How to Raise Your FICO Score 40 Points in 4 Days!


Credit scores increase gradually over time by borrowing money (e.g. by charging credit cards; by taking out loans such as student loans, home loans or car loans; and by making payments on time). It takes many years to establish good credit and reach a high FICO score (aka your credit score) and one 30-day late payment can dramatically lower your credit score in an instant.

I had a client many years ago that missed a $5 minimum payment on a Macy’s credit card and the FICO score dropped 63 points in one month!

The 3 most common reasons credit scores decrease are:
1) Paying an account 30 days late.
2) High credit card account balances.
3) Too much overall outstanding debt.
Did you know: Credit cards with balances higher than 30% of the credit limit will lower your credit score?

Are you a good candidate to increase your credit score quickly?

Late Payments:  If your credit score is low due to late payments, there is little you can do in the short term to raise your credit score. In the long term, always pay on time and never miss a payment and your score will go back up, slowly but surely.

Outstanding Debt:  If your credit score is low due to high credit card balances and/or too much outstanding debt, you are a good candidate to increase your credit score quickly by paying down and or paying off debt.

Fun fact: I have a client that buys and sells properties and his business requires him to purchase building materials, equipment and appliances and on a monthly basis. He regularly maxes out his 7 credit cards and pays them off in full at the end of the month. I pulled his credit when all credit cards were maxed out and his credit score had fallen 90 points! When he paid off his cards, his credit score shot back up 90 points. On any given month his score would fluctuate by 90 points depending on his credit card balances.

Recently I helped a couple raise their credit score 40 points in 4 days. Their credit report included the following:
–  A mortgage.
–  2 car leases.
–  4 Credit cards. One credit card was maxed out. The other 3 credit cards had balances less than 30% of their credit limits.

Below are the options they had to raise their credit score:

First, paying off a mortgage is a normally a very expensive proposition and it is doubtful that paying off a mortgage would increase their credit score since having mortgage debt is not considered ‘bad behavior’.

Paying off two car leases will most likely not help raise their credit score because paying off a car lease does not eliminate the lease reporting on one’s credit report. (BTW, the only way to get rid of a lease reporting on ones credit is to buy the car in cash.)

Paying off the three credit cards with balances under 30% did not sound like a good option to me since credit cards with balances under 30% usually do not lower one’s FICO score.

Paying off the one maxed out credit card was the only option that would all but guarantee a positive outcome to increase the credit score! The account balance was over 30% of the limit and was almost maxed out. Maxing out credit cards is considered ‘bad behavior’ and can lower your FICO score.

The game plan was to pay off the one maxed out credit card in full to hopefully raise the credit score. My client paid off the card in full. I ordered a rapid rescore. A rapid rescore allows the new $0 balance to be reported by Experian, Equifax and Transunion immediately. Four days after the account was paid in full, the rapid rescore was completed and the new $0 balance reported on the credit report and their FICO score.

For pre-approvals and general questions, email me at [email protected].

How to buy a $475k condo with $25k down and pay $1,950 per month!


Building wealth takes discipline and sacrifice, but sometimes a little creativity goes a long way. As a mortgage broker, I am frequently asked if I have any tricks up my sleeve to help bring down the cost of a mortgage.

Here is one way to buy a condo (or house) for up to a $475,000 purchase price with $25,000 down and pay $1,950 per month!  That payment includes utilities, Internet and cable TV, applicable tax deductions and taking a roommate

Here are the basic requirements:

  1. A minimum $85,000 income.

If you do not make $85,000 per year, you will need more income to qualify. One solution is a co-signer. A family member, for example, with good income and low debt can help you qualify for the loan.

  1. You must be debt free.

If you have credit card debt, reduce your spending and start paying off those cards asap.

If you have a car payment, sell the car or return a leased car back to the dealer asap.

Take whatever money you have available and buy a car for cash. My financial advisor has reminded me over the years: If you need to finance a car, you can’t afford that car. I’m not saying we can always avoid going into debt but it’s a good point. Drive a clunker for a few years while save you tons of money.

Here’s my personal story on this topic: Many years ago, I too needed to get my finances in order. I was overspending and it needed to stop. For a 2-month period I (painfully) wrote down every single penny I spent. The results were rather shocking to me. I had spent $22 on parking in 3 days, for example. To this day after (finally) becoming successful, I would rather park on the street for free 3 blocks away and walk 4 minutes to my destination than to pay a valet to park my car.

Cooking at home replaced the constant eating out. I never realized food is actually fairly inexpensive. Costco sells Japanese Wagyu Boneless Ribeye Roast at $99.00 per pound and chicken, turkey and ground beef under $3.00 per pound. Take your pick.

From there, saving money turned into a fun game – how to find ways to have a great time with spending little to no money.

I sold my car and purchased a used 20-year old Honda Accord for $3,500 cash. Honestly, driving that car made me feel semi-embarrassed at first. But soon those feelings were replaced with happiness and the joy of not having a car payment.

