12 DAYS OF MASTERING CREDIT DAY 4

DAY 4

THE CREDIT REPORT

Today is Day 4 of the 12 Days of Credit Mastering. The big three credit reporting agencies are the equivalent of the Wal-Mart of credit. They house an amalgam of personal information for virtually every consumer in the United States and abroad. They assemble information that might be relevant to prospective lenders and put them together on what’s called a credit report. Below we have detailed the type of information that should be found on a standard credit report.

1. Personal Information

Personal information helps the credit reporting companies to identify you and distinguish you from other borrowers.

·         Name, address, Social Security Number, date of birth

·         Previous addresses

·         Employment history

2. Public Records

The credit reporting companies collect information from court systems. This only includes judgments related to your finances (no traffic tickets, for example).

·         Bankruptcy

·         Tax liens

·         Foreclosure

·         Wage garnishment

3. Inquiries

There are two kinds of inquiries, there are hard pulls and then there are soft pulls. Credit inquires occur when you submit an application for a loan (tax refunds and cash advances will fall into this group), credit card, automobile, etc. These are categorized as hard pulls and can cost you on the average of about 3 credit score points. The other category is soft pulls. These are credit inquiries that can be found on your credit report when current creditors access your credit to make sure your credit is the same as it was when they initially access your credit. When you sign an agreement for your credit card you give them permission to periodically access your credit report anytime that they deem necessary. Finally your credit may have an inquiry on it from a potential employee.

4. Trade Lines

Perhaps the most significant information collected by the credit reporting companies, trade lines are records of your loans. They detail the vital characteristics of each loan. They may go by a variety of names depending on the credit reporting company, but the general characteristics in interest are:

·         Type of loan

·         Creditor name

·         Date opened

·         Date of last activity

·         Loan balance

·         Maximum balance

·         Account status

·         Comments

·         Your liability on the account

·         Amount past due

·         Minimum payment due

·         Amount of your last payment

On Day 2 we talked about the “credit mix” this includes the type of tradeline that appears on your credit. They are mortgages, installment, revolving and other (American Express).  In order to have the best credit score possible you must possess are good mix of these on your credit report.

Not On Credit Reports

The major credit reporting companies do not collect information on the following (At least not directly):

·         Bounced checks

·         Race

·         Ethnicity

·         Sex

·         Political views

·         Income

Some information is kept at the credit reporting companies, but not displayed on your credit reports. Negative items that have been closed out over seven years ago generally fall into this category. The data still exists at the credit reporting company, but is not included in most credit reports. For a free copy of your credit reports go to annualcreditreport.com. For more information on how to clean your credit contact us at 1-888-824-7622 or at The Credit Genius.

12 DAYS OF MASTERING CREDIT DAY 3

DAY 3

THE CREDIT BUREAUS

There are three major consumer reporting agencies or credit bureaus, Equifax, Experian, and TransUnion. These companies collect information from various sources, i.e. past or current employers, and provide consumer credit information on individual consumers for a variety of uses. FICO, the company who developed and maintained the FICO Score is not a credit bureau. While they compile your credit score based on data from the major credit bureaus, they do not collect credit report data on their own.

 Equifax is headquartered in Atlanta, Georgia. Experian is headquartered in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil. TransUnion is headquartered in New York, New York.

These are the organizations that provide information on individuals borrowing and bill paying habits. This assists those who extend credit to consumers to properly gauge the consumer’s credit worthiness; in addition it can help determine the ability to pay back a loan and can affect the interest rate and other terms of a loan concerning mortgages. It is the credit bureaus LEGAL responsibility to maintain accurate records, and it's your right as a consumer to ensure that they do just that, remember this phrase “for the people, by the people”.

