Credit Improvement:  Can You Get Out Of Debt By Eating Better?

 

Tell me if this sounds familiar:  You’re approaching the noon hour at work and your co-worker says, “Where do you want to eat today?”.  After 10 minutes of back-n-forth, you finally decide where to go.  Seeking novelty and mouth-entertainment, you end up spending $15-20 on yourself before heading back to the office (When did these restaurants start charging $2.99 for a glass of soda?).  Each day, your waistline gets fatter and your wallet gets slimmer.  But you go anyway because you don’t want to be accused of being unsociable!

 

For you Oprah watchers, you’ve no doubt seen her favorite health guru - Dr. Oz - bring out bowls of body parts to show what bad life style choices do to the body:  The black lungs of a smoker, the over-sized belly-fat omento of an obese person, etc.  One of Dr. Oz’s best-selling books is titled You On A Diet and he details many of the body-destroying effects of poor eating habits.  For solutions, I’ll save you 370 pages of reading by summarizing his main idea:  Make your eating “automatic”.

 

Let’s Do Something Crazy For Dinner Tonight!

 

Dr. Oz’s big eating plan is to take two meals a day and eat the same thing every day.  He suggests making Breakfast and Lunch automatic and then you can go crazy with dinner.  By making healthy choices for these two automatic meals, you’ll lose weight, you’ll have more energy, and you’ll save money.  If you're spending $10-$15 extra every workday for lunch, that's roughly $300 per week you're wasting! 

 

Remember those old sitcoms where the wife always sent her husband to work with this black, metal lunchbox?  That kind of behavior is seen as “weird” these days.  But if you’re looking for a way to save more money, get out of debt, and afford your new house payment, AND get healthy enough so you can enjoy the home for a long, long time, Dr. Oz’s plan is “right on the money”. 

 

You’ve probably been told that in order to afford the home you want, you’re gonna need to “tighten your belt”.  Follow this plan, and you won’t need to “tighten” anything – you can just wear a smaller belt.

 

Assignment:   If you’re one of them go-out-to-eat-everyday people, find a co-worker who will agree to change habits along with you.  You can begin packing your lunches and then you can enjoy a healthy walk to a local park and enjoy your lunches together.  Fresh air, exercise, better nutrition, and savings of about $300 a month.  Imagine if both husband and wife did the same thing – would $600 in savings each month get your finances (and your fannies) in better shape?  Don’t “eat yourself out of house and home”.

Credit Improvement:  Achieving the (seemingly) Impossible

 

Are you facing an impossible task?  Do you have a huge project ahead of you that is overwhelming and you just don’t know where to start?  Maybe you’ve accumulated a large amount of debt and don’t know how to begin paying things off?  Maybe you have a business project or idea that you know will make a huge difference in your life, but you avoid it because it’s just too big?

 

Brian Tracy, a well-known motivational speaker, tells a story from his youth about an adventure that changed his life and way of thinking.  Traveling through southern Europe with a group of friends on bicycles, they decided, for some unknown reason, that it would be fun to travel across the great Sahara Desert and see the wonders of Africa beyond.  They sold their bicycles and came up with enough money to buy an old Land Rover, and off they went.

 

Along the way, they encountered many hardships and were lucky they didn’t lose their lives.  In his words, “the labor was excruciating, the progress was slow, and the pleasure was non-existent.”  But it was during this “adventure” that Tracy learned a most important life-lesson that taught him how to tackle large, impossible tasks.

 

For many years, the French controlled Algeria and it was often necessary for army personnel to cross the desert quickly.  Satellite navigation wasn’t available then, maps were useless, roads couldn’t be built on the constantly shifting sands, and compass navigation was tedious and often ineffective.  So the French set up a simple system of oil barrel markers.  Spaced exactly 5 kilometers apart along the chosen path, the French placed black 55 gallon oil barrels atop permanent poles across the desert.

 

If you follow this path, you can always see exactly 2 oil barrels at all times – the one you came from and the one you are going to.  So as Tracy learned, he didn’t have to cross the entire desert all at once – he just needed to focus on getting to the next oil barrel.

