A 2011 goal you MUST have...

By Dan Beck, Certified Credit Scoring Expert

The New Year is here and with that comes a time of reflection. If you are a person that is not in the habit of setting goals, I would encourage you to do so. Having goals gives you direction and clarity about where you are headed in life. If you normally set goals for yourself I want to strongly encourage you to add a goal that I bet you have never had.

Many people have goals based around; health, relationships or finances. The goal I believe that everyone MUST have will help you in just about all of these areas. Whether directly or indirectly there is one goal that can positively affect your finances, health and relationships. The goal that has to be a part of your life, especially in this day in age, is to get control of your FICO score. I don’t care how good or how bad your score currently is, you need education and you need a plan moving forward to improve your score.

Credit scores can be linked to all kinds of other things. Think about the stress that people have. A lot of this comes from worrying about your financial future. Relationships, how many divorces are caused because financial issues are a big part of the problem? Just about everyone has one or two financial goals; the most common are to get out of debt or create more wealth. Understanding your credit score and the options that are available to you will help you get out of debt. Having a better FICO score will allow you to pay less for just about everything you do. This then allows most people the monthly savings they need to begin investing, or to increase their available investing dollars monthly!

Learning the things to do, or not to do that will affect your FICO score is the first step that I want everyone to understand. By doing this, awareness is created. I am a strong believer that when people are aware of how things affect them they make different choices. No longer is it the time to stick our heads in the sand when it comes to credit and hope that things will be ok. If you are hoping your FICO score is good, I will tell you most likely, it isn’t.

The other most common reaction from people is to get angry or call the system stupid. Whether this is your belief or not, one thing I can promise you is that lenders don’t care. I don’t mean that to be mean, but it’s the truth. You are not going to change the current system which leaves you with two choices; get educated and reap the benefits or, call the system stupid or unfair and continue to be told “no” which means you pay more for everything you want or need.

The other reaction people employ is to believe it makes good financial sense to “exit the system”. This is a very strong belief by some very popular financial experts. I agree that not having debt can be a fantastic financial plan for people. But I believe this advice goes too far to an extreme, which will then take it over to the bad advice column.

If you do not have any credit there are two big problems that come up even if you don’t have any debt. The first, for most of us, is that at some point in time something will come up that we need that we cannot just pay cash for, then what do we do? The second problem is that there are things we have to have such as insurance. Most insurance carries factor your credit score into the equation to determine your premiums. So by exiting the system, you hurt your FICO score which makes you pay more for something you have to have. I don’t think any financial expert will ever tell you that paying more for something that you have to have makes financial sense, especially when you can easily avoid it!

Think twice about adding credit scoring education or credit score planning to your 2011 goals. You will be amazed about how many ways it can affect your life. Credit Score Planning is a term that we all need to add to our lives.

Even if you have an excellent FICO score, what most don’t understand is one small wrong move could plummet your score. Take some time and make this a priority in your life. Even if you don’t, lenders everywhere are doing it for you. Hopefully I have encouraged you to start addressing this three-digit number.

The last very important thing you need to understand is where you get education or advice. Most of the things you will hear, read, or find about FICO scores are unfortunately made up, misleading, or just flat out wrong. Be very careful who or what you listen to when it comes to something as important as this. Good luck with your Credit Scoring Planning in 2011.

Popular advice that can be costly…

By Dan Beck, Credit Management Specialists

How many times can you think of that you had the best intentions, did just about everything right, but the end result turned out to be negative? Some of the most popular advice about how to improve your FICO score is just like this, great intentions, just about all the right advice advise but one key element is not addressed. This key element can take great advice and turn it into devastating results.

A lot of people think they have a handle on what makes up a FICO score, and consequently what needs to be done to improve it. I am certain we have all heard the advice to; “Just pay your credit card off in full every month and your FICO score will improve” or “If you don’t have a credit card, get one and use it, then when the bill comes just pay it off in full every month.” Now this advice is never meant to be misleading or harmful, I am certain of that. The one key factor that is not addressed with this advice is the element of time.

Following the advice can actually cause your score to go down all because one little piece was over looked. For purposes of illustration let’s assume I want to buy a house, I go apply for a mortgage and my scores are a little shy of what is needed to secure a mortgage. The mortgage broker looks at my credit report and trying to be helpful tells me to go get a credit card, use it and then pay it off in full when the bill comes. So being a good listener I go out and get a credit card with a $300 limit. I decide instead of paying cash this holiday season I will just use the card and then use the money I have set aside to pay off the card. A month later I get the bill in the mail, write a check for $300 which pays the card off and takes my balance to $0. I go back to my mortgage broker to pull a new report so I can buy the house I want and to my surprise, and that of my mortgage broker’s, my FICO score is lower than it was the previous month!