Driving that Accord saved me tons of money, never broke down, and I sold the car for $3,500 2 years later! True story. Next, I bought a used Ford F150 for $10k cash. Gas prices went up that year so after filling up for $100 on a Monday (and again on a Wednesday!), I sold the truck bought a used Toyota Camry for $11,500. Five years later someone hit my car and totaled the Camry. The insurance company cut me a check for… take a guess… yes, $11,000! I had driven that car for 5 years for $500. Yes, I got very lucky. But it all started with my decision to live within my means and pay cash for whatever car I could afford.

  1. Find a 2-bedroom condo for sale.

As of my writing this article there are 2-bedroom condos for sale for $475k or less in Studio City, Santa Clarita, Burbank, Glendale, Koreatown, Sherman Oaks, Long Beach, Reseda, Stevenson Ranch, Torrance…etc.

  1. Find a roommate who will pay you $1,250 per month rent.
  1. Educate yourself about the tax benefits that come with owning a property.
  2. You can deduct the property taxes and mortgage interest, which literally puts money back in your pocket. So let’s count those savings when calculating the monthly payment.

    Let’s take a look at the numbers:

    Purchase price: $475,000

    Down payment: $23,750 aka 5% down

    Closing cost: Negotiate seller to pay in full.

    Principal & interest: $2,400

    Property taxes: $495

    Homeowner association fee: $300

    HO6 insurance: $25

    Mortgage insurance: $0

    Utilities, Internet and TV: $300

    Roommate: $1,250

    Estimated Tax break: $4,800 per year

    Payment calculation: $3,200 mortgage payment + $300 utilities, Internet and TV –  $1,250 roommate – $400 tax break = $1,950 per month.

    Disclaimer: I am not a CPA. Please consult your CPA for current tax laws and your specific tax savings. Principal & interest payment are based on current rates for qualified buyers only. HOA payments will vary. Utilities, Internet and TV costs will vary. HOA insurance cost will vary. Property taxes may vary. Roommate figures may change. All numbers mentioned are subject to change. All loan programs are for qualified buyers only.

    Here’s one thing I know. Many financially successful spend way below their means. What feels cool to them is saving money, not spending money and always owning and never renting. When I bought my $3,500 Honda Accord, my successful friends praised and validated me while my financially challenged friends pitied and felt sorry for me – which is hilarious. And those same financially challenged friends are still financially challenged 10 years later – which is less hilarious.

    Real estate has been a great investment over the past 50 years. Let’s figure out a plan how to get YOU into a property whenever the time is right for you.  Feel free to contact me anytime with questions at [email protected].

LIBOR is going away in 2021!


A series of fraudulent transactions connected to the LIBOR first reported

Here are 5 things to know about LIBOR:

  1. LIBOR stands for Intercontinental Exchange London Interbank Offered Rate, the world’s most widely used benchmark for short-term interest rates.
  2. LIBOR rates are published Monday-Friday at 11:30am London time.
  3. Banks commonly use LIBOR as the benchmark rate to charge each other for short-term loans.
  4. LIBOR is used for debt instruments including student loans, credit cards and Adjustable Rate Mortgages.
  5. Adjustable Rate Mortgages adds the LIBOR rate + ARM Margin rate to calculate the variable interest rate portion.

Adjustable Rate Mortgages are 30-year mortgages with an interest rate fixed for 5, 7 or 10 years. For example, a 7-year adjustable rate mortgage is a 30-year mortgage with a fixed interest rate for first 7 years with a variable interest rate for the remaining 23 years.

The ARM margin rate is determined by the bank and is fixed for the life of the loan. A common margin rate is 2.25%. Today, the 1-year LIBOR rate is 1.73%. Based on these rate, ones adjustable rate mortgage would be 3.98% today.

“This date is far enough away to reduce the risk and costs of a more sudden change”, says Andrew Bailey, chief executive of the Financial Conduct Authority in Britain. “By having a date by which transition will need to be complete, however, we give market participants a schedule to plan to, and make it easier for them to engage as many counter parties and Libor users as is practicably possible in that planning.”

How will the outstanding $1.33 trillion of mortgages affected once LIBOR goes away? Nobody knows yet.

 

 

The Impact of Solar Panels on Your Home


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Residential solar is becoming more and more popular with peoples desires for independence from the grid and a greener lifestyle. Local and state governments are still offering incentives to install solar panels. Many new home construction builders include solar panels as an energy saving option. Solar may or may not become a major player in generating cheaper energy – only time will tell. What is the impact of Here are a few things to consider when looking at the property value impact of solar panels.

  1. Government incentives will not last forever.
  2. Solar panels can cost upwards of $20,000 and may be financed.
  3. Selling your property with financed solar panels? Financing agreement can be transferred to the new homebuyer or must be paid in full before or at the time of closing escrow. The best-case scenario is the new homebuyer loves solar panels and is willing to take over the financing agreement. Worse case scenario, the new homebuyer hate solar panels and wants the panels removed entirely before purchasing the property.
  4. What is the life expectancy of a solar panel?
  5. How much are maintenance costs?
  6. How much value do panels add to the value of the property?

Solar has a cool factor in my opinion but the cost is still fairly expensive. The government is betting big on solar panels, hoping solar panel technology will become more effective and cheaper in the future. With Porsche just announcing 50% of its production to be electric by 2023, it would appear our appetite for low-cost electricity is not going anywhere anytime soon.