720 Credit Guru

Paying Off Account Balances

ben.kruell@umfginc.com (The 720 Credit Guru) — Sun, 21 Dec 2008 17:00:00 +0000

Less could be more in the credit scoring system. To have less, means having fewer accounts with a reporting loan balance, not lessening the number of accounts you have overall, unless necessary.

When you have an excessive number of loans with balances, whether they have a $10,000 or $10 balance, they all can count towards your credit score. Look to consolidate accounts when you can, and pay off those accounts with small balances.

However, it is crucial not to start closing accounts once you have paid them off. Keep them open and use them occasionally so they won't go dormant.

Recognizing Critical Credit Ratios

ben.kruell@umfginc.com (The 720 Credit Guru) — Sat, 20 Dec 2008 17:00:00 +0000

The credit scoring system measures your reported credit limits, on lines of credit such as credit cards and merchant accounts, to the balances that you currently have. Except Capital One – or CapOne, or Capone as they are known in the industry.

Capital One reports your high balance as your credit limit!!! That means if you have a credit balance of $500 on a $10,000 limit card, but they are reporting that you only have a credit balance of $500 – it appears as though you are maxed out on your card. Be very cautious of this!

The system also looks at how much you have paid down on your loan balances in relationship to the initial loan amount. Lowering the ratios is critical to raising your credit scores. If possible, pay extra to lower your balances on credit cards and your installment loans each month.

Paying Obligations On Time - A No Brainer!!!

ben.kruell@umfginc.com (The 720 Credit Guru) — Fri, 19 Dec 2008 17:00:00 +0000

This is the most important factor of the Five Factors to Credit Scoring – Making your payments on time.

Most consumers think that just making timely payments is the sole reason a credit score increases, which is not the case. The credit scoring system is much more complicated than just making payments on time.

However, making timely payments on all your loans and credit cards is the master key to raising your credit score. Without it, the other strategies are less meaningful.

If you have a perfect record, great job! Keep on track.

If you have had issues in the past, address them now, and make every effort to make payments on time going forward.

Establishing Cash Reserves To Preserve Your Credit

ben.kruell@umfginc.com (The 720 Credit Guru) — Thu, 18 Dec 2008 17:00:00 +0000

Before you take out any loan - especially a mortgage, you should have a cash reserve already established. Most lenders require a 2 to 6 month reserve.

No one knows when there may be an accident, a loss of a job - especially in today's economy, health issues, or another unfortunate event. You need to establish a cushion so that you can offset any decline in income should it happen.

If you are taking out a new loan to cover your expenses until the next pay check, like a pay day loan, you are in serious trouble. Before you incur any debt, set aside a sufficient cushion that can be readily accessed in case trouble arises.

If you start missing payments on your mortgage, car loan, or credit cards, you can watch your credit score tank faster than the Titanic.

Creating Depth With Your Credit Score

ben.kruell@umfginc.com (The 720 Credit Guru) — Wed, 17 Dec 2008 17:00:00 +0000

Everything goes back to the Five Factors of Credit Scoring.

Depth, or length, is created by how long our accounts have been open. Depth with your accounts determines how high your credit scores can go. Review your credit file and identify how long your accounts have been open. Higher scores will be realized when most of your accounts have been open for at least four years.

THE OLDER THE BETTER!

Opeing New Accounts

ben.kruell@umfginc.com (The 720 Credit Guru) — Tue, 16 Dec 2008 17:00:00 +0000

Once you have an established credit profile, try to avoid opening new accounts at every opportunity. Opening multiple accounts within a 12-month period can be extremely detrimental to credit scores for two reasons.

The first is applying for new credit will show inquiries on your credit report. Secondly, a new loan will add risk and could lower your credit scores.

You should pay particular attention to the number of loans you have opened in the last year. Try to space new accounts out to avoid sudden declines in your credit scores.

Two factors of new accounts are determined by the Five Factors of Credit Scoring.

Establishing Quality Loans on Your Credit Report

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 15 Dec 2008 17:05:00 +0000

Some loans are considered more valuable than others, such as a mortgage. This type of loan usually shows that a person is more responsible. The credit scoring system requires a minimum amount of activity on these accounts for revolving – such as a credit card – and installment loans – like a mortgage or an auto loan.

