DID YOU KNOW What Is INSIDE A Credit Score ?

November 19, 2013


PuzzleDo you know what the key elements are that Experian, Equifax and Trans Union scoring models look at when creating a credit score that will give your potential  lender a ‘risk score’ ? 

Are you aware that by knowing the ‘recipe’ that makes a score you can alter your decisions and take different actions to raise your score ?  

The following information is from a lesson I provide to apartment dwellers who are anticipating buying a home in a couple of years, please share this with others who maybe facing such a challenge. 

The first step is getting inside the credit world’s head and understanding which actions are considered in creating your score.  This lesson is not directly on how to repair your credit, but with this knowledge you can  change the kind of data that is being reported.  I sincerely hope the following information  helps you as much as it has proven to help others.

1.  Know what your scores are  NOW !                                                        

Mortgage lenders look seriously back over the previous 2 years, start now taking control of your finances.   You can order all 3 FREE credit reports  at:   www.AnnualCreditReport.com    NOTE:  credit scores are NOT included in your credit reports pulled at www.AnnualCreditReport.com.   You must order and pay for them separately, or order a triad consumer credit report that comes with all 3 credit reporting agencies and all 3 credit scores online. 

Be sure to read the terms of agreement before ordering online credit reports.  You want all three (3) major credit reports with all 3 scores, NOT just one or two.  Not all creditors report to all three, so for you to see the entire picture of your credit file, pull all three.                                                                  

DO NOT have a friend at the car lot, a banker or a lender pull your report for you, it could hurt your score.   Remember you can pull your credit report every day if you wish and it does NOT hurt your scores.          

2.  What is a credit score ?   A credit score is a 3 digit number based upon thousands of components, and averaged against your peers  that tells a lender how much of a risk you are to him.  A credit score is created at the same  time  a credit report is requested and the score can change daily.

To have a credit score you must qualify under the following rules: have an account shown as ‘open’ within the last six months,  an account a credit has reported on by the creditor within the last six months, and have no narrative or indication  of you being dead.                               

There are approximately 8 other scores used in combination to the credit scores from Experian,  Equifax, and  Trans Union. A lender uses these scores to determine his risk involved in lending you money or credit:       

 Collection Score:   Once you are late, or your account is turned over to a collection agency use these   scores to assess the likelihood that you’ll be able to pay them and sort their list of debtors accordingly.

Revenue Score:  It gauges how much money your account is likely to generate for them.

Application Score:  How much you earn, howling you’ve lived at your current address, and how long  you’ve worked for your current employer.

Bankruptcy Score: The likelihood you will miss a payment in the next two years and that you’ll file for Chapter 7 liquidation or a Chapter 13 repayment plan.                                                                                                                                   

Behavior Score:  The overall analysis of your habits to determine the likelihood of your future actions.  

Response Score:  The likelihood of a consumer responding to an offer of credit.                                                                                               

Attrition-Risk Score:   Predicts the likelihood you will stop using a card.

Transaction Score:  These scores are run EACH time you use your plastic to determine whether you should be approved …or not.

3.  What does Experian, Equifax and Trans Union consider when creating a  credit score ?      

Payment History: 35% of your credit score !   Your past and present payment history is broken down into 3 categories:  

  1. Recency -The last time a payment was late.  
  2. Frequency-The number of late payments.    
  3.  Severity – When there are repeated late payments:  30, 60, or 120 days are shown late and/or  with negative narrative words:   collections, tax liens, foreclosures, repossessions, charge-offs   and bankruptcy.     

Utilization Rate: 30%  This is also referred to as ‘Debt-To-Credit Ratio’ where your revolving balances of debt are compared to the credit limits on your accounts.  Closed Accounts hurt if a balance remains.  The less debt you have the better !  10% of your credit limit taken up in debt is EXCELLENT,  20% is OK.  30% is DANGEROUS,   and  40% is BAD, BAD, BAD !      50% of the credit limit used up in debt is suicidal !

