Happy Mothers Day to all Moms!
Those “free credit score” jingles are like nails on a chalkboard to me. See—they are almost all scams.
Here’s how they work:
First, what they really offer is a free credit report. Then they try to sell you your credit score.
And here’s the problem: the credit score they try to sell you is total junk.
It’s called a “Consumer score,” and it’s not the same score that a lender, credit card company, employer, or landlord would see when they pulled your credit score.
Almost all lenders and banks use something called a FICO score. In fact, in my 20+ years in the real estate, mortgage, and credit industries, I have never once known a lender to use anything other than a FICO score.
Here’s the part that is even worse: FICO scores are almost always lower than Consumer scores. I tested this a few years ago on my own credit score. My FICO score was a whopping 237 points lower than my consumer score. I asked some friends to test it as well: Michael’s FICO score was 79 points lower than his consumer score, and Jocelyn’s was 54 points lower.
In all three circumstances, the Consumer score was higher.
Yesterday, I decided to see if things had changed. This time, my FICO score was 70 points lower than my Consumer score.
So the gap was a little narrower, but still wide enough to cause a big problem.
You see, if I relied on my Consumer score, I would have an artificial sense of security because it is always higher than my FICO score.
This can cause a big problem. Prospective homeowners do a little research, realize that lenders provide the best interest rates to people with FICO scores of at least 720, then they buy their credit scores from a free credit report website.
They don’t realize that the credit score they are buying is not a FICO score. And when their Consumer credit score comes in at 745 or 815, they think they are out of the woods. Instead of taking the steps necessary to build their credit scores, they sit back and relax.
But when it comes time to buy a house, their loan applications are either denied due to low credit, or they end up paying more interest than they expected. In Jocelyn and Michael’s case, the difference in interest on a $300,000, 30-year, fixed-rate home loan would have been about $12,000.
And this is a problem for everyone, not just prospective homeowners. What about the folks who carry credit cards and finance their cars? These people buy their Consumer scores, and then wonder why they are not qualifying for better interest rates. My credit score is high, they think. I guess these are the best available interest rates.
Little do they know that they should take a few simple steps to rebuild their real credit score—their FICO score.
So what should you do about the free credit report scam? Get an accurate representation of your credit score by buying it directly from www.720FicoScore.com.
Philip Tirone
P.S. The only place you can buy a FICO score online is from www.720FicoScore.com. Every single other website out there will have fine print explaining that the score you buy is not the same score lenders will see.
Author: Philip Tirone
Key Considerations About Divorce and Credit
While divorce often causes a person to take inventory, many people forget the implications of divorce and credit. Many married couples or life partners jointly apply for credit cards, auto loans, and mortgages. Part of learning how to build credit means that you learn about how divorce can complicate your credit situation.
If you and your partner kept all credit separate during your marriage, you will not be impacted by your ex-spouse’s credit behavior at any time before, during, and after your marriage. However, if your spouse is an authorized user or joint holder of a credit card, an angry former spouse can start lots of problems with respect to divorce and credit. With joint accounts, both you and your ex-spouse are jointly responsible for debt and therefore are affected by each other’s financial decisions. For example, your ex-spouse’s late payments and collection notices show up on your credit report after the divorce if you have not split the accounts.
The best move is to cancel these cards rather than risk the negative effects of someone else’s mismanagement. Some credit card companies may require a special type of notice to cancel jointly held cards, such as a written notice. Doing this as soon as possible is in your best interest in terms of divorce and credit. After a divorce, your ex-spouse may need to charge many things to make up for reduced income. Even if your ex is not being malicious, this could harm your credit score by causing your utilization rate (the balance as a percentage of the credit card limit) on jointly held credit cards to increase.
If you and your ex-spouse own a home together, both are charged with paying off the debt unless you work out another arrangement. Aside from selling the house, your best option may be to pursue refinancing. Using a quitclaim deed, you can take your name off the title of the property, but this is not enough when it comes to divorce and credit. Your ex must also refinance, or your credit will suffer if he or she becomes delinquent on payments.
On the other side, if you retain ownership of the home and do not put the property in your name, you could be affected if your ex-spouse is sued. The house might be seized to pay off your spouse’s debts.
If you are separated, you may want to take a few steps to prepare yourself, especially if you think you are heading toward divorce. Pull your credit report and assess your financial situation, noting all existing credit accounts. Keep copies of everything in a safe place. If you have joint accounts, have a discussion with your spouse about who will assume payments for which credit accounts. If you are on peaceful terms with your spouse, have a frank discussion about divorce and credit, and how you can both protect yourselves. Consult an attorney, and create a plan to keep your payments on schedule and your credit protected.
