Ugh.
I make it a point to read every comment that readers leave on my blog, and while most of them are positive, every now and then people disagree with something I’ve done or said.
And frankly, it can be hard to read. Like everyone else, I want to be helpful, so when I read negative comments, I occasionally feel…
Well, the word that comes to mind is “Ugh.”
Anyhow, I was hung up on something negative that one of my readers wrote. He wanted to know what I, a credit guy, was doing sending out inspirational emails. The general tone of his comment was: Who do you think you are?
It struck a nerve. I was in a funk.
Then I read this comment:
“My favorite part of your letter was when you called your words your wand. So true such words to live by. The understanding that we have the power to produce what we want & need by staying in the positive and maintaining an attitude of finding the solution.”
Then this:
“Your blog actually made me cry…happy tears…the kind I cry when I read about someone who does the right thing, even if it involves struggle, knowing that good will come of every action.”
So my “ugh” turned into a “yay!”
And I was reminded of something my friend Dean Graziosi always focuses on. Dean is a real estate guru, and he talks to his real estate students quite a bit about keeping their distance from naysayers.
He mixes lessons about “lease options,” “flipping houses,” and “wholesaling” with pep talks.
Weird, right?
Well… not really.
Dean knows that his students will accomplish a lot more if they surround themselves with people who are optimistic, who believe in them, and who give them a pep talk here and there.
So that’s why I, a credit guy, send out inspirational emails… ‘cuz I want you to be inspired to take action! You will get your credit in shape a lot faster, reach your financial goals, and TAKE ACTION a lot faster if the people you come into contact with believe you can do it.
What do you think? Let me know below.
Like I said, I read every single comment people leave on my blog, so let me know if something is on your mind!
– Philip Tirone
PS. Happy Father’s Day to all the dads out there, including my own! If you read my weekly blogs, you know that I’m “all in” when it comes to fathering… so stay tuned for a blog post about my own dad, and the big lessons he taught me that I want to pass along…
Category: CREDIT BLOG
Get the Best Car Loan and Avoid Credit Problems at the Dealership
A lot of car buyers hoping to get the best car loan have had embarrassing experiences at the dealership. The buyer picks a car and applies for financing from the dealer. The dealer offers an unfavorable loan package, telling the poor buyer that his credit is bad. The buyer is embarrassed. He feels silly for not entirely understanding the loan package, he has doesn’t have time to learn how to build credit. He has already been subjected to some high-pressure sales tactics, and he just wants to get out of there.
This is a sales tactic! It is a scenario intentionally manufactured by the dealer to get you to sign on the dotted line before you have had time to realize what a poor financing offer they have made you. Sometimes, it is even an outright scam: the dealer tells the buyer that he has bad credit just to get the buyer to agree to an expensive financing package.
I guess I can’t get the best car loan with my shoddy credit, thinks the buyer.
The number one way to avoid this unnecessary situation in the first place and get the best car loan is to already have the financing nailed down before you walk into the dealership. Dealers almost never offer the best loan packages, so it is almost always better to avoid bundling the purchase of the car with the financing, warranty, and trade-in of your old vehicle. Shop around for financing ahead of time, using banks, credit unions, and online auto lenders.
Then the dealer can make you a loan offer if he wants, but he knows you are going to compare it to other, probably better, offers. Even if you truly do have poor credit (unlikely if you have attended our free teleseminar), there are far better sources of sub-prime auto loans than the dealership.
If for some reason you still want to find out what kind of financing the dealer can offer you, then the second important step—after applying for financing from other lenders—is known as “The Folder.” The Folder has your credit reports, your credit scores, and some monthly payment calculations based on the target purchase price, interest rate, and loan term. It also has your financing offers from the other lenders. And it contains information about the price other sellers of your desired vehicle will accept. It is perfectly acceptable, and often less costly, to purchase vehicles online these days from dealers all over the country. Once your local dealership knows that you know this, it will be easier to negotiate. The Folder is hated and despised by auto salesman and puts you in charge of negotiations. If you want to get the best car loan, never enter the dealership without it.
