[JSL23]

How many times, on average does everyone think a Merchant's credit get pulled when a Broker submits him/her for funding?

I have been thinking about it lately and am starting to feel like we should pull credit 1 time ourselves before sending it out and that's it. If the Lender wants to pull a credit report one more time once a deal has been offered and accepted that is fine. The reason is I have had a couple of declines the last few weeks due to them missing the minimum score by 4-10 points. We try to send most Merchants to 5 Lenders or less and stick to whoever would be the "best fit" but let's face it, lots of Merchants are going to make the rounds.

Example: Restaurant/Retail shop depositing $40,000-$50,000/month 600 score, minimal NSF, some minor blemishes, but pretty decent overall; just about anyone will fund them....you're going to want to send them out to a few places and see who puts the best offer out.....and you have to assume nowadays they either are shopping or will be so you want to play defense....who wants to lose a deal because you inadvertently dropped someone's FICO score.

My questions is: Do a lot of brokers do this already? Do most Lenders accept that type of arrangement? If they do, than great, it's a good selling point and my clients will appreciate it. I''m definitely leaning towards doing that from now on.

[fundit]

Following JSL23's comments, I'd like to ask lenders to respond and tell us how to minimize credit pulls. Is any way to avoid credit being pulled until the merchant commits to the deal? I know that sometimes when we submit a deal, we ask that credit not be pulled and an offer be made contingent on the credit pull being done when the merchant accepts the deal? Do lenders honor these requests? Of course, I am assuming we have a general idea of the merchant's credit score. It is obviously in everyone's best interest to get deals done and having them declined because FICO scores are only a few points short of qualifying due to the credit pulls doesn't make sense. Sending files to only one lender is really not an option, since there can be such a wide disparity in the offers received and which are best for the merchant. Your opinions and insight are greatly appreciated.

[Sean Cash]

Following JSL23's comments, I'd like to ask lenders to respond and tell us how to minimize credit pulls. Is any way to avoid credit being pulled until the merchant commits to the deal? I know that sometimes when we submit a deal, we ask that credit not be pulled and an offer be made contingent on the credit pull being done when the merchant accepts the deal? Do lenders honor these requests? Of course, I am assuming we have a general idea of the merchant's credit score. It is obviously in everyone's best interest to get deals done and having them declined because FICO scores are only a few points short of qualifying due to the credit pulls doesn't make sense. Sending files to only one lender is really not an option, since there can be such a wide disparity in the offers received and which are best for the merchant. Your opinions and insight are greatly appreciated.

The one thing you can breathe easy about is that the FICO scoring model assumes that consumers will shop for credit and therefore many inquiries in a very short period of time may hold the weight of only one pull.

So if their credit gets pulled 5x in 1 week, the score might only drop after the first one, but if the credit gets pulled once every 2 weeks for a couple months, those are going to hurt.

[cardinalequity]

Sean that only applies to mortgage pulls and shopping around for a mortgage. That is not the case for all other inquires such as MCA lenders, credit cards and auto loan lenders.

The one thing you can breathe easy about is that the FICO scoring model assumes that consumers will shop for credit and therefore many inquiries in a very short period of time may hold the weight of only one pull.

So if their credit gets pulled 5x in 1 week, the score might only drop after the first one, but if the credit gets pulled once every 2 weeks for a couple months, those are going to hurt.

[Sean Cash]

Sean that only applies to mortgage pulls and shopping around for a mortgage. That is not the case for all other inquires such as MCA lenders, credit cards and auto loan lenders.

Ah well that is good to know.

[cardinalequity]

Inquires in my opinion shouldn't be a deterrent for a client (within reason of course we can't abuse the client) If we have are few go to places those couple inquires aren't going to kill a score. Especially if a client has charge-offs and collections. In other words a 600 that dropped to 590 isn't that big of a deal if the client has derogs on their credit. Underwriters will look at the substance of the full report. In the same was a 20yrs old can have a 750 fico score but only has 2 capital one 500 dollar credit cards. (no substance) That score regardless of how high will not convince someone to now all of a sudden give them a 50k credit line.

How many times, on average does everyone think a Merchant's credit get pulled when a Broker submits him/her for funding?