The activity on a mortgage or auto loan is not as critical as a revolving account because you make those payments regardless every month versus a credit card that can be put into a drawer and not used for months and months. In order to keep your credit card accounts active you should use them at least every 6 months so they won’t go unrated or become an inactive account.

You should have some payment activity from both types of loans – it is critical to raising credit scores.

This tip goes back to the Five Factors of Credit Scoring.

Holiday Shopping Alert!

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 15 Dec 2008 00:34:00 +0000

CONSUMERS: SHOPPING SPREE OR SHOPPING ALERT

I will get back to the Top 10 Credit Building Tips on the next post. There is a Holiday Shopping Alert you should be aware of:

Buying on credit. Financial experts say that those who shop with credit cards tend to spend as much as 30% more than if they'd shopped with cash.

The reason: When you shop with cash, you're more aware of how much you spend and how much you have left because you can touch it. And once the money's gone, it's gone. The best thing you can do is set a holiday budget.

Plus, if you have to put the purchase on your credit card or sign up for the store's financing, you simply cannot afford it and it could damage your credit without you even knowing it! Any good deal you thought you were getting will be eroded by the interest you'll accrue and the time you'll spend as a debt hostage. About 12 million Americans are still paying off last holiday's bills, according to Consumer Reports.

Quality Lenders and Your Credit

ben.kruell@umfginc.com (The 720 Credit Guru) — Sun, 14 Dec 2008 19:57:00 +0000

Did you know that lenders are scored differently on you credit report?

Many consumers fail to realize that credit scores give differing values for different types of lenders. Banks and national credit card companies are on one end while finance companies and payday lenders are on the other end.

Most can identify a bank, but many fail to recognize finance companies. Such lenders usually finance many auto loans and merchant purchases offering “Same-as-Cash” options or "No Payments 'Til 2020.

Many finance companies are even owned by banks; but, they are considered high-risk lenders and create a drag for credit scores because of their willingness to charge high interest rates and lend to less than credit worthy consumers.

If you have good credit, utilizing one of these lenders to save money on interest can be a good decision. The choice is up to you, and the result to your credit report is up to the bureaus.

Golden Accounts

ben.kruell@umfginc.com (The 720 Credit Guru) — Thu, 11 Dec 2008 20:48:00 +0000

1)This is the second tip (The First Tip) from the news report. I find this one a little obvious but needed to touch on it and give some more information on how to create a “Golden Account.” This post is going to be filled with links as I have touched on all of this before.

A Golden Account is any account you have that remains open for many years (ten or more) and can drive credit scores to higher levels. This basically goes back to the Five Factors that make up a credit score.

The only way to create a “Golden Account” is to open one up and then wait. And wait. And wait some more. OR…

You can piggyback off of someone else’s “Golden Account.” FICO ’08 will only partially eliminate an authorized user, or piggybacking.

Once such accounts are identified, leave them open and periodically use them. NEVER EVER NO MATTER WHAT ANYONE TELLS YOU – CLOSE AN ACCOUNT.

You need to use an account such as a credit card at least once every 6 months so the card doesn’t become inactive or go dormant.

Know Your True Credit Scores

ben.kruell@umfginc.com (The 720 Credit Guru) — Wed, 10 Dec 2008 19:25:00 +0000

I recently saw a news report on a lady who raised her credit score over 100 points in less than 3 months. I wanted to address what the news was telling people to do - as they usually get things WRONG and mislead us all into doing what we shouldn't do.

This news station actually got things right for once!!! They had a Top 10 list and so I will address each item in a different post. The first will be...

Know Your True Credit Scores and Reason Codes.

There are really only two ways to know what your actual credit scores are. The first, is to have a lender pull your credit which will show up as an inquiry on your credit report. And the second, is to go to myfico.com and pay to get your credit scores.

Keep in mind that the scores from myfico.com and the ones pulled from a lender will not be the same, but should be pretty close. Consumer credit scores pulled online are considered educational and are different from those used by lenders.

The reason codes provide valuable information by which you can identify problems affecting your credit score. They are the road map to improving your credit.

Mortgage lenders are required to give you a copy of your credit scores and usually the reason codes that go with them. Myfico.com only provides generic explanations of problems impacting your credit scores.

