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08-30-2016, 11:16 AM #1
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lenders pulling credit
so i see people on here constantly bashing brokers that supposedly do not care about the merchant but the lender supposedly does . can someone explain to me why lenders just pull credit without even doing a quick glance at the basic stuff . it is ridiculous to see one lender pulling credit 7 times on the same merchant within 3 days .
seeing lenders pulling credit for industry they dont do . pulling credit for someone negative the whole month .or someone with multiple balances . yes i get that a broker shouldn't send it but lenders should give some sort of damn about hurting the merchant credit for no reason .
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08-30-2016, 11:20 AM #2
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I agree. I can't tell you how many merchants we encounter who have reservations about going with lenders simply because they've had credit pulled on them in the past (sometimes without their knowing). When we tell them we don't pull credit, they're very happy.
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08-30-2016, 11:32 AM #3
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Isn't it cray?
There are two issues here: The fact that many Brokers characterize themselves as being an "Adviser of Capital Products" but don't even know how to qualify (cough* see deal bin) and the enabling of some Funding Companies that allow the acceptance of files based on minimal knowledge just to retain a number of submissions.
"Brokers" should know certain processing guidelines and inform their Merchants before the submission process but many of them do not know the right questions to ask or feel if they give the Merchant the "heads up" - they will not want to proceed. Thus the fast brokering, get me an offer, pull credit all over the place within 3 days comes in.
If the Broker/Funders honestly cared about the "well being" of the Business, rates wouldn't offered at 1.50 for a business thriving and a credit score over 700- even on a second position. Now were just trying to get that new gucci watch and show off at the bar...Amanda Kingsley
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08-30-2016, 11:34 AM #4
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Agreed, that is one thing I really like about Kalamata. Wish more lenders/funders would emulate their process.
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08-30-2016, 11:51 AM #5
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08-30-2016, 12:06 PM #6
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No, lenders do not. As a lender, we see brokers/ISOs/partners/whatevers that use us as their UW all the time. Even the bigger shops that send us tons of deals don't appear to be doing any preliminary UW outside of very high level stuff like screening out strip clubs and pot shops. Some ISOs, who would be considered "sophisticated and intelligent" by some on this board, have approval rates in the high single/low double digits. As a lender, we don't care that much about this type of behavior because we get a lot of data from it. The types of behavior we do care about, and will cut brokers off for, is stuff like stacking, high default rates, high fraud rates, etc.. Brokers always remind us that these are their customers and they own the relationship, well that includes where and how you submit deals. You can't have it both ways.
Now, a good lender will have a process that screens out on all file data that doesn't require a credit bureau before pulling credit, but that's a different topic."Nobody can make you feel inferior without your consent." -Eleanor Roosevelt
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08-30-2016, 12:12 PM #7
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Oh, 100% I am not putting this on the Broker.
As a Direct Company who takes on a wholesale company as a Partner in any capacity- they should have more than just submission criteria and guidelines. Since there are low entrance barriers for either a direct or wholesale company to come into the AltFi space and solicit Businesses- both are equally as guilty when it comes to the "common sense" ethics. Who is responsible for laying down the law comes from the Funder/Lender themselves. Unfortunately, there is a lot of enabling since one company can offer great products and service but have a more strict submission criteria and overall partner guidelines than that of a Funder who says "send us anything!" when their investors/money doesn't really want everything.
Bottom line: Preliminary offers should be based on financials and health of the business and overall REQUEST AND USE OF FUNDS. Final approval numbers and payments: Pending a background and credit approval.
Broker: The pre-qual questions asked by an Adviser to a Merchant like "Do you know your credit score?" or "Are there any derogatory marks on your credit report that would raise concerns from our underwriting office that we should make note of before starting the submission process?" should clear up any initial thoughts on the "Who should I send this deal to?"
Funder: If you need to pull credit to ACCEPT a file, then you are wasting your time and money and should review your submission department and how you intake deals. Yes, you may be afraid that your offer may be shopped- but it's going to happen anyway so you might as well not spend that money on that credit pull or paying your UW for wasted time (my humble opinion)Amanda Kingsley
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08-30-2016, 12:19 PM #8
May be a stupid question but if a broker is handling a merchant's deal and are concerned about the credit checks being run, why doesnt the ISO just run the credit and send it out with the app to their lenders? That way it is only run once, or at least you will cut down on the amount of times it gets run significantly.