I have been thinking about it lately and am starting to feel like we should pull credit 1 time ourselves before sending it out and that's it. If the Lender wants to pull a credit report one more time once a deal has been offered and accepted that is fine. The reason is I have had a couple of declines the last few weeks due to them missing the minimum score by 4-10 points. We try to send most Merchants to 5 Lenders or less and stick to whoever would be the "best fit" but let's face it, lots of Merchants are going to make the rounds.

Example: Restaurant/Retail shop depositing $40,000-$50,000/month 600 score, minimal NSF, some minor blemishes, but pretty decent overall; just about anyone will fund them....you're going to want to send them out to a few places and see who puts the best offer out.....and you have to assume nowadays they either are shopping or will be so you want to play defense....who wants to lose a deal because you inadvertently dropped someone's FICO score.

My questions is: Do a lot of brokers do this already? Do most Lenders accept that type of arrangement? If they do, than great, it's a good selling point and my clients will appreciate it. I''m definitely leaning towards doing that from now on.

[aredmond]

How many times, on average does everyone think a Merchant's credit get pulled when a Broker submits him/her for funding?

I have been thinking about it lately and am starting to feel like we should pull credit 1 time ourselves before sending it out and that's it. If the Lender wants to pull a credit report one more time once a deal has been offered and accepted that is fine. The reason is I have had a couple of declines the last few weeks due to them missing the minimum score by 4-10 points. We try to send most Merchants to 5 Lenders or less and stick to whoever would be the "best fit" but let's face it, lots of Merchants are going to make the rounds.

Example: Restaurant/Retail shop depositing $40,000-$50,000/month 600 score, minimal NSF, some minor blemishes, but pretty decent overall; just about anyone will fund them....you're going to want to send them out to a few places and see who puts the best offer out.....and you have to assume nowadays they either are shopping or will be so you want to play defense....who wants to lose a deal because you inadvertently dropped someone's FICO score.

My questions is: Do a lot of brokers do this already? Do most Lenders accept that type of arrangement? If they do, than great, it's a good selling point and my clients will appreciate it. I''m definitely leaning towards doing that from now on.

Depending on the lender, some will underwrite the file without pulling the credit. You simply tell them what the merchant believes his credit score to be, they will work the deal, but it is always subject to change if the score reflects something different than initially presented.

At the end of the day, you should know your funders well enough to not have to shotgun the deal everywhere looking for the best deal. I will always send my deal to my top A paper lender first, and if it gets declined I will know why and where to send it to the b/c paper based on the dirt on the file. This will limit the credit pulls. Rarely have I ever sent a deal to more than 3 lenders.

Bottomline, know your funders and know your files. That will allow for best practice.

[J.Celifarco]

How many times, on average does everyone think a Merchant's credit get pulled when a Broker submits him/her for funding?

I have been thinking about it lately and am starting to feel like we should pull credit 1 time ourselves before sending it out and that's it. If the Lender wants to pull a credit report one more time once a deal has been offered and accepted that is fine. The reason is I have had a couple of declines the last few weeks due to them missing the minimum score by 4-10 points. We try to send most Merchants to 5 Lenders or less and stick to whoever would be the "best fit" but let's face it, lots of Merchants are going to make the rounds.

Example: Restaurant/Retail shop depositing $40,000-$50,000/month 600 score, minimal NSF, some minor blemishes, but pretty decent overall; just about anyone will fund them....you're going to want to send them out to a few places and see who puts the best offer out.....and you have to assume nowadays they either are shopping or will be so you want to play defense....who wants to lose a deal because you inadvertently dropped someone's FICO score.

My questions is: Do a lot of brokers do this already? Do most Lenders accept that type of arrangement? If they do, than great, it's a good selling point and my clients will appreciate it. I''m definitely leaning towards doing that from now on.

My question to you is why submit to 5 banks.. You can't have that many banks that do different things.. Submit to 2 get some info on the file then decide where to go with the file once you have more info.. It is easier to get a file funded if you bring it to a bank and submit with any issues that the file may have. By submitting to 2 banks it allows you to minimize credit pulls and if the file is good you are able to get it funded. If the file is not good you now have valuable information you can use to get the file funded at the next bank you submit it to. By submitting to so many banks at the same time I think you hurt yourself and the merchant more then help. On top of that you are making the banks underwrite a file that they only have a 1 in 5 chance of funding. If you continue to do that the banks wont want to work with you either

[cardinalequity]

J.Celifarco is dead on with this...great advice. If you or your client are uncertain about the clients score then send it to an A lender if industry permits. Lenders like Quick Bridge and Ondeck are great about telling you exactly why it's a no go. QuickBridge goes as far as to itemize and even tell you client has to many collections. This info now gives us the opportunity to know exactly where to go with the file and to also prepare the client on a much higher factor rate.