Free Credit Scoring eBook

ben.kruell@umfginc.com (The 720 Credit Guru) — Sun, 07 Dec 2008 18:55:00 +0000

Could Black Friday = Lower Credit Scores

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 01 Dec 2008 18:42:00 +0000

The day has come...and now it is gone. Black Friday is over and we should know what impact it will have on consumer confidence in the next few days.

Dubbed "Black Friday" in reference to red ink representing loss and black ink representing gain, today's start to the Holiday Shopping season is believed to be the day that retailer balance sheets finally cross over to profitability.

Here is what we know already. Black Friday is of special significance this year because consumer spending accounts for two-thirds of the U.S. economy. Spending was up 7% this year over last year with the average consumer spending $372.

Americans are shopping in full force, and we can expect economic optimism and a mild rebound in the stock market. Unfortunately for home buyers, this should also lead mortgage rates higher.

By contrast, if sales figures are weaker than predicted, we can expect talks of a recession to grow.

So what does this mean for you?

If you went out and bought gifts with you credit card you could be paying off those Black Friday deals well into the next holiday season.

Here's an eye opening example...

If you were the average consumer and spent $347 on your credit card, at a national average interest rate of 12.82%, and made only the minimum monthly payments...IT WILL TAKE YOU OVER 3 YEARS TO PAY OFF THAT DEBT!

What does this mean for your credit score?

In order for this example not to affect your credit score - you would need a available credit balance of $3,100 so you stay below the 10% mark. Calculate your debt to credit ratio by dividing your current balance by your available credit limit.

Anything over 10% could mean trouble for your credit score.

Black Friday and Cyber Monday

ben.kruell@umfginc.com (The 720 Credit Guru) — Wed, 26 Nov 2008 17:27:00 +0000

It has come to that time of year again...

Black Friday is only two days away and just after that is Cyber Monday.

Before you go out and blow your bank account on "deals" - there are a few things you should consider.

Having a game plan is an excellent idea before you get to the malls at 4 a.m. Here are the most important things to consider...

Who are you buying for? Don't load up on gifts for people not on your list just because you think you are getting a great deal.

What are you buying them? The worst idea is to go not knowing what you are going to get them. You will have a tendency to buy them something more expensive.

What stores do you need to go to? If you think you are going to get great deals then "get in and get them and then get the heck outta Dodge."

How much are you going to spend for the entire holiday season? Create a budget for this holiday shopping season and stick to it. Don't rush out and blow your entire budget on Black Friday if you aren't buying for everyone on that day.

The newest craze to many shoppers this holiday season is Cyber Monday. It is the online version of Black Friday. You need to use the same logic and have a similar plan when sitting behind your computer as you would if you were going out to battle the other die hard shoppers at 4 a.m.

There are also a few more things to consider when shopping online...

Most of us know not to give our credit card information on an unsecured website - http:// - but the point needs to be reinforced. Only give your personal information on secured websites - https://.

Print out receipts or save them to your computer and always check the return policy of the store you are doing business with.

If you are uneasy about using your credit card online, I have the best solution ever! Go to your local bank or a store that sells VISA gift cards. They work just like a regular credit card but have a limit that you can set. It is highly unlikely that the card number could be stolen online but if by chance it is, the dirty thief will only be able to use the remaining balance.

Hopefully you will take these ideas to heart and use common sense this holiday season when shopping the old fashion way on Black Friday and the new wave of shopping hysteria on Cyber Monday.

Debt Collectors Getting Nasty & Tough - Consumers Fight Back

ben.kruell@umfginc.com (The 720 Credit Guru) — Thu, 13 Nov 2008 16:59:00 +0000

NEW YORK (AP) - After several years in which Americans were buying stuff on credit they couldn't afford, a rapidly increasing number are complaining about getting harassed and abused by bill collectors.

Nearly 71,000 people filed such complaints with the Federal Trade Commission last year, roughly double the number in 2003. In addition, more than 14,000 complained to the Better Business Bureau. Thousands more lodged grievances with state and city officials.

"And it is going to get worse," warned David Polino, a Better Business Bureau expert on collection agencies and president of the BBB chapter in upstate New York. "With the recession, with the horrible credit problems, this is going to be off the charts."

