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Show Summary
In this episode of the Real Estate Pros podcast, host Michelle Kesil speaks with Elias Flores, a credit repair expert, about the importance of maintaining a good credit score for home buying and investment. Elias explains how credit scores are calculated, common mistakes people make when investing in properties, and effective strategies for repairing low credit scores. He emphasizes the significance of payment history, credit utilization, and the process of disputing inaccuracies on credit reports. The conversation provides valuable insights for consumers looking to improve their financial standing and navigate the real estate market.
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Elias Flores (00:00)
right now, ⁓ the lowest credit score someone can have to purchase a home in the US is 620. So that’s the lowest credit score you can have to buy a home.But if you’re at that credit score of 620, you won’t get the best interest rates. You’re gonna get kind of like the lower interest rates. You’ll be considered like tier two, border tier three credit. At this point, your interest rates are gonna look kind of like in the double digits. You’re gonna be at 10%, 12 % interest rate. ⁓ Maybe if you’re lucky, like closer to eight. But the best thing you can do for yourself is work on getting your credit score up.
Michelle Kesil (02:11)
Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil Today I’m joined by someone I’m looking forward to chatting with, Elias Flores, who is in the finance industry working with credit repair, as well as with mortgage brokers to help customers get new homes. So excited to have you here today, Elias.Elias Flores (02:33)
and happy to be here. Thank you, Michelle.Michelle Kesil (02:34)
Awesome. So let’s dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is?Elias Flores (02:41)
Yes, so my main focus is helping consumers raise their credit score, ⁓ fix their credit, so when they’re ready to buy a home, they can have the best opportunity to get the best interest rates in their homes. Soright now, ⁓ the lowest credit score someone can have to purchase a home in the US is 620. So that’s the lowest credit score you can have to buy a home.
But if you’re at that credit score of 620, you won’t get the best interest rates. You’re gonna get kind of like the lower interest rates. You’ll be considered like tier two, border tier three credit. At this point, your interest rates are gonna look kind of like in the double digits. You’re gonna be at 10%, 12 % interest rate. ⁓ Maybe if you’re lucky, like closer to eight. But the best thing you can do for yourself is work on getting your credit score up.
Michelle Kesil (03:34)
Yeah, definitely. And how does someone start doing that?Elias Flores (03:37)
So there’s, when it comes to credit, there is actually a calculation. So your credit is calculated by five different ⁓ points. The first and the most important is payment history. So 35 % of your credit has to do with payment history, how you’ve maintained your payments. So for an example, simple example, let’s say you have a credit score of 650 and you’ve missed a few payments.That’s what’s most likely gonna allow your credit to remain low. So you want to go ahead and increase your credit by making sure all your payments are on time and you wanna make sure that everything is done.
So when it comes to ⁓ your credit, there is a calculation. There is payment history, ⁓ how much ⁓ amount is owed on overall your credit lines, the length of credit history, credit mix, and how much new credit is available to you. So the most important one is payment history.
Payment history has to do with how you maintain your payments throughout your credit lifespan. So if all your payments have been on time, then your credit will start shooting up. And because this is the bigger portion of your credit, 35%, they wanna maintain a good credit history by always paying their payments on time.
The second one, amount owed. This has to do with how much you owe in comparison to the credit available to you.
In real estate, we call that DTI. So what’s your debt to income? How much debt ⁓ are you carrying in comparison to the income or the credit that’s available to you? So just to keep it simple, if you have a…
10 credit cards, each averaging $1,000, so you have $10,000 in credit. If you’re using $7,000 worth of credit, then at the end of the day, you’re carrying a 70 % credit utilization. People that do that, actually they’re credit tanks, and most people are carrying a high balance.
I just got off the phone last week with a customer that was maxing out their credit cards every month and wouldn’t pay them back. So their credit dropped all the way to like 590, but they didn’t understand why. And they’re actually, they’re in the market for a new home, but they just didn’t understand why their credit was so low. And really it had to do with how they were using their credit. Credit cards were being maxed out and at the end of the day, that’s what was dropping their credit.
So if you open like your Credit Karma app, or nowadays I think major banks, all major banks, they show you your credit, they’re gonna give you like pointers. And one of the pointers that they’ll give you is make sure that you keep your credit utilization below 30%. The reason is because once your credit utilization is below 30%,
your credit tends to hover around 700. So if the first two examples are at a good standing, you have a good credit history, then…
I’m sorry.
So let me take that back. So if the first two ⁓ examples that we gave, payment history and amount owed are in a good standing, your credit will be above 700. So you wanna make sure that your credit utilization is below 30%. Ideally, you wanna have it below 10%. So this is where most people get confused. Just to break it down, what that means is you wanna make sure that you’re using
⁓ less than 10 % of your credit by the time your billing cycle closes. So throughout the month, you can use as much credit as you want. But once your statement cycle closes, you want to have the ⁓ credit available to you be over 90%. You want to only use or carry over to the next month less than 10%.