Length or Age of credit history: 15%  The age of the oldest account  AND  the average age of all your accounts  that are open is computed.   NEVER close an account, and use old accounts at least every 3 months to keep it active.  An inactive open account does not score as high.                                                                                                  

New Credit / Inquiries:  10% Considers how many accounts you applied for recently.  How many new accounts you  opened.  How much time has passed since you last applied for credit, and how much time since you actually  opened an account.  The score counts mortgage, car loans and student loans apps. WITHIN 30 days as one inquiry .   Inquiries are seen for 2 years in your file, but hard pulls by lenders only hurt your score for 1 year.  With 6+ inquiries a lender sees you as a strong possibility for bankruptcy.                    

Type of Credit / Mix:  10% Having a healthy mix of revolving debt (credit cards) and installment loans (auto  or mortgage) shows the scoring model and lenders  you have a wider set of money management skills.     

SPECTRUM  RESOURCES  has served individuals and families like yourself since 2002 with the mission to educate and assist those who seek financial self-sufficiency. 

PLEASE leave your comments,  we always welcome what you have to say.    IF you have any questions are concerns please contact us.

863-967-0660 – E-mail: SRDC@tampabay.rr.com   Website: www.SpectrumResources.org


DID YOU KNOW.. If You Ask, You Just Might Receive ?

July 26, 2013

question_markEven if you have heard the old saying, “Ask And You Shall Receive”, it still might come as a surprise to you in order to get lower interest rates on your credit card, sometimes all you need to do is ask !  

 YOU have the power !   The following lesson hopefully will give you motivation and direction to exercise your power to lower your interest rates.

 If you are a person who makes on-time payments, you might as well be wearing a red cape because in the eyes of the credit card company you are their hero who will carry them onward to greater profits.

 As a  credit card user you have probably come to realize how expensive the debt load is on your cards, yet we forget that the amount of the interest rate is what creates most of our debt load.  When a high interest rate, varying from 10% to 20% annual percentage rate (APR) ‘revolves’, hence the name: ‘Revolving credit’, then your debt load climbs as well. 

Remember, interest charges on credit cards are recalculated daily based upon your card’s average DAILY balance.   Each new purchase continues to add to the credit card interest charges you owe. 

The secret power that lies within you as a cardholder is the fact you can ask for a lower credit card interest rate. However before you even dial the phone to your credit card company, empower yourself with knowledge of the promotions offered by their competitors.   Shop and compare other bank cards. Review their intro interest rates on balance transfers, and the time limit for their promotional discounts offered.

Now, you make the call and can start your conversation with a reminder of your strong credit history and how long you have made on-time payments.  If the creditor doesn’t appreciate your past loyalty and credit history, let them know that you are considering canceling your account and moving your debt load to their competitor.

It doesn’t hurt to ask, “please connect me to the supervisor can make the decision to lower my interest rates ?”  Now if connected to a different department that focuses on ‘retention’ you can continue your conversation with a ‘specialist’.

 Keeping in mind this ‘retention specialist’ is trained to maintain the credit card company’s profits, and since you are an on-time credit cardholder, you definitely add to a credit card’s profits. It cost banks hundreds of dollars to add new customers, so they are willing to lower some interest charges to retain current timely paying cardholders.

 Mentally stay confident with the knowledge others want your timely payments. When talking to the retention specialist, inform that person you are strongly considering canceling your card due to its high interest rate. 

IF your threat to transfer your balance does not get the result you desire, then hang up and call one of the banks you previously researched and start your negotiations over.

IF..you have a strong credit history of timely payments you do have leverage. Exercise this leverage and pay off your debt sooner with lower interest rates.

 Please leave a comment or question.  Spectrum Resources has been providing education and personal money management counseling since 2002.

The objective of our lessons is to help you and to help you help others.   Pass this information on to those you feel it would benefit and please feel free to contact us with any questions you may have.  Visit our Home Site: www.SpectrumResources.org

“DID YOU KNOW..The Consequences When Ask To Pay An Old Debt ?”

June 25, 2013

old-debt-webs-dust The real estate market is moving again !   And once again bankers and realtors are telling their prospective buyers to pay off their old debt so they will qualify for their new home loan.

