If you want your business to be fundable, to have ready access to money when you need it, there are certain things you need to do. But what are they? Just in case you ever do need money from outside sources, because believe me, that’s not the time to find out that you’re not fundable. And luckily, today’s guest is an expert in the field, and when we come back, you’ll learn exactly what you need to do to be more fundable.

 

This is Business Confidential Now with Hanna Hasl-Kelchner, helping you see business issues hiding in plain view that matter to your bottom line.

 

I’m your host, Hanna Hasl-Kelchner, and today’s guest is Merrill Chandler, a personal and business credit pioneer, as well as the author of the Amazon bestseller The New F* Word, the only book on Earth that exposes how to become fundable and access highly-regarded, inexpensive lender money.

 

Merrill’s got an interesting backstory. Over 25 years ago, he got dissatisfied with the so-so results his clients were getting from credit repair, so he leveraged what he knew about borrower behavior profiles, FICO scoring metrics, and lender underwriting requirements to develop a process that could optimize a consumer’s borrower behavior and improve their fundability.

 

That’s pretty cool, and it all led to founding The Fundability Movement and. GetFundable.com to make this technology available to people like you and me. As a matter of fact, Merrill has helped thousands of borrowers become more fundable and helped them access capital that they need to fulfill their financial dreams. And hey, I’m all about making dreams come true, so welcome to Business Confidential Now, Merrill.

 

Thank you, Hanna. It’s awesome to be here, and I’m so excited for our discussion today.

 

Me too, because money is always such an interesting subject, and I am super curious about what you mean by the word fundable and how to be fundable since I’m willing to guess a lot of people listening think it has mostly to do with credit scores and maybe some assets that they can put up for collateral. So, please help us out here.

 

Absolutely. So, fundability is, like the name suggests, the ability to be funded. Now, that has little to nothing to do with someone’s credit score. So, the first thing I want to kind of sweep the decks here, Hanna, is to tell your listeners that we’ve been lied to. I don’t know if they, the credit bureaus and lenders, want us to focus on a shiny object, like a laser light for cats, right?

 

Well, credit score seems to be placed in borrower consciousness as the shiny thing that we’re chasing around and we make decisions based on our credit score when in fact, the truth is your credit score is not even used to approve you. Never has, never will. Your credit score is actually used to determine the interest rate and the term of your loan and how much money they’re going to give you after, Hanna, you have been approved. It doesn’t even come into play until after.

 

So, what does get us approved? That’s what fundability is about. That’s what being fundable is, is what is it that lenders are measuring, if it’s not credit score, to get us approved? What are they measuring? And it turns out in my relationship with FICO and lender underwriting teams, they showed me – I had to sign an NDA with them, a non-disclosure agreement, before they kind of opened up the cookbook.

 

But they showed me that fundability is based on 40 borrower behaviors that are measured when an inquiry is pulled. So, they look at and approve us on the status of our borrower behaviors, these 40 areas over, believe it or not, the preceding 24 months of our borrower lifetime, and it’s a rolling 24 months. So, our score – so bottom line is, score is useless until we’ve been approved. Forty borrower behaviors are measured and that is what dictates our approval or denial.

 

Well, that’s a real eye-opener, Merrill, I got to tell you because even myself included, you know, “Oh yeah, credit score, credit score.” What are these 40 borrower behaviors? Can you clue us in on what some of them are or the most important ones?

 

Absolutely. See, here’s the thing. Like whether or not you pay on time is an important borrower behavior. What your utilization rates are, and people confuse utilization with what we call traffic. Utilization is how high of a balance do you have that goes on to, that gets reported to the credit bureaus and then scored by FICO versus how much you actually just charge up and pay off with that particular credit card, right?

 

So the traffic is charge up, pay down, charge up, pay down. Utilization is what balance gets reported to the credit bureaus and then scored by FICO. So, those are vital borrower behaviors, but there are borrower behaviors like how many inquiries have you had by which type or tier of lender.

 

There are four tiers of lenders. The highest are Tier 1, and that’s Chase, Wells Fargo, Bank of America and Citi. And then there are Tier 4 which are the worst, which are finance companies, retail cards, anything from a mall store. Those are actually detrimental cards, and you get negative indicators for having retail cards on your credit profile.

 

When you get an inquiry from one of these lower tiers, it costs you more on your profile than if you get a Tier 1 inquire because of the value of the institution you’re borrowing from. Does that make sense?

