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The 411 on FICO Scores and How to Improve Them!
Presented by Tiffany Cross, Credit Repair

Highest Rated Financial Experts Webinar EVER!

The 411 on Credit Scores and How to Improve Them

Credit expert Tiffany Cross's 16 years of experience came shining through with valuable insights on how anyone can improve their credit scores while addressing common myths and more. Here’s what the audience had to say: 98.9% of the attendees rated this session as EXCELLENT! 

Whether you have a solid credit score, or not, this session is sure to teach you things about credit scores work and how to maintain them. See below for an edited transcript. 

Highlights include: 

  • The 5 factors that determine your credit score
  • Tiffany’s recommended website for monitoring your credit score 
  • Monitor your credit score monthly 
  • How many credit cards you should have to improve your credit score
  • How much of your available credit line you should use
  • How credit inquiries can negatively impact your credit score
  • How long bad credit instances will stay on your credit history
  • How to help your child build a credit history

Attendee Comments: 

Kathleen: One of the best webinars I've ever attended. Tiffany is knowledgeable and professional. She is able to articulate the information. Thank you. 

Robert: One of the best yet. An excellent session to share with clients. Very practical information that was presented in a useful way.

Mark: Best presentation that I’ve seen in 2 years.

Lynn: Best presentation that I’ve seen in 36 years.

Maria: GREAT information--not to mention scary!  But everyone does need to know how the industry really works...  Thank you for hosting Tiffany!

 

TRANSCRIPT (The transcript has been edited to highlight key concepts and make it more readable).

Tom Dickson (:05)

Well, good afternoon, everyone. It's Tom Dickson here with Financial Experts Network. I've hosted over 400 national webinars over 11 years that have drawn over 140,000 financial advisors with thought-leaders like Tiffany Cross, Michael Finke, Harold Evensky, Bob Keebler, Larry Kotlikoff, Jeff Rattiner, Mark Kantrowitz and Kurt Czarnowski. As a bonus, many Financial Experts webinars provide CE credit for financial advisors who hold the following designations: CFP, RICP, CLU and ChFC.

Upcoming webinars: Please visit www.financialexpertsnetwork.com  to see what’s coming next.

I have always wanted to do a session on credit scores and everything around credit scores and FICO and delighted to have Tiffany Cross with us here an expert who's been in the field for 16 years, she and her firm have helped 1000s of people over the years. And I don't know about you. But credit scores have often been a mystery to me, and I think too many of us so we have someone who can explain kind of the inner workings of it.

Tom (6:26)

We not only have Tiffany on screen, but we also have Joe Damo from my sponsor, Sun West Mortgage.  

I want Joe to share a little bit of a refinance story at the end of Tiffany's presentation. Joe and I have worked together for over 10 years. Joe works with financial planners, advisors, all over the country, hundreds of them, and is very well regarded. The refinance story involves one of our financial planner members, Michael, who's agreed to come back and share more of it. But I just wanted to give you a preview. According to Michael, Joe and his team did a great job helping him (Michael) refinance his mortgage from a 6% rate to 2.8% or so. Michael and his wife will save a lot of money. Even though it was challenging, because guess what Michael is self-employed, Joe go it done.

Joe, thanks for joining. I think you and I will go off screen and we'll let Tiffany have the stage.

 

Tiffany (7:55) 

Thank you so much, Tom, thank you so much for the introduction. Hello, everyone. Boy, what an interesting year last year was hopefully we're all off to a crazy amazing start to the 2021 year. I wanted to briefly review a little bit about my credentials. I know the screen was up briefly, but I wanted to explain this is my 16th year in the credit restoration industry. We have helped 1000s of clients nationwide. We're located here, excuse me in Southern California. However, like I said, we work with clients pretty much all over the nation. One of the things I can mention to you probably is that part of the reason why we're considered a reputable company in terms of a great resource for not only mortgage lenders and bankers and realtors and financial planners and bankruptcy attorneys and Family Law Attorneys, is because only 3% of all credit repair companies nationwide are registered with the Department of Justice. And that is a requirement my friends. Sadly, if you've been in the financial world for any length of time, the word credit repair can sort of give you a little bit of a flinch. And so sadly, that's something that our industry is working awfully hard to change. But I can proudly say that we have been in the industry regulated by the DOJ and of course we are approved every single year. So, wanted to mention that. I wanted to dive a little bit into the difference between debt settlement and credit repair because I have financial planners nationwide that really don't understand the difference in our industry is kind of people say credit and it has a broad-brush definition for many people. And so, I wanted to just really explain that debt settlement and credit repair are literally polar opposite industries. So, a lot of people are under the impression that when they're referring to a credit repair company, that it's all in one and really it is not debt service. settlement is essentially one solution to individuals or for individuals that are currently during a financial hardship. So, they're in the financial hamster wheel, perhaps they're in debt 30 4050, sometimes $100,000 worth of personal debt. They're making their payments sometimes on time, possibly not on time, but they're just not seeing an end in sight. And so, for those clients, many of those clients will turn to either a bankruptcy attorney, or a debt settlement company, looking for a solution to help dive out of that current situation. debt settlement companies, they range in all types of different types. So, I don't want to speak outside of my knowledge, but debt settlement. One of the reasons why we sort of don't play well in the sandbox together is that while a consumer is in a debt settlement program, they're still getting 30-day lates on their credit report, even if they're making monthly payments on that debt. Oftentimes, we see clients in debt settlement programs that are still getting wage garnishments and judgments and things like that filed against them. So, there's pros and cons of debt settlement companies, there's, you know, good ones, and bad ones, like any type of industry. But just preemptively those are the types of clubs, you're still in the financial hardship, essentially, when you're in a debt settlement program. Credit Repair is the afterwards where the plastic surgery after the financial hardship. So, when we're working with clients, it's typically somebody that's about a year from their last missed payment. When I'm working with my financial advisors, you know, a lot of times people are under the misconception that, that credit repair is not your person, it's not the person that you deal with daily, because let's face it, if you're investing money for individuals, many of those individuals operate with financial savviness. How are what we don't often think about is that credit repair is really your person, it could be anyone that has gone through a divorce, a life event, such as a catastrophic medical issue. For example, we've got some clients that have acquired $200,000, of excessive medical debt, and things like that. So, it could be also business partners who have dissolved business partnerships and disagree about the finances and things like that. So, credit repair isn't always the person you don't want to do business with. So, I just wanted to mention that. And then of course, we'll talk a little bit more about how credit repair works, possibly at the end. But this, this slideshow for all intents and purposes is just to really understand the core foundational parts of what credit is all about. I want to start by describing the term credit. It's described and defined as the granting of money or something of value in exchange for a promise of future payment. I've mentioned that because right now we see that the word credit application appears on things like mortgage applications, rental applications, frankly, and auto loan applications. And the reality is that the word credit is often overused. When someone's applying for a mortgage and they see the word credit application, they get confused by the fact that their income for example, although as asked for in a an application for a mortgage, it's not used to determine a FICO score. So, I really am sort of an advocate for consumers that the word credit is not misused or overused. Today's focus is going to be on you know, who gets credit and why. Why do people get credit? And then we're going to talk a lot about the different factors of the FICO score and why they're so confusing. Hopefully, we can put some answers. We can put a pen to the paper, and we can answer some of your basic questions.