[omegafund]

I have my clients pull their own credit so we know what we are dealing with upfront. Sure the personal pull and lender pull show different but good enough to submit. After that you should really only need to shop a deal to 2 lenders most of the time. Also when you get a client that says my credit is perfect high 800s they will see their own credit pull and realize it sucks and is only 600. They cant argue with their own report. I think some funders have gotten better, in the past they did not even review a file until they pulled their own credit. We can UW to a point without credit pulls

[CreditGuy]

Sean that only applies to mortgage pulls and shopping around for a mortgage. That is not the case for all other inquires such as MCA lenders, credit cards and auto loan lenders.

Ah well that is good to know.

Why would it be good to know something that is incorrect?

[anonymous]

The one thing you can breathe easy about is that the FICO scoring model assumes that consumers will shop for credit and therefore many inquiries in a very short period of time may hold the weight of only one pull.

So if their credit gets pulled 5x in 1 week, the score might only drop after the first one, but if the credit gets pulled once every 2 weeks for a couple months, those are going to hurt.

Shotgunned about 15 application between this post and the following one haha.

[cardinalequity]

You're the credit guy, so educate us or me for that matter.

Why would it be good to know something that is incorrect?

[Sean Cash]

Why would it be good to know something that is incorrect?

I was saying that it was good to know the correct information.

[blKC]

At Kalamata Capital, we don't pull any credit until the merchant has accepted our offer and signed the contract.

Up until that point, the offer is underwritten based off the number reported to us.

It's not a perfect process, but we prefer not to damage anyone's credit if there isn't mutual interest in the deal.

[CreditGuy]

The impact on a borrower's credit score is a function of whether it is a hard pull or a soft pull, as well as the type code of the lenders that are pulling the borrower's credit. Ignoring the hard/soft pull distinction, provided the lenders pulling the bureau all have the same type code (mortgage, auto, *actual* bank, etc.), the borrower's credit is only impacted at the first pull and then a window is open for 30-90 days depending on the type code and credit bureau being used, during which subsequent pulls from lenders with that same type code won't impact the score. This is done by the bureaus to allow borrowers to shop rates and approvals from different lenders. It should also be noted that some lenders incorporate the pull count over a certain duration into their risk scoring, so while the FICO score itself might not be impacted, multiple pulls might cast the borrower's risk profile in a negative light.

[MCNetwork]

At Kalamata Capital, we don't pull any credit until the merchant has accepted our offer and signed the contract.

Up until that point, the offer is underwritten based off the number reported to us.

It's not a perfect process, but we prefer not to damage anyone's credit if there isn't mutual interest in the deal.

That's a good idea because it prevents trigger leads from reaching competitors. All too often, my underwriter pulls credit on an "exclusive" lead and then within 24 hours, several cash advance companies are pitching the merchant like sharks attracted to blood in the water. By delaying the credit pull, you give yourself a good head start to get the merchant firmly committed to your company.

[JSL23]

My question to you is why submit to 5 banks.. You can't have that many banks that do different things.. Submit to 2 get some info on the file then decide where to go with the file once you have more info.. It is easier to get a file funded if you bring it to a bank and submit with any issues that the file may have. By submitting to 2 banks it allows you to minimize credit pulls and if the file is good you are able to get it funded. If the file is not good you now have valuable information you can use to get the file funded at the next bank you submit it to. By submitting to so many banks at the same time I think you hurt yourself and the merchant more then help. On top of that you are making the banks underwrite a file that they only have a 1 in 5 chance of funding. If you continue to do that the banks wont want to work with you either

UNDER 5 banks.....usually 2-3. Sometimes it can go up to 5, if the Merchant gets declined or we get a weak offer but usually it is 2-3 on the initial submission. I would honestly like to send it to 6-8 Lenders; let you guys compete for the business but I do not want to shotgun anything in the best interests of the client. That is why I would like to do the credit pull ourselves, so it is one-time and on time ONLY until an offer is accepted.

