Category: CREDIT BLOG

Top Ten Things that Will Hurt Your Credit Score: Part II

Posted on September 22, 2021 by - CREDIT BLOG, CREDIT SCORING

In my last post, I talked about five of the top ten things that will hurt your credit score. Here are the final five:

Things That Will Hurt Your Credit Score #6: Not Pulling Your Credit Report Regularly.

A lot of people worry that if they pull their credit report, they will hurt their credit score. While it is true that 10 percent of your score is based on the number of inquiries by lenders into your credit report, pulling your own credit report does not hurt your score. You can pull your own credit report each and every day, and your score will not budge.
In fact, failing to pull your credit report could hurt your score. How will you know if someone opens an account in your name? How will you know if your account limits are being inaccurately reported?
At a minimum, pull your credit report from www.720FICOScore.com at least every six months.

Things That Will Hurt Your Credit Score #7: Closing an account.

15 percent of your score is based on the age of your credit accounts. The older your accounts, the better your score.
For instance, let’s say you have five accounts:

  • Account #1 is five years old,
  • Account #2 is twelve years old,
  • Account #3 is seven years old,
  • Account #4 is eight years old, and
  • Account #5 is nine years old.

The average age of all of your accounts is 8.2 years. Now let’s imagine that you close account #2, which is twelve years old. Now the average age of your accounts is only 7.25 years.
And this is just one reason closing an account can hurt your score. If you close an account, the account will show a $0 limit. So if you have a balance on this account, your balance-to-limit ratio will be sky-high.
Don’t forget, too, that 10 percent of your score is based on the type of credit you have. The credit-scoring bureaus like credit reports with a healthy mix of credit, and they prefer that you have at least three credit cards. If you close an account, you might have too few credit cards, or you might not have a healthy mix, both of which will hurt your score.

Things That Will Hurt Your Credit Score #8: Collections.

Collection accounts are particularly harmful because they are always preceded by late payments. A collection account should stay on your credit report for seven years from the date of activity that sent the account into collections. For instance, if you fail to pay your credit card bill on March 1, 2010, this is the traditional course of action:
1. A 30-day late payment will be added to your account on approximately April 1.
2. A 60-day late payment will be added to your account on approximately May 1.
3. A 90-day late payment will be added to your account on approximately June 1.
4. A 120-day late payment will be added to your account on approximately July 1, and the account will be sent to collection.
5. Assuming you make no further payments on the account, the collection will remain on your credit report for seven years after the original late payment. In other words, it will fall off your credit report on approximately March 1, 2017.

Things That Will Hurt Your Credit Score #9: Paying a bill in collections.

Now let’s add a payment into the mix. Let’s assume all of the above, but that in March 2012, you make a partial payment on the collection account. Guess what? This renews the date of last activity, meaning that the collection account will stay on your report until March 2019!
It’s crazy but true. Paying a collection account will often hurt your credit score.
In 7 Steps to a 720 Credit Score, I describe this process in detail, and I provide you with all the forms and worksheets necessary to get that collection account off your credit report!

Things That Will Hurt Your Credit Score #10: Late payments.

You probably already knew that late payments will hurt your credit score. Here’s the good news: The credit-reporting bureaus pay more attention to recent behavior than past behavior. If you follow the steps for building your credit score, the damage will be all but erased in as little as two years!

Married or Engaged? Here’s the 411.