See Full Article...

The Day Is Finally Here

ben.kruell@umfginc.com (The 720 Credit Guru) — Tue, 04 Nov 2008 16:50:00 +0000

The day is finally here for all Americans to exercise their right to vote.

The Times ARE Changing

ben.kruell@umfginc.com (The 720 Credit Guru) — Tue, 04 Nov 2008 16:24:00 +0000

From the election to the release of FICO '08 in January...

The Times ARE Changing!

FICO 08 Is Scheduled For Release - Prepare Yourself NOW!

ben.kruell@umfginc.com (The 720 Credit Guru) — Tue, 28 Oct 2008 17:02:00 +0000

Fair Isaac Corporation is scheduling FICO '08 for release on
January 10, 2008.

The primary reason for the planned switch to FICO '08 has to do with the forecasting powers of the new model. Fair Isaac believes that FICO '08 will do a better job at predicting the likelihood of default on a loan by making two changes to its existing model:

Authorized Users - An authorized user is a person that is permitted by another account holder to use their account. Normally, this situation applies to a family member who is trying to manage credit for the first time, such as a college student. The new scoring model eliminates "piggybacking" which allowed individuals with bad credit to leverage the payment histories of "stronger" credit card holders by becoming an authorized user on their accounts.

HOWEVER...I have heard from an industry expert that "piggybacking" was the problem with FICO '08. Fair Isaac needed to reconfigure the scoring model and deal with the issues it had with "piggybacking."

Here is what I was told. Fair Isaac is going to eliminate "piggybacking" for those accounts that show different addresses. Accounts with the same address will not be affected.

Here's an example.

Parents have a student going off to college who is on their credit cards. If the student changes their primary address they will not have the benefit of their parents account. If the student keeps their primary address the same as their parents, they will still have that account show up on their credit report and receive all of the benefits of that account.

Delinquencies - The second change in the scoring model has to do with payment patterns - especially those that are greater than 90 days late in making a payment. The FICO '08 model will be more forgiving to consumers that are in arrears in one area, but have a number of other accounts that are in good standing.

Your FICO score is determined by a number of factors. Mainly they are 1) Payment History, 2) Credit to Debt Ratio, 3) Credit Length, 4) Types of Credit, and 5) Number of Inquiries.

Operation Clean Sweep Video

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 27 Oct 2008 22:47:00 +0000

Here is a link to an interview with John Ulzheimer, credit expert, and CNBC's Carmen Wong Ulrich.

Operation Clean Sweep

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 27 Oct 2008 21:56:00 +0000

The Federal Trade Commission (FTC) is reacting to thousands of complaints across the country by consumers about credit repair companies. As a result, the FTC (along with 24 state agencies in 22 states) launched Operation Clean Sweep.

The FTC is charging 33 companies with violating the FTC Act and the Credit Repair Organizations Act (CROA). The FTC states that these companies made false claims they could remove accurate information from their credit reports. The agency also alleged that the defendants violated the CROA by charging an advance fee for credit repair services.

Here is the list of 33 companies that are being charged with violating the CROA.

Advantage Credit Repair, LLC
Nationwide Credit Services, Inc.
Clean Credit Report Services, Inc.
Successful Credit Service Corporation
Hargrave & Associates Financial Solutions
American Credit Experts
RCA Credit Services, LLC
Good Credit Company
Payneless Credit Repair, LLC
Lee Harrison Credit Restoration
Sherrye Mance and Tiffany Morris
Absolute/Advanced Credit Services
Credit Advisors
Executive Financial Credit Services
Federal Debt Relief Systems
Financial Link Services
7 Steps to a 720 Credit Score - NOT THE 720 CREDIT GURU!!!
Integrity Credit Fix, Inc.
My Purchase Power, LLC
Enterprise Technology Group, Inc. doing business as Ameritrust Financial Card
New Leaf Associates, LLC
Financial Freedom Resources, Inc.
American Credit
Credit Counseling of the First Coast
United Credit Adjusters, Inc.
i3 Solutions
Warren and Associates
Bigger & Better Business Solutions
Affordable Computer Mobile Repair
Clean Credit Report Services, Inc.
Life Changing Credit Repair Services
The Credit Physician
Creditmax Financial, LLC

Operation Clean Sweep also includes three FTC cases announced earlier this year: Home Buyers Consulting Network, Inc., Payneless Credit Repair, LLC, and Lee Harrison Credit Restoration.