 

As you face your impossible tasks, try to break up the task into small, well-defined steps.  Then to complete the impossible task, you’ll just need to take it “one oil barrel at a time”.  Keep your focus on completing only this smaller task – don’t fret about the rest of the overwhelming project.  Get one piece done, and then move on to the next piece.

 

Need to pay off a huge amount of debts?  Start with the smallest one.  Make the minimum payments on everything else, but focus all your “extra” resources towards paying this one off.  Then move to the next smallest one, etc.  For that large project, do something TODAY that will get you to the first oil barrel – just 15 minutes maybe.  Then get to the next oil barrel tomorrow…

10 Things I Learned from the “10 Things I Hate About You” Home

 

2715 N Junett St, Tacoma, WA Built in 1905

This home is currently for sale for $1,600,000

 

Quick background: The above home was used in the 1999 movie “10 Things I Hate About You”. The movie’s plot was a modern day adaptation of Shakespeare’s “Taming of the Shrew”. In 1991, 8 years before the movie was filmed here, I was working as a painter’s apprentice and was assigned the task of stripping this old 5,760 square foot home to prepare it for painting.

 

The current 15+ layers of paint which accumulated during the previous 86 years was in serious disrepair – cracking, peeling, failing – so the idea was to take it all off – right down to the bare wood. Chemical strippers didn’t work and the only solution was a hair-dryer-sized heat gun and a little hand-held hook scraper. 4+ months, working all by myself – heat, heat, heat, scrape, scrape, scrape.

 

Below are 10 things I learned that may help you survive in today’s tough real estate market, and since the movie was based on Shakespeare – it’s only appropriate that I use Shakespeare quotes for the titles. Enjoy.

 

To climb steep hills requires slow pace at first: Staring at the 3 stories of 5,760 square foot home and the little heat gun in my hand, the task was impossible. All I could do was start in. I picked a spot, heated the first 2 square inches, and scraped it off. Then the next 2 inches. Then the next.  The hill would be climbed, 2 inches at a time. What hill do you need to climb? Is there some impossible project that you keep putting off? Why don’t you do 2 inches of it right now?

 

Nothing can come of nothing: There was no question that this was going to be a lot of work. It wasn’t fun or exciting. It was tedious and boring, not to mention potentially dangerous knowing many of those layers of old paint were likely filled with lead, and at times I’d be working high above the ground at odd angles. But this old beauty was not going to restore itself – it was going to take hard work, persistence, and patience. What about you? There are deals being closed right now. If you’re not getting your share, could hard work, persistence, and patience get you there?

 

An ounce of prevention is worth a pound of cure: It didn’t take long for me to figure out that the scraped-off paint didn’t just float away into nothingness. Not only did I have to scrape it off the house, I had to get rid of it too.  If I didn’t take the time to put down drop cloths to catch the chips and blobs, it would take me 4 times as long to pick the little pieces out of the dirt and off the plants and surfaces below, like the proverbial 2 steps forward / 1 step back. Do you make more work for yourself because you don’t plan ahead and think projects through before you start? Do you have your systems set up that will enable you to capture all the opportunities that come your way?

 

Though this be madness, there be method in it: My little heat gun had a simple thumb-activated “On/Off” switch. It was simple to flip it on and off with little effort.  Too simple, in fact. You see, when the gun was off, I wasn’t heating up any more 2 inch sections of paint to scrape. “Off” meant no progress. If it was too easy to turn off, it was too easy to not work.

So, before I’d start working, I had to wrap masking tape around the handle to keep the switch in the On position. It didn’t need to be held on.  The tape was only there to prevent me from easily turning it off.  Because if it was too easy to turn off, I would. Then I’d mark a target on the wall - a "written goal". Once I reached it, and ONLY once I reached it, would I allow myself a short rest or lunch break. Until then, that gun stayed on. This simple act of discipline literally doubled my progress each day. Have you set up daily and weekly “On” targets for yourself?  Are they written down?  25 phone calls before lunch? Talk to 5 new clients this week or you can’t leave early on Friday?