Paying off old debt is a two sided sword.  Move carefully, or you can wind up getting hurt.  When deciding to pay off old debt  there several things to think about.

The eager realtor is seeing only one side. The side of the sword that figures the debt  to income ratio, and tells the realtor if can you afford the monthly payments. Yes, you may be deleting an amount of debt owed, but  the realtor doesn’t see the other side of this equation. 

By paying off old debt you have deleted the amount you owe compared to your income, but  you have also activated this account for another seven years from that pay off date leaving for all to see derogatory information. All your late payments are still shown and still pulling down your overall credit score.

There are times you must listen to the old wives tale, “Let sleeping dogs lie”.  Chose wisely which old debt you want to wake up, because it could come back and bite you.  The decision to pay or not to pay an old debt depends upon the kind of debt, the age of the debt, your overall credit report, and what the lender’s priorities are when reviewing your reports.  

Bankers and realtors have good intentions, but since they aren’t trained in the specifics of credit repair, they don’t know what a trained professional in credit repair knows. Therefore they can’t give you the best information to help you in your decision process.

For you to know your best options, you need a trained and certified credit expert to give you an  analysis of your credit file.   Bankers and realtors objective and yours of course,  is to  improve your creditworthiness in the eyes of lenders.  So to you and them,  it always seems logical to pay off old debts — assuming you can afford to pay it without getting behind on other bills.

Many people think that when an old debt is paid off it will disappear from the credit report.  Wrong !   An old debt can remain in your credit report long after it is even time barred under the statute of limitations. Check your particular state to see your time limits, each state is different. . 

FYI, the ‘statute of limitations’ I am referring to puts a bar or limit on the time that a creditor can sue you.  It doesn’t mean the debt is no longer due,  it just means you don’t have to worry about being sued over it. 

Many people confuse the time limit of statute of limitations with the 7 year time limit credit history is shown in your credit file. That clock starts ticking from the date of last delinquency or first month after last payment.

The best time to pay off an old debt to  be beneficial to you in getting that new home is to pay off the debt BEFORE 180 days.  This is  the time a bad debt is normally charged off and/or sold to a 3rd party debt buyer. 

 Once a bad debt reaches a 3rd party debt buyer – a collection agency, then you have not one but two derogatory histories showing up in your credit report. This a huge danger sign flashing to potential lenders.  

Having less debt compared to the amount of your credit limit  raises your score, but having late pays still showing up in your credit history that has now been re-aged because of you paid it off lowers your score.  How this all washes out is based upon your overall credit history, so there is no way to know what the computer’s analysis will deliver in the end.

Lenders look seriously at your history in the past two years. When you have recent unpaid debt the dent in your score is going to be much deeper.  The scoring model that the lender is using determines greatly on which priorities determine their decision.

 Large lenders customize their scoring model based upon their investor’s criteria. Therefore, when realtors and bankers give blanket / generic credit repair advice, they are not aware of these issues.  

Most people are unaware there are probably at least 8 different scoring criteria lenders look at in making their decision.  Your credit scores are just one set of evaluations.   A lender may review your entire credit file , not just the score and may take a dim view of you because you have neglected a certain type of credit.

A different lender may not feel that same unpaid debt is a big deal and would place more importance on other indications of your money management skills.  A lender, to satisfy his investors has one decision to make, how big of a risk you are to them.  

There is obviously more options when making the decision to pay or not pay off old debt.  Each option leaves different outcomes, only you can decide which serves you best.  

 Please leave your questions and comments,  through sharing we ALL grow.  

Please share our lessons with those who are seeking to learn and gain financial self-sufficiency.

Visit our home site:  www.SpectrumResources.org

DID YOU KNOW…The Tax Lien Options: Withdraw OR Release ?

May 10, 2013

44 The fact remains and it’s a given,   IRS isn’t going to remove or release the lien until it has been satisfied (paid) or has become unenforceable under the law.

With that being said, this leaves you with two options to make sure that the lien is either withdrawn or it is released.

A Federal Tax Lien RELEASED:     Under 26 U.S. Code Section 6502  the statute of limitations is generally 10 years on a federal tax lien.   What this means to you is that usually..your tax lien will be released automatically after 10 years.