These bureaus are all publicly-traded, for-profit companies who are not owned by the government. I inform my customers all the time that the credit bureaus do not have some special power over you. They are like McDonald’s, McDonald’s business is selling hamburgers, the credit bureaus business is selling your credit report. Yes they sell your information. This is the main reason that they do not want to easily remove inaccurate items that appear on your report. Imagine that they have thousands of records from each company, like a nationwide furniture company for instance. The credit bureau sends Macy’s their bill for keeping the record of all the customers. The furniture company does not deem it necessary to go through all the thousands of records to find out which ones are no longer account holders. Then the credit bureaus are not going to take the time to do it themselves. The more accounts the higher the bill which equals more money for the credit bureaus. Also they this means they have more names and addresses to sell to telemarketers and credit card companies.  To keep the credit bureaus from selling your information, you can opt out. You can also opt for a two-year period, renewing your request at any time in the future. Call 1-888-5-OPTOUT or 1-888-567-8688. You can also fill out the form online www.optoutprescreen.com to opt out of all credit offers sent to you in the mail.

When you engage in a credit transaction (loan, mortgage, credit card etc.) with a bank or any other creditor the information for each of these accounts will be reported to one or more of these CRAs (credit bureaus) by each creditor and each month each “credit item” will be reported in your “credit file” which is indexed under your social security number, physical address and full name.

Trimerger

If you are in the market for a new home you may come across the phrase trimerger or a tri-merge credit report. The name is exactly as it says three credit reports in one. This type of report is accessed in the majority of the instances by a mortgage broker, which uses the three credit reports to evaluate a borrower’s credit potential. A credit report is obtained from each of the three credit bureaus (Equifax, Experian, and TransUnion).

Middle score

The lender then takes your scores and uses the middle or median score to calculate things such as rates, interest, etc. For instance if you have a 720 on Equifax, 710 on Experian and a 699 on TransUnion, then the lender will use your Experian score of 710 to make the above-mentioned determinations. However they can access your credit report at a different date and your TransUnion can be a 760, your Equifax can still be a 720 and your Experian a 710. This means that now your middle score is now 720 on Equifax. Your middle score can change at any time, it is not set to a particular bureau but rather is based on what the scores are at the time that they are accessed by the lender.

If you want more information on how to improve your credit score contact us at 1-888-824-7622 or at our website The Credit Genius.

12 DAYS OF MASTERING CREDIT DAY 2

DAY 2

YOUR CREDIT SCORE

The credit score is probably the second most important number in your life, right behind your social security number. It’s ironic that they are intrinsically tied together for the majority of our lives. Whatever you are planning on doing in life then you probably are going to need to know your credit score. If you plan on owning a home, then you will need to know your credit score, purchase a vehicle, also you will need your credit score, insurance, student loans, even getting a job, your credit score will come into play one way or another.

There is some confusion over your FICO^® Score and your credit score. The FICO^® Score is a number that summarizes your credit risk. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan. This number is provided exclusively through the Fair Isaac Corporation. This number is used by approximately 90% of the lenders in the United States. FICO^® Scores range from 300 to 850, with the mean value score being right at 725. In all actuality, the most favorable credit rates are typically extended to those with scores of 720 or above.

Credit score is the number assigned to person that indicates to lenders their capacity to repay a loan. This number can be provided by a variety of sources and can fluctuate in number and calculation methods. Perhaps you may have checked your credit scores, then went to a car dealership or a mortgage loan officer and found these numbers to be vastly different. The reason being is that not everyone is using FICO^® Scores to calculate your scores in the products that they offer. The true way to get your FICO^® Score is to go to myfico.com. If you have a great FICO^® Score then you will have a good score no matter accesses your credit file. Although many new score calculations have come out, the FICO^® Score remains the most established and well-respected among lenders. Below we have broken down how FICO^® Scores are calculated to the nearest percentile.

35% of your score is influenced by account history (how timely you've paid)

30% to current account usage which is that which you have actually used (how much of your credit is being used, with greater amounts causing calculations to reflect negative).

15% to length of credit history (the longer an account has been established, the better)

10% to new credit inquiries and accounts

10% to the "credit mix" or variety of credit types present. (mortgage, auto, installment, etc.)

Remember to increase your score from 550 to 630 your strategy will be DIFFERENT from someone who is going from a 680 to a 720. Why? It is like a relay team race each guy will have to have a different strategy, because they each have a different starting point. Also depending on what you are trying to qualify for it will also take a different strategy. If you are going to try to get a mortgage or a vehicle they will have to completed different strategies to get the desired goal.

