I have been in realestate for some time now, and I have found a way to cheaply (about $500) add carryback/mortgages to our CRA's. They show an extremely low balance (around a few hundred) and eventually 12 months of perfect payment history. Also it is even cheaper (per mortgage) to add additional carrys/mortgages too cool I have a few buddies that are running them on their Credit Reports, this should be fun The best part is the "mortgage" is sellable to someone else after a year for the same amount they paid, pretty neat eh
It's not, totally legit, you actually buy a property and run it through my title company with legitiate financing. I have been financing properties for awhile, and wanted to come up with a way to add low balance mortgages cheaply, and now I can do it, and yes do it legally.
Everytime I financed buyers it has been a big help to their scores after even a short time. Also the lower the balance the higher it raises their scores (as far as I have seen), and the principal on this mortgage is as low as you can go. This is good stuff, and good timing now that the "authorized user" won't be working anymore. Also you are Primary on the account.
So who is writing, and holding the mortgage? Is it your title company? Are these mortgages recorded? I'm trying to understand how this is economically feasible, with all the usual fees with processing and recording, as well as cost of reporting to CRAs... And who is creating the "market" for these mortgages?
I have several title companies I use that I have a long established relationship with, and that helps out on much of the costs. Everything runs through title just like any other purchase of land/home/building/etc. The "economically feasible" part was the hardest to overcome. Surveys, corner stakes, easements, contracts, legals, the actual property, and about a dozen other things but I got it now, and can "build" over 32,000 mortgages if I wanted. Neat stuff. I think the "market" is already here, "authorized users" are basically a thing of the past and this works just as well for improving credit scores and is cheaper, it just takes a little longer.
Yes, authorized users are a thing of the past . . . Can someone please show me the data that supports this OTHER than some hot-air statement from Fair Isaac trying to sell off an illegal scoring model. You know the thing about these new "mortgage" accounts and "primary" tradelines is that no one can adequately explain how they work. I suppose "I got it now" may work for the extremely naive but, I would speculate some folks would like a little more insight into the process. Oh, well, sell it while its hot . . . Sounds like bull$^it to me.
It took me sometime to get it to work, and work cheaply; I'm just not ready to draw up a tutorial at this time,(the umbilical cord is still attached and I don't want to let it go but it DOES work. I have several people that have already had the tradelines added, and all of them saw big increases in their FICO's after just a few months, and it seemed that multiples increased the Scores. In case you guys are worried this might become a SPAM thread, I promise you will not see me post a link to a site, my email, paypal, ebay or anything considered spam. This is a real deal, and I am a guy like you that just got really lucky to find this little legal and wonderful "loophole".
The question in my mind is whether or not any actual real estate trades hands? If I were to buy your method would I ever actually get title to any real estate and if so what would that real estate be and where would it be located?
Not to be a killjoy, but wouldn't this also show an increased monthly payment obligation? Let's say I have a house, a car, and a couple of credit card bills that total $2,000/month as reported on my CR. If I make $4,000/ month, I'm going to be barely within the lending limits for a mortgage. Now if I add another tradeline for another mortgage at $1,000/month. My debt/income ratio (on paper) has just gone from 50% total (marginal) to 75% (fatal). While that might boost my score from "in the crapper" to something less smelly just by gaming the scoring model, all I could really apply for is a credit card (which would probably be asking for more trouble if the score is already in the crapper) or something less picky than a full-doc mortgage. If you applied for a mortgage, I don't see how that would help your application at all if it increases your payment obligation. Unless it's one of those "dont-ask-don't-tell" mortgages (if they're still making those), I would think someone is going to wonder how you plan to pay for your new house on top of this "other" mortgage you have on your file. Am I missing something?
And in the above, one of the issues is exposed . . . . No one ever tells anyone this, unless the consumer is savy enough to know this information going in.