The third important method to get the best car loan is simply this: get up and leave several times before agreeing to a deal. If the sales tactics are too heavy-handed—if the dealer is asking for your credit information even though you are not sure you want to apply for financing, if the numbers they are offering do not make sense, if it just feels like you are not going to get the best car loan—get up and leave. Shake the salesperson’s hand and tell him or her you will be in touch. Then walk out. If they tell you their offer is only good for a day, reply calmly and confidently that you are willing to take your chances, and then go.
Only once the dealer understands that you are knowledgeable, educated, prepared and willing to walk away will you start hearing their best offer. Have confidence and do not get emotional. You have financing from other sources, “The Folder,” and numerous other sources from which you can buy your chosen automobile and get the best car loan—and it is a buyers’ market
Teaching Children About Credit: Step One
Last week, I told you that I had a “crazy” plan for teaching children about credit. And I explained that teenagers who do not know about managing credit might be in trouble when they leave the nest. On the other hands, if you teach children how to build credit, they will have an advantage.
This week, I’m going in-depth with Step One of my seven-step plan for teaching children about credit.
(Step One, incidentally, is the step that sounds the most crazy!)
Teaching Children About Credit: Step One—Add your children as authorized users to one of your existing credit card accounts.
Let’s get this out of the way: an authorized user is someone who has permission to use your credit card, even though you are responsible for paying the bill. That’s right—an authorized user has no legal obligation to pay a bill.
Nonetheless, I think you should add your children as authorized users to one of your existing credit cards.
But let me be very clear: Unless you have extremely mature children, you should not give your child a physical credit card (at least not yet). If you are just starting the process of teaching children about credit, your kids could very well misuse a credit card, leaving you with a pile of debt, a higher utilization rate, and a lower credit score.
So clearly, you must protect your pocketbook and credit score, which is why I say you should not give your children a physical credit card. In fact, you might not even want your children to now that they have been added as authorized users yet. And be sure your children cannot access your financial records or account numbers. In doing so, you can begin building your child’s credit score without exposing yourself (or your children) to the dangers of an immature credit user.
Okay, with all those precautions out of the way, let me explain why I think this is a critical step of teaching children about credit.
Listing your children as authorized users comes with a host of positive outcomes:
1. You will set the stage for later steps of teaching children about credit. We will talk about this later, but briefly, once you start teaching children about credit, you might want to give your children access to a credit card so that they can make small, pre-approved purchases, like paying for a $20 dinner or a $10 movie.
2. Your children will begin developing a relationship with the credit card company. Eventually (when your children become adults), your child might want to apply for a credit card company of his or her own. If your child has been an authorized user for years, he or she will receive better terms, so long as your account has been in good standing.
3. If you use the right account, your children’s credit scores will rise. In short, you should choose a credit card that:
- Is and will remain in good standing. This means you have always paid it on time and you will always pay it on time!
- Has a low utilization rate.
One last thing about teaching children about credit by adding them as authorized users: If you are ever late on a payment, remove your children as authorizes users immediately. This will preserve their credit score. And be sure to join us next week for the next part of this series!
A joke and a coin…
“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around…
“But when I got to be twenty-one, I was astonished at how much he had learned in seven years!”
I’m not sure who said it, but I love that joke. And isn’t it true? It isn’t until adulthood that we realize how special and wise our dads are…
Now that I’m a dad myself, I’m “all in.”
There is nothing I love more than having Ava crawl up next to me to cuddle…


My favorite thing about the coin is the symbolism. It has the numbers 2-4-7-3-6-5 and the words “magna pater” written on it.
If you feel a shred of what I feel about my dad and you want to find something special and give your dad a heartfelt gift on Father’s Day, keep reading…
Now,I know it’s tough to come up with presents for dads, but that’s not the real reason I’m promoting the coin…
See, I agree with Margaret Mead, who said, “The supreme test of any civilization is whether or not it can teach men to be good fathers.”
As a civilization, we’ve got a long way to go. About 40 percent of kids grow up without fathers under the same roof.
That’s the real reason I’m “shamelessly” promoting the coin… because I want to support a nonprofit that helps dads become better fathers.