For more information feel free to contact us at 888-824-7622 or visit us at thecreditgenius.net.

Make sure to check back tomorrow for Day 3 where we will break down the different Credit Bureaus.

 

12 DAYS OF MASTERING CREDIT DAY 1

12 DAYS OF MASTERING CREDIT

Every Christmas each child anxiously counts down the days to when Santa Claus brings them joy, good cheer and every item at Toys R Us (right?). The same anticipation should be felt by us adults who decide to grab the bull by the horn and tackle the uncertainty of correcting their credit. A lack of credit knowledge can cause you to pay more than you have too, both in the future and now. Fortunately there is hope, over the next 12 days be on the lookout for a tip a day on general credit knowledge that will assist you in taking that first step to a new life, a new you for the new year.

DAY 1

WHAT IS CREDIT?

We all know that we need good credit, or at least want to have it, but what exactly is credit? The majority of us does not find out what credit is, until we get to college or decide to make a major purchase sometime in our adult life. There are several ways to augment your credit but before you do that, you need to know what credit is, how it functions and how it can hopefully help you, instead of harm you. Let’s take a deeper look at what exactly credit is.

Credit is your reputation as a borrower. I often tell customers that it is equivalent to your interview at a job. A potential creditor has no idea who you are. They don’t know how much time you volunteer in the community, how you make sure the office is never without coffee or if you read to your child every night before they go to bed. They know none of this and quite frankly could care less. They want to know how much financial integrity you have. Your credit informs them what is likelihood and the chance that you are going to pay your bills on time, month after month. They want to get personal with you and check all into your financial past.

There are many misconceptions around the information that makes up your credit and all things that pertain to it. However, the best thing you can do initially is to make sure that the information you provide on all your applications are accurate.

In the beginning credit was primarily used for making lending decisions. However in recent times, especially since the financial fallout that started in 2007, they use credit scores and reports for other areas of your life. Most importantly of all the people that access your credit are potential employers.  Also they use your credit reports in determining insurance rates and premiums.

THREE COMMON MISCONCEPTIONS ABOUT CREDIT

1: Credit bureaus are officially recognized entities.

WRONG: Credit bureaus are companies which are in the business of making money at your expense. They gather together stories told by their “friends” and tell them to their other “friends”, without consulting you whether or not these things are true. That’s one of the main jobs of the Fair Credit Reporting Act that is to make sure not what they CAN do but what they CAN NOT do especially to your detriment. A credit report is not even an official legal document; I mean your driver’s license carries more weight with the government than your credit report, at least that’s the way it was meant to be. It at the beckoning of the “machine” which is corporate America it has caused many much grief, anguish and has even pushed some to suicide. It has more influence but not as much substance as a two-dollar bill.

2: Items on your credit report are required to remain for 7 years.

WRONG: This has been misconstrued due to the relation with Chapter 7 & Chapter 13 bankruptcy filings, nothing, I mean absolutely NOTHING is REQUIRED or should I say mandated to stay, other than that which can be ACCURATELY verified.

3: I have good credit because I pay my bills on time each month

WRONG: You have to understand there are a lot of factors that go into determining your credit score and one of them is your debt to credit ratio. You have to have this under control and understand what it is. Your debt to credit ratio is your debt that you have versus the total available credit that you have. Let’s say you have a credit card with a $10,000 limit & you owe $2500 then your debt to credit ratio is 25%.

In the days to come we will explore more of these topics in detail and others such as how your credit score is determined, your rights as a consumer and good debt versus bad debt. For more information on how to start your credit makeover visit our website. The Credit Genius

 