Posted on September 22, 2021 by - CREDIT BLOG

One of my readers recently sent me a great question:
“If I marry someone who has declared bankruptcy this year, will it lower my credit score?”
She went on to say that her credit is currently golden. So when she marries her fiancé, what is going to happen to that great credit?
It’s a common worry, but the good news is that you and your spouse will retain separate credit files. Marrying someone with bad credit won’t hurt your credit in and of itself. And if you are already married to someone who experiences credit issues, your score will not be affected, so long as you protect yourself.
It works like this: If Joe has a credit card in his name only, his credit score will suffer if he makes a late payment, but his wife Jane’s credit score won’t be affected at all. But if Jane and Joe have a joint credit card, and Joe makes a late payment, both of their scores will suffer.
This is one of the reasons I always tell married people to keep separate credit files. This way, if one person in the marriage defaults, the other spouse still has strong credit, which the couple can then leverage. But if you have joint credit cards, mortgages, and car loans, what one person does on those accounts WILL affect the other person.
So no need to worry about your fiancé’s past mistakes. There’s no way it will hurt your credit score. But to protect yourself from any future credit problems, I strongly suggest that you don’t open joint accounts with your soon-to-be spouse. Instead, have him apply for secure credit cards and start the process of repairing credit after bankruptcy.
– Philip Tirone

What to Do if You Can’t Stop Worrying About Your Bills, by 720 Credit Score

Posted on September 20, 2021 by - CREDIT BLOG

One of my friends just told me that he owes $68,000 in credit card debt.
He’s 26 years old.
And he has that feeling in the pit of his stomach—you know that feeling. He can’t ever truly relax because he’s so worried. All these questions start racing through his head…

  • How I will ever pay all these bills?
  • Will I ever have fun again?
  • Are they going to sue me? And if they do, will my wages be garnished.

As I was talking to him, I was reminded of the last time I felt that way. Several years back, I carried a loan for a friend of mine. He was making a fortune, but he had declared bankruptcy a few years prior, so he didn’t qualify for the loan.
So I foolishly agreed to carry the loan on his behalf. He would pay me; I would pay the bank.
I knew he was good for it.
Until one day he wasn’t. The market took a nosedive, and so did his business. Suddenly, he couldn’t pay me one month.
And his loan skyrocketed to $9,841 a month.
I got that feeling. That terrible feeling.
How was I going to absorb an extra $9,841-a-month when my own income was down?
The next month, he couldn’t pay me again.
So I remember how it feels. It’s terrible, to put it mildly.
The trouble with that feeling is that it stops people from taking rational steps. They just want the feeling to go away. They’ll do anything to make the feeling go away.
For some people, that means ignoring it entirely. Others start worrying so much that they cannot focus on the solutions in front of them. There’s so much emotion packed into financial problems that it’s hard to be clear-headed and strategic.
But here’s the truth: There’s always a way out. I’ve had clients who have owed hundreds of thousands of dollars in debt that cannot be discharged during bankruptcy—like most student loans and some back taxes.
And there’s always a way out.
But you aren’t necessarily going to see it if you are panicking.
So here’s something I want you to try this week. Go sit somewhere peaceful and calm. Give yourself permission to feel that panic for five or ten minutes.
Then ask yourself a question. Ask yourself: “If I were to consider every single opportunity for resolving this situation, what would be on that list?”
Then start making a list. It might include things like declaring bankruptcy, selling your house, or getting a second job. It might include things like dipping into your children’s college fund or selling your car and taking the bus.
These are things you might be thinking that you would never, ever consider. But Don’t judge the things on your list. If you pile more fear on top of the fear you already have, you aren’t going to find a solution. The key is that you want to allow your mind to open up to all of the possibilities. Let it wander. Invite it to consider the absurd.
And see what you come up with.
There are always options. In fact, the universe is filled with infinite possibilities. The question is: Can you see the options?
So take a deep breath. Believe that there is a way.
And let me know what you come up with by leaving a comment below.
And one other thing because I want to give you an example of a solution that you might be afraid to think about.
Most people are terrified when they think of bankruptcy. Considering filing bankruptcy just makes them feel worse.
But is it really that bad?
I don’t think so. Bankruptcy allows people an opportunity to wipe the slate clean. It gives them the chance to start over, without having to feel financial stress day in and day out. And it also allows them to start rebuilding their credit score a while lot faster than if they just keep struggling to stay afloat for years on end.
But you won’t see options like this if you do not allow your mind to consider them.
So if you would like a referral to a bankruptcy attorney, send an email to Info@720creditscore.com and we will put you in touch with a bankruptcy attorney in your area.
Otherwise, keep us posted on your progress by leaving a comment below!

