Who could have known that auto drafts can be a bit tricky, even for a credit expert? Merrill Chandler shares his harrowing experience of encountering a late (and seemingly phantom) payment for his own auto lease, getting in a bit of a predicament with his car dealer. He shares his takeaways on this situation, detailing how he became his own coach by learning from his bootcamp discussion, as well as appreciating the help he got from the most unexpected people. Merrill emphasizes focusing on how being happy than simply being right can eventually lead to saving even more money than you can imagine.
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A Funny Thing Happened On The Way To The Car Dealer
How I Saved $9,000 By Taking My Own Advice
We’re going to be talking about the crazy adventures that how, Professor Fundable, almost got a 30-day late and dropped my credit score 30 points but knew what was happening and still the scariest thing ever on the planet. We’re going to be talking about how I bought my lease out from my vehicle and the treacherous shoals that I had to navigate to make sure I came out alive. I promise you this is going to be a wild one.
This episode is about the harrowing experience I had knowing full well the playbook of the lender and the dealer, and still, it’s unnerving. Let me give you a little bit of background. As I’ve shared before, I was on a lease, my 24 months is up, I decided I was going to buy out the lease and get a new loan. Remember, as you learned in the bootcamp, if your balance is above 50% and under 24 months, you’re getting both time factor and balance factor points on any installment loan including auto loans.
I’ve run past my 24 months. The interesting thing is it was some serious navigating. First, I’m going to tell you something that I learned so I’m passing it onto you. We’re on auto-pay for my Jeep. Every single month auto drafting. I was ahead of the payment curve, the payment slope. I was already 20%, 25% under the payment slope. If you don’t know what that is, get to the bootcamp, make sure that you have all the strategies that are going to make you killer fundable. For those of you who have been, you know what I’m talking about.
A Missing Payment
I’m ahead of the payment slope but what I learned, as the story goes, I go to the dealership. I’m buying the lease out. I selected Wells Fargo. A, it would be a Tier 1 auto loan. I also chose Wells Fargo because I have a relationship with Wells Fargo and I know that they pull Experian. Experian is the highest of my high 700, 800 scores but I’m already there. I tell them, “Pull an Experian from Wells Fargo.” To do that, they look and check out what the payoff balance is. It says that I’m missing a payment. This is September 22nd. What I thought was my last payment was due on August 23rd. I’m fully out. Remember what I always do? You want to go into that 25th month. I’m in there ready to buy out the lease. I’m thinking that I’m clean and clear.A number of times you can be right, or you can be happy. Click To Tweet
It comes back that I owe two payments. The final payment was supposed to be in August. I am panicked. Not only I am one day away from 30-days late because August has 31 days, but the 22nd of September might be the 30-day late mark. I am freaking pissed and I’m panicked. I call up my bookkeeper and he said, “No, you’ve been on auto-pay for 24 months.” I’m like, “I know then why is it showing that I don’t owe August payment but I owe some mystical a second payment.” When my payment is around $600 and they say, I owe $1,200.
To refinance the loan, I got to come up with $1,200 when I’m 30 days past what I thought was my last and final payment. My bookkeeper looks it up and says, “August was your last payment.” I come to find out, as I’m doing all this research with my bookkeeper, I’ve called up the previous lender and they say, “We don’t auto-draft the last payment.” I’m like, “Where is the notification that tells me that you don’t draft the last payment?” “It should have been sent to you.”
I’m scouring my emails. My bookkeeper scouring her emails. There is no notification that, “By the way, we don’t auto-draft the last payment.” If it’s the last payment, many people pay that off when they’re getting out of the lease. They just don’t draft the last one. No notification. This is a landmine. I’m telling you right now, we’ve started to bet lenders because we have some people who bet lenders 2 or 3 times a week in different areas of the country. We’re always asking all of these questions that nobody knows to ask.
A majority of lenders, especially Tier 1 and 2 lenders do not auto-draft the last payment. We didn’t get a copy of this. I am now on what could be day 30, 30 days late from my August payment. I get back on the phone with my lender. The good news is I know what the playbook is and I know how to talk to these guys. I’m going to tell the whole story guys as bloody of a mess as it was. I talked to the first gentlemen and said, “Could you please tell me what the current status of this payment is?” He goes, “you’re 30 days late. It’s been reported to the credit bureaus.”
I haven’t had a derogatory account since I got out of prison several years ago going into the big house. I’m like, “What? May I please speak to a supervisor?” This supervisor was mad props to the supervisor. Remember, you can’t be panicked. You got to be almost emotionless. You got to be just a calculator. You’d be like, “Please help me with this particular thing.” I described the conversation I’d had with one of his frontline team members. You always ask the question without giving them a leading answer.