-Though, there is no excuse why the same lender would run credit more than once on a merchant anyway????
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08-30-2016, 12:22 PM #9
you should understand what their process is. Every file that comes in goes through a process. The first process is entering them into their system, and running credit, before it's placed on an underwriter's desk. The girl who is running credit is not an underwriter. It's not up to her what deal will get approved and what deal does not qualify. She does her job, then passes the file along.
The broker should know ahead of time what file should be placed where, instead of shotgunning them out blindly to see who gives them the best approval.
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08-30-2016, 12:25 PM #10
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08-30-2016, 12:35 PM #11
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"As a lender, we don't care that much about this type of behavior because we get a lot of data from it." Kudos to you but are you utilizing that data to build up your army and be the example and not the enabler? And if you condone the behavior because it gives you numbers, how is your default rate? Do you survey your Merchants on their experience? How is your renewal rate? I know you (or most) answer these questions but how do your answers affect the small structural differences you can make with your Partners? It only helps you both...Amanda Kingsley
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08-30-2016, 12:43 PM #12
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this is an issue of ISO's not knowing how to control relationships with their lenders and not knowing specifically what lenders carter to specific types of deals. When this is the case they send the file out to million an one different lenders hoping to get a good offer back and each lender of course pulls credit. If they knew what lenders liked funding what they would send to specific lender for specific scenarios. I spoke with merchant once who sent me his credit credit cause I couldn't believe what he was telling me his credit was pulled a total of 43 times in matter of two weeks by and Iso shopping him around.
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08-30-2016, 12:56 PM #13
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08-30-2016, 01:06 PM #14
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SO not only is this an internal issue for the Funder who does not have all of the Merchants documents in one place for the companies credit committee/UW to obtain but an issue with EXCLUSIVITY as well. So you are telling me that the submissions department who "enters" the deal and the "girl" who pulls credit didn't check to see if the deal already had a file in their "system" (or excel sheet,computer folder, dropbox) and accepted it 6 more times, pulled credit 6 more times, and did not once say "hey... this name looks familiar?" *I can't find a gif to show my reaction to this*
Amanda Kingsley
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08-30-2016, 01:08 PM #15
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At the heart of the matter is that most ISO shops are not professional. Brokers are not trained well mainly because their boss isn't/wasn't. Maybe we can stop pretending and understand that a huge percentage of brokers live month to month or are driven by greed. Debating what "should" be best practices is wasted breath.
I am not exactly sure what Amanda's current approach to serving the industry is, but if it is what I think it is and I were a broker or small ISO shop, I'd call her asap to get ahead of the curve.
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08-30-2016, 01:17 PM #16
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Soon Brokers will have the answers to be the Adviser their clients need and Direct Partners look for ... and email, don't call ask@options.capital (PROMO - Now boarding Direct Partners and Mentors)
Amanda Kingsley
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08-30-2016, 06:22 PM #17
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lenders pulling credit
Funders like TransMark Funding give a 15-Day exclusivity period to the agent on every deal submitted. As such, it's basically impossible for them to pull credit twice in only a few days.
When a funder pulls credit more than once in a few days, someone or several people, are not paying attention.
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08-31-2016, 07:51 AM #18
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This post hits it right on the head. You want to weed out the chop-shops and unprofessional brokers, the way to do it is to REQUIRE them to submit a tri-merged credit report, pulled BY THE ISO SUBMITTING THE FILE, within the past 30 days. This is how it's done in the mortgage industry. This is how it should be done here.
We were, as a standard practic,e pulling credit up front and including the reports with our submissions only to find out that the funders were just pulling credit again anyway, and telling us that they wouldn't accept our report and had to pull their own. There's no reason for this. If you are doing business with me as an ISO, then there is a presumed level of trust, which means that you should take the credit reports I send you at face value. If you're going to doubt the integrity of my credit reports, than you shouldn't be doing business with me.