To understand why this happened, we need to understand that balance-to-limit on a credit card is actually the second largest component of our FICO score. It makes up roughly 30% of our overall score. Now before I had no credit cards, which is negative to my score, so I followed the advice and did exactly as I was told. I got the new card, used it and paid it off in full when the bill came. The element that was overlooked is by the time the statement comes in the mail the balance has already been reported to the credit bureaus from my credit card provider. The new credit report that I have will show the one credit card I have has 100% utilized, thus causing my scores to drop, most likely severely.

An easy solution to this problem is just a little more education. If we are educated we can avoid a lot of frustration and heartache. If the advice that was given to me would have contained one more step, the plan would have worked perfectly and I would be approved for my new house. We know that balance-to-limit is extremely important to our FICO score. I will also share with you the absolute best percentage to utilize for your credit card limit is 7% for maximum gain to your FICO score. 7% of $300 is $21, so if I would have had a balance on my card of $21 I would have seen the most improvement to my score with this advice. But only if I knew the proper time to pay down my card, this is the ingredient that was over looked from the beginning.

Credit cards have cycles. It is important to know when you’re billing cycle ends. Most cards tell you that date on your statement or you can call and they will tell you. Mechanically what happens is when my billing cycle ends my credit card reports to the credit bureaus that my balance is $300, and then they mail me my statement and give me a 21 day grace period to pay my bill. So you can see that this piece of the equation being over looked is a huge problem. By the time I paid my card off in full, it was too late! The damage has already been done. My FICO score is showing the effects of being maxed out on my credit, even though I just paid it off in full! Talk about frustration.

To keep this original advice from resulting in a negative outcome, all we need to do is know that paying the card when the bill comes is too late. The simple solution or the last part of the advice that I needed to have received should be, call my credit card company and pay it off in full, five (5) days before the billing cycle ends. Now instead of being frustrated and angry, I am a homeowner and I am telling everyone I know how wonderful my mortgage broker is! Just one little thing can have a huge effect to overall success of the advice. Credit education is extremely important, make sure that the advice you follow is from an expert and complete.

The Easiest Financial Plan…

By Dan Beck, Credit Management Specialists

It seems that everywhere you go people are discussing the economy. The proof of the bad economy is everywhere, and millions of people are searching for answers. Whether the economy is doom and gloom or it is booming, one constant is the number of financial plans that people have come up with or tried to implement in order to get ahead.

Some of these plans are very complex and some still are very simple. Think about all the different types of plans or approaches you have personally heard about. They start out as; “the best way to get ahead with your finances is…” I am not saying any of these plans are bad or that they can’t work, but I will tell you why I believe so many of them end up failing.

I believe that one of the biggest reasons people end up not being successful with different plans is they associate the journey that leads to the final destination as one involving pain. Most people I see know the plan will work and try to convince themselves they can do the things they need to reach the final outcome they desire but more often than not they fall short. The pain that is associated with getting ahead for most people ends up stopping them from staying on track.

The pain I am referring to is “don’t”. Such as, don’t go out to dinner, don’t go to a movie, don’t go on vacation, don’t buy the kids new school clothes, just to name a few. Some people even go as far as not running the air conditioner at their house or wearing coats inside instead of turning up the heat. All these kind of things will save people money, which is the pivotal part of their financial plan, but so many lose interest of the goal because they get tired of the not doing the things they want to do.

We don’t like the pain of doing away with things we want to do and in the end that alone is enough for most people to just give up. Therefore the well constructed plan fails.

How about a way to get ahead that doesn’t involve pain? Personal finances can be very basic in terms of complexity. You have a few options; make more money or spend less money. Doing either of these things if you don’t increase your monthly obligations will give you flexibility to get ahead. Once you have the extra money that is where you can get into many other options and much debates as to what is the best way to use those funds. That is for you to decide.

So keeping this as simple as possible let’s assume that just going out and making more money is not an option that is viable for most people. If that option is off the table it comes down to saving money every month, but how do we do that without getting back into the cycle of pain, otherwise known as not doing what we want or sacrificing? Drum roll please…Pay less for the things that we have and have to have.