 

Cowards die many times before their deaths: To reach the upper sections of this home required two 40’ ladders fully extended and a 20’ long, 12” wide plank stretched between ‘em – that was my work surface. It was a long way down to an agonizing and painful death. It was scary – and there was no way to harness myself on and no one around to hear me scream (I hope OSHA’s not reading this). I could barely function up there at first and every little wobble and creaking noise made me wet. And then? After a while, it was absolutely no big deal. I was prancing back and forth on that little plank like I was walking down the sidewalk. I finally realized that if that same plank was on the ground, I wasn’t going to fall off it there, and the plank was no different just because it was 30 feet in the air.

 

What projects are fear keeping you from trying? Are you afraid to cold-call a neighborhood or check in with past not-ready leads?  It’s only scary until you’ve done it a few times, and you’ll likely never be killed or injured doing it. Go for it!

 

Love looks not with the eyes, but with the mind: The owners bought this home a few years before they hired us to work on it, and it really didn’t look like much. It was big and had a great view of Commencement Bay and Mt. Rainier, but the home hadn’t been well maintained. This was your classic “Buy the ugliest house in a good neighborhood” purchase. But they saw an opportunity to go back to basics (strip all that old, ruined paint and start from bare wood) and restore the original beauty. The real estate market when they purchased this home was not good, yet because they used sound investment principles they did really well. Are you helping your clients take advantage of the opportunities available in this market? Can you find real jewels amongst the common stones?

 

How poor are they that have not patience: This was a huge job for these homeowners to undertake. Not only the paint job, but there were several other areas of the home that needed restoring, and they took it all on one project at a time. And little by little, they transformed the home into a classic beauty. They did it right, took their time over several years, and the results are breathtaking. With patience, they were able to obtain a true dream home to live in, not to mention that their home has increased in value tremendously since they bought it. They did it little by little, project by project. You can apply this principle to your business too. Work to improve your skills and broaden your sphere of influence – little by little, project by project – and soon you’ll be working at your dream job.

 

This above all – to thine ownself be true: There were so many places on the home that were hard to reach and out of view where I could have “cheated” and not done a careful a job. Nobody would have known – until years later when the chances of paint failure could have occurred. But I couldn’t do that. That job was 27 years ago and I still drive by occasionally to see the home. And each time, there is a special pride in knowing that I did that, I gave it my all, and I have no regrets.

 

Treat your clients the same way. Give them the best service you can without taking shortcuts. Always keep in mind that they’ve trusted you to do the job right for them. Don’t let them down! 

Are you true to yourself too? Do you do what it takes to get the job done right – every time? When YOU know that your clients are making a smart choice by choosing you because you aren’t going to let them down, No Matter What, that sense of confidence will come across when they meet you and your competition won’t have a chance.

 

A hose, a hose! My kingdom for a hose! Yes, I know that is supposed to be “A horse, a horse…”, but hose fits better. I had completed 3 sides of the home and was 90% done with the fourth side. Way up at the top of the last side, as I was heating and scraping away, smoke started coming out of a knot hole. My gun had sparked something under the siding 35 feet off the ground! Oh my gosh! I needed water!  Guess what wasn’t on the outside faucet below?  There was no hose. Run around the house – no hose anywhere. Nobody home. No cell phones then – can’t call 911.  I’M GONNA BURN THIS THING DOWN!!! 

 

Running around the neighborhood from house to house – I need a hose! I found one across the street two doors down, borrowed it (as the hose owner yelled at me from his porch), hooked it up, turned on the water – up the ladder I went and somehow got it to stop smoking.  It was a real lesson in safety and caution – having a contingency plan – using common sense in planning. Of course I should have made sure I had a hose available. The only thing amazing was that I got through most of the job before I needed one. Whew!