To protect yourself from the pitfalls of divorce and credit, cancel your joint accounts, and make sure you contact all credit bureaus to ensure that your address information is updated.
I messed up…
Sometimes, all you have to do is ask.
This is one of the major themes of my credit course. If you want lower interest rates, if you want your banks and credit card companies to wipe away penalties or forgive some debt, sometimes…
All you have to do is ask.
But even though I teach this in my course and in my book, I messed up.
See, I help a lot of non-profit and for-profit companies with their marketing strategies. And I neglected to ask…
I didn’t ask one of them enough deep questions to make sure that our interests were aligned.
So after several months of being frustrated, I finally realized something. I wanted them to make as much money as possible. If they made money, I made money.
But that’s not what they wanted—not in their heart of hearts. They wanted to grow slowly. When it came down to it, they weren’t comfortable with the same explosive growth that I was trying to help them achieve.
There isn’t anything wrong with either of our goals – they just weren’t aligned. If they didn’t make money—and fast—I wasn’t going to make money.
And if I pushed them too hard to grow, the corporate culture they wanted and loved would be non-existent.
So the relationship that we initially established was doomed from the start. We had (and still have) great rapport, and we are trying to find a solution so that we can continue to work together, but it sure would have saved us a lot of time if we had made sure our interests were aligned from the get-go.
So what’s my point?
From now on, I’m going to make sure my interests are aligned every time I enter a professional relationship, create a friendship, or sign a contract.
In fact, if I’m working on a solution with someone, the first thing I’m going to do is make sure our interests are aligned. If they aren’t, we will only be frustrated when working together.
Having aligned interests is a big part of making any area of life work.
It works with professional decisions, personal relationships, and it works with financial decisions as well.
And it also works on a big scale…
Imagine if the banks had disclosed their interests to the people who bought houses pre-2008! If people had known what was in the banks’ “heart of hearts,” would they have entered into an agreement with them?
And on a small scale…
Would you sign up for a retail store credit card if the cashier disclosed the store’s true interests? Imagine that a cashier said, “Would you like to sign up for a retail store card and save 10 percent on today’s purchase? Our goal is to lure you into signing up for the card so that buy more from us over the long-haul and pay a ton of money in interest rates.”
Heck no! You wouldn’t sign up!
So ask away… before you enter a relationship, make sure you know the true interest of the person (or business) you are going to work with.
As always, let me know your thoughts below. Have you recently realized that a relationship isn’t working because your interests weren’t aligned?
– Philip Tirone
I’m a big failure…
It’s true. I’ve written about being a failure here.
And guess what?
My list of non-accomplishments grows longer and longer every year…
So the following quote from President Theodore Roosevelt’s speech “Citizenship in a Republic” spoke to me. And because I know I’m not alone in stumbling a time or two, I thought I should pass it along…
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.
“The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”
That’s it for today… short and sweet because I don’t want to try to compete with those powerful words from President Roosevelt!
As always, be sure to share your thoughts below. Did the quote inspire you to rise above some of your stumbles?
– Philip Tirone
Marry Your Spouse, But Not Their Credit Score, by 720 Credit Score
If you are getting married, you might be a little worried about how the marriage will affect your credit score, especially if your spouse’s score is lousy.
But right off the bat, let me dispel this rumor: Your credit score and your spouse’s credit score will never be merged together. What your spouse does in his or her own name (past, present, or future) will not hurt your credit score…
As long as you do not join accounts.
When you get married, your behavior still counts toward your credit score, and your spouse’s behavior still counts toward your spouse’s credit score. If you pay your Visa bill late, the late payment will not hurt your spouse, so long as the credit card is in your name only. If your spouse has a mortgage payment and defaults, the default will be on your spouse’s credit report only—so long as the mortgage is in your spouse’s name only.
Most people approach marriage and credit with a one-for-all, all-for-one attitude. They apply for car loans as a couple, open joint credit card accounts, and stop building separate credit histories. After all, they have joined their lives together; why not marry their credit histories?
This might sound like a great idea, but the truth is that you should never vow to join all of your credit accounts. Keeping some credit accounts separate has big advantages. In fact, holding credit jointly puts a couple at even greater risk during times of financial crisis. Here are two common credit pitfalls of marriage.
Marriage and Credit Pitfall #1: Keeping All Credit in One Spouse’s Name
Opening all credit cards and loans in one spouse’s name is not wise, but unfortunately, it happens all the time. This usually happens when one spouse works a nine-to-five job and the other stays home with the kids. The spouse with the paycheck opens all credit in his or her name.
Here’s the problem, though…
Shat happens if something happens to the working spouse? A bankruptcy, death, loss of income, or divorce would make the other spouse vulnerable. Because no credit is the same as bad credit, the stay-at-home spouse would have no ability to secure a loan.