No I am not telling you to only shop at Wal-Mart that would put many people back into the pain cycle. Instead, simply pay less for most of your monthly obligations by improving your credit score! Think about it, credit scores are vital in determining your rate on Mortgages, Auto loans, credit cards, Insurance, personal loans, etc. Improve your FICO score, and pay less for things you have. It’s really pretty simple, and pain free. You then have the ability to take the monthly savings awarded to you by having a better score, and use that to get out of debt faster.

Incorporating your FICO score into your financial plan needs to be at the foundation of any variation of a plan that you want to use. This is simple. You can do it. Best of all, it is relatively pain free! The only pain involved with this plan, is you need to get credit education, or hire an expert to help you with the things you need to do to improve your FICO score.

Improving your FICO score becomes a lot simpler if you actually know what is good for your score and what is not. It is a lot easier to make good choices or decisions once you know what the outcome will be. Most people if they know doing something today will be negative for their FICO score will no longer make that same mistake once they get over the myth that they have no real control of their FICO score. Very few people understand the scoring system; therefore they try to add common sense to FICO scores. This just causes people to end up mad which yields negative results. Education is key.

The last step is getting education from an actual expert. Not just a person that thinks they know the rules or someone that you think should know the rules. There is a big difference from an actual expert vs. someone that just should know the answers because of their job. So, be very careful who you listen to when it comes to credit score advice.

There you have it. Simply put, improve your FICO score and save money. One of the easiest, most effective and pain free plans you will ever come up with.

My Credit Score is costing me how much?

By Dan Beck, Credit Management Specialists

Never in history has a three digit number been more important than it is right now. Many people get an idea that if they can qualify for the loan or credit card that they want then their score is good enough. Unfortunately, that kind of thinking is a very costly approach.

Your goal when it comes to your FICO score should not be, it is “good enough.” A recent study suggests that the American Consumer could save in excess of $28 Billion a year in credit card interest rate charges if they could just raise their score 30 points! A 30 point increase in your FICO score for most people should be a very simple process, the problem is that we as consumers are very uneducated and/or confused about the things we can do to improve our score.

People that are so-called experts have all kinds of crazy advice for when it comes to what to do to improve your FICO score. Unfortunately most of these people, or companies really have no clue what they are talking about. Their advice gets published and several people follow it with great hopes for a better score only to find out the hard way that the advice they received is usually way off track.

One of the fastest ways we as consumers can reverse the current economic situation we are in is to become educated about what to do and how to improve our FICO scores. If we increase our scores, more people are able to qualify for the things they want.

Look at the housing situation for example, prices will never increase unless there are more people that can buy a house; it is purely a function of supply and demand. The problem is that roughly 25.5% of American consumers currently have less than a 600 Credit Score. Millions of these people would love to buy a house, which would increase the buyer pool and create greater demand, but without proper education these people will never pull out of the bottom tier and become credit worthy for house buying purposes.

It doesn’t matter if you can’t qualify for things or if you can, our goal needs to be to become educated so that we can improve our scores and stop paying more for everything we do. There are 3 easy steps that most all of us can take to quickly and dramatically improve our scores.

Step #1; understand what Aggregate Revolving Utilization is. It sounds complicated but it really isn’t. In simple terms it is the percentage of revolving credit (mainly credit cards) that we are currently using.

For example, if I have one credit card and the limit is $100 and I have a balance on that card of $50, I am utilizing 50% of my available limit. If I have more than one credit card then I add all the limits together, then all the balances together, and divide. So if I have three credit cards, each has a limit of $1,000, I would add those together ($1,000+$1,000+$1,000) and I would get a total of $3,000 in available limits. Lets assume all three of these cards have a balance of $500 each, I would add these balances together ($500+$500+$500) for a cumulative total of $1,500. So for this example we have $1500 in total balances and $3,000 in limits which again would result in 50% utilization.

That is step 1; understand what Aggregate Revolving Utilization is, by the way this makes up most of the second largest piece of your FICO score. If you do not have any revolving accounts, you need to get at least one. I don’t want you to get in debt, but I do want you to play the game. Without any revolving credit you are losing several points on your FICO score, which in the end means you are paying more than you need to for several things.

Step #2; compute your own Aggregate Revolving Utilization. One thing I recommend you doing for this step is to go to www.annualcreditreport.com and pull your own credit report. This is a free service and you are entitled to it once every 12 months with out charge. You will not get scores on this site for free, but we are not concerned with that right now, we need education first. By the way, don’t pay for anything on this site. They will offer you a “credit score” on this site that you can buy, don’t buy it. It is not a FICO score, so no one really cares about it.

For this step I want you to compute your number based off of the balances and limits on this credit report. The first thing most people will notice is that the balance on this report is probably different from what they think should be. That is part of step three. For the purpose of this hint, let’s say your number is 75% Aggregate Revolving Utilization.