And these two, just with these two points alone, your credit will be above 700 month to month. So it is a calculation, right? And the two major calculations is FICO. There’s actually a new FICO score called FICO 10T. ⁓ And what FICO 10T does, it averages a 24 month period and looks at your credit from a bigger point of view. It looks at the past 24 months, then it gives you an average.
So I think more than ever, ⁓ consumers need to be aware that your history, your payment history is more important now more than ever. You wanna make sure that you’re building a positive credit, not just month over month, but over time, like more than two years of history. From there, the third point is length of credit history. So this is something you can’t really control. This just takes time.
and this carries 15 % of your credit is the length of time you’ve had that credit. So most people, you know, they come out of high school or college and then they start building their credit.
So this is where it starts averaging out. It would be one year, two years. And every time you apply to new credit, that average, that history, it actually ⁓ changes and it becomes less and less. So it’s an average. So if every year you’re applying to a new credit card, then the average time you’ve had credit also changes and it drops.
So the last one is ⁓ credit mix, which is basically the different types of credit.
that you have available to you. Credit cards are the number one. I feel like everyone has credit cards. But from there, you should eventually get an auto loan and you should eventually get some sort of personal loan. This strengthens your credit and it gives you that credit mix. This is about 10 % of your credit, which is credit mix. Now, most homeowners…
They want to be over 720, their credit score. If they can have their credit score above 720, they will get the most competitive interest rates as we speak.
That was a lot.
Michelle Kesil (11:05)
Yeah, no worries. I think that’s super helpful information. So what are some mistakes that maybe people make when they’re trying to invest and get new properties?Elias Flores (11:17)
This is a good question. So when people are trying to invest in new properties, ⁓ the biggest mistake that they do is that they don’t maintain a good credit score after they’ve purchased their first home. So what I’ve seen is when customers are trying to buy multiple properties, ⁓ they don’t necessarily use the credit that’s available to them to their advantage.So they would go ahead and buy their first property and then they want to go ahead and invest in a second property. ⁓ But credit needs to be maintained ⁓ in every phase of you can say, know, their purchasing lifetime.
So you wanna always maintain your credit so that way when opportunity comes, you will qualify because you do need to get that second loan, right? That loan needs to be approved and it all has to do with how much credit you’ve built up until that moment.
Michelle Kesil (12:15)
Yeah, absolutely. And if someone has a low credit score, how can they repair it?Elias Flores (12:20)
So ⁓ if you have a low credit score, it’s one of two reasons why. First reason is, ⁓ like I said earlier, you’ve maxed out your credit cards. Credit cards are maxed out. ⁓ So the simplest way is to start paying down your debt. Once you start paying down your debt, credit will start going up. ⁓ And this actually is the biggest game changer. So.Bring down your debt, your credit card debt, not your loans, right? Because the loans, they’re already set, right? Because they’re already set, ⁓ those don’t affect your credit as much. But credit cards, they’re called revolving debt. So because it’s revolving, that affects your credit month to month. So if you bring down your credit card debt, I guarantee you, your credit will shoot up. That’s the number one.
And the second reason, usually credit score is low, has to do with ⁓ having negative items, collections. Maybe in the past a credit card was charged off because they couldn’t pay it. Some people may have a repo on their credit.
These are the two biggest reasons why your credit will be low. Either you’ve maxed out your credit cards or you have negative items that throughout history you’ve accumulated. So you wanna go ahead then resolve those negative items. ⁓ Fun fact, 80 % of the information that’s on your credit has a mistake on it.
So this has actually been revealed that about 80 % of credit information is incorrect. So this is where most people just come in and either themselves go in and start disputing these items. ⁓
And this is how negative items get removed from credit. You dispute them, you look at the negative information and you say, hey, I never owed, you know, $5,000 or my payments weren’t that amount. Cause when you check your credit, let’s say you owe Bank of America $5,000, you never paid it. They close it and they go ahead and charge it off. Once they charge it off, that becomes a negative item on your credit.
But you analyze it, right? This is where people need to pull their credit. Pull their credit, analyze it, and then they can see, oh, something’s wrong here. I never had a $10,000 limit. Mine was only $5,000. And these are the little errors that go on your credit, and this is where you leverage. This is where you leverage the law, right? Because the law says that whatever’s on your credit needs to be accurate. So.
Credit repair for the most part is analyzing your credit, looking at the mistakes, and basically fighting to get them removed. So you want to do that if your credit is low due to negative items.