How can you avoid turning credit repair into credit despair? Here are a few suggestions from the FTC:

Avoid any company that wants you to pay for credit repair services before they provide any services. It is against the law.
Avoid any credit repair company that will not tell you your legal rights and what you can do, yourself, for free.
Avoid any credit repair company that tells you not to contact a credit reporting company directly.
Avoid any credit repair company that advises you to dispute all of the information in your credit report.
Avoid any company that suggests creating a 'new' credit identity - and then, a new credit report - by applying for an Employer Identification Number to use instead of your Social Security number. That is against the law.

If you follow illegal advice and commit fraud, you also may be subject to prosecution.

Will Closing A Credit Card Account Help My FICO Score?

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 20 Oct 2008 20:39:00 +0000

I recently read a blog post that suggested that you should close credit card accounts if they are old and you don’t use them anymore. BIGGEST CREDIT MISTAKE #1. I went out and did some research on the matter and found this article from MyFICO.com.

The Question is: Will closing a credit card account help my FICO score? The short answer is no. We never recommend closing a credit card for the sole purpose of raising your FICO® score.

This may sound a bit counter-intuitive; after all, cleaning up your credit profile by getting rid of old or unused credit cards sounds like a good idea – and it may be from an overall credit management perspective. If you are tempted to charge more than you should just because you have more availability to credit, then getting rid of that temptation by closing some credit cards might be your best course of action.

However, your FICO score takes into consideration something called a "credit utilization ratio". This ratio basically looks at your total used credit in relation to your total available credit; the higher this ratio is, the more it can negatively affect your FICO score. So, by closing an old or unused card, you are essentially wiping away some of your available credit and there by increasing your credit utilization ratio.

It's a bit tricky, so here's an example:

Say you have 3 credit cards. Credit card 1 has a $500 balance and a $2000 credit limit. Credit card 2 is an unused card with a zero balance and a $3000 limit. Credit card 3 has a $1,500 balance and a $1,500 limit. In this scenario your credit utilization ratio looks like this:

Total balances = $2,000 ($500 + $1,500)
Total available credit = $6,500 ($2,000 + $3,000 + $1,500)
Credit utilization ratio = 30% (2,000 divided by 6,500)

Now, if you decide to close credit card 2 because it's an old card that you never use, your credit utilization ratio looks like this:

Total balances = $2,000 ($500 + $1,500)
Total available credit = $3,500 ($2,000 + $1,500)
Credit utilization ratio = 57% (2,000 divided by 3,500)

You can see that your utilization ratio rose from 30% to 57% by closing the unused credit cards.

Read the full article here…

Consumer Alert: Countrywide Credit Scandal

ben.kruell@umfginc.com (The 720 Credit Guru) — Sat, 20 Sep 2008 05:22:00 +0000

On September 10th, 2008 it was released that two million people who had home loans with Countrywide learned that they may have been the victim of Identity Theft.

Why - because their personal information may have been sold.

Countrywide admitted that a former employee sold unauthorized personal information to a third party over a two year period for more than $200,000.

The information included names, addresses, social security numbers and application information.

Thankfully the FBI found and arrested the employee, and reports as many as two million people may have had their data stolen. Countrywide is offering affected customers two years of free credit monitoring service.

If you have a loan with Countywide you are highly encouraged to contact them for the free credit monitoring service they are offering if they have not already contacted you.

Now the shocking news…Countrywide is only offering this service to primary borrowers on the loan!

Co-borrowers have not been notified that their information may have been sold and could be in jeopardy. Co-borrowers have not been offered the free credit monitoring service for the two year period.

If you are a co-borrower on a Countrywide loan your information is at just as much risk as primary borrowers and you need to contact them immediately and demand them to start monitoring your credit for the next two years for free.