However,  IF…you need your credit report to look better BEFORE the ten years is up, then once again you have two options:  1) Satisfy the lien by either paying the amount in full OR..2)  make an attempt to settle the amount due with IRS with  an Offer In Compromise.

As you can guess there are no guarantees in dealing with IRS, therefore an OFFER In Compromise doesn’t  mean  you will reach a settlement. Because it is an ‘offer’, you may still be held responsible for the full amount, of course, depending upon your circumstances.

 IF…your Offer In Compromise is accepted, this will not affect the amount you owe on the tax lien.  It does mean you will have the opportunity to make what would be perceived as affordable payments until the amount agreed upon has been paid in full.   When IRS is satisfied, meaning all fees related to the release have been paid, then the lien can be released.

A Federal Tax Lien WITHDRAW:    This option offers a big foot in the door to you.  At this time, IRS, the NOTICE of a tax  lien can be withdrawn, meaning it will no longer be seen in your credit report, IF  your tax lien is under the following circumstances:

  1. The notice was filed too soon or not according to procedure;
  2. You entered an installment agreement to pay the debt on the notice of lien;
  3. Withdrawal will speed the collection of the tax; or
  4. Withdrawal would be in the best interest of both you and the government. (Source: http://www.irs.gov)

What # 4 basically means is IF.. you are placed into a position or circumstance that your tax lien is preventing you from making a transaction that would enable you to pay the lien, it could be withdrawn to allow you to make the transaction and, in turn, pay the debt.  

Of course, we all know IRS does not make any process easy, however, if funds become available to you making it possible to settle your tax lien, you may have a chance of getting the lien withdrawn or released.  You can then proceed in attempting to remove it from your credit report with the normal dispute process.

Remember there always options, even when dealing with IRS.  Now, there is a process to remove this public record that is extremely damaging to your credit file, and your lifestyle .   The basic requirement is you have entered into an installment agreement to pay the debt on the notice of lien.  

Normally a tax lien is seen in a credit report until it is satisfied or paid.   You now may have an opportunity to remove this damaging data from your credit history by following the current and correct procedures that satisfy both IRS and the credit reporting agencies.   By educating yourself of your options, you can proceed to build a credit report reflective of your current lifestyle.

PLEASE leave your comments and questions below.  Please come back to learn more, share this site with others and please… visit our home site:  www.SpectrumResources.org to learn more about what we have to offer in financial literacy.

“Did You Know…Plastic Could Make You Fat ?”

April 16, 2013

plastic-makes-u-fat Of course, you know I am referencing the impact of plastic on your debt load…not your body weight.   

If you use plastic in an ill-advised way such as buying groceries, and/or eating out at a restaurant, then yes,  it could be plastic is expanding  both your waist line and your debt load at the same time.

I’m not sure what a dietitian would say, but here is what I have to say as your personal credit risk assessment planner, “Neither is good for your health !”  Well, for those who know me, read on, for  there is always more to this lesson.

 I haven’t seen any commercials that state as a disclaimer pertaining to the side effects  when becoming fat from the overuse of your plastic !  From many years experience as a debt counselor I can tell you few people  think about the many different ways plastic can have an ill effect on them personally .

An expanding debt load can cause expanding  mental anguish that turns into costly depression.  Depression can cause loss of work / income,  more doctor visits and more costly prescriptions.    It’s a vicious cycle, especially to those who attempt to make expanding debt go away by eating themselves into an even more unhealthier state.  

Sadly, we all partake in some very unhealthy habits without thinking of the full ramifications of their actions.  Debt addiction can cause serious life style management problems such as job loss.   Secure jobs can be lost by having too much debt, you become a security risk. ( Employers can check your credit report – they don’t see your scores)   Unemployment does wonders in reducing your waistline, however, it expands your debt load.

When your plastic allows you to purchase things that gives the impression that you are ‘financially comfortable’  you become a target to con artist and thieves, a health hazard in today’s economy that is becoming more and more real.