Sorry I didn't get back to respond in a timely manner, I got caught up on another board about the same discussion. So here it goes: >>cap1sucks (nice name by the way) Yes land does actually exchange hands, and no I am not in the market to sell land. This is just something I have been playing with for a time now, and finally got the costs down low enough, and saw high enough improvements on FICO's to make this a worthwhile credit building tool. Just passing the technique along, nothing more >>ccbob You are correct, the ratios would go bad if your payment was $1000 a month, but these are much much less. Remember 12 months of payments and "interest" are part of the $500 costs to setup, and most of the $500 goes elsewhere. This isn't a money maker, I wouldn't benifit selling "land" for $500, thats just what it would cost an average Joe if he wanted to do this. The thing I haven't been able to figure out is why the increases are as good as they are in time, I just don't have a good enough comprehension of the FICO scoring model. I tried to find an answer on another board but mostly got bulldozed over as opposed to having any constructive input added, can't blame them, it's a new thing that has only marginal testing done So my thinking is that the increases from the FICO are caused by two things, and here is what I got: 1. Many of the people who had these tradelines added to their CR got large volumes of offers for new credit lines and a very good deal of approvals. This seemed pretty consistent, so I am assuming the new mortgages are the cause for increased approvals and offers somehow. This in turn raised their credit scores very nicely over time. 2. There is some type of "trigger?" or "anomaly" in the scoring system. I don't think it was meant to compensate for mortgages that run such low balances for such long periods of time. Also there is a way to make it show a very high initial balance, but that one is my secret , but I am willing to share the rest of the process with you guys. So that is where I am at, next time I come on and have more time, I will go over the details on how to set this up.
One characteristic about the FICO model that might be coming into play is the concept of "bucketing" or grouping where they score one person amongst others with similar profiles. Because of that effect, it could be that these amazing gains are temporary until the scoring model re-buckets them. For example, without knowing anything about your clients, it could be that they were in a marginal profile to start with but by gaining a mortgage, all of a sudden, they outshined the rest of the people in their current profile (bucket). In a couple of weeks, the score might take a nosedive as they are scored against a different profile where they may not appear as favorable. That effect is widely documented and has been discussed (and experienced) here. (It's kinda depressing )
Knowing how algorithm modeling runs, my opinion is that a "low balance" on a mortgage tradeline is "tricking" the FICO model. It is not used to seeing a "low balance" on a tradeline labeled as a mortgage account. If the balance is truly "low" relative to the "initial balance" of the "loan", then this ratio is tricking the model into thinking it has more age and payment history, even if the "date opened" is only a few months. This "extra" mortgage on a credit report also may trick the FICO by grouping it into those reports which have multiple mortgages (i.e., the wealthy), whose "pattern" of credit management, and subsequent low risk of default are causing the model to give points based upon the "grouping" factor with them (and their behavior). My advice, run with the opportunity as fast, and long, as you can. FICO will soon catch up to this "purchased behavior", and adjust the scoring to look for other validating factors.
>>ccbob, not a bad point, however these tradelines, I think, are past that point. I do have a basic understanding of the scoring models, just not enough to explain this paritcular anomoly without more time, and more reports to play with (larger sampling). I am aware of the "stepped" CR's, or "bucketed" as you put it. I signed up for a few different Credit Boards about the time I first managed to get these mortgages reporting. Initially I was hoping that this new technique would show huge gains fast and I could come across as the new "hero" saving us from our credit captors by enabling us to add unlimited mortgages to reach never befor seen credit scores, so much for that dream You can see by my join date here, and on other boards (still can't remember them all this has been going on for some time before I felt good enough about the process to share my methods, (took a little longer than expected I wanted to give you guys something somewhat easy, and cost effective for the given increase in our FICO's. Funny thing is I had it right the first time, just didn't know it until some time passed Initial results were not good, and I abandoned the idea for a short time until the people I used started telling me about some marginally impressive gains. I have been using your boards as resources for new information while keeping track of the FICO's and staying quite until I got most of it sorted out. (Hence the early signup dates and almost no posts on any of the boards until now). It doesn't do anyone any good to throw out an idea without checking to make sure it works first, theories are fun, but can only get you so far without actual testing, and unfortunately credit building can take a looooong time
Ok, now that I completely strayed on a tangent on that last one , next up >>bizwiz41 that has to be about the best answer I have heard yet, thank you That is similar to my thinking, except much better articulated than anything I would have written Also not too far from the post of >>ccbob, just in a different direction, good thinking on both your parts Any other ideas floating around?