Child's Play

Remember the 80s and 90s these were the days of horror movie killers? They invoked fear with just there mere presence. There was Freddy, Jason, Michael Myers and who could forget Chucky. Chucky was a doll that was possessed by a famed serial killer Charles Lee "Chucky" Ray. Although Chucky was originally a toy, once he was overtaken by Ray he didn't play any games & had a crude sense of humor. In the last three years, there have been 57,000 cases of child identity theft reported to the Federal Trade Commission (FTC). A new report from All Clear ID estimates that one in 10 U.S. children are victims. Apparently thieves aren't playing any games and posses a crude sense of humor as well. Imagine your child trying to start a new life with their spouse or in their freshman year of college only to find that their identity has been stolen. Furthermore upon further investigation they find out they are in hundreds or even thousands of dollars worth of debt. As responsible adults of course we can shred unwanted credit card offers, create enigma passwords to protect ourselves but imagine if its our children that are the target of these identification sharpshooters. Unfortunately this is no Hollywood tale of horror fiction, as in most cases the crime is not detected to several years later. Now thats scary! Here are some tips to stay safe and secure.

1. Keep your children's important documentation in a safe deposit box or in a safe place at your home. This includes birth certificates, social security cards and medical records.
2. Contact Equifax, TransUnion and Experian to request a free copy of your child's credit report. The will probably ask for you to prove your relationship to the child with a birth certificate if your child is not of legal age to request their own reports.
3. Once you receive the credit reports, carefully review the credit report for any errors. If some errors are located then promptly contact the FTC (www.ftc.gov), Internal Revenue Service (www.irs.gov) and the Internet Crime Complaint Center (www.ic3.gov) to your report your child's identity theft. Keeping an eye on your child's identity may be a full time job but the damage that you can prevent will be well worth the effort. For more information on opening a safe deposit box, contact your local bank or credit union.

Black Friday Is Coming To Town

I was reading over the lyrics to Santa Claus is Coming to Town and decided to write a blog dedicated to creating a better shopping experience on Black Friday.

1. You better watch out

Be careful of your surroundings when out shopping. If you are making major purchases you may want to take those items home as opposed to leaving them in your vehicle all day. Make sure to hide all packages out of plain view of those with less than good intentions this holiday season. Finally at all costs avoid going alone.

2. You better not cry, You better not pout
Guess what?!?! Your favorite item may just be sold out. Keep a good attitude about it and move on to the next item.

3. Making a list, And check it twice

Before heading out to brave the elements, traffic and stand in line at Starbucks (you didn't know Caffeine was mandatory for Black Friday). Make a list of items & break them down into three categories that you plan to snag. From got to have, must haves and just want to have. Prioritize the items and try to map them by location as well. Don't forget to coordinate with your fellow shoppers to maximize time and avoid backtracking.

4. Who's naughty and nice

There is the old adage that says it pays to be nice. I can attest to this from personal experience. My wife and I have been shopping several times when other customers have offered us coupons or to skip ahead in line. Also there have been times where we have gotten free coffee or food while waiting. You never know who's watching so it's better to be nice instead of naughty.

5. He sees you when you're sleeping, He knows when you're awake

You have to ask yourself is it really worth it to wake up THAT early? The answer lies somewhere in how early THAT is. Take into account that most of the best deals come in limited quantities. Then calculate the sleep that will be lost plus gas used times elbows thrown (just kidding I hope) to see if that one deal is really worth it. If you deem that it is indeed worth it, then set your alarm clocks and get ready to participate in the melee, madness and methodology of America's biggest shopping day.

Remember Black Friday is coming to a town near you, so be smart for your savings account sake...

Name Your Price

A good name is rather to be chosen than great riches, and loving favour rather than silver and gold. (Proverbs 22:1 KJV)

I ran across this Christian proverb and it made me think. What's in a name? Entrepreneur Magazine declared that naming a business is by far the hardest task for a startup. I know personally that it comes with a certain amount of pressure to "get it right." Names are important and they are an essential part of our life. When we think of certain names, a particular thought whether negative or positive comes in our mind. A good business name is utterly important these days especially in the wake of scandals such as Enron & Bernie Madoff. Unfortunately, these and many other individuals chose to "sell" their good name away. In light of all the social media campaigns, email blasts, radio and print advertising, word of mouth has still been my greatest and most lucrative form of advertising. This doesn't mean that I don't believe the others work but there is something about a friendly recommendation that has a way to sway ones opinion. Sit back and ask yourself what is my name worth to me. Then consider what you are willing to do to maintain or to clear up your name.