 A bulging credit card bill coming in the mail box creates anxiety, marital stress, sleepless nights, and blisters on the finger tips from dialing the phone numbers of E-Z loan providers.   That in its self leads to a migraine headache  mere aspirin can’t even touch.

Our ego is always happy when we receive notice our credit limit has been raised.   Few remember this stamp of approval from the very same people who make money off of your uncontrolled spending habits.    

In a board game we might get a ‘Get Out of Jail FREE’ card, however in real life when we continue spending without heeding the warnings of the game rules regarding utilization, there is no magical ‘Get Out Of Debt FREE’ card available.

Plastic gains weight through lack of ongoing financial literacy and not continuously increasing one’s life style management skills.   When your plastic has added volume to your life in a negative way remember,  unwanted debt is much like unwanted fat.   

To reduce debt is much like reducing unwanted body fat, it takes education to understand why we do what we do.   It takes firm personal goals to stay motivated.  And it takes discipline to overcome our weaknesses.

 The good news is becoming financially healthy, just like becoming physically healthy is a challenge that can be overcome and success can be achieved !

Please leave your  comments, questions or concerns. 

Our objective is to discover what you want to learn more about and share with you the best solutions we see available.        

Please visit our home site:  www.SpectrumResources.org  to learn more about Spectrum Resources.

DID YOU KNOW..The Top 2 Questions Ask About Veteran Burial Benefits ?

March 13, 2013

120x150_myth While I was recently providing information as a consumer advocate to a large group of seniors, it became evident to me many veterans who are now retired are uninformed when it comes to their Veteran Burial Benefits.

 From over ten years of counseling we have found because death and money are subjects that most people don’t discuss openly, especially seniors, few veterans are informed of the current true cost of dying. 

Few realize the steps necessary to coordinate family traditions and final wishes with those of the veteran burial benefits. 

Spectrum Resource’s mission as debt counselors is to provide education and resources to help people make better financial decisions.

 Responsible people see the benefits of pre-need planning and establish it as a household budgeting priority.   

If pre-need planning is ignored,  life guarantees there will be left behind a huge emotional, mental and financial burden on family and/or friends.  Pre-need planning is necessary to save money and grief.   

Veterans who are now seniors do realize no one leaves this world without dying.  However,  many veterans hold the belief that when they go, the government will take care of all the details.  This is a myth that needs busting !  

 Many are unaware that family and/or friends of the deceased must make all the arrangements and pay for everything to be done at the time of death  when there is no pre-need plan in place. 

AFTER the funeral, THEN the family of the deceased can apply to VA for eligibility of any VA Burial Benefits with evidence of a death certificate, DD214, and receipts of the cost of the funeral and burial bills.  ( Receipts must show all bills are ‘PAID IN FULL’ ).  

We fear few veterans who are now retired are experiencing the peace of mind they deserve,  found by locking in today’s prices no matter how far into the future death arrives.  

We found installment payment plans, if necessary, are available and even pay monthly compounded interest.   For those on limited budgets, there are plans that would assure no additional financial burden is left behind.   

In counseling with our clients, we also found  pre-need planning  has the combined benefits of being spiritual, economical, logical and legal.

People can always make better personal money decisions when they seek to know and understand all their options. 

 The VA offers a tremendous amount of free information on Veteran Burial Benefits, it is unbelievable how many conditions must be met. 

Here are answers to the big money questions regarding ‘Non-Service Related Death’:

 HOW MUCH will VA pay IF I am hospitalized by VA at the time of my death OR under a VA contracted nursing home care ?      VA will pay up to $700 toward burial AND funeral expenses  and some of all of the costs for transporting the Veteran remains MAY be reimbursed.

Or HOW MUCH will VA pay IF I do NOT die in a VA hospital?  VA  will pay $300 toward burial and funeral expenses  AND a $700.00 plot-interment allowance IF not buried in a national cemetery.

To further our research into the true cost of dying, we phoned our local county medical examiner’s office and ask questions.

Like many other people,  we too thought that if you had no money the county government would bury you. Much to our surprise, this particular county has no free burial plots. 