Michelle Kesil (14:57)
And how can someone figure out what was a mistake?Elias Flores (15:41)
That’s a good question. So the first thing you can do is pull your credit. ⁓ Right now there is a ⁓ free way to pull your credit report. And I’m gonna pull it up right now. The website is called Annual Credit Report. So it’s called Annual Credit Report and…This is the website that is backed by the government and basically they allow you to have a free credit report once a week. So once a week, you can go on to annual credit report and pull your credit for free. Once you pull it, you look at it, you analyze it. ⁓ If we’re looking for mistakes or negative items, you’re gonna just go in there and.
analyze what is wrong with that debt. Now this is, yes, this is where you need to do some homework. We need to look back and we need to see ⁓ when was the last time I made a payment and then see what was my balance. How much did I owe? What was the total balance due? And this will kind of determine whether or not either the balance is wrong, ⁓ the amount ⁓ your credit limit was wrong.
So it’s mostly just analyzing your credit from what you already have. But this is where the hard part is, which is analyzing. So this is where people usually come to professionals to kind of help them out, to guide them. But if you’re trying to do it yourself, I feel like nowadays with AI, you should be able to pull it and then be able to analyze it. AI is incredible for that. It’ll tell you what’s wrong.
Michelle Kesil (17:15)
Yeah, that’s cool. And then if something is wrong, like how can someone work through that?Elias Flores (17:20)
So if something is wrong, ⁓ the best thing you can do is begin to dispute. So you begin a dispute process with the three credit bureaus. So the three major credit bureaus, Experian, TransUnion, and Equifax, they’re the ones that are reporting this debt. So by law, the law is FCRA, Fair Credit Reporting Act.they need to report accurate information and if it’s not accurate, they cannot report it. So the first thing is you identify the mistake. What is being reported wrong? Then second is you send a certified letter to the credit bureaus so that they can investigate.
I always tell people I wouldn’t recommend you doing it online even though there’s an option. There is an option for you to dispute online. You can go to TransUnion.com. You can open a dispute. But what that does is it takes away your freedom to one day take legal action against them. And that’s the disclosure. Like if you go online and you open a dispute with TransUnion or Experian directly online, one of things that you need to agree is you will not take them to court. So…
you don’t want to give your rights away. You want to all your rights because at the end you don’t know. A lot of people have sued the credit bureaus or have escalated their disputes further up. So you don’t want to give that up. So you send them certified mail. Always certified mail.
Michelle Kesil (18:44)
Yeah, that’s super interesting. I’ve never heard of that. And so if someone does a dispute, can they get money back?Elias Flores (18:50)
Now they won’t get money back if they dispute. ⁓ What will happen if they dispute is the credit bureaus will remove that negative information. So let’s say you’re disputing in our example, the Bank of America credit card, right? Because it went to collections and it was charged off, but Bank of America is reporting it ⁓ wrong. It’s inaccurate information. You catch that information.And you tell Experian, hey Experian, Bank of America is reporting ⁓ a negative item on my credit and it’s wrong. So you’re gonna find example one, ⁓ the balance is incorrect. And example two, ⁓ the dates are off.
And this is where it’s important. Example three, charged off. So a charged off account is basically the bank stating to the government, hey, know, John Smith never paid me. He owed me $5,000. He never paid. So they are allowed to write that off on their taxes. So that’s what a charge off is.
but most lenders, most banks, what they do is they’ll continuously report a charge off every month on your credit. This is actually against the FCRA. This is against the credit law. If they charge it off, it has to be done once on your credit. So if it’s done ⁓ next month in March, then only March should report a charge off. From there, there’s no new information, because there’s nothing above a charge off.
But most banks, they’ll continue to report every month, charge off, charge off, charge off, charge off. And this does affect your credit long term. So this is, I would say, the most important thing to look at when you’re looking at negative items. How are they reporting my debt?
Michelle Kesil (20:30)
Yeah, well, that’s definitely something that can be helpful for people. So thank you so much for sharing that.So before we begin to wrap up here, if someone wants to reach out, connect, learn more, where can people find you and get support?
Elias Flores (20:44)
Yeah, so I am in social media. My main social media right now is I am on TikTok, I’m on IG, and I do have my website. So my IG is Mr.credit.So this is where people can find me online and this is where mostly I’m getting a lot of feedback. So my IG Mr. Credit ⁓ and my website is unchallengedcredit.wixsite.com
Michelle Kesil (21:16)
Perfect. Well, appreciate your time and your story. Thank you for being here.Elias Flores (21:19)
Thank you, Michelle. Thank you for having me.Michelle Kesil (21:21)
You’re welcome. And for the listeners tuning in, if you got value, make sure you have subscribed. We’ve got more conversations with operators who are building real businesses and we’ll see you on the next episode.