Top Ten Things that Will Hurt Your Credit Score: Part I

Posted on September 17, 2021 by - CREDIT BLOG, CREDIT SCORING

You might be surprised by some of the things that will hurt your credit score. Over the next two blog posts, I’ll reveal the top ten things that will hurt your credit score, in no particular order.

Things That Will Hurt Your Credit Score #1:

No credit.

I always say that no credit is just as bad as bad credit. The credit-scoring systems have certain criteria by which they determine a person’s credit score. Without that information, they have no way of telling whether a person is creditworthy. Better safe than sorry, they think, and they assign a poor credit score to that person.
Ideally, you should have between three and five credit cards, an installment loan, and a mortgage.

Things That Will Hurt Your Credit Score #2:

Bankruptcy.

You probably already know that a bankruptcy is one of the worst things that can happen to your credit score. Not only does the bankruptcy hurt your score, but so do the late payments and collection accounts that led up to the bankruptcy.
Here’s what you don’t know: You can repair credit after bankruptcy in as little as two years!

Things That Will Hurt Your Credit Score #3:

High credit card balances.

Your credit score is comprised of 22 criteria, and a whopping 30 percent looks at your outstanding debt. Among other things, the credit-scoring bureaus want to see a low balance-to-limit ratio. If you carry a balance that exceeds 30 percent of your credit card limit, your score could be lowered. For instance, if you have a limit of $1000 on your MasterCard, keep your balance below $300 at all times.

Things That Will Hurt Your Credit Score #4:

An incorrect credit limit.

Here’s a dirty little secret that will hurt your credit score:  Almost half of people have a credit card limit that is being incorrectly reported to the credit-scoring bureaus. Say, for instance, that your MasterCard has a $1000 limit. The credit card company might be reporting your limit as only $500.
Now let’s imagine that you have a $250 balance on that credit card. This is only 25 percent of the $1000 limit (see #3). But because of the credit card company’s mistake, your balance-to-limit appears to be 50 percent!
Failing to correct this mistake is one the ten biggest credit mistakes to avoid.

Things That Will Hurt Your Credit Score #5:

A foreclosure, repossession, judgment, or lien.

Ouch. Each of these things will cause your credit score to drop. The key to recovering after a foreclosure, repossession, judgment, or lien is to be proactive. You can raise your score to 720 in just two years if you start the process of rebuilding your credit score.
Too often, though, people feel overwhelmed by their finances, so they adopt a do-nothing approach and hope the problem just disappears. This only delays recovering. Instead, decide that you are going to take simple steps to rebuilding your credit, and that you are going to start today. If you follow an easy plan to rebuild your credit, your score will start to increase, and in just two years, you can enjoy all the perks of a 720 credit score.
Be sure to come back next week for #6 through #10 of the top ten things that will hurt your credit score.