And I’ll be completely honest… I’m not really ashamed. I have three children and a fourth on the way, and this is the type of gift I would like to get from my kids.
In fact, nothing would make me more proud than to know that my kids think I’m a great dad!
(And yes, I’m ordering one for my dad!)
Be sure to order a coin this weekend – right now – to get it in time for Father’s Day.
Teaching Children About Credit: An Introduction
I’m about to say something about teaching children about credit cards. And you are probably going to think I’m crazy.
Here goes …
If you have teenage children, you should give them access to your credit accounts.
Now, I know what you are thinking …
What? My teenagers can’t even pull their pants to their waists, much less manage credit responsibly.
And this is exactly why I think you should give kids access to your credit accounts.
Because most minor children never buy homes, apply for lines of credit, or purchase cars with installment loans, most have no credit. And credit bureaus assign really terrible credit scores to people with no credit. In some ways, no credit is just as bad as poor credit.
So if your kids go out into the real world without first establishing credit, they will pay higher car insurance premiums, and they will pay higher interest rates on their first car loan and credit cards. Landlords might not want them as tenants (or you might be required to co-sign), and some employers might not hire your kids.
In other words, your children will be at a disadvantage when they leave the next.
So while I might sound a little crazy for suggesting that you give your teenager access to your credit, weigh the dangers associated with not teaching children about credit cards.
Teaching Children About Credit? If you aren’t, here is Danger Number 1:
As soon as they become adults, your kids will be heavily solicited by credit card companies. They will receive offers for credit cards with astronomically high interest rates and fees. Your kids might walk by booths on their college campus, pick up a credit card application, fill it out, and agree to lousy terms with interest rates that will cost them an arm and a leg.
Teaching Children About Credit? If you aren’t, here is Danger Number 2:
If your kids don’t know about credit cards, and have experience using them, they will likely try to establish credit by using methods that don’t work. So they will end up with lousy scores, and overpay on car loans and credit cards. And, like I said, they might even be turned down for job opportunities.
Teaching Children About Credit? If you aren’t, here is Danger Number 3:
Guess who your kids will turn to when they need financial assistance? Probably you, the parent. And if they are paying high interest rates and unschooled in debt management, they will likely need to borrow money from you.
But as the old adage goes, if you give them the tools to fish and teach them how to fish, you will never need to give them fish again.
Over the next few weeks, I’ll take you through my seven-step plan for teaching children about credit! Stay tuned!
Credit-Scoring Myths
Credit-Scoring Myth #1: If I avoid credit, I’ll have a great score.
Fact: Though shunning credit cards and loans might sound like a good idea, going down this path will make your life harder, not easier. Credit scoring systems want to see that you can responsibly handle many different types of credit before they award you a good credit score. If you don’t accumulate a proven track record, you won’t get a good score. And I always say that no credit score is as bad as a poor credit score. Credit companies will be unlikely to advance you a loan, and a bad credit score may prevent you from getting a job or landing an apartment.
Credit-Scoring Myth #2: As soon as I shut down some of my credit card accounts, my score will go up.
Fact: In this case, rather than causing your score to rise, your credit score may drop sharply. Fifteen percent of your credit score is affected by the length of time you’ve had credit. To reach this figure, credit-scoring bureaus take the average age of all of your credit accounts. Canceling several of them could cause your credit score to plummet. A better bet is to pay off the balances on your credit cards.
Credit-Scoring Myth #3: I must retain a balance or else I won’t have a good credit score.
Fact: Unfortunately, this myth has caused many consumers to spend money for no other reason than to preserve a balance on their credit cards, which actually has no effect on a credit score. Credit-scoring bureaus value activity on cards, but they do not add any value to keeping a balance. If you retain a balance, you will accrue interest on the balance, and your utilization rate might increase about 30 percent.
Credit-Scoring Myth #4: I’ve just experienced a bankruptcy, foreclosure, or tax lien and had bills turned over for collection. There’s no way I can get credit.
