook, the product expanded to become an infomercial, a teleseminar, and an online wealth enhancement course.
Bruce had mentioned off-air that he pulled his credit score, and he said it was something that he has not seen in a long time. For Bruce, it has been a while since he has borrowed money; so when he was looking at it he was surprised to see one of the comments. Someone said, “One of the negative things that you have is you don’t have much credit.” He has 40 years of perfect payment history; but now that he does necessarily have need for credit, this is the negative and seems backward. Philip said one of the questions he gets all the time is how to improve their credit after they have read the first page. He said fundamentally it makes no sense because you can get someone with an 800 credit score who is still told they don’t have enough credit or their credit is too extended. What they are trying to do is say if there is something for us to tell you, here is what we would tell you. However, over and over these are wrong. Fundamentally, it does not give the proper picture.
For example, when someone has a lot of late payments or short sales, many times they get the response that says “Two New Late Payments.” The person would then be asking what to do with this since they know they had been late before in the past. On Bruce’s, it said he had a public record. He looked at it, and it was a supplemental tax bill, which is the kind of bill you receive after the fact. Nine years ago, he sold a house. The tax bill was mailed to that address, and he never received it. It turned into a lien, which he paid. Despite this all happening nine years ago, it is still on his credit report nine years later. This is actually a perfect example of errors. One of the key things that Philip points out in his program is the difference between high-priority errors and low-priority errors. According to a public interest research group, 80% of American’s have an error on their credit report. The reality with Bruce’s credit score is he has a low priority error on his because something nine years old should have very little impact on his credit score. To resolve a situation like this he would have to write a letter to one of the bureaus and show them that it is over seven years old, and they will drop it. It’s amazing how the computer cannot figure this out on its own.
This is why Philip points out high-priority and low-priority errors. Philip’s philosophy and what he teaches in the webinar that there are certain things you should never worry about. You are never going to have a perfect credit report, and it does not really make sense to spend 10-30 hours cleaning up errors. It won’t have any impact on your life or credit score. Philip said as long as he gets to the credit score the other person wants and they become bankable, that is all that matters. Whether or not the number is still 720 depends on the banks. Certain banks or other things such as car loans require 750 at the most, so there are a lot of different factors. It is not always like it was in the past where it has to be just a credit score. They look at what you have done with your credit, which is why if you have a short sale foreclosure or a bankruptcy. The first thing you want to do is re-establish your credit after the bankruptcy. Philip can take someone who had a bankruptcy, short sale, or foreclosure, and you can go from whatever the credit score is now to 720 in about 8 months depending on how quickly you open the program and where your credit is at this point. Philip has had 12,000 people go through the program, so he can really see what works and doesn’t work and update it. This is why he knows what works and doesn’t work. Just because you have had a bankruptcy, foreclosure, or short sale does not mean your credit is going to pay for 7-10 years.
Bruce was asked to be part of a Riverside foreclosure task force with the city. In their first meeting, one of the things he asked was how they force the lenders to accept, cram down, or reduce principle. Bruce said one of the favors that could be done for the citizenry is to tell them there is life after a foreclosure. Ultimately, the lender should have the right to say they are not getting paid, had signed up for being able to chase the asset, and this is what they will most likely ultimately do. If you could tell the people on the other end that there is a path back and they will own the home again. Some people have blown this up to say this is it, and if they lose this house it is over. Part of that misinformation comes from realtors. They do not know either. When Bruce speaks in front of a group of realtors about foreclosures and how long it takes before somebody can get a loan, he usually tells them 7 years is very common.
Philip said it feels so good to give hope to people, which is one of the reasons why Philip does what he does. When he is on his question and answer sessions with his students, is addressing specific questions, he sometimes hears someone ask him if he is sure about what he is saying. His program is not about getting a bankruptcy or foreclosure off of someone’s credit report. Instead, he is saying we are going to have good credit coexist with your past as it is, and you are still going to end up with the FICO score you need. We are seeing the recovery of credit scores happen faster than they did in the past. Philip does not know what the credit bureaus are doing or if they are doing anything. All he knows is he is seeing a quicker jump in a person’s credit score than he has ever seen before. It is so exciting, and so many of the people have a full credit score. The bureaus are looking at this and saying the average credit score has gone down so much. When you re-establish and do the right thing, you get a bigger kick.