Step #3; what to pay and when to pay it. There are two parts to this step, lets tackle the “what to pay first.” Many people that really don’t know much about the FICO scoring system will tell you that there are three separate break points for utilization. They preach that 100% to 70% is one category, 70% to 50% is the next, 50% to 30% and the last being below 30%. So if you listen to one of these people and what they are teaching, if you had 35% utilization they would tell you to pay your balances down below 30% of the limits and you are maximizing that part of your score. This advice is very misleading, incomplete or just flat out wrong.
The easiest advice is the lower the better. The number that I would set for you as an ultimate goal would be 7%. Don’t be discouraged if you compute your number like the example and are at 75% for instance. Work on 10% chunks. Set a goal. Most likely you didn’t get into credit card debt overnight and you probably will not be able to get out of it overnight either. If you are at 75% work to get down to 65% and keep going all the way down to 7% or lower.

The last step is when to pay. Understand that most credit cards have a 30-day cycle. Look at your statements and find the cycle ending date. That date is very important because in most situations that is the day the credit card reports your balance to the credit bureaus. Then they mail you a statement and give you a 21-day grace period to make your payment. So if you are thinking of applying for anything and have the money to pay down balances on credit cards, you will want to make that payment a few days before the cycle ends, if not your score will not reflect your effort.
Knowing these easy three steps will get most of us those 30 points that we are currently losing. Hopefully you will start to understand that improving your FICO score through credit education and/or credit repair can and will work for most of us. Don’t be selfish with these tips, please share them with the people you love or care about, they will thank you.

If you want to learn more about your FICO score or would like to see that score improve, I can help you. Credit repair does work if done by someone that truly knows what they are doing and use credit education as the backbone to their practices.

How Bad is Bad?
By Dan Beck, www.expertcreditrepair.net


New numbers have been released that I believe are very informative, but can also be scary unless something is done. When talking about FICO scores, remember the whole purpose of the system is to predict the statistical chance of a consumer being 90 days late, or more, in the next 24 months on an obligation. This model has been created to evaluate certain things on our individual credit reports that have been classified as predictive information, and then a 3-digit number is generated. These numbers most commonly have been said to range from 300 as the low to 850 as the high. This is not 100% accurate but for our purposes it is close enough.

All the information on our credit report is analyzed then a 3-digit number is produced to determine our credit score. Lenders, for example, love this system because it makes their job easier and faster. They have predetermined ranges that they use to approve clients and also know what rate to charge.

So for lenders, a lot of the guesswork is out of the equation. The model has always been somewhat secretive because the more information that we know as consumers, the less predictive the model becomes. Lenders take this number and base decisions from it.

Some of the new facts that are coming out are that a lot of lenders have not been validating the performance of their lending portfolio as often as the system would suggest. Most lenders want to re-evaluate their portfolio every six months, for whatever reason many of them have not been doing that and now we have even more problems when it comes to the stability of the credit arena.

To illustrate this let’s assume that a lender knows that if they have 10 borrowers with a 720 FICO score, one of those ten will become 90 days late or more in the next 24 months on any one payment. Also, let’s assume that if the same lender approved 10 people with a 650 FICO score that 5 of those will go on to become 90 days late or more in the next 24 months on a payment. Again these are not actual numbers just showing you how the system theoretically works. What has been found is that borrower’s that had a 720 three years ago are now performing more like borrowers with a 650.

What this tells us is that more and more people are having problems. But you can see how this can cause huge problems for lenders, if they give loans assuming that 1 in 10 will have problems in the next two years, but in reality it turns out that 5 out of ten are non-performing, this presents some huge challenges.

The most recent numbers say that 25.5% of the American population has a 600 FICO score or lower, and 35% has a 650 FICO score or lower. Lenders usually classify 650 or lower as subprime (talking about industries).

This tells us that 35% of US population is currently subprime or less, which equates to about 70,000,000 people! The scariest part about all this new information is that most people don’t drop down to the 600 category just by maxing out a credit card. Most of them get down to this level by a severe negative incident occurring on their credit report. The biggest problem with this is most of these people are not going to have the desire or the ability to just make a quick change and jump themselves back to the level they were before.

Most of these items will stay on the person’s report for 7 years. These people are in great need of credit repair.

This is important because it shows the real effect of the economy and the potential recovery as well. A lot of these 70,000,000 will not be able to buy houses, cars or other goods unless they make a huge change and become cash buyers for everything. Which is great until they need to, or want to, buy something they can’t just write a check for.