 

Tiffany (14:55) 

The major questions that were asked are who are the three main credit bureaus and what in the world do the credit bureaus have in common with their Isaac Corporation? Although this seems like a basic question, you would not believe how many people are not aware of the fact that TransUnion Experian and Equifax are of course the three major credit bureaus, but not very many people understand what the connection is between the credit bureaus with Fair Isaac Corporation otherwise known as FICO. So, TransUnion, Experian, and Equifax are private companies individually owned, other than the communication occasionally, with different products and services they offer, they really do operate very independently of one another. The credit bureaus are simply the places in which data is stored and reported. So, for example, credit card companies, banks lending institutions all report to TransUnion, Experian and Equifax and they do so by subscription. So, in other words, they pay money to report their monthly data to the three credit bureaus, the three credit bureaus then supply Fair Isaac corporation with the information that's been provided to them to the data furnishers. And then at that point, fair, Isaac Corporation grades the consumer by giving them and applying their algorithms to give them a FICO score. So, that is something that clients get confused with all the time. They go online, they jump on TransUnion website, experience website, they pull a credit report, and they don't realize that the credit report that they're pulling is quite different scoring wise than what Fair Isaac Corporation provides. And we'll talk a little bit about the different scoring modules a little bit later. I also wanted to view the how the credit scores are determined.

 

The five factors that make up your credit score are simple.

You'll find that when you're talking to consumers, however, there's a lot of confusion about why the fact that the payment history only incorporates about 35% of the score, when in fact it is the most important section, it's not the only section of the FICO score. So, I wanted not only mentioned that it is 35% important, but I thought I'd mentioned a couple other key points.

When you miss a payment when you're late 31 days is an execution of a late and not only a 30 day late on a credit report, when you see that hit a credit report, you will typically see that a consumer will lose about 60 to 80 FICO score points when that late payment first hits the credit report. It's a huge, huge deduction in the end immediately on the FICO credit scoring module, those late payments stay for seven years. One of the biggest misconceptions consumers have is that if they bring the account current after the late payment that their score adjusts upward, when in fact it does not. So, the late payment will stay for seven years. FICO tells us that the first four years of the seven are the most critical meaning the most damaging to a consumers report. So, again, 60 to 80 points is the expected number of points lost for just 130 day late and five who doesn't care if you've been in a student all your life that 130 day late can absolutely drop you 60 to 80 points, which is super unfortunate. The next section is your utilization of credit or outstanding debt. I like the term utilization of credit because I think people get a little bit confused. utilization of credit simply just means how much has a consumer used of their available revolving lines of credit, not installment loans. So, we're going to talk a little bit about installment loans later. But when we talk about revolving lines of credit, we're referring to credit cards. So, realistically, the appropriate amount of credit cards that a consumer should carry are anywhere from three to five. If a consumer has three to five open credit cards, all within 25 to 35% utilization, then you're going to see that 30% of the FICO score is going to be positively impacting the consumer. Now, that being said, that is not an average of three to five cards, it's per trade line. So, each credit card should be kept no more than 25 to 35% of the available credit limit. And that is something that is not taught in high schools. Unfortunately, and a lot of people will sit in the 680 FICO score ranges with perfect payment history and not know why their credit or FICO scores are not adjusting upward. And it's truly almost always the fact that their credit cards are either above the optimal amount, or frankly, they're not using them at all, which we will also talk about shortly. The credit history or length of credit history encompasses up to 15% of your FICO score. So, simply put, it doesn't help a client or a consumer when they pay off an account and close it. Many people are under the impression that once they've paid off something, that they're, you know, they should close it, and that they would remain in a positive standing. And unfortunately, once the credit card is closed, or once the car payment has been made and finalized, the account is no longer reporting on the credit report as a positive, open installment or revolving line of credit. So, the key is, pay them off, pay them down, but never close a credit card

10% of your FICO score is the credit diversification or credit mixture. So, we like the word diversification because people are often confused by does it matter if they're retail cards? Does it matter? If they are? If I have five car loans, but no credit cards? The answer is yes, it absolutely does. You've got to keep the three to five credit cards open; you know diversify your credit mixture or diversify the types of credit. And then you will see that 10% of your FICO score will in fact be positively reported. And finally, my favorite section of the FICO score, which is the pursuit of new credit, otherwise known as credit inquiries. Shortly we're going to talk about the difference between a soft inquiry and a hard inquiry and when to avoid doing them. Now, the elephant in the room is who determines the factors of a FICO score. Right? So, we all know that we all live and die by this system called FICO. We're not educated about it in high school. We're not educated about it oftentimes in even college. But unfortunately, it's a system that we all live and die by. And often we do it wrong unintentionally, and then learn by consequence, how the FICO score works. So, the truth is that the FICO score is designed and often in favor, of course, to lending institutions. So, that is why the idea of what makes good FICO sense, and what makes excellent financial sense are often not in agreement. So, keep in mind that many of the things that we're going to review today are going to make absolutely no sense at all regarding things, you know, why would I pay off a car and then get penalized? Well, because lending institutions want you to have a car loan. So, we'll talk more about that. But if you understand that the FICO score factors are created in favor of the lending institutions and not in favor of the consumer, then you'll have a little bit more understanding as to why. Time for our first polling question.

Tom (23:44)

Let me read the question for you. And again, hopefully you can see it but what is the second largest component of the FICO score?

  1. the payment history
  2. the credit inquiries
  3. diversification of credit
  4. utilization ratios or outstanding debt.

77% answered utilization rate ratios, which is the correct answer.

Tiffany (25:42) 