[JSL23]

The impact on a borrower's credit score is a function of whether it is a hard pull or a soft pull, as well as the type code of the lenders that are pulling the borrower's credit. Ignoring the hard/soft pull distinction, provided the lenders pulling the bureau all have the same type code (mortgage, auto, *actual* bank, etc.), the borrower's credit is only impacted at the first pull and then a window is open for 30-90 days depending on the type code and credit bureau being used, during which subsequent pulls from lenders with that same type code won't impact the score. This is done by the bureaus to allow borrowers to shop rates and approvals from different lenders. It should also be noted that some lenders incorporate the pull count over a certain duration into their risk scoring, so while the FICO score itself might not be impacted, multiple pulls might cast the borrower's risk profile in a negative light.

I appreciate the input.

I usually deal with the Merchants on the sales end of things and my firm's President and Office Manager handle the Underwriter's and submission part. They fill me in pretty well but based on what I hear from them and several other people(and this is my opinion) is there is just a disconnect between the Lenders and Brokers. It is not always explained WHEN they pull or if it is a "Soft Pull" or not. These things should all be explained by every single lender. Yes, there are some that are thorough and fill us in on their process and then there are the one's that piss on your back and tell you it's a waterfall! "Just send the file! We fund in 2 hours!" you guys know the type....

I would still like some feedback from the Lenders as to whether this type of arrangement is doable....Good for the Merchant, good for us in terms of saving time. Win Win.

[J.Celifarco]

Just my opinion by taking that approach with submissions banks are not going to go out of their way to get your business, I think its going to have the opposite effect. If you are submitting a ton of deals and not funding a good % then you are not going to have any leverage to try to get better deals with the banks (higher commissions, faster turnaround times). Maybe I am crazy but you make it sound like the ISO holds all the cards, I wish that was the case but it isn't. The bank has final say if the deal funds and they have tons of ISO's trying to do business with them, they are going to favor the ISO's that do right by them. Making a bank underwrite 20 files to only fund a small hand full is not gonna win you any favorability with the bank, its going to make them think you are a waste of their time

[cardinalequity]

Thank you! Good info and theoretically makes sense and sound. My experience and the experience of others I know says something different. The most infamous example is someone walking into a car dealership with subpar credit. When the dealer puts you into dealer track(which most use) in about a minute you get sent to 7,8,9, even 12 lenders you will notice a difference in your score right away. Not because it counted as 1 inquiry but because they all counted. I've seen clients scores drop 15 points in a few minutes. Most in the Auto industry know this but they need to do it in order to see which lender bites. This of course applies to subpar credit clients. If someone walks to Mercedes Benz knowing that they have a 750 fico score and they can go with a prime bank then the 1 pull is enough. And of course I was just referencing hard pulls. Going back to the codes, I've only seen what you are referring to with Mortgage pulls and nothing else. FYI. this is not designed to be argumentative. I value everything you wrote and I know it's sound. Describing my last 8 years of experience that's all. Thanks for the info!!!!

The impact on a borrower's credit score is a function of whether it is a hard pull or a soft pull, as well as the type code of the lenders that are pulling the borrower's credit. Ignoring the hard/soft pull distinction, provided the lenders pulling the bureau all have the same type code (mortgage, auto, *actual* bank, etc.), the borrower's credit is only impacted at the first pull and then a window is open for 30-90 days depending on the type code and credit bureau being used, during which subsequent pulls from lenders with that same type code won't impact the score. This is done by the bureaus to allow borrowers to shop rates and approvals from different lenders. It should also be noted that some lenders incorporate the pull count over a certain duration into their risk scoring, so while the FICO score itself might not be impacted, multiple pulls might cast the borrower's risk profile in a negative light.

[JSL23]

Just my opinion by taking that approach with submissions banks are not going to go out of their way to get your business, I think its going to have the opposite effect. If you are submitting a ton of deals and not funding a good % then you are not going to have any leverage to try to get better deals with the banks (higher commissions, faster turnaround times). Maybe I am crazy but you make it sound like the ISO holds all the cards, I wish that was the case but it isn't. The bank has final say if the deal funds and they have tons of ISO's trying to do business with them, they are going to favor the ISO's that do right by them. Making a bank underwrite 20 files to only fund a small hand full is not gonna win you any favorability with the bank, its going to make them think you are a waste of their time

Of course, no doubt! It is a two-way street and I do not expect any special treatment. I am talking about existing relationships where we have established credibility. I wouldn't expect a brand new partner to make special exceptions(like us pulling the FICO score).