Fact: The facts of bankruptcy, foreclosure, tax lien, or collections notice on your credit report will have a very negative effect on your credit score, but if you take the proper steps to learn how to improve your credit score after a financial disaster, your score could increase to 720 in two years. As well, some lenders cater to people with bad credit, although you’ll probably have to deal with a high interest rate.
Credit-Scoring Myth #5: As long as I pay my credit card bill in full and on time each month, my credit will be perfect.
Fact: This is a popular myth, but paying your bills on time is only part of the story. You’ll have to add a diverse mix of credit and show that you can responsibly manage several active accounts to fully maximize your credit score.
Credit-Scoring Myth #6: My credit score will increase by paying any account in collection.
Fact: This is not a sure thing. More often than not, your credit score will decrease if you pay a collections account, especially since it will extend the time the account stays on your credit report.
If you want to learn more about the credit-scoring myths, be sure to attend the next teleseminar!
The dinner question…
I recently turned “the big 4-0,” and at my dinner party, we all took turns answering a question…
Over the next 40 years, what is the thing you are most excited about?
One of my buddies has the coolest idea, and I wanted to share it with you…
He’s going to do a “reverse retirement,” meaning he’ll retire in his 40s and start traveling with his wife and kids.
Here’s the “reverse” part of his plan: He will then go back to work in his 50s.
Isn’t that cool? In his 40s, when his kids are young, he will give them the greatest gift of all: his time.
And once his kids are nearing graduation and preparing to leave the nest, he will go back to work.
Of course, most of us do not have the financial resources to stop working in our 40s, but it did reinforce the idea that I should spend as much of my time as possible in “transformational mode.”
What are some of the functional things I can stop doing (or at least postpone) in lieu of doing transformational things?
A big one for me is this: I could substantially cut down use of my cell phone and instead use this time to hang out with my kids and wife. Checking my email and voice mail isn’t necessary all of the time, but spending time with my wife and three young kids is incredibly important!
What about you? Is there anything functional that you should STOP doing (or at least postpone) in lieu of doing something transformational—financial or otherwise?
Leave a comment below!
– Philip Tirone
The Consumer Score Hoax
An Additional Resource Exclusively for Students of the 720 Credit Challenge …
Every time I hear one of those catchy jingles on the radio advertising a “free credit score,” I cringe.
I’ve written about this before, but it bears repeating …
Almost none of the so-called “free credit score” website will actually give away free credit scores. They sell them, and the credit scores they sell are total junk.
The system is admittedly a little confusing, so let me explain the players …
There are two entities working to determine your credit score.
First are the credit bureaus—Equifax, TransUnion, and Experian. These three bureaus are responsible for collecting information about your payment history. If you pay your Visa bill on time, for instance, Visa will let the credit bureaus know that you pay as agreed. If you pay late, Visa will report a delinquency.
Think of the credit bureaus like a grocery store. The credit bureaus keep all sorts of information about you (groceries) under one roof.
That said, not all creditors will report to every single credit bureau. Your Visa credit card might report information to two out of the three credit bureaus. Your MasterCard might report to all three.
So the “grocery stores” all have slightly different information about you. Just like some grocery stores carry goat’s milk and some do not, some credit bureaus might know about that late payment on your Visa, and another might not.
But remember: the credit bureaus store the information. This alone isn’t enough to give you a credit score.
This is where the second entity comes into play.
Your credit score is created when a formula is applied to the information the credit bureaus keep about you.
That said, a different formula is applied to your information based on who wants to know your credit score.
For instance, if a potential employer wants to know your credit score, a different formula will be used than if a mortgage banker wants to know your credit score.
This is because the mortgage broker cares much more about your history on mortgage payments than a potential employer, who wants a more general picture of your financial trustworthiness.
If the credit bureaus are the grocery store, the formula is a recipe.
Like I said, your credit score is calculated when a formula is applied to the information stored by the credit bureaus.
But because the credit bureaus (grocery stores) all carry different information about you, and because the formula (recipe) varies based on who is requesting the credit score, you actually have many different credit scores.
- When applying the auto formula, Equifax will produce one score.
- When applying the tenant-screening formula, Equifax will produce a different score.