My Wife Won’t Sleep in Our House, by 720 Credit Score

Posted on September 13, 2021 by - CREDIT BLOG

After renting for years, my wife and I just bought a house.
It’s our ideal house—exactly what we were looking for in the exact neighborhood we wanted. We have dreams of raising our children there, and we smile thinking about the birthday parties, sleepovers, and graduation celebrations that will fill our home in years to come. When our children grow into adults, we imagine what it will feel like when they return for Thanksgiving and Christmas. We think about what it will feel like when they come to visit with our grandkids many, many years from now.
It’s a house that will be a home that will hold a family that builds memories together.
Right now, though, as I write this, our dream house is infested with scorpions.
The family who owned the house moved out 3 years ago. Unbeknownst to us, in the absence of human occupants, scorpions took up residency.
Talk about a buzz kill.
We planned on having a special celebratory dinner to mark our first night in our home. But in place of this, my wife and kids are sleeping at my parents’ house while I walk through the house hunting scorpions.
You might not know this, but it’s easier to find scorpions at night because they are nocturnal. Scorpions glow neon blue when illuminated by a black light.
These are facts I wish I didn’t know. I wish our perfect vision had come true.
I’m trying not to get too depressed about it because there’s a lot to be happy about, too. We’ve had the house treated, and in seven to ten days, the scorpions will be gone (fingers crossed). My two oldest kids just started first grade and kindergarten at a great school. My wife and I have a rock-solid marriage, and my two youngest kids are healthy and happy.
But those scorpions.
I told a friend of mine about the scorpions, and her response was laughter.
“I don’t think you understand,” I said. “It’s awful. Have you ever seen a scorpion? Can you imagine how scared we are? There’s no way our kids can be in the home. They glow-in-the-dark. It’s a kid’s worst nightmare: A glow-in-the-dark monster.”
She laughed again.
“I know, but it’s only scary right now. In a few years, you guys will look back on this as a great memory. You’ll think: Remember what a nightmare it was when we moved into this house, and it was infested with scorpions? And you’ll think: Look at our family. We’ve gone to battle together.”
When she put it like that, I thought: It’s only scorpions. We’ve been through worse. Surely, we can get through this!
I am reminded of another friend, who couldn’t find a job when his daughter was young. He lost his job while his wife was pregnant, and he didn’t find a job until his daughter was three.
Recently, I asked his wife, Connie, what their daughter’s first word was. She joked, “I can’t remember for sure. All we talked about during those first few years was Mick’s job search, so her first word was probably ‘résumé.’”
Then they shared a laugh. “Remember how awful that was?” Mick said. “We had to live with my parents.”
But they both had big grins on their faces. It was only awful back then. Now, it’s part of the fabric that bonds their family.
Here’s my takeaway: Our struggles define us as much as our victories. In future years, we will remember the tough times we have survived as battles that we have won. The scorpions in our lives will turn into beautiful, sacred memories that mark a lifetime.
I know that many of my readers are having financial struggles, and I know that these metaphorical “scorpions” can be worse—much worse—than my actual scorpions. It is my hope that you fight this battle and win it, so that in future years, this chaotic time somehow transforms into a memory you can look back upon with a smile.
In the coming months, we will be transforming our website so that it supports you in this mission. Please keep visiting our blog so that we can continue to share our message with you. And as always, we want to hear from you. We can’t address every comment left on our site, but we do read each and every one, and we use this as input in developing content for our site. Please let us know what is on your mind by leaving a comment below.

In and Of Itself, a Credit Score Is Meaningless, by 720 Credit Score

Posted on September 12, 2021 by - CREDIT BLOG

I know how weird it might seem to some people that my credit emails and my blog are oftentimes about my personal life…
And while I know that people want (and desperately need) practical advise on how to deal with the confusing and critical world of credit scoring, I also know that ultimately, everything boils down to a person’s personal life.
In and of itself, a credit score is meaningless. More important than a three-digit number is how a person, or a family, uses it to enrich a life.
So with that said, thank you for allowing me to share yet another personal story—a story I believe has relevance in your own life.
My two oldest kids (Ava, who is six, and Dom, who is five) started school this year. And it just feels … so permanent. There’s no going back now. My babies are kids, and now, more than ever, we have to make sure that the culture inside our home is stronger than the culture outside our home.
We have had our share of trials as parents. We have four kids, and the oldest is six, so that brings its own set of challenges. The first few years of our life as a couple and then a young family were rocky. I had been in the mortgage industry, and all that took a nosedive in 2008 and 2009, right as our family was growing to include Ava and Dom.
Since then, we’ve had the normal problems any couple faces: Lily and I haven’t always been on the same page as parents. We’ve lost loved ones and grieved as we parted ways with dear friends.
But all that pales in comparison to the challenges before us.
Our kids are starting school, so there’s only so much we can do to control the external forces. Our focus has to be on making sure the internal forces are accompanied by rock-solid values.
Then, over Labor Day weekend, I read an article in a Canadian paper that put some of my emotions to words. One of the people interviewed for the article said …
“January 1 isn’t really the beginning of the year for most families. [The beginning of the year] tends to be Labour Day because everything starts fresh again. September seems to be the reset button for most families.”
It’s true, isn’t it? When the summer ends and kids go back to school, families revert to their routines. We set goals and start thinking about what’s going to happen next.
For us, with our kids starting school, it feels like a giant reset button on life in general. With our oldest kids at school, it’s time for us to set some new goals with this new context in mind.
Life has shifted, as so too must our goals.
What about you? Is this a good time for you to take stock of your life and make shifts? What has changed since the last time you set goals?
And what can we do to support you?
At 720CreditScore.com, one of our main goals is to help you find ways to strengthen your financial life, mindful that the final goal is a happy, successful personal life. We invite you to let us know if there is any information that you think we should include on our site that might help you along the way.
If there are, please leave a comment below..
And remember: A high credit score is a powerful tool that can help you live an easier life, but it is not a reflection of who you are as a person. A great credit score is meaningless if you aren’t using it to support your deepest values.