Utilization of credit, how does credit card utilization work? And what are the best practices regarding the use of credit. I mentioned previously that the second biggest component of the FICO score is in fact a consumer’s credit card utilization. But I wanted to address the best practices relating to credit card use. So, the key is, again, the three to five credit cards actively being used. When you are not using your credit cards, and they're sitting in your wallet. There, you're what we call credit avoidance. And when we are dealing with credit challenged clients, that can be especially damaging, it could keep people from even having, frankly affect the score at all by simply just not having any sort of credit card utilization. If you are 720 or higher in the FICO score calculation, it is a little bit more forgivable to have credit cards that are open and not used as often. It's more for people that are struggling with the FICO score to acquire, you know, cycle points, for example, you do need to use the cards regularly and make on time payments. I cannot tell you how often we give the same coaching to our clients and we tell them three to five credit cards, make active payments, make sure you never exceed 25 to 35% usage. And what ends up happening is they max out the card every month thinking well I know she said not to do that however, I'm paying it off in full every month. Again, both ends of that business practice are not good for clients, or consumers. So, what you really want to do make on time payments, use the cards regularly avoid interest though by doing what I call the every other month payoff strategy. So, best practices for someone that's credit challenged, that's trying to gain FICO score points quickly and aggressively are to make maybe two minimum payments of you know, one minimum payment one month, the following month a minimum payment. The third month however pay it off in full. That way you only had two months of interest to deal with and to have to pay couple months of non-use is okay. But every few months, you need to use the cards, keep them active and show on time payment history, when you pay off a card in full every month, and you are credit challenged, that defeats the purpose and can damage the FICO scores. Now again, just to remind you, the rules changed a little bit for clients who have 725 go scores and higher, I do have a ton of business owner clients that use their credit cards too, strictly for business, of course, air miles, things like that, they already have excellent credit. So, they just maxed them out pay them off in full every month. And of course, they're not penalized. So, really the 25 to 35% usage on time payment. Avoiding credit avoidance is really for clients who are having credit challenges. Alright, installment debt, what is installment debt? And how is it different than revolving lines of credit. And installment debt are things like student loans, car payments, sometimes we see Home Improvement loans, solar, things like that installment loans, they play a little bit different role in the FICO score algorithm. And that every month that a consumer is paying that debt, the amount that you owe drops to the amount that's available to you. So, for example, when you pay the final payment of your car, let's say it was a $32,000 car loan, at the very end of that loan, the account is considered paid in full, therefore, it completely closes that installment loan and therefore damages substantially the FICO score. So, we tell our clients if you are even six months out from being finished with a car loan, super important that you do that six months prior to purchasing a home because we've seen people fall right out of escrow because they lost 60 to 80 points on their FICO score calculation for doing something positive which is to paying off a loan. So, again This is a FICO score sense tip, not a financial sense tip, and you'll find that Dave Ramsey Suze Orman, all the Gurus that a lot of the consumers tune into every day are advising differently, i.e., to pay off their loans. But if you do that the FICO score will absolutely suffer, which is unfortunate.

When you are credit avoided, and you have no established credit, you will lose your FICO score completely. If you have just been kind of off the radar, you've been using the Dave Ramsey strategies and you are paying cash for everything. Although that might be financially wise. some could argue would be others will say not. If you live in Southern California or anywhere, where home prices are very high, unless you have mattress monied that amount of money, you will absolutely need your FICO score. So, again, being credit avoided, can be extremely damaging. I also want to talk about young people are 16, 17 or 18 years-old that are trying to establish credit, they will have no FICO scores unless they begin the credit journey. And we'll talk about a little bit more about that shortly. Okay, the truth about credit inquiries, how did the credit inquiries really affect your score? Now, I cannot tell you how many times I have personally called my utilities companies, or I've called to establish my cell phone, things like that. And they'll say we're going to run your credit, but it is a soft inquiry, you don't have to worry. The truth is the only type of soft inquiry is when a consumer pulls their own credit through a credit monitoring resource, whether they go to Credit Karma, free credit report.com, Experian, any of the websites, you can pull your own credit, of course, most of the websites will require payment. But it's a soft inquiry, it will never affect your FICO scores. But applying for credit, you know, anywhere. And even utilities are a hard inquiry. So, it's a misconception that you can do that and not be penalized. The average amount of points that a consumer faces when they do pull their credit is anywhere from three to five points. I will tell you that inquiries only stay on a credit report for two years, whereas all other types of derogatory information stay and reports for seven. So, the hard inquiry affects three to five points stays on the report for two years. And typically speaking, about three to four months after the hard inquiry. It's only fractions of a point of a consequence. So, just to be clear, Hard and Soft inquiries, the soft inquiry is truly the consumer pulling their credit just to see how their payment history looks online. Okay.

Why are there so many FICO scores?

Now this is a question that that we get from even the most knowledgeable people in our even our industry will say, well, mortgage lenders, Why are my clients calling, stating that they're ready for the mortgage, and then we pull credit, the scores are super different. So, the real true accurate FICO scores come directly from Fair Isaac Corporation. So, my fico.com is where you want to go to see your true FICO scores. When you go to fair Isaac's website, you and you pay the I think it's 35 to $40. Now, you're going to receive a report from all three credit bureaus, and you're going to receive nine different versions of your FICO score, on average. And yes, I said nine, there's an auto FICO, and a mortgage FICO, and a bank card FICO, installment FICO, many, many variations of the FICO score, and they're all utilized. So, my fico.com is where you'd want to go for that. A lot of people tell their clients to go to annual credit report.com for the free report that you can get as a consumer, but you must remember that annual credit report.com is free for the content, but the scores you still must purchase. And so, it's much better to go directly to my FICO because if you're going to buy your report and your scores at least get all the FICO scores that are going to be utilized. So, again, my fico.com if you go to TransUnion or go to Experian or go to Equifax and you buy a report, you must make sure that the report that you bought is a true FICO score because most of the websites like Credit Karma are going to offer you what we call a vantage score. That's truly the name is called Vantage, otherwise known as a consumer report. Score. Normally, the Vantage score is much higher than the actual FICO score, which is why there's so much confusion as to why the FAKO score was low when a lender pulled it. On average, the next question we get is always how many points different is it? We've seen it vary 40 points all the way up to 100 points. Keep in mind, the Vantage score absolutely cares more about mortgage payoff. So, for example refinances of a mortgage and things like that will drop the Vantage score much more than the actual FICO score. So, again, if it's not a five go score, it's a fake Oh, score. I think I made that up, by the way. Or at least I'll pretend I did. Okay, collection accounts, you know, these are probably one of the hairiest, things that pop up on credit reports, a lot of my bankruptcy attorney referral partners CPAs financial advisors, call me with this very question, What do I tell my client, he or she has a collection account. And this is the scenario. And by the way, it's important to do that with a credit expert, because there's so many different variations of a collection account whether they're with if the collection account is still with the original creditor, whether it's gone to a charge off status, whether it's a charge off account with a balance without a balance, if it's with a collection attorney's office, if it's beyond the statute of limitations are still within the debt statute of limitations, so many different moving pieces to how collection accounts should be resolved. But, by definition, a collection account is simply an account that has gone without payment is now officially in the process of being reported on a credit report and is now collection. So, at that point, traditionally, we have found that, of course, penalties and interest are attached to the original principal balance, it is now reporting on the credit report, oftentimes as a duplication, in that the new collection company has renamed it, given it a new account balance and account number, and impacts the score sometimes up to 100 points. When the account is sold, we do often see that that report will be affected 234 times by the same collection debt. So, clearly, that would be a violation of the Fair Debt collections Practices Act, and the Fair Credit Reporting Act, in many cases, easy to have removed.