Here is the information to contact Countrywide.

countrywidecredit.com

Countrywide Home Loans 1-800-763-1255.

creditguardhelp@experiandirect.com

Experian 1-866-369-0422

Experian Customer Care Team
PO Box 19729
Irvine, CA 92623-9729

If you do not receive prompt and courteous service from a Countrywide representative you are encouraged to contact Consumer Affairs.

Authorized-User Credit Card Plans Can Be Useful, and Abused

ben.kruell@umfginc.com (The 720 Credit Guru) — Mon, 18 Aug 2008 19:00:00 +0000

Written by Sandra Block
USA Today

In the world of credit reports, an "authorized user" is someone who is allowed to use another individual's credit card without being responsible for the bill.

When a credit card holder designates a child, spouse or other individual as an authorized user, the card holder's payment history appears on the authorized user's credit report. If the card holder has stellar credit, it will boost the authorized user's credit score. More than 50 million consumers are listed as authorized users on another person's credit card, according to Fair Isaac.

But in recent years, some credit-repair outfits have exploited authorized-user accounts in ways that Fair Isaac never intended. These companies arrange for people with good credit to "rent" their histories to strangers with tarnished credit.

"Some consumers were paying thousands of dollars to be added to someone's account to get a short-term increase in their credit rating," says Tom Quinn, vice president of scoring solutions for Fair Isaac. Fair Isaac officials were concerned that the practice, known as piggybacking, allowed consumers with bad credit to artificially inflate their scores.

In an effort to stop this practice, Fair Isaac announced last year that its new scoring formula, known as FICO 08, wouldn't recognize authorized-user accounts. Critics said the change would lower credit scores for millions of consumers, forcing them to pay more for everything from mortgages to car loans.

About 1% of consumers would no longer have enough of a credit history to get a score at all, according to a survey by Credit.com, a consumer website. Without a credit score, it's very difficult to qualify for a loan.

Lenders, meanwhile, raised a regulatory concern. They told Fair Isaac that they used FICO scores to comply with the Equal Credit Opportunity Act, which requires lenders to consider a spouse's credit history when weighing a potential borrower's credit risk. If Fair Isaac stopped recognizing authorized users, lenders said they wouldn't be able to use FICO scores to meet that requirement.

In response, Fair Isaac sent its scoring model back to the laboratory. Company analysts came up with a new version of FICO 08 that will continue to recognize authorized-user accounts but make it more difficult for credit-repair agencies to manipulate credit scores, Quinn says. Fair Isaac declined to provide details on how its new formula will close the piggybacking loophole. The company says it's working with the three credit-reporting agencies to get FICO 08 adopted as quickly as possible.

"This is great news," says John Ulzheimer, president of educational services for Credit.com, an outspoken critic of the original proposal. "I'm thrilled with Fair Isaac's willingness to take a second look at this."

A Credit-Building Tool

Ulzheimer believes the authorized-user designation offers a valuable way for parents to help children learn how to manage credit without giving them their own credit card. "It's like a credit card with training wheels," he says.

There's no downside for the child, because an authorized user has no liability for the account, Ulzheimer says. If the parent falls behind on payments, the child can ask to have the authorized-user designation removed from his or her credit report.

"When you have someone as an authorized user on a credit card, you give them an escape route," Ulzheimer says. "If you lose your job or get into a horrible financial mess, you're not dragging them down with you."

view full article

What Should We Do?

ben.kruell@umfginc.com (The 720 Credit Guru) — Sun, 17 Aug 2008 19:00:00 +0000

Courtesy of Warner Home Video.

Credit Information Reflects Responsible Financial Behavior

ben.kruell@umfginc.com (The 720 Credit Guru) — Sat, 16 Aug 2008 19:00:00 +0000

Most people have good credit. The average credit score is 682 according to Fair Issac.

Experience has shown that fiscally responsible consumers with good credit scores have fewer losses than individuals with poor financial track records.

Credit information provides an indication as to how a person manages their financial obligations. Research shows that people who manage their financial responsibilities also manage other important aspects of their life. Careful behavior leads to fewer accidents. The Texas Department of Insurance found that the average loss for people with the worst credit history is DOUBLE that of people with the best credit. Drivers with the best credit are involved in 40% fewer accidents than those with the worst credit.

In addition, homeowners insurance losses for people with the worst credit are triple that of people with the best credit.