Looking at housing for example, prices steady or increase with demand. If more and more people are becoming credit challenged or just un-financeable the demand goes down which as we have all seen; slows, stops, or reverses financial recovery. Rates can be low, prices can be low, but if no one is out there that can qualify to buy the houses, we all have problems.

All the new legislation or potential legislation is making credit qualifying harder. I am not debating whether that is a good thing or not, but I am saying that credit as we know it is not going away.

The system is not going to change, and until we as Americans start getting educated and actively start implementing Credit Score Planning into our financial lives, the road to recovery is just going to get longer and longer.
Credit Education and Credit Repair works, but make sure you are working with an expert, get started today!

If you have a Credit Question or need some Credit Advice For yourself or a friend or
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Why aren’t the rules just given?
By Dan Beck, www.CMSconsultants.net

When most people start being educated about how the FICO scoring system works some of the most common responses are; “that is crazy”, “that doesn’t make sense” and “why can’t they just tell us the rules!”

Just in case you are not aware, FICO scores are designed not to be common sense.

The purpose of the FICO score is to predict the statistical chance of a consumer being 90 days late of more in the next two years, that is it. The key word there is predict, or predictive. So don’t get hung up on trying to add common sense into the equation, because unfortunately that will just confuse you more.

To better understand this whole process or system it is helpful to understand how the model was created in the first place. Fair Isaac (FICO) went to the credit bureaus and requested 1.5 million random credit reports; two years later they went back and requested new reports on the same 1.5 million people.

From there they started to find similarities between the reports more importantly between the reports of the individuals that had become 90 days delinquent or more on a debt during that course of time. That is how the FICO scoring system that we all know now was created. As you can see it is all about predictive information. Why that is so important to know is because now you understand why FICO is not in the practice of sharing much information about their model.

The more information people know about the model, the less predictive the score becomes. If you know all of the factors that will hurt or help your FICO score more people will change the things they do so their score will improve. As people do this, the model loses some of its value. FICO doesn’t want you to know the rules and the rules are not common sense, they are all about predictive information.

Lenders don’t know how the model was created or the ways your information is being valued, they are just looking at scores and then based on that score, they have done research to know if they will approve you or not and also what rate you will receive. The FICO scoring system has made the world of credit much more efficient and streamlined.

Having said that, the more things that we learn that will positively affect our score the more money we will save. To illustrate just how important this is The Consumer Federation of America found that consumers could save $28 Billion a year in lower credit card finance charges if they improved their credit score by 30 points!

The rules are not going to change nor is the process going to change any time soon. The system is the way it is and we all need to become as educated as possible, or just continue to waste money by having higher interest rates.


The biggest challenge that we as consumers have is not finding information about FICO scores, but finding correct information. The world of credit has become cluttered with new companies sprouting up every day.

All of them have some new way of packaging a product that will either help improve your score, allow you to monitor your score or save you all kinds of money on your current bills.

The challenge for us as consumers is to sort through all of these offers and find out which ones are actually basing their education or advice on actual factual information. To help you with this, one of the first things you need to look for is if the advice you’re getting is being based off “credit scores” or FICO scores. Many companies are using “credit scores” as a way to get the attention of their potential customers.

A FICO score and a "credit score" can be summed up quickly as they both are evaluating the information on your credit report, and that analyzed data then produces a score.

The big difference is just about every lender is only checking your FICO score, not many people or industries care about any of these other “credit scores” or models. So if no one uses those other models to determine your credit worthiness, then why should we care about them? The answer is we shouldn’t. Why get advice on any model or system that is basically irrelevant when it comes to getting a loan? When it comes to credit scores FICO is king.

Knowing that FICO is not in the habit of publishing their model, it is pretty safe to guess that just about all of these new companies are either purely guessing about the FICO system, or they have created new ways to sell you information based on some other “credit scoring” model. Long story short, they are teaching you how to improve a score that no one cares about.

Make sure any product or service that you are buying or getting advice from is actually giving you your FICO score or information that is FICO factual. Most of these credit monitoring systems or credit score simulator systems will tell you if you read the disclaimers that they are not tied to FICO in any way and they are evaluating your “credit score” based on some other model than that of FICO. Knowing this doesn’t make the products completely worthless, but in a lot of cases pretty close.

Potentially the only thing worse than not knowing anything about our FICO score, is paying for something that we think will help us improve our FICO score only to find out we just became an expert on a model that is basically worthless.

If you have any questions or just need some Credit Repair advice -- Please contact me at: 970.302.5185