Lily Tirone… Thank You, by Philip Tirone

Posted on September 8, 2021 by - CREDIT BLOG

On September 3, at 10:17 a.m., Lily Tirone made me a dad… for the fourth time.
The birth of all of my children has been unique and beautiful.
Ava was our first. From her, two parents were born.
Dominic was the fastest. Lily labored a long time with Ava, so she expected the same with Dom. We stopped by Mass on the way to the hospital, but when Lily went into active labor in a church pew, we decided it might be time for a trip to the hospital.
And Lucas surprised us and came six weeks early. He was tiny, but healthy and perfect in every way. For the past three years, he’s been our baby. Now he has the privilege of being a big brother.
Little Emma Therese Tirone was born in our home.
We planned it that way. Lily awoke from a contraction in our bed around 7:00, and 3 ½ hours later, she was a mom for the fourth time, and she was taking a nap in our bed.
It all felt so … familiar. The familiar feeling of family.
At my 40th birthday party, Lily gave a toast. She told everyone how amazing it was to bear witness to another person’s life. She was talking about me, and how she had the privilege of watching me succeed, fail, pray, laugh, grow, and struggle.
But the privilege is mine.
Being a spouse is hard work—and Lily and I both sometimes joke that the celibate, lonely lifestyle of our priest is probably a lot easier than ours. We have to keep a solid, vigilant commitment to keeping our relationship on track.
I know for certain that I’m the one who is harder to get along with.
So today, there’s no post about credit or your finances. Instead, I want to thank my bride for letting me bear witness to her life, and all the miracles that have unfolded over the years.
Thank you, Mrs. Lily Tirone, for giving me our growing family.
Phil

 

Good Debt / Bad Debt: The Second Inapppriate Use of Credit

Posted on September 3, 2021 by - CREDIT BLOG

Good Debt / Bad Debt: The Second Inappropriate Use of Credit
Last week, I introduced the discussion of good debt versus bad debt by explaining the worst use of credit out there: using credit to dig yourself out of debt when you do not have a budget that proves the loan will solve your financial problems.
Today, we talk about the second inappropriate use of credit: retail therapy. In the good debt/bad debt debate, this one is a no-brainer.
Good Debt / Bad Debt, Inappropriate Use of Credit #2: Retail Therapy

If you use your credit cards to buy things because you are bored or depressed, you are creating bad debt. Retail therapy makes you feel worse in the long run, particularly if you are maxing out your credit cards to finance the shopping spree. Not only is this expensive, it also hurts your credit card score. Find less expensive and more effective means of coping.
Here is a list of things you can do that will actually make you feel better and preserve your credit score. And you will notice that none of them cost a single penny:

  • Invite your friends over to play card games.
  • Snuggle in for movie night with a carton of ice cream.
  • Write a letter to someone you love.
  • Invite an old friend for a bike ride, run, or picnic in the park.
  • Re-read a favorite book.
  • Call your best friend with the goal of making her laugh so hard she gasps for breath.
  • Take your kids to the park for a play date.
  • Take a couple of hours to start that project you have been postponing.
  • Wash your car, give your dog a bath, or clean out your closet. These might not seem fun, but I guarantee you will feel much more productive after conquering a chore than you will after a day of abusing your credit cards.