In fact on average, it cost this county approximately two thousand dollars to process a body, depending upon the required test and procedures.

By Florida state law,  the county government is required to maintain burial land for un-identified bodies in case of further investigation in the future.   

In this county, the body is cremated, regardless of your family traditions or preferences or religious faith, if a person is designated by social services as indigent, ( meaning persons within a certain income level, with no attachable assets).

This mission to attain more information to help veterans who are now seniors  has been an eye opener to me as a daily money manager. In regards to the financial realities involved in dying, the bottom line in death – there is no free ride to your destination. 

Please share this information with others you feel it will help. “Through Sharing We All Grow !”

Please feel free to leave your questions or comments.    Our purpose is to provide education and options to help those who seek financial self-sufficiency. 

 Till next time,  your personal credit risk assessment planner.

DID YOU KNOW…Your Christmas List Says A Lot About Your Values ?

December 9, 2012

Photo of Janet FolkertsHave you noticed lessons in life come in all forms and fashion.  As I walked through a crowded department store I saw customers with their arms full of gifts and from all appearances, money to spare. Yes !  Christmas is in the air.  

 However,  I am confused at what I see. As a debt and credit counselor,  I have the perception in speaking with  my clients,  America is facing a financial cliff.   

  Today’s  world is like a two sided sword;  commerce and the reason for the season.  America needs commerce to sustain jobs and homes.  But to sustain the families that dwell inside, Christmas is a perfect time to reflect upon your personal values and the priorities you establish pertaining to how you spend your money.  

 I was shopping for material and pretty ribbon to decorate small jars of cumquat jelly, a fruit unique to this part of Florida to give as gifts.   The woman assisting me at the local fabric and craft department confirmed my suspicions that people really are re-evaluating their priorities. She shared with me her observations of her customers so far this year.  

The store’s employee told me more and more people were creating gifts made from love and that extremely valuable thing called time.   With empathy, she told of how more people were searching for ways to show they truly cared in a more personal and non-commercial way with  homemade gifts such as  cookies,  candies, small cakes, or personalized crafts.

 We exchanged several money saving gift ideas along with other customers standing in line.  I told her I had made  ornaments hand scripted with the year and name written with a special paint pen in gold or silver ( found in office supplies) .  Exchanging only special Christmas ornaments each year will hopefully  start a new tradition.  Of course, personally I still welcome homemade cookies and candies too.

 Another gift idea shared was filling out a blank gift card with a verse or heartfelt words of appreciation. The Christmas spirit is about sharing the gifts you have which might be a talent in expressive writing, poetry,  photography, painting or woodworking.  Adults seem to value being remembered the most where children are content to play with the empty gift box.  A wonderful tradition to start is bringing back the value in caring.   The best gift isn’t always big in size, but one that comes from a big heart.

 Let your sensitive side out and think creatively.  We all live in a busy stressful world where customer service has become a rarity.   People, friends, co-workers and even loved ones are sometimes taken for granted and not recognized as an individual with special interest or cares.  Because of these changing times, think about how rewarding it is when a friend or loved one is reminded they are important by a personalized gift that involved time, effort and consideration.  

 “One man’s trash is another’s treasure.”   Yard sales and flea markets are places you can find beautiful glassware, some antiques and some new.  You may find unique pieces of art, odd pieces of decorative items, all  can be cleaned, refurbished, or personalized.  Using a simple engraving tool, or painting the recipient’s name makes a gift special. 

 The key is finding something that sends the message  that you know who they really are as a person, and you sincerely appreciate them being in your life.

 My objective is to assist those who seek financially self- sufficiency.   Personal money management is about priorities and what better time of the year than Christmas to take an inventory of your priorities.  Take time to look  inside yourself of what  and who is really important. 

Reviewing realistically at what you have to share and who you want to share it with is the beginning of not only a more meaningful holiday, but a step toward you becoming self-sufficient. 

I wish each and everyone of you a safe and happy holiday ! 

The SRDC Lessons will resume after January 2, 2013.

Please leave your comment and visit our home site:  www.SpectrumResources.org to get to know us better.


Get every new post delivered to your Inbox.