CREDIT TIPS

What a low credit score really costs you

Your monthly loan/credit card payments can easily be 40% higher with a low score! A higher credit score can save you an enormous amount of money by qualifying you for a lower mortgage interest rate (and by letting you qualify in the first place). According to Fair Isaac (at the time of this writing), lenders would probably demand a 5.5% percent interest rate on a $300,000, 30-year fixed mortgage for a borrower with a credit score between 500 and 579. That’s a $1,700 monthly payment for principal and interest. But a score above 760 would qualify you for about a 3.3 percent rate - with a payment of $1,300 a month. That’s savings of $500 each month - and more than $100,000 over the life of the loan!

This chart illustrates just how much a low credit score can cost you over the life of a loan:

YOUR CREDIT SCORE

720+
700-719
675-699
620-674
560-619
500-559

*ADDITIONAL COST TO YOU

$0
$7,000
$30,100
$86,450
$143,640
$287,200

*Based on a 30 year $200K loan @ 5.6% interest

Common Dispute Reasons

There are several reasons to dispute an item on your credit report. The most common are:

Items on the account are misleading or questionable
The account is not yours
Balances are inaccurate
You have not received a notice of late payment
Tradeline amounts are incorrect
Account numbers are listed incorrectly
Accounts are unverifiable
The original creditor is listed incorrectly
The charge-off date or amount is listed incorrectly
The date of last activity is inaccurate
The credit limit is listed incorrectly
The account status is inaccurate

Let’s face it, clients aren’t that interested in the dispute process or in the intricacies of how exactly the FCRA works. They usually just want one thing: to increase their credit scores. “Just get me above 700!” Not to worry - here are 7 practical steps to boost a credit score.

# 1:

Correct all inaccuracies on your Credit Report

Go through your credit reports very carefully, looking for late payments, charge-offs, collections or other negative items that aren't yours. Note accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full. Same goes for any accounts that were included in a bankruptcy but are still listed as unpaid, and negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report (warning: sometimes scores actually go down when bad items fall off your report - it’s a quirk in the FICO credit-scoring software; you should still get rid of negative items). Also make sure to remove any duplicate collection notices listed (for example, one from the creditor and one from the collections agency).

# 2:

Make sure that your proper credit lines are posted on your Credit Reports

This seems bizarre, but often (in an effort to make you less desirable to their competitors) creditors will show you as having less available credit than you actually have. If you see this on your credit report, bring this to their attention. If you have bankruptcies that should be showing a zero balance…make sure they show a zero balance! Very often the creditor will not report a “bankruptcy charge-off” as a zero balance until it’s been disputed.

# 3:

If you have any negative marks on your credit report, negotiate with the creditor/lender to remove them.

If you are a long-time customer and it’s something simple like a one-time late payment, a creditor will often wipe it away to keep you as a loyal customer. If you have a serious negative mark (such as a long-overdue bill that has gone into collections), always negotiate a payment in exchange for removal of the negative item. Do not pay off a bill that has gone to collections unless the creditor agrees in writing that they will remove the derogatory item from your credit report. Also: never admit that the debt gone into collections is actually yours. Admission of debt can restart the statute of limitations and may enable the creditor to sue you. Admission also hurts your negotiating power. Simply say “I’m calling about account number ___________” instead of “I’m calling about my past due debt.”

# 4:

Pay all credit cards and any revolving credit down to below 30% of the available credit line

The scoring system wants to make sure you aren’t overextended, but at the same time, they want to see that you do indeed use your credit. 30% of the available credit line seems to be the magic “balance vs. credit line” ratio to have. For example; if you have a credit card with a $10,000 credit line, make sure that your balance is never more than $3000 (even if you pay your account off in full each month). You can also try asking your long-time creditors if they will raise your credit line without checking your FICO score or your credit report. Tell them that you’re shopping for a house and you can’t afford to have any hits on your credit report.

# 5:

Do not close your old credit card accounts

Old established accounts show your history and testify to your stability and good payment habits. Cut up the cards if you don’t want to use them, but keep the accounts open.

# 6:

Avoid applying for new credit

Each time you apply for new credit, your credit report gets checked. New credit cards will not help your credit score and a credit account less than one year old may hurt your credit score. Use your cards and credit as little as possible until the next credit scoring.