That said, if I send you a full submission pursuant to your guidelines and include a tri-merged report pulled within 30 days, then you literally have everything you need to underwrite the file for an approval. Pulling your own credit report again up front is superfluous and akin to nothing more than pissing on the file to mark it. Now, if the merchant accepts your offer and requests a contract, then by all means go ahead and pull credit before you fund them. That makes sense.
Bottom line IMO - funders should require tri-merged reports with all submissions. It will save them thousands of dollars in preliminary UW costs. It will weed out fly-by-nights and criminals from the referral pool. It will also probably reduce auto-declines as ISOs have access to current credit scores and other current credit history up front. And if an acceptable report is submitted, then the funder shouldn't pull credit unless and until a contract is requested.
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08-31-2016, 08:33 AM #19jotucker1983Guest
I wouldn't have funders/lenders start requiring brokers to pull credit.
- For one, it creates additional legal provisions that the broker needs to follow to cover their tracks.
- Then two, many funders/lenders have credit scoring models that go beyond what just the traditional FICO score provides.
In regards to the OP, yes, I agree with previous comments that the lender pulling a merchant's credit 7 times in 3 days is an internal issue.
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08-31-2016, 08:45 AM #20
No funder will ever use a CBR run by a broker. They will never trust that it's accurate and legit.
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08-31-2016, 09:07 AM #21
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For a pre-approval? The use bank statements, processing statements, tax returns, financials, and every other document provided by a broker in order to give an offer. Why can't they use a CBR pulled by the broker? They would pull their own before contract or funding anyway. If there's any discrepancy at that point, they can withdraw the offer or reprice the deal. It's no different with bank login or Decision Logic - there is a certain level of legitimacy given to the statements submitted by the broker, but everything is confirmed during verifications. "Trust, but verify," right? Again, we're only talking about the approval process, not final review.
There's no reason why a funder shouldn't accept a broker-provided CBR. They all have the same information. Scores are all going to be within a few points. Layout and format are the only major differences. It's enough for a soft-approval. If a broker provides an adequate CBR, there's no need to pull again unless there's a deal on the table.
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08-31-2016, 09:16 AM #22
yes for a pre approval of course, but the whole point of this thread was to decrease inquiries. They can give a soft offer, but they will always pull their own credit anyway. So one inquiry from the broker, plus one inquiry from the lender = 2 inquires, when they could have only had one if the funder pulled it only.
A lot of the bigger brokers who know how to place deals are pulling credit anyway.
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08-31-2016, 09:18 AM #23
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With the amount of merchants doctoring bank statements, to fund a deal based on a credit report not run by the lender would be a mistake to say the least. The same reason decision logic/log-in or some kind of bank verification should always be done in place of MTD. That being said we work with many ISO's that will provide a CBR that we will give a soft approval based on and pull our own credit before funding.
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08-31-2016, 09:21 AM #24
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IF a company can trust a "Broker" to be one of their contracted sales offices and pay them out $XX,XXX in commissions, why can't they accept a credit outline from a major provider? Obviously not sent via email- but even if the broker obtains the credit to better qualify the submission and put the highlights of the credit report for the submissions/UW to see before giving #s- what's not to trust? Sure it will take a few submissions and cross checking the facts but after a few "try outs" I don't think a Funding Company will say NO we have to pull credit or no offer. That's just a waste of time, money, and shows paranoia. Those are the companies that wait to see what everyone else is doing and not take the lead in creating a better partnership.
The fact that a Funder can't trust a broker is up to how that company works with their partners. If they accept anyone to send them paper- that's there fault. I'd rather have 10 good companies I can trust than 100 who will misrepresent my company and question if the submissions I get are realAmanda Kingsley
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08-31-2016, 09:24 AM #25
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BTW- I know some Brokers who send a credit report with their submission packet and highlight what needs to be seen first. I never had complaints from them, their deals never got stolen, and they have great relationships with their guys and can call up anytime and say hey- don't pull credit yet, let me know what you think first.
Do you guys do that? I feel a lot of people on here are completely misguided.Amanda Kingsley
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