What happens when a consumer pays off a collection balance, versus settling for less than the amount owed? And I think this is one of the best tips I can provide. When you pay a collection, whether you pay the full amount, or a negotiated amount, the scores are never positively impacted. And I almost never use the word never. So, I just want to be clear that it's very, very annoying 95% of the time, when you pay a collection, your scores are going to drop. And the reality of why is because it reactivates the date of last activity on that credit profile. So, a collection that was perhaps five years old. Now, when you pay it or settle it, your scores drop, because the payment date of 2021 is more harmful than the payment was helpful. So, it may be a necessary part of the process for loan approval, though. And again, it's super important that that clients realize that if they pay that collection, then they need to expect that their scores are going to drop. That's where a company like ours would come in. And of course, dispute the collection as a paid collection and have an 80 to 90% chance of deletion. Oftentimes consumers can negotiate a pay for deletion with collection companies. But just know that it's rare that a collection company would agree to those terms. Five, six years ago, that was still common practice. Okay, next polling question.

 

Tom Dickson (39:17) 

The next question is what is an example of a soft inquiry?

a. car dealership

B. mortgage inquiry

c. establishing utilities

d. the consumer credit monitoring website

The most popular answer was 85%, consumer credit monitoring websites.

Tiffany (41:13) 

Excellent. You have A+ students listening today. The top answer was the correct answer. Okay, so we talked a little bit about financial wisdom versus FICO wisdom. And, you know, I think at the end of the day, you know, in my opinion, I think it's intentional that this information isn't taught in school. I don't know, maybe that's the conspiracy theorist in me. But what we do know is that clearly some of the stuff that we have to abide by doesn't make any sense. So, for example, paying off large payment on a car, dropping my score 60 to 80 points, if not 100 points. doesn't make any sense. Why would that happen? Well, of course, we talked about that, you know, auto dealerships, and auto finance companies, and all the all the big, big companies out there, they're paying big, big money to report to FICO have made it clear that listen, we want part of the algorithm to include diversification of credit. And of course, we want to make sure make sure that consumers are you know, are not rewarded for paying off credit debt and having and paying no interest. So, that is part of the reason. When we talk to consumers about financial wellness, versus FICO wellness, we really need to be talking about what are your goals? What are you trying to accomplish, because if you're not trying to buy a home, if you're not going to buy a car, and you're just trying to manage your debt, and become financially solvent, or even more solvent or invest money, then of course, the financial wellness becomes the key focus. It's for individuals who are recovering from financial hardships, such as divorce or illness. As I mentioned before, they must temporarily refocus their strategies. And of course, that's when the physical wellness portion of life becomes relevant.  

When you have debt payoff strategies that penalize you for paying off debt, or credit avoided playing a big role into financial wellness, you can see why it's so important to keep the consumer laser focused on what their goals are. One main example of the difference between financial wisdom and FICO wisdom is often the question that we receive from clients is, what credit card Should I begin with first? Or should I pay off too? Small, smaller credit cards versus one larger one? You know, the answer for FICO is pay off two or three smaller cards rather than the largest one. And of course, the question becomes, well, what about if the larger one has the highest interest? You know, obviously, in a financial wellness conversation, you would clearly want to address the accounts that have the highest interest rate, so you're paying more interest. FICO says doesn't matter what the interest rate is, it's better to resolve three accounts rather than one regardless of what the interest is. So, that's a perfect example of where the person leading the conversation with a consumer needs to pay special attention to what the goal of the client is whether they're worrying about financial wellness, insolvency, or just trying to focus specifically on their FICO scores. All right. How do you build credit when you don't have any? Exceptionally good question. There are still many strategies that can be utilized. authorized usership is one of the main ones that we recommend especially for young people. If you are mom and dad and you're trying to help your student establish credit, authorized usership is the way to go.

There are a few stipulations. Mom and Dad cannot be maxed out on the credit card. Remember, FICO considers maxed out anything over 50% usage. So, if you have a card that has great history, but you've used 90% of it, or you tend to use it for business, so at any point in time during the next couple months, it's going to look maxed out, meaning over 50% usage, it will not help your son or daughter to add them as an authorized user on that card. So, again, best practices are to add student to your long standing, meaning the longer you've had it open the better credit card with low utilization and of course, the perfect history perfect credit history, about 45 days after adding them to the card, they should see it instantly report onto the credit report, thus helping them immediately establish a FICO score. Once they've done that for a year or two, obviously, the easier it is for them to establish their own credit, their own credit cards, we offer a webinar three times a month for students called physical fitness. And we talked to high school kids and of course, the young adult that wants to be a winner when it comes to this FICO game. And we educate them on all these core principles. One of the things parents ask is, are you going to tell my student or my son or daughter to get three credit cards, please tell me now. So, of course, the ideal situation is over time, the consumer has three to five credit cards. But when we're dealing with someone who's just at the very beginning stages of establishing credit, we start with one card, and we teach the every other month pay off strategy. But we give them we encourage what we call secured credit cards, which is on this list. secured credit cards is truly the prepaid credit card, you walk into a local bank, say I'm going to be establishing credit, I'm 19 years old, I need credit, they will give you a secured credit card in the amount that you provide. And of course, use it every month, same rules apply with the secured card can exceed more than 25 to 35% usage, make the on-time payments, and those scores will absolutely begin soaring, which is fantastic. When asked Should I get three cards, or one larger card? Believe it or not, in this case, I say if you have $1,000 to work with rather than setting up two cards with $500 limits best to set up one with $1,000 credit card limit. Because practicality becomes important. If you only have a $500 credit card, using 250 of it, which is half is considered maxed out. And nowadays a tank of gas and groceries would max that that bad boy out. So, we're encouraging clients to get the $1,000 credit card limit. That way, at least they can use 250 to 300 of it, and then keep it in good standing. Now as a business owner, corporate trade lines, there are companies that do sell trade lines. There's a lot of conversation and conflict in the industry about whether it's legal and ethical to do that. I personally don't like to operate in the gray. I don't love corporate trade lines, I think it's borrowing trouble, but I want to express to you that it is available, some companies will sell temporarily access to a credit line or trade line so that business owners can acquire large credit limits or increased credit limits or even in some cases, business loans. So, I'm going to skip right through that one because I don't love that one. And then there are credit building accounts that are available through various banks that are a little bit different than secured cards oftentimes work a little bit like a CD. And when it matures, it reports or they'll extend a small loan to a first-time credit establisher, for example, and they operate as credit building accounts that can also serve the same purpose. All right, here's one of the questions that pertains specifically to my industry. How long does it take for balances to reflect paid on credit cards? Now pre COVID. Without fail, it was always 30 days, 30 days, you could count on your paid balance to reflect within 30 days or at least by the next reporting date. we're now seeing that answer is 45 to 60 days, which is affecting loans, it's affecting buyers being able to close on home loans. If a borrower is in the process of paying off credit cards. Sometimes the best way for that to reflect instantly is for a mortgage lender to pay for what we call a rapid rescore and that's done by the lender. But for those to organically update on a credit report you're looking at 45 to 6060 days and the score Do drop after a late payment miraculously, that hits the report almost immediately. So, they don't give us the same grace. With those you I have still yet to see a score drop usually happens right away. So, it's we're looking at 30 calendar days for that score to drop from the missed payment or late date. When a consumer disputes an item on their credit report, let's say that they found something on their credit report that they don't agree with. I don't believe it's accurate or timely, or perhaps it's unethical that it's on the credit report, then they hire us to dispute it off their credit report. We do all of that in writing. Of course, none of it's done online. No one should ever be disputing items online for a million reasons. But we do everything certified mail. And when we dispute it, pre-COVID, we would get a resolution in 30 calendar days, the cares act extended that to 45 business days. So, unfortunately, that timeline is now 45 business days for the credit dispute to be resolved. Many times, the elephant in the room with a credit repair company is how can you say that your legal and ethical and how are you registered with the Department of Justice, but you're getting things removed off credit. And so, what we use on the FCRA most of you know is the Fair Credit Reporting Act, that law stipulates that a consumer in our case, a company can dispute an item on behalf of a client. Based on one of three things, the item must be 100% accurate, meaning there cannot be there cannot be any errors in the reporting. One third of all the items on a credit report are in fact inaccurate. The second stipulation is that the item must be verifiable, and it must be verifiable temporarily and 45 business days, we're hoping that we return to the 30-day timeframe that's allowable per the Fair Credit Reporting Act. And then the third stipulation of a credit dispute being allowable is that the item must be placed in a timely manner. So, in the example that I spoke about earlier, with collection accounts being reported and duplicates, and then sold, and three or four times a client will see the same item on the credit report that is not legally allowable. And so, in that case, those would be removed. We have recently implemented the cares act into our disputing for individuals who have been in loan deferment, loan forbearance, things like that, of course, whenever there's an inaccurate reporting of a 30 day late under a contract, we of course, would get those items removed as well.