If these suggestions don’t work, at least make a commitment to use cash to finance your retail therapy. Sell some of those old clothes you found when you cleaned out your closet online. Then use the cash you earn from your online sales to pay for your shopping spree.

Did you hear about “bedtime” math? by 720 Credit Score

Posted on August 31, 2021 by - CREDIT BLOG

Since it’s back-to-school time, I want to share this great story I heard on NPR …
You can listen to the whole thing here, but the gist of it is this:
A mother of three (who is also an astrophysics graduate) wants to promote a cultural-makeover when it comes to math.
“You hear educated adults say, ‘I’m just not that good at math’ or ‘I’m kind of afraid of math.’ And that’s a totally acceptable thing for a well-educated person to say,” said Laura Overdeck in the interview.
“But you never hear them way, ‘Well, you know, I’m just not that good at reading.’”
She also said that the more parents talk about numbers, the better students perform in math.
This got me thinking about MONEY!
If parents talked more at home about money, the cost of things, their savings’ goals, and their investments, would kids be more money-savvy?
Probably. After all, you are your child’s first teacher. The culture you establish at home (or the culture you fail to establish at home) will have the largest impact on your child’s habits as an adult.
So why not start telling bedtime money stories? Or, if you are worried this will keep your kids up, how about giving them snack-time money stories?
Let me know what you think below!
Be sure to listen to the whole interview and subscribe to Laura’s blog.
Philip Tirone

Teaching Kids About Credit Scores, by 720 Credit Score

Posted on August 30, 2021 by - CREDIT BLOG

Last week, I sent part one of my back-to-school credit tip.
I told you my “crazy plan” for helping your children build a great credit score.
Part two of this plan include an educational platform whereby your children learn about, budgeting, savings, interest rates, and credit scoring.
Last week, I reminded you that no one else will teach this information to your children—not the schools, not their future employers.
The responsibility lies with the parent.
So after making your children an authorized user, start talking to them about credit scores, interest rates, budgeting, and the like.
Then, establish something I call the “Bank of Mom and Dad.”
If your daughter wants to buy something, lend her the money and then sit down with her to create a weekly or monthly payment plan whereby you budget the payments, which should include interest, just like a credit card company would do.
If your child is late with any single payment, assess a late payment, just like a credit card company would do.
Expect your children to make mistakes, and use these mistakes as teachable moments. Don’t berate them, but make sure they understand the consequences of being late with a payment.
Once your child demonstrates continued financial responsibility with the “Bank of Mom and Dad,” consider providing an actual credit card to your teenager.
If you are worried that your children will be irresponsible with the credit card, my suggestion is this: Allow your child access to the card only if you are present and only long enough to hand it to a cashier. This way, the child will not be able to memorize the credit card number, nor will he have prolonged access to your account.
Then have your child repay you directly for the purchase. Because you are the primary cardholder, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
The purchase can be small or large, depending on your budget and your comfort level. Make sure it is not so big that you will be unable to pay your credit card debt should your child default on payments to you.
Just like with the “Bank of Mom and Dad,” make your children pay interest on their credit card purchases. If they exceed the prearranged limit or fail to make a payment by the due date, you should access an over-the-limit fine or late payment penalty.
When the credit card statements arrive, sit down with your children and explain the statements. Discuss your annual percentage rate, annual fees, late penalties, over-the-limit fines. Ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!
Teaching your children about finances and credit is like teaching your children manners. It won’t happen over night. Your children will make mistakes. But it’s far better that you teach them—in the safety of your home—than allow them to enter adulthood without a shred of knowledge about credit scoring and finances!
Okay, that concludes my back-to-school lessons.
P.S. Do you still think my plan is totally crazy? Leave a comment below!