 

Well, that makes sense because these retail stores usually have very high interest rates attached to their credit cards, but I don’t understand the connection between why one of those inquiries is so bad.

 

All right, perfect. Great question. Because retail accounts denote a consumer borrower behavior versus a strategic borrower behavior. When you’re borrowing very inexpensive money from the Tier 1 and Tier 2 banks, well, not only the relationships with these Tier 1 and Tier 2 banks are more powerful for our audience.

 

Or our entrepreneurs, right? And entrepreneurs want to have business loans, business lines of credit, business credit cards. Well, for us to be able to have those business, one of the other great secrets that most people aren’t aware of, 80% of a lending decision for a business loan or line of credit is based on your personal profile. So, everything is based on this personal profile and the borrower behaviors that are manifest there.

 

We call your personal profile the goose that lays the golden eggs of business loans, business credit cards, business lines of credit, commercial loans, et cetera. If we mess with our golden goose, we’re not going to get the high-yield golden eggs that are going to help our businesses grow.

 

All right. Well, let me get back to some basics here because all right, you’re telling me that the FICO score is, yeah, that’s pretty but that’s not really what moves the needle in terms of being fundable. You talked about these 40 types of borrower behaviors. What else goes into a fundable credit profile?

 

All right. Well, there’s six main areas that are being measured and the attending borrower behaviors that go with them. First of all, there is what we call personal borrower identity. If your listeners want to find the truth about their situation, they need to go to myFICO.com. That’s myFICO.com.

 

And you will see the actual credit scores that are used by lenders in the back offices in their underwriting software. So myFICO.com, get the truth. When you know what the truth is, those listeners are going to see that they have multiple versions of their identity, so we’ve got to clean up. And since it’s all algorithms right now, right, nobody is using full documentation, financials, tax returns and income verification for credit cards…

 

…most of your listeners will have the experience – you as well, Hanna, you may have had the experience of literally applying online and getting approved within 30 seconds or less, right? No human being is looking at that credit profile. It’s all being an algorithm is searching the current databases, the credit bureaus and others, for your data, and if it syncs up, you get an approval.

 

Well, your identity is the gatekeeper to that approval. Before I knew what I was doing, Hanna, I would file an application for Merrill or Chandler, sometimes Merrill Ray Chandler, sometimes Merrill Chandler. Well, to an algorithm, those are three different people.

 

Those are three different profiles, and those data points have to be reconciled. So, first place of the six, we got to make sure we have a fundable borrower identity. Then second is we need to optimize our revolving accounts, our credit card portfolio, because as we just mentioned a moment ago, multiple values assigned to different types of credit cards, all the way from the national banks down to retail cards and credit unions, and community banks all in the middle.

 

So, different credit cards have different punch, let’s say, to the value of your credit profile to a lender. So we’ve got to optimize your revolving accounts, right, your credit card portfolio. We also have to do the same to your installment loan portfolio. FICO and lending software loves it if you have at least one mortgage and at least one auto loan, plus a couple of others like student loans or personal loans or otherwise.

 

But they want installment loans because that sends a different message than credit cards do. The next is, how well do you treat your own money? It’s a crazy important metric. Most people aren’t even aware of it. Think of it this way, Hanna. Your check guarantee credit line that protects against bounces, right? That is your worst enemy because any time you use that credit line, you punch through zero, right? You go through zero on your checking account…

 

…for some reason, you’re telling the lender that we don’t even value our own money. And so there are borrower behaviors that are being measured about how we use our checking account. Then the fourth one is accuracy, and by accuracy, I don’t even mean your like derogatory account. I’m saying every data point on your profile needs to be accurate, and one of the ways to tell the degree of accuracy is if the credit scores between all three bureaus, when you pull your FICO report…

 

…if the credit score between all three bureaus is within five to 10 points of each other, your data is pretty solid. But if it’s 10-plus points, you got to do some work because there are some – because imagine, if there are too many point difference, then you’re going to end up sending a message to lenders like which is true, the 710 or the 730? I don’t know which score is true.

 

And so they want to go into manual underwriting. Then the last place is the 24-month lookback period. What are our borrower behaviors? Are we doing good borrower behaviors over the most recent three months, the most recent 12 months, the most recent 24 months? So those are the six areas of your profile and the borrower behaviors that we’re being evaluated on.

 

Well, who knew, right?

 

Right. [Laughter] That’s why we’re talking, right?

 

My goodness. Yes, no, this is amazing. So, what if somebody doesn’t have outstanding installment loans?