I said, “Could you please tell me the status of this payment?” He says, “It appears you’re 30 days late.” I asked him, “How’s it reported to the bureaus?” He said, “I do not believe it has.” I said, “You need to notify or retrain your people on the front line because this gentleman told me that I was 30 days late and it had always been reported. One of you is not fully transparent with me.” He goes, “I do not believe this has been reported. However, I have the ability,” Figure out a way to remember this because you need it. I told him the entire situation.
I said, “We don’t have a copy of anything that says that the last payment on the lease does not auto-draft.” By that time, when I found out that I was near 30 days late, I immediately made two payments to catch it up because the dealership guy said that I owed $1,200 and change. I made both of those payments immediately. That way, I could come back when you’re talking to the people and say, “The second I heard, I already did it. I should be okay because it’s not close of business on what you’re saying is day 30, 30 days late.”
Remember, August is the day they’re counting and there’s 31 there. We don’t know if we’re on 30 days of the September month or 30 days of August. I made both payments. By the time I got to the supervisor, I was able to say, “That payment was supposed to have been auto-draft, you say it wasn’t. I accept that. My dealer said that I owe two payments. I don’t know where that second payment would come from, but because the payoff said that, I paid both of them.”Even one day late can start ruining your fundability because you're not paid as agreed. Click To Tweet
Now, we’re going to bracket right here. Remember how many times you’ve heard me say this? A number of times you can be right or you can be happy. Most of us want to be right. I want to be happy because no matter how much I jump and scream, if I’m 30 days late and they report me, it is a pain in the ass to try, go back, and rearrange everything. It is easier for me and for you, pay it then fight for it because it’s a machine and it will mow you down.
When the dealer said I owed two payments, I didn’t care. I made two payments worth even though my bookkeeper said only if they didn’t auto-draft the last one, only one is owed, the payoff said two, I paid two. You’ll find out how right you want to be. If you make the payment, collections, or charge, whatever you’re trying to negotiate with somebody who says you owe them money. You’ll find out how valuable that money is to you. If you pay it then fight for it. Fight for it after the fact but pay what they say is owed, because otherwise, I’m going to get a 30. If I only paid one payment, I don’t know where the missing payment was.
If I paid one payment and they said, “The second payment is August. I’d take the 30 and I’d get stuck with that. My score is going to drop 50 to 100 points. It’s going to obliterate my fundability for up to four years.” Pay it, then fight for it. Here I am talking to this gentleman and he’s trying to help me. Here is the big secret. Here’s the big thing to ask for if you find yourself in a similar situation. After you’ve paid everything possible to make sure that you are showing good faith. This is how the entire universe of fundability came to be because I’ve been my own crash test dummy and I’m passing this one onto you guys.
Predating The Payment
I did not know this was a thing for auto loans. I’ve done it on revolving accounts but I’ve never heard it for an auto loan. He said, “I’m going to predate the payment.” He could see that I had paid it earlier in the morning while I was doing everything to sew this thing up. He predated it a few days now. I don’t know if predating is a thing. He could have been trying to swatch me because I was saying, “I didn’t want the risk of going 30 days late.” My question to him was, “What can we do to make sure that this is not 30 days late? I didn’t know. I’m here. I made the double payment that the dealership said was on the balance. Will you please make this an impossibility?”
You have to say this every time. If you don’t acknowledge it, you can’t fix it. I know this is a machine. I know that there’s a process that every account goes through. As the human being talking to me, what can you do to stop the machine from reporting this? He said, “I’m going to predate your payment.” I said, “Do you have the authority to do that?” He goes, “Yes, I do.” True or not, I have no clue but ask. If you run into that similar thing, see if they could predate a payment, but you have to have already shown good faith that you made in payment.
You don’t wait until you’re talking to the supervisor and go, “I’ll make a payment right now.” I did it the second I found out that the payoff that they pulled was two payments. I made that payment. I could go in the past showing good faith to pay that off. He said, “I made that happen.” I’m saying thank you. He said, “I only see one payment owed.” I’m like, “Do you know why they would show two payments on the payoff schedule?” He goes, “I don’t. It only showed the August payment wasn’t paid. You already paid that. I’m backdating the payment. You’re within the 30-day late period.”