- When applying the tenant-screening formula, TransUnion will produce yet another score.
- And so on and so forth.
That said, if a lender pulls your score, the credit-reporting bureaus will almost always use something called the “FICO” formula. The only credit scores you need to know are credit scores based on the FICO formula.
But if you, the consumer, pull your own score from one of those jingle-y websites, the credit-reporting bureaus will almost always use something called a “Consumer” formula.
The trouble is that no one—no lender, no credit card company, no employer, and no landlord—will ever use your Consumer score.
Yet, this is the score you will get if you buy your credit score from most free credit report websites.
For instance, take a look at AnnualCreditReport.com. While downloading your free annual credit report, you will be offered your Equifax credit score for a fee. But check out the fine print:
“The Equifax Risk Score [a Consumer score] and the credit file on which it was based may be different than the credit file and credit scoring model that may be used by lenders.”
The truth is that the score a lender uses will be different. As of 2013, I have been in the mortgage industry for 20 years, and I have never once used an Equifax Risk Score.
When writing my book about how to build credit, 7 Steps to a 720 Credit Score, I studied tens of thousands of credit reports and credit scores used by my loan office. All of them—a full 100 percent—were based on the FICO formula, and not one of them used a Consumer formula such as the Equifax Risk Score.
This bears repeating: 100 percent of the tens of thousands of credit reports and credit scores that my loan office used to determine creditworthiness were based on the FICO formula.
So just how different are the credit scores sold on free credit report websites?
I tested this with my own credit file by pulling my FICO score and my Consumer score on the same day. My FICO score was a whopping 237 points lower than my Consumer score.
Then I asked my friends, Jocelyn and Michael, to let me run an experiment on their credit scores. Again, the Consumer score was artificially high.
Michael`s FICO score—the score a lender would consider—was 79 points lower than his Consumer score, and Jocelyn`s FICO score was 54 points lower than her Consumer score.
In all three circumstances, the Consumer score was higher.
This provides would-be-borrowers with an artificial sense of security.
Prospective homeowners or car buyers 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 or a car, 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 or car buyers. What about the folks who carry credit cards? 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 this dilemma?
Get an accurate representation of your credit score by buying it directly from www.720FicoScore.com. This is the one and only place you can get your FICO credit scores.
You will notice, though, that only two out of the three credit bureaus (Equifax and TransUnion) sell FICO scores through www.720FICOScore.com. Experian does not allow FICO to sell its credit scores to the general public. In fact, even Experian’s own website does not sell FICO scores.
It’s website has this disclaimer:
“Calculated on the PLUS Score model, your Experian Credit Score indicates your relative credit risk level for educational purposes and is not the score used by lenders.”
So if you want to know what your Experian FICO score is, the only place you can get it is from a lender …
But that’s okay, because you really only need to know two of your three FICO scores. Let me explain …
When determining your interest rate for any given loan or credit card, lenders look at your middle score and assign that rating to you.
For instance, if your Experian FICO score is 720, your TransUnion FICO score is 680, and your Equifax FICO score is 612, lenders will consider 680 to be your credit score.
Experian 720
TransUnion 680
Equifax 612
Because you most likely will be unable to get your hands on your Experian score, you won’t know which of your two scores is your “middle score”…
TransUnion 680
Equifax 612
Experian could come in higher, lower, or in the middle.
So what I suggest is that you work to raise both your Equifax and TransUnion scores to 720. This way, when you go in to apply for a loan, it will not matter what your Experian score is. If it is lower than 720, it will be “cancelled out” by your highest score. If it is higher than 720, it will cause another score to be cancelled out. Either way, your middle score will fall above 720, and you will be considered for the best possible loan terms.
I hope this clarifies some of the mystery surrounding the world of credit-scoring. As always, leave a comment below the Lesson Plan Video if you have any questions.
The Faces of Identity Theft
About 80 percent of people have errors on their credit reports, and many of these are a result of identity theft. Identity theft can be a devastating event that gets in the way of learning how to build credit. Once a thief acquires your personal information s/he can quickly suck your account dry or steal your identity, resulting in not only a tremendous financial loss but a considerable outlay of time to put your affairs back in order.