Okay, I want to briefly talk about the potential pitfalls, what pitfalls can happen when you're just using data. Now, clients come to us to help them raise their FICO scores, we successfully remove negative items off their credit reports, legally, ethically, of course, permanently. However, perhaps they get a new late payment, or a new collection account hits their report, whenever you get something deleted off a credit report, whether it's a 30-day late collection, charge off, you name it, the scores rise, sometimes 2030 points within that first 45 days, but a new payment hitting the credit report drops at points. So, it's and unfortunately, we see that quite a bit where clients are in our program, doing all the right things. And then unfortunately, a collection account from four years ago hits their report. And so, we just need to know that any new late payment or any new derogatory item, Trump's the movement we had or progression we had towards the removals, credit inquiries, this is a big one, when you're being told to establish new credit because you have a thin credit profile. Well, when you go do that you have a credit inquiry. And that inquiry is the three to five points that we talked about earlier. And sadly, those inquiries do add up. So, again, sometimes, with the FICO score rules, it's the chicken or the egg. In this case, it's confusing, because you do have to run credit to establish credit, it's part of the necessary journey. And then lastly, paying collections incorrectly, that can absolutely damage those scores. So, if you have an open collection that was on the report, they're calling crazy. They're calling you at work there of noxious Lee trying to collect that debt, and it was passed the statute of limitations. In California, the statute of limitations on debt is four years. Each state is unique in that if you pay a collection account that was already so seasoned, that it wasn't affecting the FICO scores very much, you will in fact see a substantial hit on the FICO score by paying the collection and reactivating the date of last activity on that account. So, super important that you talk to an expert to determine which collection should be paid. If in fact, you're going to pay the full amount versus a negotiated amount, and how to maximize the FICO score bang for the buck, essentially is important. Okay, what shows on a credit report versus a rental report, just a reminder, the credit report will never ever, ever show your income. In fact, it's considered a discriminatory practice for so therefore, it's not allowed. So, there are people who do not make a lot of money who have almost perfect FICO scores. And there are people that make a tremendous amount of money and have horrific FICO scores. So, really, truly your credit report is no indication of income. However, on things like rental reports, mortgage reports, applying for various things, your income will be considered. And when I started this presentation, I mentioned that the word credit on an application is what creates the confusion about why income isn’t considered in this FICO scoring module, yet it's called credit on the application. So, that's a big confusion in our industry. rental history, on the same token is not reflected on a credit report. So, rental history is not something considered. However, if you break a lease, for example, you break a lease, you buy a home and you didn't quite finish, you know, your contract under the rental agreement that you were in, that will absolutely appear on your credit report in the format of an open collection, a map a collection account, so we do see negative rental history reflected on the credit report, but positive rental history is not. Now I see that. But also, there are a couple new companies out there called the rental report, rental reporters.com I believe it is, and they are claiming to now be able to help a consumer add their rental history to a credit report. I have yet to become familiar with it. But I know it isn't on an up-and-coming trend. But currently, unless you hire a company to add it, it's not considered on a credit report.

Debit cards do not report on a credit report.

Utilities do not report on credit reports.  Cell phones and other types of utilities never report on to a report unless there is a broken contract or a missed payment.  In other words, they do not report monthly on time payments.  The only time a utility company or a cell phone payment reports to the credit bureaus if there has been a broken lease agreement or missed/late payments in which case only then will the provider report negative history.  Positive payment history is not reported.  

Very recently, the EXPERIAN BOOST product is encouraging consumers to report their own utility payment history and banking history.  It is possible to now self-report utilities on your Experian report.  However, mortgage lending credit reports would not reflect this type of payment history.

 

 

 

With Experian Boost, it is simply a consumer going on to Experian’s website and adding all their banking information all their utility payment history. Experian provides them a slight boost in their score. I'm super skeptical, I don't love that the credit bureaus would have access to any buddies checking information or any additional information.

So, unless you're absolutely five to 10 points shy of qualifying for the loan you want, and your Experian score is your mid FICO then I would leave it alone and never ever use it. Again, mortgage lenders use your middle FICO score not your higher low. So, unless your experience score is your mid FICO and you're shy just a few points. We're currently not recommending that Experian boost product not quite yet.

Couple credit tips from Tiffany:

Always receive paper bills monthly. This is something that we see damages consumers all the time payments that are on auto pay with no bills being sent to them. We have clients hundreds a month that contact us nationwide and suggest that they have 60-day lates or 90-day lates on an annual fee on a credit card. So, let's assume that you have paid your final payment to Capital One, and you're paperless. You've dismissed it in your brain that you know what that's paid off. I don't have to think about it anymore. Because you're not receiving statements in the mail. you're unaware of the annual fee that applies to almost every credit card company. We see that sometimes people will have four or five rolling lates on their credit report all because of a $35 annual fee that went missed or unnoticed. So, again, I'm all about the environment. However, I'm not about electronic Bill Pay, or excuse me not receiving paper bills, auto pays fine. But just make certain that you're monitoring those bills. We see it hit the reports all the time. Again, never closed credit cards, we talked about why always pay your final payment of a lease or a loan at least six months before you're trying to apply for a loan. Never dispute items online, always do it in writing, I would argue that you want to use an expert like our company. And then I want to go over the next one, which is be hesitant to put a freeze on your credit. I'm all about monitoring your credit. But freezing your credit can be horrific. To remove, the credit bureaus will say it is as easy as a phone call, how and it might be initially, but I cannot tell you how many clients are in escrow. And at the very 11th hour, the lenders calling us frantic because they only can't pull a score two scores are missing. Because the freeze was placed back on the credit, the client never called to put it back on, but they cannot close the loan without removing the freeze. And it can sometimes take up to 45 days for that to happen, which would, of course, kill a mortgage deal. And then of course, the obvious Be careful about cosigning for friends, family, and business associates.