The FICO scoring model is an algorithm formula which attempts to predict behavior based upon the weighting and presence of certain data. It's end objective is to predict the probability of a major default on repayment of debt. The simplest explanantion is that it looks for data, and "patterns" similar to events that have happened. Do not completely take FICO's "breakdown and weighting formula" at face value. Of course negative payment history is a huge part of the formual, as this is the most "validating" data for predicting a default. But if you follow some of the analyses out there, the model hints at its inherent "twists". For example, the highest FICO scores (on average) are in the Northeast of the U.S., however, they also carry the largest outstanding debt. So, there are other factors at play here. What you may have picked up on are new "tweaks" to the model. The recent mortgage crisis has skewed the workings of the model, as will the AU account items. In other words, what were higher scores are now experiencing higher than historical default rates. So, "mortgage loans" showing higher balances (read that newer loans) will be weighted to have higher risk. "Lower balances" will be a sign of stability and "good behavior". I have noticed FICO is including these "factors" in their negative and positive comments now, where they have not in the past. So, "mortgage performance" may now be a highly weighted factor in the model. Obviously I do not know exactly how the FICO model works or is formulated, but there are instictive measures and indicators which the model should consider. For example, if a person makes "extra principal payments" on their mortgage, this is a pretty good sign that they have financial prudence. The model (if sophisticated enough) should be able to roughly calculate if extra payments are made by comapring the open date, listed payment, and current balance. I think we all can see the common sense that if someone is prudent enough to make extra payments to accelerate their mortgage paydown, then they probably are responsible on all their debt management. This is the "function" I beleive your mortgages are capitalizing on. The inherent problem with these algorithm models is that they do not have "street smarts", though the creators try to work them in. You happen to have come up with a street smart tradeline that the model only knows how to process as a strong "positive indicator".
That might be close, it's fairly easy to show a higher initial principal, (found it by accident while working a legitimate close) and then the balance usually drops immediately to almost nothing. I could even structure it to appear to be 12 "big" equal payments as opposed to 1 "very large" and 11 "small" payments; however it would be a lot more difficult to perform and the legality starts to get hazey, probably best to stay away from that last one. I could structure these mortgages over 30 years and still have the payoff set for whenever I chose, but from what you're saying the modeling software probably doesn't recognize the terms, but actually just makes assumptions by the payment history, initial balance, and final balance. Is that right? If so, it would be interesting to take several similar Credit Profiles (although this could be very difficult to find) and see what chages occur for different strategies if any at all. The only problem is that we would only be getting the most basic assumptions of the software for a given "type" of report. I know that there are several people out there that essentially have "blank" CR's, that could be a good starting point to play with different scenarios, once again impossible to get anywhere close to a model, but we should be able to gain some basic assumptions. Any thoughts?
The FICO scoring model is basically an "If/Then" formulation. It looks for certian "inputs" for the "Ifs", and "Then" calculates a value. This is overly simplifed, but applicable. The "If/Then" algorithm is built upon historical data of actual "If/Then" scenarios, in a collective fashion. A new "input" which does not fit historical data sends the algorithm looking for the best place to put it. It would be interesting to see this "input" of your mortgage accounts impact on different credit report scenarios. My feeling is that it would not have as great an impact on a wealthy individual's report (that may have 3-4 mortgages on it already). Having it on a "blank" report would be interesting; as my feeling is it would truly confuse the model. My thesis (stressing that this is only MY opinion) is that mortgage tradelines on a credit report are given more "weight" than the FICO published category weights. There is common sense, and empirical evidence that having a mortgage changes an individual's "mindset" about credit and debt management. Bluntly, a mortgage "makes us grow up". I think we all can relate to the perception that an individual who has a significant "paid down" mortgage, generally has a strong ethic about paying their bills. (i.e. think of our grandparents, parents, etc.). So, your "discovery" seems to validate this thesis, if the FICO scores gain are large enough. However, I feel that this anomoly will also be "corrected for" with subsequent editions of the FICO model, as is the case with "Authorized Users". The other half of this equation is the external market, specifically the sub-prime mortgage crisis. These events are skewing the historical data equations, and I'm positive the FICO mathematicians are killing themselves trying to tweak the model for this. In short, no forecasting model is perfect, and the creators cannot possibly envision all possibilties for the "inputs". So, for a business model, run with it as fast and long as you can!
I posted a reply to Apex's "Warning..." titled thread about a couple of outfits that may be doing this already. What do you guys think? http://consumers.creditnet.com/Discussions/credit-talk/t-warning--66635.html
