What if your credit score was 1000?
What if your credit score was 1000?
I was invited on a Lansing radio show last week. This was the interview…
Michael Patrick Shields: What if your credit score was 1000? If I had a credit score like that could you get anything you wanted?
The Credit Guy: Well the scoring model does not go up that high, anything above 760 you can have whatever you want and you get the best rate available.
Michael Patrick Shields: You can imagine why people are disturbed by this credit number because when you and I were younger there was no such thing as credit scores.
The Credit Guy: True, Yes.
Michael Patrick Shields: Now we’re judged immediately by the Credit Score Number, this mysterious number that comes from, we don’t know where…
The Credit Guy: Right
Michael Patrick Shields: …and they’re different credit reporting agencies and this number controls your life.
The Credit Guy: It really does people don’t realize how much this number of impacts insurance rates on home and auto. Consumers credit card their mortgage on their auto loans. It’s going even further where employers are looking at your credit report for job.
Michael Patrick Shields: I disagree with that.
The Credit Guy: When you understand the scoring model, I think you understand why it’s important. I feel like if you take control of your credit it can work for you.
Michael Patrick Shields: That’s the tricky part though.
The Credit Guy: Yes
Michael Patrick Shields: because people sometimes are in for a whopper of a surprise when they look at their credit which by the way is it free to do that?
The Credit Guy: Yes if you go to annualcreditreport.com you get one free copy of your credit report once a year.
Michael Patrick Shields: OK so obviously that’s sponsored somehow by somebody.
The Credit Guy: It is federally mandated.
Michael Patrick Shields: Good, so they look at that number and they ask how do I get that number and then what happens.
The Credit Guy: They usually start to get a little more interested in how to improve there credit score.
Michael Patrick Shields: Can they get look at why they received a 530?
The Credit Guy: There are four reason codes, if you look at the credit score if you get a credit score and you don’t necessarily get one from annualcreditreport.com usually if you want a FICO score you have to buy it.
there are four reason codes why your score wasn’t higher and that’s really the first place I tell people to go on how to improve their own scores. Look at those four reason codes and it’ll tell you how to improve
Michael Patrick Shields: what sort of reasons would there be?
The Credit Guy: Revolving balances to high is a common one.
Michael Patrick Shields: Meaning you’re never paying down the principal.
The Credit Guy: If you’re running high balance and it becomes more and more important with the changes going on at the federal level with Fannie and Freddie.
Michael Patrick Shields: Fascinating now that statement it says if you make the minimum payment on a consumers credit card you will have it paid off in thirty-seven years and you’re a seventeen times the amount that you borrowed.
The Credit Guy: So you go to McDonald’s and wind up financing that for thirty years. It just doesn’t make any sense. That’s why I feel like if you educate people about the importance of their credit score people pay more attention to it but it’s not hard to get a good score you just have to have the right behavior.
Michael Patrick Shields: How late do you have to be for it to show up on your credit report? it seems like a threat.
The Credit Guy: Usually consumers have got to be more than 30 days past due for creditors to reporter 30 days passed due and I find that if you pay your balance before the reporting date your score will go up naturally because you’re reporting a lower balance on your credit accounts.
The Credit Guy: When I say the reporting date, I mean the date that the creditor shared that information with the repository. The repositories are the three major collectors of the data in the country. TransUnion, Experian, Equifax. All the creditors send the information from their database to the repositories on one day and that day usually is right around the 5th of the month, but it’s different for every company. I would tell you to check with your credit provider to find out exactly when your reporting date is. It is best to pay your balance down before that date, that way you’re reporting a lower balance when they’re reporting day goes to the repository.
Michael Patrick Shields: That also depends when they give your statement.
The Credit Guy: Well it’s not necessarily the statement date. It could be. The way you find out what the reporting date is you can call in and ask the creditor. They will tell you when the reporting date is. You can look on your online statement every month. As the month goes by you get more and more things on your current balances. When you login the next day and check your statement online all the current charges will be gone. the day before was the reporting date.
Michael Patrick Shields: When you make an offer in compromise with the credit card company for a less than foll balance it doesn’t damage your credit score?
The Credit Guy: It depends on how the creditor reports it. If you’re closing the account and you settle for less than full balance (the score doesn’t look at the words it only looks at if it’s close)
You’re better off than having it with a balanced and still open. If you have an error or if you made a mistake or have a collection you’re better off paying that off and then letting that date sunset into the past. As time goes by.
Michael Patrick Shields: This is where you would call and say “look I owe you five, I give you 2500 right now” we call it quits.
The Credit Guy: I tell people start of ten percent of the balance. If you own a thousand bucks offer the collection company a hundred. The Collection company bought that debt for pennies on the dollar. Start at ten percent, usually you will work your way up to about fifty percent, Which is what you said
Michael Patrick Shields: Isn’t it better to pay the company directly than the collection company?
The Credit Guy: Whoever holds a debt. If they’ve already sold it to the collection company you probably have to deal with them but you want to make sure that their previous creditor reports it as zero. You don’t want to have the balance reporting on both accounts. Start negotiating hard and it’s all up to you on how much you pay.
Michael Patrick Shields: …and that’s how you deal with collections how do we deal with you? TheCreditGuy.tv. Obviously we’re barely scratching the surface sure mysterious fascinating and have all the answers thanks for having created will hear you in Kalamazoo and statewide this morning with Michael Patrick Shields
If you want to see more videos about credit and credit scoring check these out at www.thecreditguy.tv. If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.