This is my biggest tip for you today is to always check your credit, every single month.

We insure our vehicles, we insure our homes, all the things, but very few people take the time to ensure that their social security number has not been compromised. I would say LifeLock is fantastic. Identity guard is amazing.

Monitor your credit every single month. Because right now identity theft is on the rise, we're seeing that the number one source of identity theft is in medical offices, believe it or not, where information is being stolen. So, of course with all the COVID-19, new online purchasing and all the things going on right now. Now more than ever, it's super important to be monitoring your credit, and do it every single month. And that's it for me.

Tom Dickson (1:06:51) 

Wonderful and thank you, Tiffany Let me reintroduce Joe Damo.  

Joe Damo (1:07:39) 

Michael is a financial advisor who reached out to me because he was having trouble getting his refinance completed with a bank that he had worked with, for a long time, I think a that they had a relationship with, and they were giving him the runaround. And I think, you know, unfortunately, thanks to that, and without eventually turning him down, he ended up leaving that transaction or that process and came to me and we got it done quickly. There was certainly paperwork involved with the self-employment situation, but I think he was pleased, and we saved him a lot of money. And just to kind of further talk about the forward business that we do, you know, I've been doing reverse for many years, most of the folks who know me on this call know, I've been doing reverse for about 20 years. And I'd love coming to Sun West to be able to do forward or conventional loans. And one of the things that I would say that it's worked out well and I know that we're doing a good job with it is that I've helped about not only Michael but four or five other financial advisors with their own refinances over the past six months and all have gone again very well in the process has been smooth and I know they've been happy with the results and the rates and overall terms

Note: Joe Damo can be reached at joe.damo@swmc.com

Questions and Answers

Tom (1:11:07)

How far back do they look at for permanent history?

 

Tiffany (1:11:12) 

You know, the word permanent throwing me off it. So, as far as positive payment history, I'm assuming is what you mean. If that stays indefinitely, as long as the accounts open, and it's got positive history, it will remain for the remaining part of the time that it's on there. Unfortunately, though, most lenders do close trade lines for non-use. So, from that standpoint, it would not be permanent, it would be just always reported if you're using it and making on time payments.

Tom Dickson (1:11:40) 

Great question from Marjorie. Could you re-address the question around the use of like, department stores? I remember this when I was younger, you'd shop at a department store and they try to give you all these incentives to open a card with discounts, etc., major purchases with no intention of buying from them again, would you not close that account? So, that's, that's a, that's a great question, Tiffany.

 

Tiffany (1:12:09) 

Excellent question. If you're the person that opened a Kohl's card, to save 25% at the time of purchase, and, you know, maybe you used it one time and paid it off? You know, it really kind of the answer is always it really depends. Depends on was it something that never got used? … we got to really look at how long has it been in place? Did you ever use it? And you know, it really doesn't hurt you that much to close it. But of course, what we're trying to avoid as consumers having credit cards for 5,6, 7, 8 years, and then paying it off in full and closing it. Because then of course, what went from a positive account to nothing where you're, you know, lose points from missing a positive trade line. But yeah, so very rarely do we see things from non-usage just get closed, but it had less of an impact on someone that just opened it to get the discount, never used it than someone that had established a positive history on that card.

 

Tom (1:13:11) 

Okay, next one. Patrice. Great, great question. You know, Patrice is observing that, you know, she thought paying more than the minimum would help. And let me just add to that append to that Tiffany, like, I have two credit cards, I think my wife has one or two credit cards, and we for 30 plus years have paid off the balance in full. Right. So, what's the right answer there?

 

Tiffany (1:13:41) 

So, the answer, the first part of the answer is what is your FICO score, because if you are a 740 or higher, and you use it every month and pay it off in full every month, no problem. But for the clients that are credit challenged, the advice is different. You want to you know, make a minimum a little bit more than the minimum payment, that's fine. The goal is to not pay so much that you're not showing a good solid utilization ratio. So, you know, I do tell my clients guess what 5% usage is fantastic. But don't exceed 25 to 35%. So, if you want to pay more than the minimum payment for a couple months, I share that I can't stand paying interest. Nobody should want to pay interest, but you just want to show that you do make payments and you don't avoid it.

 

Tom (1:14:31) 

Tiffany if you don't mind as well. I don't think you touched on like how you're you. You work with clients like what's your what's your rates are like you explained that to me a little bit if you could just briefly.

 

Tiffany (1:14:43) 

Absolutely. So, to do what we do legally and ethically. We don't even have a place on our website for consumers to log in and enroll which is unheard of in our in our industry. Clients contact our office they schedule a free and mandatory call consultation where they get 30 to 40 minutes of just super thorough evaluations of their credit reports with credit analysts that go through their utilization ratios, look at every one of their missed and late payments and talk to them about the strategies that we use. So, that 30-to-40-minute consultation is a requirement. And it's valuable even for clients that are not yet ready for credit repair. The cost of our services is simple. We have $199 enrollment fee; we keep it super affordable. It's $199. Because of the DOJ requires that our clients pay us in arrears. The month we have a monthly fee that the clients pay after they've already received a full 30 days of service in our program. And that fee is $99 a month. Most people ask how long it takes. not uncommon for people to be in our program anywhere from four to six months, very rarely more than six months to give you an idea. And that's people fresh out of bankruptcies fresh out of divorces, major foreclosures and life events can still finish our program in six months.

Tom (1:16:09) 

Next question from Chris, can you make a payment before the card statement closes? To keep it in the 25 to 35% range and improve your credit?

Tiffany (1:16:25) 

Sure, if you're super on top of it, and you're aware, very few people are that aware or that tuned in to their circumstance? But yes, absolutely. Also, to the last question that we kind of didn't touch on the end part of your question, which is what if you make two payments, or, you know, in my case, I refinanced my mortgage, and I almost did a 15-year mortgage. And I thought, what if for some reason I get like, I don't know, a pandemic hits. And I'm unable to make the increased amount. So, what I did was I kept my 30 year and then just calculated out what will it take for my payment to be if I want to pay off my mortgage in 15 years, rather than 30. And then I make that payment every month. So, that I do have my mortgage payment paid off in 15 years, but if you know, you know what hits the fan, and I'm unable to make the double payment, at least I wouldn't be penalized on my mortgage. And so, I do that now doing that qualifies for financial wisdom or wellness. But doing that doesn't help the FICO score at all. So, a lot of people think well, I made two payments on this this month. doesn't do anything. You don't get brownie points for paying two a month. Just don't miss it. Don't be late.