 

What’s the lesson? For me, it’s “don’t throw files in to underwriting and ‘hope’ they don’t burn up”. Instead, anticipate potential problems ahead of time and be prepared with solutions, alternatives, and compensating factors to quickly douse any flair-ups. What things cause your deals to fall apart? Can you anticipate these problems and make sure you have back up plans?

 

Parting is such sweet sorrow! I was amazed at how emotional I was when I finished that paint job. I had bonded with the home and left knowing that I had absolutely given it my best effort. It was a real lesson – sometimes jobs come to an end. I don’t plan on leaving the mortgage biz any time soon, but I do know that when the day comes when I must quit because time marches on – I want to leave with that same feeling of pride and sorrow that I felt that day when I put away my heat gun and scraper.

 

Every day I work, and every client I work with, deserves my very best. Your life deserves your very best too! Put your best in to it – it’s the only way to truly live.

 

I leave you with a final Shakespeare quote (spoken by Robin Williams playing Teddy Roosevelt in “Night at the Museum”):

 

"Be not afraid of greatness: some are born great,

some achieve greatness,

and some have greatness thrust upon 'em."

Home Shopping Tips

Congratulations on your preapproval.  As you begin your home shopping, I want to provide you with important and hopefully helpful information along the way so you’ll be a more informed shopper and be better prepared for the closing process. 

While you’re shopping, I’ll email you a series of Home Shopping Tips.  If you have questions along the way, you can always reach out.  I love questions!  It shows me you are actively engaged in finding a home and that means I can complete your home loan soon. 

Many people are afraid that they are “bothering” me when they have questions.  Please don’t feel this way!  Answering your questions and making sure you understand what you are doing is what I do for a living.  It’s okay to make me do my job!

The first and obvious question is, What Is A Preapproval?  A preapproval basically means that I believe you can buy a home that is priced up to a certain amount.  I am basing that belief on your credit report and the information that I’ve gotten from you so far.  I may not have all your information, and some of the information I have may be wrong, so a preapproval is not a guarantee that your loan will actually end up being approved.  But I’m pretty good at what I do so my beliefs are usually pretty good.

The preapproval is your ticket to start shopping for a home.  So start shopping.  But while you’re doing that, we need to do some work to make sure that my belief that you can qualify for a home loan is correct.  So watch your email for lists of items needed for your file and paperwork for you to sign.  The sooner you complete your tasks, the sooner we can know for sure that my belief in you is justified.

Once I get your items, I will be forwarded your file on for an underwriting review.  We don’t need to wait for you to find a property to do this.  The underwriter is the ultimate judge in this process.  Once we satisfy the underwriter that your file is worthy, then we know that you WILL be able to buy a home. 

And since the current market is so competitive, it’s nice when you can tell potential sellers that your credit application has already been fully approved by the underwriter.  That is much stronger than just having a preapproval letter.  Because frankly, many preapproval letters aren’t worth much when they are done by lenders who don’t know what they are doing – and there are a lot of lenders who don’t know what they are doing.  I used to be a lender who didn’t know what I was doing too!  You gotta learn somehow. 

Just tell them they are approved!

Many years ago, my first boss told me, “Just tell them they are approved!  Hopefully you can get the loan done and get paid.  But if you can’t, you just deny them and move on.”  Sad, but true.

There are a lot of shoppers trying to buy the same homes that you are looking at.  Anything we can do to make your offer stronger, we're going to do.  So get your documents in quick and we'll get your file fully approved!

Credit Improvement:  How Long Must This Go On???

A frequent question I get asked about is how long certain things stay on credit reports.  The general answer to that question is that I like to change the question to one that is actually more important, like this:  What are the most important things on my credit report when I’m trying to raise my scores?  And the general answer to that is to pay attention to the MOST RECENT items on your report.  “How Long” isn’t nearly as important as “What’s Happening Now?”  Your credit score will weight the most recent items much heavier than the older items.  So pay most attention to the here and now and your scores will improve.