One of the things Bruce said drives him crazy is he walked into BofA and happened to look at their mortgage rate for 30 years, and it was about 3 ¾, a number that he just never thought he would see. He happened to ask what their rate was for non-owner occupant loans. Looking at what Bruce had with him, they told him they could do four loans with him. He told them there were programs that let you do ten, and she said their bank had what was called an overlay, which they cannot do. An overlay is a bank preference that sometimes trumps what Fannie, Freddie, or FHA will do. Bruce thinks one of the most detrimental things in the housing market right now is unnecessary overlays. Bruce interviewed FHA on the radio show for the whole purpose of asking them how long after a bk or a foreclosure would they consider doing a loan. Their answer was six months. If you could have a FICO score improve and FHA is willing to loan to this person with the improved score, the problem is there may not be a lender out there who will do it. When you are going into owner financing or things like this, when you are dealing with an owner, then people will look at you and say, “Wow, this guy had a foreclosure, but he already had a 750 credit score!” This is significant.
The thing mentioned above is not really common, so we are not talking about someone, for example, who will sit down with Bruce and tell him they have a 720 FICO score but lost a house 8 months ago. He would think this was strange. However, Philip is able to accomplish this legitimately. When a person he is working with is sitting in front of a lender with a 720 FICO score and a foreclosure or bankruptcy 8 months prior, Bruce wondered which fact is looked at when these two worlds collide. Do they look at the FICO score and say in this instance this is going to trump the recent problem? Philip said from what he has heard with his clients, if you are going to traditional lenders, such as Bank of America or Fannie Mae lenders, the credit score does not trump the bankers. They will say, “Sorry, you cannot lend for 2-3 years.” It depends on what their lending rules are, which are always subject to change. You never know what these guidelines are. They may pass a law that says they are loosening the guidelines to stimulate the real estate market, but who knows.
However, when you are dealing with small credit unions and small regional banks, they make decisions based on their loan committee. Then, when you are dealing with owner financing, this is the easiest hurdle to jump. You can simply say you have had a bad experience, were hurt in the market, but you can show what you have done. What is interesting is there is a two-tiered system. One, if you have a 720 FICO score, all is well. On the other hand, sometimes if you have one it is actually not a good thing. It is really interesting how this can exist simultaneously, but now Bruce said nothing really surprises him. When he returned from Washington D.C., where he had the privilege of sitting in front of Fannie and Freddie, he was comforted to know that there would always be a need for private money because of the way the decision process works.
Most people start pretty innocently trying to figure out that they have a problem, are upside down, and are going to call their lender and see what to do. Then, somebody inside says they are not going to talk to them until they stop making their payments. This causes them to comply. When asked if this was a bad idea, Philip said the thing he has learned over the past 3-4 years is to not speak about the morality of your credit score. He has seen unbelievable people who have had bad credit for numerous reasons. What Philip teaches is how to recover from a poor credit score. He looks at the credit score as just a tool.
Philip said two years ago he had a loan with a regional bank, and he was in the mortgage business, which had gone down 90%, and he had never missed a payment. He was sent loan documents and told they needed to be resigned. He looked at the loan documents and saw a $495 processing fee. This was just his yearly renewal; there was nothing else about it. He had asked numerous times if they could give him a break since he was in the mortgage business, to which they replied that they could not do anything. He felt like he was being taken advantage of. He was one of the lenders who kept paying. He had numerous friends and people who owned mortgage companies who did their own thing and went their own way. He was so frustrated, and in the heat of the moment he said he was done and they were being unreasonable. He had asked for a break in payment and for a break in interest rates, and they kept saying no and sent him a $495 processing fee. He ended up being sued, and it was an ugly situation. They kept telling him he can’t miss his payments since he teaches on credit scoring, to which he replied that he teaches on how to raise a credit score and not on the morality of making a decision that does not fit. What ended up happening was they negotiated it out, and six months later he paid $.25 on the dollar. There was no logic since what he had told them six months prior was he would pay and did not want to walk away from the loan, but he wanted them to be reasonable with him and give him a break while he was getting on his feet. None of this happened, and he then ended up paying $.25 on the dollar and the recorder covered the fee.
