Buying my First Home

I just had my offer on a house accepted last week and I’m equal parts excited and terrified. Because I’m weird and superstitious I talk about the house that I have a prospective offer on as my “potential home” – nothing is final until I reach closing day! In the post I talk about my search for a house, and what’s to come in the future.

Why a house? Why now?

My main motivation is that the features I require from a living space have expanded greatly – and the cost for those features in an apartment is just not what I’m willing to pay to a landlord anymore. My non-negotiables for an apartment – covered parking, in-unit laundry, central air, – those items would start me off at around $1200/mo for an apartment. That $1200 isn’t even for prime locations either – downtown and stuff near Lake Michigan will run you closer to $1500/mo for a one-bedroom. And your girl doesn’t do studios, even in the fancy new builds. 

So I started tentatively looking in about November. And when I say tentative, I essentially mean looking at Zillow. It wasn’t until February that I reached out to a real estate agent and got pre-approved through a local credit union. I toured seven houses before my offer was accepted on my dream home!

My accepted offer

The house that I’m hoping to live in is a cape cod built in the 1920s (P.S – the subreddit r/centuryhomes has been such a stress reliever in easing my potential woes of owning a 100 year old house). I’ll be in the city limits of Milwaukee, neighboring one of the more popular suburbs (Wauwatosa).

Even when I made the offer, I knew the house was going to need some work done. My accepted offer was just under $100,000 and comps in the neighborhood are going for $120k+ these days. The last owners did a lot of nice-to-have cosmetics updates, but it will ultimately be on me to take care of the bigger ticket items. Some pertinent projects for the near future include regrading the yard to promote drainage and repairing loose stairs. Luckily, other projects can be put off for at least a couple of years. 

Fears of the future

I do worry a bit about my safety, being that I will be a single homeowner. At this point in time, I’m not very handy and I’m preemptively annoyed at the prospect of having to take care of repairs by myself or calling in a professional.  I only say “annoyed” because all I’ve ever known is a life where I call up a maintenance team and minor stuff is fixed for free! (free meaning already priced into my rent)

Other notes on the experience

The ‘starter home’ market is CRAZY – even here in Wisconsin! In my neck of the woods, I’m talking in the $150k range and under – which generally can get you 3BD/2BA in the city limits. Yes that may be very cheap to you – checking my midwestern privilege (/s). Mortgages are just so attractive now that rates are so low. I can only hope that all of these new homeowners went with fixed rates and not ARMs. I know that my credit union has 5/1 ARMs at 3% for first time homebuyers who only have to put 5% down, I only imagine that banks and CUs are offering similar products throughout the country. 

That’s it for now! Once I have signed on the dotted line and everything is official, I plan on making another post a few months into homeownership. I welcome any and all tips on being a first time homeowner, and even horror stories to adequately prepare me for the road ahead. Thanks for reading.

  • J

Credit Rules Everything Around Me

You likely know the ‘Big 3’ of credit reporting – Equifax, Experian, TransUnion. But there are PLENTY of other consumer reporting agencies (CRAs) with a variety of information on you and your checking accounts, credit inquiries, job history, and all that. Per the CFPB’s list in 2019, there are over 30 CRAs! In this post, I’ll highlight a couple of these “specialty” CRAs and detail your rights under Federal law. 

The two companies I am about to share are bound under Fair Credit Reporting Act (FCRA) provisions that secure your right to a timely and reasonable inquiry to any dispute you raise about inaccurate information. Timely means that they need to investigate within 30 days of receiving your dispute.
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ChexSystems:

This CR reports info on closed checking and savings accounts – including derogatory information like bounced checks and NSFs. They even report items like suspected fraud activity. The below snippet is from ChexSystems’ website and represents a sample line item from their report. 

ChexSystems sample report

LexisNexis (using the RiskView report as an example):

This CRA’s reports are similar to the Big 3, but offer more granular detail like what assets you own and their tax assessed values. Also items like your college education (including major!) and professional licenses. 