There’s another problem with this strategy. Let’s switch this scenario up a bit and imagine that both spouses work. The wife has a part-time job with a small salary, so all of the credit is in the husband’s name. The couple decides to buy a home. To qualify for a loan, they need both spouses’ income.
The couple now has a big problem: The wife has no credit history, so her score is low. Putting her name on the home loan would endanger the loan. And the husband cannot qualify for the loan on his own—he needs his wife’s income for that extra boost.
Most likely, the couple would not qualify for the loan. At a minimum, the couple would pay a higher interest rate.
This pitfall can be avoided if both spouses build their own credit scores.
Pitfall #2: Joint Credit Cards and Automobile Loans
Imagine that Jack and Diane are married and have joint credit cards and joint automobile loans.
When Jack loses his job, the couple struggles to make ends meet. After a couple of months, they start realizing that they cannot afford all of their bills. So they stop making payments on several credit cards and on one of the two car loans. The credit card bills are sent to collections and the car is repossessed.
And both Jack and Diane’s credit scores are trashed in the process.
Now let’s see how the same situation would play out with Peter and Paula, a married couple with separate credit cards and automobile loans.
When Peter loses his job, the couple creates a strategic plan about their forthcoming financial problems.
Peter and Paula know they can only afford to pay all their bills for three months; the money will run out after that. Peter searches high and low for a job, but is unsuccessful. After three months have passed, the couple decides to stop paying credit cards and car loans in Peter’s name. They stay current only on bills in Paula’s name.
Of course, Peter’s credit score suffers. But Paula’s remains pristine. This means that Paula is able to apply for loans in her name, while Peter learns how to rebuild credit.
Any other questions about marriage and credit? Be sure to leave a comment on my blog, and I will answer it in forthcoming blogs.
What Are the Credit Score Factors?
Question: What exactly are all the credit score factors I should consider when learning how to build credit?
Philip Tirone’s Answer: There are actually 22 criteria that go into determining a person’s credit score. These criteria can be organized in five credit score categories:
1. Payment History—The first of the credit score factors, your payment history, accounts for the largest percentage of your score: 35 percent. Do you pay your bills on time? How many late payments have you had? How severe are your late payments? How recent are your late payments?
This credit score factor takes a look at the answers to these questions. If you always pay your bills on time, your credit score is probably better than someone who rarely pays on time. If you have a lot of recent late payments, especially if they are more than 90 days old, your score is probably low.
This component considers your credit cards, mortgages, car loans and other installment loans, student loans, and retail credit card accounts. It also looks at the details of your late payments. Late payments within the past six months have the greatest impact on your credit score; late payments that are more than 24 months old have less impact on your credit score.
2. Outstanding Balances—This is the second-most important of the credit score factors, comprising 30 percent of your score. In short, the less you owe in relation to your limit, the higher your credit score.
Among other things, this criterion considers your “utilization rate,” which is the debt you carry on a credit card as a percentage of your credit card limits. Credit cards with balances that never exceed more than 30 percent of the limit provide for better scores.
This category of credit-scoring also looks at how much you owe on home loans, car loans, or other loans versus how much you originally borrowed. If you have a new loan, credit-scoring systems usually consider you riskier than someone who is five or ten years into a loan. Loans usually take about six months to “mature,” meaning they might harm your score at first, but after six months of on-time payments, your score will probably start to climb.
3. Age of Your Credit History—Credit-scoring is a lot like wine: the older the better! This is the third of the credit score factors, and it accounts for 15 percent of your score. The longer an account ahs been open, the better. This component looks at individual accounts, as well as the average age of your accounts.
4. Mix of Credit—The fourth of the credit score factors, this looks at the type of credit you have, accounting for 10 percent of your score. Credit bureaus respond best if you have a mix of credit. Ideally, you should have three to five credit cards, a mortgage, and an installment loan.
Contrary to popular believe, having too little credit can hurt your credit score because the credit-scoring models will not have enough information to determine whether you can responsible manage debt and high limits.
5. Credit Inquiries—This is the final of the credit score factors, and it counts for 10 percent of your score as well. Anytime you apply for credit, the creditor will run a credit check, which causes your score to drop slightly.
But keep in mind that inquiries into your own credit do not affect your score. Only inquiries by a lender or creditor will hurt your score, and the damage will be minimal. As well, inquiries stay on your report for only two years, and they affect your score for only one year.
2:53 second recording, by 720 Credit Score
I just got off the phone with a client that was not applying for certain jobs becuase she knew that the company would run her credit.
Here is what I told her (2:53 second audio).
Here’s to your future,
Philip
P.S. It’s funny, most people think that they are the only people with financial problems, that is NOT the case.