Remember, I’m still past the late pay date for August. I’m also past the due date. Even one day late can start ruining your fundability because you’re not paid as agreed. I know that I’m trying to save my 30-day late because that’s going to gut my fundability for years to come. It’s hard to go up against the machine once it’s already there. You got to do this on the front end. There I am. He’s been a superhero for me. I find out which call center he’s in and find out that he’s half an hour from one of my team members in Texas.
I’m like, “Note to self, send this guy one of those edible flower floral candy arrangements.” This guy deserves it anyway because of how well he treated me, but when we hung up the phone, I was still on pins and needles because I didn’t know if it was true even if he did what he said he’d do. What do we do? What’s our rule? You call until you get the same answer three times. I call up, get a different person and supervisor. I say, “I want to find out when my last payment was credited.” He was like, “Four days ago.” I’m like, “Yes.” He was telling me a few days. Call again, ask the same question. I talk to a frontline person this time, not a supervisor, to see if it’s on everybody’s screens. I said, “When was my last payment credited?” He goes, “It was late.” I’m like, “Pins and needles.” He said it was on September 20th. Frontline, supervisor line, everybody’s showing it that it was a few days early or the 23rd due on the 22nd.We all tend to support other people, but sometimes, we don't support ourselves. Click To Tweet
I waited for the reporting date and my reporting date is the 15th. It would be on the 15th of October because I know the reporting dates of every single one of my credit accounts, my trade lines. I’m looking at my FICO all day on the 15th. Nothing shows. No 30-day late and no changes in score. I’m like, “Praise the funding gods.” Here’s the thing, I knew the questions to ask, even though I’m learning stuff, as we roll this out, the crash test dummy in so many ways. I knew who to talk to. That is why it’s so important.
If you run into one of these things, all of my clients who are reading, you guys know. You can call up your team and have them remind you what are the right steps and how to make this work. You cannot underestimate having on the fly real-time support for emergencies like this. That’s not the end of the story. Remember, I’m buying out my own lease. I’ve never bought out my lease before. I’ve always leased and then picked up a new lease. Turn the car in and picked up a new lease. One of my roommates, who has less than perfect credit, wanted my Jeep.
Being A Co-Borrower
They said, “I can’t buy it.” We’ve been roommates for years. I know the money that they make and everything. I said, “I will refinance it in my name, you pay me, and insure your car. We can title it in your name and everything but I’m going to carry it.” Remember, that’s like being the co-borrower. I recommend you only do that in high trust circumstances. We’ve been roommates forever. It was no brainer for me, but you still have to dot your I’s and cross your T’s. I’m buying it out and I can use the extra tradeline on my installment portfolio. I had never personally experienced since I had never bought one out, it was the only auto loan I have.
What have I told you guys dozens of hundreds of times are that auto loan isn’t reporting, you’re going to drop anywhere between 10 to 20 points? Your score is going to drop because that auto loan is a key indicator for your FICO profile to make sure that you’re fundable. I knew that one was coming knew that one was coming. I didn’t remember the math for my own situation because I’d never done it before for myself. The 15th of October comes but no derogatory report. I’m thinking, “I’m solid that it didn’t report poorly.” It wasn’t for another fifteen days before it showed the bounce because it was 30 days after I’d closed out the lease and made the last payment. It was right at the end of October, the 22nd or 23rd or whatever.
The new reporting period score crossed all three drops 22 points. I was more than I thought. I have a very narrow, tightly defined profile so my auto loan is a significant contributor. On the 22nd, 23rd, whenever it was, significant drop in my score, 22 points. It was 19 on 1, 22 on 2 of them. There I am, I knew it was coming, but I didn’t remember, which is easy coaching when I’m working with somebody else. You know how the mechanic what his car is broken down. We all tend to support other people but sometimes don’t support ourselves.
I’m generally not that way but I wasn’t in this regard. It bit me in the ass because I knew I was going to drop. I forgot that when you buy the car out, I put the first payment down. I’m out the equivalent of three payments to terminate the old loan and a new one to put the first payment down so that 45 days later, the next payment was due, but they don’t report the first payment. What I’ve done is effectively reduced the equity or reduce the balance by putting money down that I didn’t plan on waiting 45 days for the next one that would report. I’m waiting 45 days to make a payment and then another 30-ish for it to report. I’m out for 75 days with a twenty-point score drop.
Remember, I’m sensitive to my look back periods as I tell you to be. Here I am, I’m 15 days short of 90 days without an auto loan. I’m like, “Damn it.” Because of this scenario, it is likely I’m never going to buy out a lease again. I did this one because I was doing my friend a solid. It was a win-win for everybody involved, except now, I end up with an auto loan gone for my profile for 75 of the 90 days. I was like, “That was a hit.” It reported.