LexisNexis Risk View sample report

If you’re anything like me then you might have some questions around why so many CRAs exist, especially when the Big 3 are so dominant in the credit reporting marketplace. Let’s break it down.


Why are there so many CRAs and consumer reports? 

With data being the driving force behind business decision making, everyone is trying to capture the sweet spot between ‘charging as high an interest rate as possible’ and ensuring ‘on-time, full repayment’ of consumer obligations. Creditors are largely figuring out that using the same-old data from the Big 3 isn’t producing new insights, so they are after whatever other information is available. 

CRAs charge fees to furnishers that submit consumer data. Therefore, one business submitting to 10 CRAs might not make business sense, but one user of the information can choose to mix and match different reports as they see fit. 

Why should consumers care about CRAs and all of these various reports?

As previously stated, companies are utilizing as much of your publicly available data as possible. The inclusion of inaccurate negative data or the exclusion of accurate positive data can have a significant effect on your credit score. Your score doesn’t just determine whether or not you get approved for credit – it influences loan pricing and whether or not a creditor will proactively increase or decrease your credit line (in the case of credit cards). 

When it comes to credit decisioning, there are creditors who may deny your application simply due to the inclusion of a very derogatory item in your credit history, regardless of what your numeric score may be. This is commonly the case with charge-offs. A charge off is an account that has become so delinquent that a creditor has written off the balance as uncollectible and closed the account. 

Why do creditors report if it’s costly?

Per Experian, consumers “may be more likely to make payments on time” when they know delinquency could affect their credit history and lower their scores. And to the furnishers’ credit (ha!), despite all of the potentially negative info that can be reported – reporting positive payment history is very helpful for customers. I’m sure you’ve seen lists of credit cards that are seen as “good for building credit” – it’s possible that some consumers choose these businesses *because* they report their credit history and wouldn’t patronize them if they weren’t a furnisher. 

According to an FTC survey in 2015, out of 84 consumers who believed disputed information in their credit report remained inaccurate after the investigation was completed by the CRA, 42 consumers, 50%, planned to abandon their dispute. Their reason for abandoning the dispute was because they didn’t feel it was “important enough” to keep pursuing.

I just want to get on my soapbox quickly and say that you have rights and I really hope you find it within important enough to stick to your guns when you KNOW that something is wrong.

Another right that you have in regards to disputing credit information is to ask a CRA to describe the procedure and steps they took to come to the determination that the data they have is accurate. Ok, I’m off my soapbox now. If you have any questions or comments on credit reporting – I’d love to hear them. 

-J

A loan by any other name…

In today’s edition of “things that don’t sit right with me” – online layaway. I’m being facetious, but the premise is quite similar!

Affirm and Afterpay both offer customers the opportunity to pay for their online purchases over time in more palatable installments versus a lump sum payment. Both set out to solve retailers’ issues of low conversion rates [Conversion is turning traffic into revenue aka sales]. The main difference is that with traditional layaway – you have to make the payments before you receive the merchandise. But with Affirm and Afterpay, you get your stuff and then deal with the bill. A breakdown of some key differences between these two business models…


  • Affirm
    • generally for stores w/ higher priced items – Wayfair (furniture), Priceline (hotels, plane tickets), Purple (mattresses), etc…
    • actually markets itself as a loan (i.e. – lists APRs and is transparent about pulling credit reports)


snapshot of Priceline checkout w/ Affirm


from Affirm’s home page. but the terms of service state that Affirm loans range from a fixed 10% up to 30%, so what’s the truth?


  • Afterpay
    • retailers at this point seem to be mostly clothing stores & other discretionary goods? (Forever 21, Madden, Ulta)
    • interest-free service where you only pay late fees if you miss payments


snapshot of Afterpay




I went through the terms of service for both of these companies just to see what the deal is. Because Affirm is a bit more forthcoming in their advertisement, I’ll switch gears and focus on Afterpay.