A dirty business…
I’m talking about my business. It’s an ugly, tough, dirty one. Despite the fact that a lot of people desperately need my service, most people think credit is boring…
And those who aren’t bored by credit repair are often scared. They bury their heads in the sand because they just don’t want to deal with their credit problems.
So getting the word out there to the 10 million people who need credit repair?
Well, like I said, it’s a tough and ugly business.
But recently, I had an epiphany that I know will help you get out of a financial mess.
First, some background…
Because I spent so much time figuring out how to spread the word about my program, a lot of my friends and colleagues ask me to help them with their business models…
After all, if a credit guy can do it, a “prettier” business can do it!
So I was recently meeting with a colleague of mine to discuss his marketing strategy. My company has been writing the weekly emails he sends to his list …
And after sending just six emails, he earned an additional $60,000!
Wow! That’s $10,000 per email.
And all he had to do was ask his existing clients and colleagues for referrals.
All he had to do was ask.
Now, this guy is really sophisticated. In fact, he’s one of the smartest people I know.
But he wasn’t asking for referrals (at least not often and not strategically).
When he did, he earned $60,000 in six weeks. And all he had to do was push the “Send” button on his computer.
So what’s the lesson in this?
You have to ask for what you want. If you aren’t calling your creditors and asking them to lower your interest rates or waive the penalties, they aren’t going to.
You have to ask.
That might be all it takes. Call up your credit card company and ask for the hardship department. Then tell them your situation. See what they say.
The worst that will happen? They will say “no.” But I’m willing to bet that 99 percent of them will work with their customers to provide at least a little wiggle room. Maybe they will let you skip one
payment.
Or maybe they will settle your $15,000 credit card bill for 40 cents on the dollar, like they did for my friend.
You will never know unless you ask.
In my program, I teach people to call their credit card companies at least once every six months to negotiate lower interest rates or better terms.
Why not make today the day you call ‘em up and ask?
As always, let me know your success stories by posting a comment below!
– Philip Tirone
Give Your Testimonial for a Chance to Win $500
As you know, I love receiving testimonials from my happy and satisfied clients. So for fun, I have decided to host a challenge on who can give the best testimonial about their success with my 7 Steps system… AND I’ve made it SUPER EASY. Just follow these simple instructions:
You will need to record your testimonial by calling 1-800-609-9006 Ext. 9038.
Please use the following script as a guideline for your testimonial (fill in the blanks):
- Hello, my name is ___________________ (first and last name) from ________________ (city), _____________(state)
- What I love about Philip’s system is ______________________________ (make sure this flows from the heart)
- The specific results I achieved because of Philip’s system are_________________________________ (examples: higher credit score, low interest rate, money saved per month, etc. – the more detailed the better)
- Philip, I want to thank you for __________________________________ (fill in the blank)
Be sure to end your recording with your phone number, as we will be contacting the winner by phone.
Once you have submitted your recorded testimonial, email a digital picture of yourself to info@720CreditScore.com. Once your entry has been received, we will confirm receipt via email. If you do not receive a confirmation email from us, within 48 hours call us at 1-877-720-7267.
All entries must be eighteen (18) years of age or older and submitted no later than Saturday, May 15th 2010.
The winning prize for the best testimonial will be $500. The winner will be selected based on the following three criteria:
- Success with the system – Increase in credit score (before and after score), time it took to increase your score, your savings per month due to your increased credit score.
- Communication – Effectiveness in communicating your success story in a clear, expressive, and genuine way.
- Presentation – Creativity of your script
The winner will be contacted by a 7 Steps to 720 representative and we will post the winning testimonial on this site on Friday, June 4th 2010.
Thanks for your support!
Bankruptcy Isn’t As Dirty as It Sounds, by 720 Credit Score
I’ve written a few posts about bankruptcy lately, but it occurred to me that I should explain what happens to a credit score after a bankruptcy.
The truth is: Sometimes your credit score will be better off in the long run. And here’s why…
If you are struggling with your finances and your credit score, and you do not see an immediate light at the end of the tunnel, you will probably continue to struggle for a few more years. As you fight to stay afloat, you will probably miss a few payments here and there.
And your credit score will suffer. In two years, it will be exactly where it is now.
But if you declare bankruptcy today, and then start the process of rebuilding your credit score after bankruptcy, in two years, you could have a 720 credit score!
I always say that bankruptcy isn’t as dirty as it sounds, so I hope this eases your mind!
Sincerely,
Philip Tirone
P.S. One more thing, certain mortgage companies are stopping their clients from reaffirming mortgage debt during a bankruptcy. Some of my clients are worried about what this will do to their credit scores. To them, I just want to say: Don’t worry—you don’t need a mortgage on your credit report to have a high credit score after a bankruptcy.