Still, the “How Long” question can be answered, so here goes:

1. How Long Do Hard Inquiries Stay on My Credit Report?

Hard inquiries are created every time your credit report is accessed by a business when you apply for credit. For example, your credit would receive a hard inquiry when you apply for a car loan, mortgage, student loan, or credit card.  There are “soft pulls” that go on behind the scenes for various purposes, but these don’t impact your scores.  It is only when you apply for credit that you’ll get hit with a hard inquiry.

Inquiries remain on your credit reports for two years (24 months). However, hard inquiries impact your score for only the first 12 months. After that, they have no impact on your score. The impact on your score during month 12 is far less than in month 1 – again, the more recent the activity the more impact it has.  Usually the impact of the credit inquiry goes away for the most part within a month or two – especially if the credit you applied for was approved!

Beware the “Used Car Salesman” scare tactic:  Don’t get tricked out of comparison shopping when you’re applying for credit.  With mortgages, for example, you have a window of opportunity to apply as many times as you want within a 45 day period without getting dinged for each hard inquiry along the way.  The slimy salesperson who tells you not to shop around because it will ruin your credit score is not your friend.  The Fair Credit Act of 2009 prevents credit bureaus from discouraging you from shopping around.  But don’t make having your credit pulled a habit.  Only do it when you need to have it done and you’ll be fine.

2. How Long Do Credit Accounts Stay on My Credit Report?

Credit accounts refer to all of the accounts for which you hold credit, including credit cards, mortgages, and car loans. Credit scoring models like to see a healthy balance to the types of credit accounts (or “credit mix”) you have and can manage effectively. Negative information on a credit account includes late or missing payments.

Negative account information stays on your credit report for seven years from the date it was first reported as late. If you close the account, the entire account will be removed from your report after seven years. If the account remains open, the negative information will be removed after seven years, while the rest of the account information stays on your report.  Be aware that sometimes the negative information stays on your report for longer than that – for various reasons like the original creditor doesn’t exist anymore.  In cases like this, you file a dispute and it’ll go away – no questions asked.

Positive information, on the other hand, remains on your credit report indefinitely. If you close the account, positive information typically stays on your report for 10 years past the closing date.

3. How Long Do Collection Accounts Stay on My Credit Report?

When you fall behind on making payments on an account, your debt could end up in the collection’s department of that particular company, or sold to an independent collection agency. At this point, the original creditor that sold the debt should not continue to report a balance owed, but you should watch out for duplicate collection accounts.  Again, if you see mistakes on your report, you can file a dispute with the bureaus and have your report corrected.

Collection accounts remain open for seven and a half years from the date the account was delinquent. After that time, it must be removed regardless of when it was paid or when it was placed for collection.

Understanding how collection accounts can affect your credit score is tricky. The most important factor that will affect your credit score when it comes to collections is how recently the collections occurred—the more recent the collection, the lower the score. Multiple collection accounts or lawsuits resulting in judgments can also lower your score.

While there’s no way to tell exactly how much a collection account will affect your credit score, it is one of the higher penalties, so the best course of action is to avoid having accounts sent to collection in the first place.

4. How Long Do Public Records Stay on My Credit Report?

Public records include any of your personal information that becomes public knowledge, including bankruptcies, tax liens, and judgments.

The type of public record will determine how long the information stays on your credit report.

Chapter 7, 11, and 12 bankruptcies stay on your credit report for 10 years from the date filed. Completed Chapter 13 bankruptcies are usually removed after seven years from the filing date.

Tax liens remain on your credit report for seven years from the date filed if they are paid, or indefinitely if they are not. If you settle these accounts, ask that they get removed from your report as part of your settlement.  They usually just want your money and they are usually willing to agree to this stipulation.

Paid judgments remain on your credit report for seven years from the date filed, and unpaid judgments remain for seven years or the governing statute of limitations, whichever is longer. Since unpaid judgments can usually be renewed, these may remain on credit reports for a long time.

There is no way to know exactly how many points your credit score might drop with a public record on file, but the effect of public records on your credit report could be severe.  And with mortgages, there are usually mandatory waiting periods following public records events.