 

Then there are ways. Think of it as silos. Let’s say that there are 10 silos worth 10 points each for a total of 100 points. If you’re lacking in one silo, then you can make up for it by being spectacular in other silos. Let’s say you need 80 points to be approved for something; business loan, business line of credit, whatever, you need 80 points.

 

Well, as long – every single one of those silos has – let’s say there, you need a minimum of three. Everybody has to have three. So, as long as you hit the minimums, you can be a little lower in one of the areas like installment loans. If you’re the bomb dignity in revolving accounts or your 24-month lookback period is spectacular, et cetera. You can make up for total points as long as we get over that 80. That’s what underwriting methodology kind of builds on, if I’m making sense.

 

Yes, it is. I mean, so it’s a portfolio of factors to look at. Is any one factor more important than another?

 

Well, they’re graded. They’re graded by five characteristics. One is payment history, right? Not just on time. The payment history is 35% of the value. Then there is like credit usage. Utilization is 30, so it’s less than payment history, but it’s 30%. Then the next one is there’s credit, there’s age, which is 15%, and then credit mix and like how recent of credit, like inquiries, et cetera.

 

All 40 borrower behaviors fit into those five groups, and that’s kind of how the silos work when it comes to the valuation. So it’s 35%, 30%, 15, 15 and 10, I believe. So, yes.

 

That adds up. What are some funding landmines that limit our ability to be fundable? I mean, what are the biggest ones?

 

Sure, sure. So, probably the most egregious is how we started out. It’s not about your credit score, you guys. People come to my boot camp and they’re like, “I want to – yes, I want to raise my credit score,” and I said, “You’re probably in the wrong place,” because if you’re still focusing on your credit score, then you’re missing the point of fundability.

 

Credit score comes after we develop a fundable personal profile and fundable borrower behaviors. The score will follow all the way to 850 credit score, but the biggest landmine is believing. For example, people should run – I’m going to tell your listeners right now, if you read an ad that says, “We can raise your credit score,” and then I don’t care what it says after that phrase, “We can raise your credit score,” run because they don’t know what lenders are actually measuring.

 

Credit repair focuses on credit score because yes, you can delete some negative items and your credit score goes up but your fundability doesn’t. You have to have high value, fundable credit cards, installment loans, all the things we talked about, accuracy and identity.

 

But credit repair deleting a couple of negative things doesn’t make you fundable. You can’t repair your way to a fundable profile. So, if somebody says, “Oh yeah, buy some trade lines, have somebody become an authorized user and it’ll raise your credit score,” no, it doesn’t. I mean, it raises your score but it doesn’t make that person fundable.

 

We need to establish those markers that are going to be measured by the actual lender approval software. Another one, many times they’ll say, “Yeah, buy trade lines.” Well, trade lines are just people act like they’re in the know. When you become an authorized user on some random person’s credit profile and you become an extra user, yes, your score goes up, but never will you be approved by being an authorized user. So, that’s probably the biggest landmine is…

 

…if somebody is advertising, “Raise your score,” run to the hills because it is not. There’s no value there because they’re not helping their clients or their potential customers do the right thing by way of FICO and lender approval software.

 

So that really is a bunch of B.S. when it comes to being able to get your foot in the door to get the loans, never mind the better rate.

 

One hundred percent. We’ve got to be approved before the score comes in and tells us what kind of rate we’re going to get. Yes, the score is important, but if you have a fundable profile, the score will follow. You can have an artificially high score. We see them all the time. We have clients that have 820s and come to me and go, “Why won’t anybody lend to me?”

 

I’m like, “Because your score is based on a -” a score, a high score simply means, Hanna, that you get more of what you got. So if you have a lowbrow consumer profile, then yes, you can go back to the mall and go to Kmart or Target or Victoria’s Secret or Home Depot and get the best rates possible for those retail cards. But they also – those two will also make you more of a consumer and carry negative indicators from FICO and lender software.

 

How did you come to develop this model for how to be fundable? I mean, okay, so 25 years ago, you got frustrated with credit repair results that didn’t float the boats as high as you’d like. But what happened? What was the spark that made you draw the connections between these different components of a fundable credit profile?