 

 

 

Tom (1:17:41) 

Great question here. If Frank and his wife have a joint credit card, is that counted as one card or two? That is if the cards have the same account number? Is it one card in different numbers? Is it two cards? Or is it always counted as two cards,

Tiffany (1:18:03) 

it's always counted as one per person. So, it only your individuals to the credit bureaus. So, your social security number gets credit for having that credit card, and her social security number gets credit for having that same account number. So, it's not two cards. It's two, same card two for family.

Tom’s Tip on Authorized Use (1:18:25) Authorized

I shared this with Tiffany before today's session. I recently added someone to our credit card, which I've done that a few times, not only for my, for my daughters, but also did it for a friend who I kind of call my adopted son. And I just did it in January because he has a bad credit history, has no card, and needed to rent a car. After adding him to my card, he sent me a text the other night that his credit score went from the high five hundreds to 717; all because he got added to my account! Thank God we make our payments on time, etc. But I that was something new for me.

Tom Question

Thomas, it’s good to see you on from the state of Washington. If your cars are paid off, is it advisable to refinance your car to take out a loan on its equity to boost your credit score?

 

Tiffany (1:19:32) 

Technically, it could help your scores, I would never tell someone to do that. If you've got a paid off, good for you, let's try to find extra FICO score points in a different strategy than owing money in that way.

Tom (1:20:43

Marjorie is asking about home equity lines and do installment debt rules apply?

Tiffany (1:21:37) 

Same exact rules apply. So, absolutely.

Divorce and Credit: Now, one thing I didn't touch on is divorce and credit. Re: because so many people during a divorce say: “this is on my credit report, but it shouldn't be… it the court said it's husband's responsibility.” And that hits a credit report all the time. And just to let you know, yes, that absolutely will impact the way we'll and it should. So, even though the divorce decree says guess what: legally, I'm not responsible for this debt. Unfortunately, the credit bureaus trump that and say no, it's on your credit, if you were married at the time, you both signed for it, therefore, it's your consequence too.

Tom (1:22:19) 

Chris asks: my credit card gives company gives me a credit card score every month. Is that generally accurate?

Tiffany (1:24:12) 

If the product says FICO underneath it, then it's accurate. For example, a firm like Discover will send it but remember, the score you're getting is a credit card FICO you may look and see that your mortgage FICO is higher or much lower than that score, your auto if you've ever been late, on an auto loan, your auto FICO score is going to be quite different than your credit card FICO score. So, my guess is it probably is an accurate score, but just make certain that you're comparing it to, you know, apples to apples.

Tom (1:24:47) 

Great question from Michael. Is it true that getting an increase in the available line of credit with an existing credit card company and they tell you that it is a soft? inquiry is a truly soft? Yes,

Tiffany (1:25:34)

Yes, absolutely. And by the way, that's super advisable. Increasing your credit limit as often as possible, not increasing your debt. But increasing your limits will absolutely bring the scores up on your FICO score.

Tom (1:25:50) 

How much if you do a refinance on your mortgage, does that drop or impact your credit score?

Tiffany (1:26:03) 

I can attest to this personally. So, the sad part about that is that although it's excellent to do financially, I was hit about 95 points. And the reason why is that the original loan is now closed because you refinance out of it, therefore, it was paid off and closed. Now I have a new loan with no seasoning, no history established the hard inquiries that came along with it. So, it's super detrimental to your FICO scores. Now there is a term called credit gardening that FICO now utilizes and simply says that what used to penalize somebody for four years, for example, within 12 months, you recover much, much faster because you used to see that the penalty of a refinance lasted substantial amount of time. And now that's shortened due to what they call the credit gardening phase that FICO has now implemented.

 

Tom (1:26:59)

If you see a FICO reported from your credit card company, should you assume that they are paying the FICO fee on my behalf? Are these really FICO scores?

Tiffany (1:27:24) 

Yes. So, anytime you apply for a mortgage, you're going to get a more real or real mortgage. And other lines too.

Tom (1:27:34) 

So, Linda is asking, how do you know if you have a collection account on your report?

Tiffany 1:28:34 

You know, I'm a huge proponent of myfico.com. why not just go right to the source for the information rather than the FICO scores. MyFICO will tell you it will be listed under the collection section. And by the way, you could still easily have a collection account with Verizon and still be using Verizon. So, a lot of you know a lot of my clients will go well How could that be? I've got I use Verizon every month that I pay every month doesn't mean that they didn't somewhere along the line throw you onto collections for adding an iPad for your you know, coworker or adding extra lines that you'd forgot you even had that were like, you know, there's so many ways that can happen. So, monitor your credit.

 

Tom Dickson (1:29:30) 

Next question: John has a personal loan and installment loan is asking if he pays that off before getting a new mortgage that frees up cash flow for a larger mortgage loan. How do you balance the hit the FICO versus getting the desired mortgage?

Tiffany (1:30:06) 

Timing is everything. Timing is literally, yeah, you want to make sure that your FICO scores are extremely high. So, that if you know, by chance you did lose, you did lose the substantial number of points whether it's 50 to 60 points, you would still be okay. Really, the starting FICO score is always the question, what is your score? If you are a 720 or 740, it's not an issue. But for the clients that are barely able to qualify? You would not want to do that, within even six months of considering purchasing or refinance.

 

 

Tom (1:30:45) 

Next question. If you have six to seven credit cards and only use this for regularly, at what point does it make sense to close some of those cards not being used? Or is it better to use all of them regularly and pay that pay them off monthly?

Tiffany (1:31:05) 

First, look at the cards and figure out on the credit report the date of last activity, and the original date. If it's a 12-year-old trade line, do not close the card. Do not close it.

If it's six months old and I've got five cards already, then you could consider closing it. Again, all the things that I'm telling you don't do any of it six months prior to refinancing or purchasing, because any change at all will always you always drop down before you go back up.

Now, unused cards, I'm all for, you know, keep them active, if you if you can put a couple of purchases on there. But again, don't get a debt, just do a couple little things, keep them active so that the cards don't get closed on you, especially with the uncertainty of the economy. And just all the things right now, having access to credit can be the difference between for some clients, having a home to live in and being able to buy groceries. So, you know, don't close cards, just keep them unused if you can.

Tom (1:32:16) 

Great question again, from Lynn, where to car leases fall into these categories? How do they affect your FICO score?

Tiffany (1:32:28) 

Car leases are the exact same as a car purchases and how they reflect. It's an installment loan. It closes on the final payment of a car lease reflects-just like the final payment of a purchase. And so, it's the same.

Tom (1:32:43) 

What, if someone failed on the debt and the debt is turned over to a collection agency? What are the next steps to help rebuild their credit? A part of my advice would be to reach out to Tiffany, but Tiffany, what else would you add?

Tiffany (1:32:58) 

…It’s a chess game, when it comes to collection companies, because you need to know who the original creditor is, you need to know whether they're willing to settle for the typical settlement amount of 25 to 50 cents on the dollar, whether you'd like to dispute it first, to see if you can get it deleted. There's a lot of different things, ways, and strategies. And as we talked about earlier, that's probably the most in-depth part of a credit repair consultation. And it certainly does take super careful evaluation.