As far as competing on a file, I have to disagree; I wouldn't do something underhanded like send something out once an offer has been made and accepted verbally. Ever. I would, however, send it out to 2-4 Lenders simultaneously after I initially receive it and see who puts their best foot forward. It is a competitive business. I am competing with other ISOs/Direct Lenders on files and I accept that. It comes with the territory. The way i see it is our interests are aligned, the Lender,the Merchant, and myself. Lender wants Merchants to add to their portfolio, the Merchants want/need the best offer/term for the money they are receiving and we need the two to come together. Until the day i get psychic powers, all I can do is narrow that part down to a few Lenders. I hope at some point in the very near future I only have to use 4-5 total Lenders and know their Underwriting methodology as if it was my own. Communication on both sides makes that a lot more possible.

[cardinalequity]

My experience is that really only higher risk lender do that. They'll approve a file pending credit check and bank login. I think the reason for that is because for the most part factor rates won't change much, they will be high whether it's a 540 fico or 620 fico. The A lenders will typically pull credit right away because personal and biz credit will play a big difference in there potential factor rate and term. So it's part of seeing the whole picture upfront for them.

I appreciate the input.

I usually deal with the Merchants on the sales end of things and my firm's President and Office Manager handle the Underwriter's and submission part. They fill me in pretty well but based on what I hear from them and several other people(and this is my opinion) is there is just a disconnect between the Lenders and Brokers. It is not always explained WHEN they pull or if it is a "Soft Pull" or not. These things should all be explained by every single lender. Yes, there are some that are thorough and fill us in on their process and then there are the one's that piss on your back and tell you it's a waterfall! "Just send the file! We fund in 2 hours!" you guys know the type....

I would still like some feedback from the Lenders as to whether this type of arrangement is doable....Good for the Merchant, good for us in terms of saving time. Win Win.

[CreditGuy]

When the dealer puts you into dealer track(which most use) in about a minute you get sent to 7,8,9, even 12 lenders you will notice a difference in your score right away. Not because it counted as 1 inquiry but because they all counted. I've seen clients scores drop 15 points in a few minutes.

This is most likely a function of the different lenders pulling credit have different type codes (bank, finance company, dealer credit, etc.). Also, a drop of 10-15 points for the initial inquiry is about right depending on the bureau.

Going back to the codes, I've only seen what you are referring to with Mortgage pulls and nothing else.

Here's an article I found from Equifax that affirms it applies to both mortgage and auto loans, again assuming that all inquiries coem from the same type code. Credit card hard pulls don't trigger a grace period for multiple inquiries given the nature of that lending market and the possibility that the applicant could in theory accept and open multiple revolvers at once.

[J.Celifarco]

Of course, no doubt! It is a two-way street and I do not expect any special treatment. I am talking about existing relationships where we have established credibility. I wouldn't expect a brand new partner to make special exceptions(like us pulling the FICO score).

As far as competing on a file, I have to disagree; I wouldn't do something underhanded like send something out once an offer has been made and accepted verbally. Ever. I would, however, send it out to 2-4 Lenders simultaneously after I initially receive it and see who puts their best foot forward. It is a competitive business. I am competing with other ISOs/Direct Lenders on files and I accept that. It comes with the territory. The way i see it is our interests are aligned, the Lender,the Merchant, and myself. Lender wants Merchants to add to their portfolio, the Merchants want/need the best offer/term for the money they are receiving and we need the two to come together. Until the day i get psychic powers, all I can do is narrow that part down to a few Lenders. I hope at some point in the very near future I only have to use 4-5 total Lenders and know their Underwriting methodology as if it was my own. Communication on both sides makes that a lot more possible.

I think you said at the end is the key. Understanding different banks underwriting process and then deciding what works best with your process of selling a deal is when the whole process gets easier. Most banks give you a pretty clear picture of what deals work best for them. Having that info and using it to get the right deals to the right banks will streamline things and make funding deals easier and reduce the number of credit pulls because you will know what deals belong at each bank