# 7:

Have at least three revolving credit lines

and one active (or paid) installment loan listed

on your Credit Report

The scoring system wants to see that you maintain a variety of credit accounts. It also wants to see that you have at least 3 revolving credit lines - so make sure you do. If you have poor credit and are not approved for a typical credit card, you might want to set up a “secured credit card” account. This means that you will have to make a deposit that is equal to or more than your limit, which guarantees the bank that you will repay the loan. It’s an excellent way to establish credit. For installment loans, car loan, furniture/appliance loans, or mortgages (best of all) all qualify.

These seven steps are not just quick fixes but rules to live by for lasting good credit history (with a high score). Take care of your credit and it will take care of you.

How to negotiate a lower credit card interest (APR)

Credit card lenders usually charge anywhere from 0 to 20% in interest (APR), with the meanest banks charging as much as 30% (yikes)!

Most people do not realize that you can negotiate with your credit card company for a lower rate, especially if you’ve had any of your credit cards for a long time.

All you need to do is to call them up and insist on a lower rate. Shoot for 9-15%. You’ll be surprised at how easy it is to save yourself a lot of money.

Here’s how to do it:

Start with a credit card that you’ve had for a long time. One that you have never been late on with payments.
Look on the back of the card and dial the customer service number.
Start negotiating. Here’s a sample script.

Sample Script:
You: (Upbeat and polite) “I just got an offer in the mail for a new credit card that has an introductory interest rate of only 6.9%! I don’t really want to switch cards, because your service has been wonderful. But even though I’ve had your card for five years, I’m still paying a 19% rate on my balance. I’m going to have to transfer my balance unless you can lower the interest rate.”

Them: (Over the sound of keyboard keys being tapped as your credit and payment history are being examined.) “Hmmm … well, that is the standard rate… but let me see…”

You: “Of course, I understand that, but I can pay a lot less in interest if I transfer my balance. I really need you to reduce the rate to 9% or so.”

Them: “Hold on while I check with my supervisor … OK, how about 9.9%?”

You: “No problem.” (Now pat yourself on the back for saving some bucks!)

This may not work as well if you’re frequently late on your payments and over your head in debt. But it can’t hurt to at least ask for an interest rate reduction. If you have a solid track record, handle your obligations and are generally polite, your lender should be willing to offer you a lower rate to keep from losing you to their competition.

Keep trying. If you don’t get what you want the first time, try to get another customer service rep or a supervisor on the line. They still won’t lower the APR? Mark your calendar to call them back in a few months.

Don’t be angry. I have found that I am far more successful in all financial endeavors when being polite. These financial “gatekeepers” have angry people calling them all day long. Isn’t it nice not to get yelled at for once? I’ve found that if you’re nice and treat them with extra respect, they often return the favor and give you a little extra care.

Profitable Home Ownership Tip

Always Pay Bills on time + Stop Applying for credit + Don’t use more than 25% of your credit line = maximum score

Start by building rapport. Present yourself as an authority, but focus on engaging with the prospect. Ask questions and show that you care about them. Make sure they know that you are not just here to make a fast buck. Find common ground. Use context to get the conversation started.
Ask them about their goal. The context for how they found out about your services can help here. Start with “I see you were on our website, what brought you there?” or “You responded to an ad we posted online, what made you want to increase your credit?” Finding out their goal will guide the rest of your conversation.
Find out and emphasize their problem or pain point. Why haven’t they been able to reach the goal you discussed previously? This is where the sale is made. If someone has an acute enough need for something, they are going to take action.
Identify key decision makers and time frames. This will help you decide if a prospect simply isn’t ready for your services yet or if you need to speak to someone else in the household instead. It is crucial that you do not move forward with the presentation until the prospect is ready.
Budget. By learning and understanding the prospect’s budget you will know whether they are a fit for the program before moving forward. Be very clear and upfront about the potential costs - there is no purpose to giving a presentation to someone who cannot afford your services.
Soft Close. Very clearly lay out your offering before moving forward with the presentation. Say something like: “If I can help you at a cost of XXX dollars per month, would you take action today?” By getting an agreement to this beforehand, your presentation will go much more smoothly.
Presentation. Describe your services and your credit repair software. Describe the portal where they can see all the work being done. This should be the least important part of your script, as you should already have positioned yourself as an advisor and begun building trust.
Close. End your script by repeating the benefits of your services and explaining how they can specifically help achieve the goals that the prospect described at the beginning of your call. Mention the price but don’t emphasize it. Instead, focus on how you can help.