 

Tom (1:33:31) 

What guidance would you give a couple as to the number of cards they should carry? Or is it still three to five per household?

Tiffany (1:33:44) 

Three to five cards per person. So, you know, you could it's just they don't care about hubby or wife at all. And you know, you're not linked in the world of FICO at all. So, it's just does Tom have three to five? Does Tiffany have three to five? Now, we might share one, but it's going to report to each of our accounts individually.

Tom (1:34:16) 

Great question from John here. And I'm going through this with my 20 something daughters who now are getting credit cards and for a young person starting in the credit game, should they use the pay interest for two or three months, then pay it off if they can monthly? So, should they carry a little bit of a balance for a few months? and then when they can like pay it off in full like we do. Is that what you would advise?

Tiffany (1:34:44) 

With kids, I'm all about paid off in full every month. They need to get into the rhythm of not over-spending. Not thinking, I will eventually make the money that will eventually pay this credit card debt... we just bought what we wanted and just worried about it later. The first couple years of credit, it isn't about keeping it balances at 25 to 35%. Unless they're responsible enough to operate in that reality. Really the coaching, should we get one card, only buy what you can afford to buy, the next month, pay it off in full get in the rhythm of using credit cards effectively, because that's a huge temptation.

Tom (1:35:39) 

Good question from Dan. How do you check your credit? If you could just give that advice again, Tiffany, how? What's the best source to go?

Tiffany (1:35:53) 

For an accurate FICO score versus a FAKO score, go to www.myfico.com. Again, I pay for it. The annual credit report website that everybody goes to for the free report does not give you a score that you have. You still must buy it. So, might as well just go straight to the source.

Tom’s Tip:

It appears that MyFico.com has monthly payment plans and a one-time report option. The monthly plans start at $19.95. The one-time credit reports range from $19.95 to $59.85, depending on whether you want one credit bureau or all three.  

Here is a link to one-time report option:

https://www.myfico.com/products/fico-score-credit-reports

 

Tom (1:36:30) 

Next, Barb is asking if you recommend paper bills versus electronic payments?

Tiffany (1:37:14)

That's correct. Yes, absolutely... You know, I have two little kids, I have an 11-year-old and a 9-year-old. It's amazing what they have learned how to order online without my approval.

Tom (1:37:4) 

 Next, from Lynn. Can I as a small business report to the bureau relative to my clients? Or can my clients report on their customers?

Tiffany (1:38:03) 

Absolutely. You could have to pay to do that. And certainly should, you know if you can, but you don't have to, it's interesting, you can just subscribe to TransUnion. To just report to TransUnion, you can use all three, you know, that's why there's a high medium and low FICO score. Frankly, not all creditors report to all three credit bureaus. You might find that your Experian, because experience reporting the broken lease that you had five years ago, but not the other two, perhaps the property management company that you went through only reports to one Bureau. So, that's why mortgage lenders only use the middle FICO score.

Tom (1:38:42) 

So, if a client owns rental property, can they report if a tenant breaks a lease? Is the same true if you have an office building and you have office tenants? Especially, if they break a lease, and they personally guarantee the lease, I'm assuming that you could that could impact their credit, is that correct?

Tiffany (1:39:05) 

Absolutely. And you know, the best way of handling that too, is just to outsource your bad credit clients to a collection company and the collection company pays to report them on your behalf. So, that's, you know, probably a little bit more affordable way to go. And there's some excellent collection companies nationwide.

Tom (1:39:29) 

Next from Jennifer, Jennifer is asking if you could revisit the authorized user case. Is that just giving a credit card to a student that is attached to the parents account, and therefore paid by the parents along the way with their own card? Tiffany, again, if you can just explain that one. One more time.

Tiffany (1:40:01) 

It comes down to the maturity level of the student or to the child. You know, if I had been given a credit card by my parents at 17, I just I don't think I could have handled the responsibility of having the card in my wallet and not exceeding usage. I just wasn't ready. So, what my parents did was they added me to their cards. And then when my card came in the mail, it went in the safe. And I didn't get. I didn't even know what happened. And so, I was building a FICO score based off my parent’s utilization of credit. But they could very easily have said, Here, Tiffany, you know, here's, here's a card to use for your gas. And here's a card for emergencies. And here's what you know, the card that you have in your wallet is only for these things, it and of course that would build, my usage would also help. So, it just depends on the maturity. But if the card doesn't get used at all by the student, it would still build the FICO scores by the parent’s usage.

Tom (1:41:01) 

Oscar, good to see you on. What happens if you have a large one-time purchase that goes over the 50% ratio that you pay it off that month? Will that hurt your score?

Tiffany: NO!

Tom Question:

Next from James. You mentioned that ID theft is sometimes originating in medical billing, is it necessary to provide the alpha slash numeric characters from your Medicare card when receiving medical services?

Tiffany (1:41:33) 

I have always said at a medical office, there's no reason for them to have my social security number on their paperwork. If I can provide you with a copy of my driver's license, and you have my medical insurance card, which by the way, does not have my social security number on it, then always, always on my medical information, I put NA. Not applicable. You don't need this information. So, keep your social security number, carefully guarded.

Tom (1:42:32) 

If you have multiple credit lines, how should you handle that? What's the best way to think about that in terms of balances and kind of paying those are keeping those current?

 

 

Tiffany (1:43:32) 

So, my coaching is always thinking FICO. But remember, you must think about what makes financial sense also, depending on your goals, so the FICO score is going to reward you by having three cards under the 25 to 35% ratio. But if the interest rate is ridiculous, then obviously you'd have to outweigh what you're trying to accomplish. So, it's better to keep the balances. All below 25 to 35%.

Tom (1:44:03) 

If you have a large purchase, say you bought a bed for $6,000 a month ago, would it have been smarter to have used two credit cards to put $3000 on one and $3000 on the second card?

Tiffany (1:44:29) 

Absolutely. And you know, I just did the exact same thing. And but I did it where you know, and I always tell people don't open credit card them. But this one was the 0% interest for six months. Well, of course, you can do it. There are times where that's a good idea to do.

Caution: And so, remember though, six months and one day later, all the interest is now applied plus penalties. So, it just depends on the circumstance. Just the major point is just to be super AWARE of the payment date. And you should confirm you do not have a prepayment penalty on the credit card.

Tom (1:45:08) 

One last question on client motioning from Pedro. Say one has multiple credit cards with higher balances. Is it better to pay one off or keep making payments on all credit cards?

Tiffany (1:45:25) 

It's better to pay them all down rather than one off. UNLESS paying them all down isn't going to reduce at least one of them to a credit utilization ratio of 50% or less.

While Dave Ramsey, and other strategists, would totally disagree with that. THE key factor to consider is your initial goal FICO score driven.

Tom (1:45:52) 

Tiffany, thank you so much. Well done. We will do it again at your convenience.

Tiffany (1:46:40 

Thank you so much for having me.

 

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