 

Thank you. That’s an amazing question. The biggest thing that happened was I was frustrated because at Lexington, we literally had thousands of clients and they were getting all these great results and they were like, “Yes, thank you. My score went up 30 points, 50 points, but I’m being denied for an auto loan,” or, “I can’t get a mortgage,” or, “Why can’t I get a credit card?” And I’m like going, “Well, I don’t know why you should -”

 

Based on my frame of reference then, just like everybody else’s now, it’s like, well, you have a great score now, you should. It’s some other problem we had to solve. So, I started doing the math. I started looking at befores and afters of literally thousands of profiles, and I was looking for what the approvals guidelines were. That’s when I got introduced to FICO. After I had built out this approval model that was just me intuiting what might be true, we went back to FICO. It’s called FICO World.

 

It’s kind of the conclave where all the score and underwriting geeks all get together and compare notes on how to protect lender money while still offering competitive rates to borrowers. A gentleman came up to our dinner table after the first day and he introduced himself as Will Lansing, the CEO of FICO, and he asked me, “What’s your business model?”

 

And I said, “Well, we make borrowers fundable. We help borrowers meet underwriting guidelines. If they miss an underwriting guy – like, say, they go for a car loan and they’re literally three points off of – they got good credit, but they’re three points off of the best rates. The credit union would send them to us so that we could show them what the borrower behaviors would do to augment those points and go get a better rate.”

 

And he was like, “I love this because more fundable borrowers is good for my clients which are lenders, right?” So, over the course of the next several days, we met with the score development team several times and that’s when they NDA’d me so that we could look under the hood, and they gave me kind of the secret sauce of what makes a borrower fundable to their customers, to lenders. And then now it’s been collaborative ever since.

 

Actually have a FICO liaison that I talk to a couple of times a month about what our current lending environment, what changes are happening because of COVID, post-COVID, what’s happening out here such that my borrowers can stay in tune with what lenders are looking for right now.

 

Think of it this way, that you have a funding target and the outer rings are when everything is good and anybody can get approved for most anything. But when financial times tighten, they shrink that funding target and that approval target. Well, what we do with optimizing these borrower behaviors is that we make them bullseye borrowers so that no matter how big the funding approval target is, it’s always going to allow for bullseye borrowers to get approved.

 

And we’ve had over $53 million in approvals since COVID alone. As a per year average, we’ve had higher funding since COVID than before COVID on a per year basis because there are fewer borrowers out there so the lender approvals are higher for people who are bullseye borrowers.

 

Well, that’s a great track record. I’ve got one more question here for you before we wrap if you’ve got the time, Merrill.

 

Sure, please.

 

[Laughter] Okay. Let’s look at this scenario. Let’s say we’ve got a business owner out there, and their credit profile isn’t horrible, their fundable. But how do they know whether they’re really getting the best interest rate, okay? They got their foot in the door but maybe it’s not optimized. How would they know? What would they need to do?

 

Well, first of all, in our – we have a boot camp. It’s a two-day event that’s livestream so people can watch it in the privacy of their own underwear. One of the modules we go through is what we call a fundability index, and that is where we have them harvest data off of their – they pull data off of their myFICO account, myFICO credit profiles, and fill out this simple little spreadsheet.

 

Then that spreadsheet shows them how they stack up against current COVID, post-COVID underwriting guidelines. They can literally get to see what a perfect score is and what their scoring is on over 35 funding areas, right? All 40 of these characteristics. So, they will be able to see for themselves how fundable they are and why they’re getting a no or why their approvals are less than they imagined or wanted them to be.

 

They get a $20,000.00 credit card instead of a $50,000.00 or a $20,000.00 credit line instead of a $50,000.00 or a $100,000.00 credit line. All of that is available as part of the two-day workshop that we have.

 

Well, that’s awesome, Merrill. Thank you because this has really been an eye-opener on so many fronts about what happens behind the scenes in terms of what lenders evaluate and how we can be fundable in their eyes or more fundable, whether in our business finances or even our personal finances, because it sounds like they’re very interconnected.

 

Very much so, yes.

 

We want to be fundable if for no other reason than as an insurance policy in case we need the money, because there are some people out there that are self-funding; not everybody, but some are. So still, it’s something that they need to keep an eye on it, be wise to.

 

So, if you’re listening and you want to be more fundable, Merrill’s contact information can be found in the show notes at BusinessConfidentialRadio.com, along with a link to his book The New F* Word, which you know is not what you were originally thinking. If you know someone who wants to be more fundable, please tell them about Merrill Chandler and this podcast episode.

 

Share the link and leave a positive review so others can find out about his amazing tips as well. You can do that on your podcast app or at lovethepodcast.com/businessconfidential because this is Business Confidential Now with Hanna Hasl-Kelchner. Thank you for listening. Have a great day and an even better, more fundable tomorrow.