Now, more than ever, you have to be careful about leaving any scrap of personal information available to scheming identity thieves. Take safeguards to avoid leaving yourself open to identity theft, and be aware of the many ways identity theft might occur.
Dumpster diving. One of the more common forms of identity theft is when thieves find pieces of personal information is to rummage through a victim’s rubbish. For example, the credit card offers that you discard without a thought might be used by a dumpster diver to set up credit accounts in your name. Bank account statements that have your credit card number or bank account might even be used to purchase items online or over the phone. To prevent this, purchase a shredder and use it on anything with your personal information.
Open-access mailboxes. If you have a mailbox that is not secured or is a community mailbox, beware of identity thieves snatching your mail and setting up bogus accounts in your name. If you’re going to be away on vacation, protect yourself from identity theft by asking the post office to put your mail on hold so no one can grab it.
Pickpockets and purse-snatchers. Make sure you never leave your purse or bag unattended. Having access to your credit card and driver’s license is an identity thief’s dream. For that reason, never, ever carry your Social Security card in your wallet.
Phishers and Phreakers. Be especially wary of phishers and phreakers, the newest form of identity theft. Phreakers are people who search for personal information by eavesdropping on telephone calls. Phishers send cleverly disguised emails that ask you to provide personal account information. Using anti-virus software and a firewall is a good way to cut down on malignant attempts by criminals to access your information. Do not share your password with anybody and change it often to decrease the possibility someone may hack into your computer. Also watch out for spyware, which is often installed on your computer without your consent. It can monitor your computer for personal information, such as credit card numbers.
Keep a close lid on your Social Security number. This is your most sensitive personal information, and when an identity thief gets your Social Security number, s/he can easily steal your identity. Do not give out your number unless you started the call and can confirm the identity of the person/company you are calling.
Always keep track of your credit report. Regularly checking your credit report is the best weapon you have against identity theft. Request copies of your credit report at least four times a year. You can get a free annual credit report once a year. Follow up to see any suspicious information or other irregularities show up. Another important safeguard against identity theft is double-checking the purchases on your credit card and withdrawals from your bank account.
Are you living in survivor-land?
I can’t stop thinking about something my powerhouse friend Dave McLurg said…
(Dave has a brilliant business mind and is exceptional when it comes to strategizing so as to best leverage a business, offer, or a service.)
He said that people move in and out of three states-of-mind: survival, functional, and transformational.
He also said that while a person can move up the ladder, he or she can’t skip steps. So you can move from survival to functional, but you cannot move from survival to transformational.
If your state of mind is focused on surviving, you are thinking about basic needs, like putting food on the table. If you are in functional mode, you are thinking about getting the laundry done so you have something clean to wear to work.
These two phases aren’t very exciting, are they? In fact, “survivor-land” is downright depressing…
But the third area is… well, it’s transformational.
If you are in the third phase, you are considering where you want to go and how you can transform your life into something bigger and better.
This is where I want to spend most of my life.
Of course, we all live in “survivor-land” here and there, but if you are always focused on “just surviving,” you won’t be capable of focusing on transforming your life.
So if you want to limit the amount of time you spend in “survivor-land” and spend more time thinking about how to transform your life, you must find a way to quickly move up the ladder.
In other words, you must develop a method for getting out of “survivor-land” and into functional mode.
When I find myself focusing on the scarcity and “just trying to get by,” I ask myself a question…
What do I have to do next?
This way, I start taking action on things that need to get done. By taking action, I allow myself to stop being paralyzed by the fear of “getting by.” For me, jumping into “action-mode” puts me in a state of mind that allows me to then shift gears and focus on my future.
For instance, if I’m going through the actions of getting my kids dressed (a functional activity), I can try to turn this function into a transformational moment. I can ask my kids: “What are you going to do today to make the day a great day?”
And then I can tell my kids what I’m going to do to make sure my own day is great.
How about you? How do you shift your focus from scarcity and surviving into transformation and thriving? Share your ideas below.
– Philip Tirone