Philip said this was where the shift really happened and when he began looking at credit score as a tool that you use. He does not say this because he does not think you should pay your bills. What he is trying to describe is there are certain situations that you are in where times change and you have to make a decision. When someone walks away from a home or the bank tells you to stop paying your mortgage, you have to make the decision that is right for the family in that moment. The decision he made was one he felt was right and worked out for his family, but sometimes the decision can turn into a foreclosure or other scenario. Bruce said there may sometimes be people behind the scenes giving advice who may not understand that there are ramifications outside of an attempt to put pressure on the lender.
One of the things that has been a good change is that you have lenders now seemingly willing to do short sales without you having to be late, which makes a lot more sense. They figured out a long time ago that if the lender is doing it, then it is in their best interest. They finally figured out doing a short sale was in their best interest. Bruce wondered if, credit-damage wise, there is an easier path back from a short sale than a foreclosure. Philip said the bottom line is how many times you were late before the short sale or foreclosure. For example, if you did a short sale and were late, but no one noticed the default was filed, then it is going to be easier to recover. If you had those defaults filed after a foreclosure, there are just more negative marks backed up against you. Either way, it does not matter. It does not matter if you have a 500 credit score, 4 short sales, 4 foreclosures, and a bankruptcy yesterday, you can recover.
The good news is Philip does not care how bad your situation is, it is really not that bad. As messed up as the credit system is, the good part is it looks at new credit much better and with much more weight. The weight on new credit is so much stronger than old credit. Even what is bad can be recovered; it is not as bad as it seems. The best thing to do is get two or three positives to show up on your credit as soon as possible. This means instantly, right after the event happens. It is important to reestablish credit from the beginning as if you have no credit. This is what Philip and his company does. They have a webinar absolutely free, and they give them numerous times during the week. If you go to 720creditscore.com, there is going to be a box that pops up with a free download. You sign up for the download, and it will invite you to the webinar. You can pick the time you want, and it is going to give you so much information. His webinars are really designed to educate you, and you can either do one of two things. You can take the information and deal with it yourself, which is fine. This means spreading the word, or you can enroll in a program, where they will handhold you the entire time.
Bruce said he remembers seeing on his website something called Operation Hope. This was a conference Philip was invited to go to and is a low-income financial literacy program. They had their event in Washington D.C, and now he is trying to spread the word about it because the sad thing is people who are tight financially are the ones who really get taken advantage of by the private credit scores. If someone who is making hundreds of thousands of dollars a year is overpaying $200-$300 a month, then it is no big deal. If you are making $25, $30, or $40,000 and over overpaying $200 a month, this scenario happens all the time. Philip’s average client is overpaying $302 a month on average. Therefore, this leads to $3600 a year in things that are very unnecessary, and it is because they are not playing the game according to the rules. What is interesting is that you don’t really have to like the rules; but you better know them because some of the rules don’t make sense, but this is immaterial. If someone does not have the right number of credit cards or the right balance on those credit cards, his FICO score is going to be affected. Whether you like it or not, you are being judged by a set of criteria, so you might as well figure out what the criteria is.
One of the things that surprised Bruce when he and Marsha had a discussion back in 2004/2005 was they had paid off everything they had, and his FICO score went down. He did not think this would happen. Logically, there is no logic. Some of the things that matter, Bruce does not see why they mater; while other things that he would think matter, such as assets or income, don’t matter at all. Logic makes no sense. You would think that someone who has $10 million in the bank would naturally have a higher credit score. However, this is not how it works at all. If nothing else as a lender, you think that at least there is a cushion to fall back on.
If you would like to check out Philip Tirone’s website, go to 720creditscore.com. Here you will find a free webinar you can sign up for. Sign up for the free report on the website, and it will take you to the registration page.
For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.