This is what I teach at every bootcamp and I forgot about it in my circumstance. Remember in the bootcamp, when I say that, “You’re going to get your points for having an auto loan but it takes six months for them to legitimize and recognize a new loan.” Many people pay off their cars when within 3 to 6 months that they don’t even start giving loan points back until your year sixth payment has been paid. I’m sitting here I’m waiting for my score to bounce back 22 points.It is okay not to know everything. Click To Tweet
Part of the reason why it’s 22 points because I had a mature 24-month loan that had been reporting faithfully. I get back fifteen points but I’m still down 5 to 7 points, and I’m like, “Why is it rebounding?” I remember because it doesn’t even count as a loan until the sixth payment. I’m like, “I should listen to my own bootcamps.” 5 to 7 points is no big deal but I’m sitting here, the master of fundability. I want to give you guys a shout out. There are a lot of moving parts here.
I love that you guys keep coming back to the bootcamps. I love that you can keep re rereading the book. I love your commitment. You guys are devoted to learning all of these things and implementing it. It’s okay to not know everything. I’m confessing right here to be as transparent as I can but even I forgot that I’m not going to get the credit until I make my sixth payment. My first payment was 15% so I’m now ahead of the curve. I even received my statement that says your next payment isn’t due until April. That’s awesome.
Wells Fargo allows us to continue to auto-draft. I have four months’ worth of payments stored for whatever reason. I’m ahead of that payment curve. That payment curve is everything when it comes to showing the current lender that you’ve got their back. It also broadcast to future lenders that you are an amazing risk. What are the take-home messages here? Make sure that you know what the policy is about auto drafts on the last payment of your lease.
On loans, it goes to a zero balance. It’s a lease. Make sure what the policy is so that you don’t go late on that last payment. There’s my landmine number one and I stepped on that one. I may be a few steps ahead of you but I’m still navigating the landmines. I want you guys to know that I share everything I possibly can from my own experience. Avoid the landmine of the last payment on a lease. They may not make that payment.
Second, you’ve got to know when your exact 30-day late is given a particular month. I found out both of my people said that it was now. The only reason why I dodged that bullet was because the supervisor was able to predate my payment. Since I’d already made that payment in good faith. I was even able to use in my argument that I made two payments when the supervisor told me I only owed one, but the paydown said I owed two. I’m not going to argue. Landmine number three, do not argue with what they’re saying, pay it, then fight for it. If I were wrong on this one, I would have got a 30-day late guys. You can be right or you can be happy. Do not fight ahead of time. If they say you owe it, pay for it and then fight.
The fourth one, send a fruit basket or whoever is your superhero in bailing you out of a situation because they deserve it. You get to acknowledge somebody. Since you know the game, you need a partner at the lender to play the game well. That was my supervisor rep. Make sure you take care of anybody hooks you up. Do something but make sure you take care of them. The story isn’t over. This is the fun part. I’m titling along. I made the double payment. My balance was zero according to the buyout.
I got the new killer loan for a used car at 4%. It was Tier 1 so I’m paying a little bit of a premium on a 5% loan. It’s how I do. Installment loans don’t move the needle as much. You could’ve gone Tier 2 or Tier 3 but I wanted to leverage my relationship with Wells Fargo because I plan on continuing growing my credit lines and business loans with them. It was all strategic on my part. Remember, I teach her in the bootcamp as well. I invest dollars in interest. The business loans that I’ve had, I do far more with that than the point and a half that I’m going to save on my auto loan.
I’m sitting here, pick up the mail, and there’s a check for the lender for exactly one payment. I had double paid. I still don’t know what it was but the dealer showed me the payoff schedule. I paid it for the reasons I’ve shared but then I get it in the mail free money because I’d rather be happy than right. I got to check for exactly one payment. It’s a check in the mail which then I went to Chase which is the bank and cash that check. I called it a bonus.
In this instance, I was my own coach and best counsel. My clients out there who are reading, make sure that you leverage your team and their expertise. If you’re not a solution coaching client then do whatever it takes to make sure that you have the resources to know and ask the right questions. If you’re a funding hacker and part of the funding hacker group, go to more bootcamps, come to the Q&A’s that I hold twice a week, Tuesdays at 4:00 PM Mountain and Thursdays at 12:00. Come to those. Ask questions, learn as much as you possibly can. I hope to see you shortly.
- Bootcamp – Get Fundable! Bootcamp
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