What gets me about Afterpay’s marketing is the insistence on “free and easy”. I completely understand that they make (probably a good portion of) their money from marketing. Let’s say Jane Doe is fresh out of college and has landed her first full-time office gig. Hoodies and Uggs may have worked in lecture, but aren’t becoming for the workplace. Now Jane needs office clothes ASAP but money is tight. Urban Outfitters offers Afterpay so she can pay off her clothes easily over time while GAP doesn’t – so she’s going to go with Urban Outfitters instead. I totally comprehend that business value.


I couldn’t figure out how the application decision worked given their lack of transparency around when they decide to pull a credit report. But there IS decisioning logic used on Afterpay’s side, because they frequently reference application approvals in their ToS (so logic would have it that there are denials as well).


And to their credit, why would any business give away thousands upon thousands of dollars only under the protection that I, as a consumer, pinky promise to pay it back? Not to mention, that without the added service of an installment loan, Afterpay would be nothing more than a carbon copy of Rakuten (formerly eBates). The following sentence comes verbatim from their Terms of Service:


You agree to provide any information or documentation reasonably requested by us to verify your identity in connection with your Afterpay Account, and you authorize us to make, directly or through third parties, any inquiries we consider necessary to verify your identity.


So at some point in the future (or perhaps never at all!), Afterpay may pull your credit report to determine that you are who you represent yourself to be. But it’s the uncertainty of pulling the credit report that is a bit troubling. If I’m making a $500 order, will you pull my credit? What if I successfully paid off my first $200 order w/ no issue, but then during my next $600 order – I slip up and am late with my third payment? Before I make my next $650 order, will you make a credit inquiry to see if I’m becoming insolvent or if that was just a fluke? Who knows, but if you agree to the ToS, Afterpay has that right and can invoke it at any point during your agreement.


We may, in our sole discretion, not provide the Installment Feature to you, or cancel an approved order before the goods or services are delivered or supplied for any reason including but not limited to your history of transactions with our service provider Afterpay or to prevent against fraud, legal, regulatory or nonpayment risk.

— From Afterpay’s Purchase Payment Agreement.


I don’t want this post to seem like an indictment of Affirm or Afterpay, or anyone who has used or plans to use these services. The holidays are pretty here, and using an installment loan can certainly help to make the financial hit of the season feel a little less harsh. I just to inform others to be weary of hopping onto the newest, hottest service without doing some due diligence. So… what will be the next innovation in the online shopping experience? Do you use these apps or any other similar services?


– J



My 8-5

So today I decided write a thread on Twitter about my career (tangentially speaking)! The thread was a bit brief, because character limits (while necessary) are quite aggy. The day-in and day-out of my job can get very tedious. But seeing these landmark cases (that I reference in this thread) puts everything into perspective. The work I do, ultimately can have direct impact on consumers (and I am consumer just like the people I help!).

To summarize some major points of the Avant (Chicago-based FinTech company) case from April 2019…

  • Avant forced consumers to repay their loans through automatic (pre-authorized) payments from their bank accounts. This is a violation of Regulation E which explicitly states: “No financial institution or other person may condition an extension of credit to a consumer on the consumer’s repayment by preauthorized electronic fund transfers […]“.
  • Avant also told people that after they completed their loan application, they could change their payment method to “paper check, money order, debit card or credit card”. But when consumers tried to pay by these methods, in many instances, Avant refused.
  • The lawsuit also alleges that Avant charged consumers’ credit cards or took payments from their bank accounts without permission. One consumer’s monthly payment was debited from their account *11* times in one day.

The full text from the FTC alleges that Avant’s limited software system was to blame for these problems. Imagine that you receive hundreds of millions in VC and can’t figure out how to actually facilitate the servicing of the loans you’re soliciting. Couldn’t be me.

The main reason I chose this case in particular is because of the rise of FinTech companies, it’s all about “disruption”. The rush to get to market, the pressure to turn a profit for investors – these challenges often push compliance off on the back burner, but having knowledge people on your team (even on retainer) can make the difference between whether or not you’re cutting checks for a settlement and legal fees.

– J