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Part 2 of 3 P’s: Product-Free, Personal, Passion
Part 1 of 3 P’s: Product-Free, Personal, Passion
Sept. 25, 2006
I was interested in the factors to FICO score, the actual numbers and the sequence of those numbers. To the right of the FICO score the factors are listed in this maner 038/013/010/020: I was interested in the meanning of the numbers...
A credit score is really nothing more than an “I Love Debt” score. It isn’t based on how “worthy” you are, how much you have, or how much you make. It’s based on the fact that you got into debt, stayed there for a long time, and paid creditors a lot of unnecessary money.
I stopped borrowing and paying back debt 20 years ago. As a result, my credit score gradually deteriorated to the point where it doesn’t even exist anymore.
FICO will love you if you’re always in debt and making payments, but you’ll never be able to take care of your family, retire with dignity, or make a difference in the world through giving. Close the accounts! Cut up the cards and pay cash for everything! You can’t worship at the altar of the great FICO if you want to get out of debt, and stay out of debt!
Not a Slave To Debt
This brings home the message that FICO scores should be more than a loan decision number - its also a valuable educational opportunity between credit unions and their members that provides members with something to act on for noticeable results.
Key info and articles of this nature are extremely beneficial to our Member Service Consultants because they serve as a value added dimension to the sales and service process.
Excellent information, Mary. Now how to get this information into the financial planning of credit union members. I would venture that a small percentage of members know these facts, where they stand, and how to reverse any of their practices that could be hurting their credit score. Credit Unions owe it to their members to provide education to ther members in easy to understand language like this.
So what the FICO score is a way to get you in debt and keep you in debt. So it really is the “I love debt” score because there is no way to have a great FICO score without getting into debt and staying in debt. If you make $1 million per year and have $10 million in the bank, you can have a low FICO score simply because you don’t borrow. With all due respect to this forum, getting out of debt and staying out of debt, is the true path to sucess. If you can''t afford it don''t buy it. As for mortgages, you can still get a good mortgage with "manual underwriting." The banks are just getting lazy, and don''t want to go through the extra work.
Not a slave to Debt
Some bad advice told me to get a credit card (after my bankruptcy was discharged), get a high balance and pay it always on time. After I read and realized this was bad, I paid off my credit card yesterday. I wonder how that will affect my FICO score. It''s also not fair that FICO considers some collection accounts in it''s figuring; creditors have the power to place items on your file, with impunity. The onus is upon you, the consumer, to prove that it''s fraudulent, false or otherwise inaccurate. That takes both time and money. The credit system itself is designed to benefit creditors. I''m not suggesting the system is unnecessary, but the way it''s presently designed is, in my opinion, quite biased and a bit unfair. Companies like Equifax, who cleverly delegate their "dispute process" to online-only do this to avoid investing time. You basically say to them "this is false!" and they say "nope, sorry" without so much as any evidence. All the creditor has to do is confirm certain information, and there you go. Is that fair? NO. These companies are no better than the Sallie Mae''s of the student loan industry. They have a vested interest, and they are making tons of money off of it. There has to be a fairer away to do this.
You are quite right. A lesson I''ve learned later in life, but a lesson none-the-less. It seems, though, if you do make a credit card purchase, you should consistently pay it off as soon as possible (immediately in the billing period). This looks good on your payment pattern. I still think it''s a game, made by and invented by snakes... the kinds you find around sewer systems ;-)
Who cares what your FICO Score is? Pay cash for everything you can, and it will not matter... And as you have found out, when you play with snakes, you will get bitten!
Not a slave to Debt
"Not a Slave to Debt" is right. How often do you buy a new car? I know an individual who has bought (and financed) a new car every three years since she was 19 years old (she’s now 47). Did you know that if you buy a new car every ten years (today’s cars will easily last ten years if you properly maintain them), versus buying one every three years, that it will save you an average of approximately $400,000 in interest and depreciation over your lifetime? That’s a huge price to pay for enjoying that new car smell every three years. Could you use an extra $400,000 when you retire? Have a 30-year mortgage on your home? Seriously consider paying extra on the principal every month. Doing so can save you many thousands of dollars in interest and will result in paying off the mortgage years earlier. Personal Financial Management Rule Number One: Remember, if you don’t control your credit, it will control you. Consider credit a tool that can either be used wisely or can be abused with deleterious consequences. The best method is to not use credit at all, but not everyone can do that, especially when you are a young adult. However, you should establish a goal early in life, of getting out of debt and staying out of debt. Doing so can save you literally hundreds of thousands of dollars over your lifetime.
Insurance companies check their customers’ credit reports regularly and use the information obtained to increase customers’ insurance premiums, an ethically questionable practice, but it is legal (the insurance industry constitutes a powerful political lobby in the U.S.). You should limit the percentage of available credit that you use to no more than thirty percent, even if you pay off your balance every month. Your credit report will show the maximum amount that you owed, even if you pay it in full every month, and “excessive spending” will lower your score (it’s nonsensical of course, but that’s how the system works) and increase your insurance premiums. Want evidence that the credit reporting system is an unfair system designed by morons? Consider this: How can they determine that you have engaged in “excessive spending” when they don’t even know your income or net worth? And the fact that you might pay off all credit card balances in full every month is not even considered. This system needs to be completely overhauled. It''s time the consumers have a say in how the scores are to be used, instead of it all being determined by retailers, creditors and insurance companies.
Bill G- Thanks for the backup. I have learned the no debt ways by my own mistakes. (I''m 41) Over the last two years, I have cut up and paid off every debt I have, except the house. (I''m working on that now) I pay for everything in cash, And i buy two and three year old vehicles with cash. The FICO is truly the I love Debt score. I am working on getting my score to ZERO! But Bill you are wrong about one thing. Young Adults should especially not use debt as a tool. By living within their means, and without a I love Debt Score, they can get a mortgage. With a letter from their landlord, for the past two years, (On time rent payments, and proof of income), they can get a mortgage at the best rates available. I''m teaching my children to live debt free!!! FICO IS A SCAM! If debt is normal, call me weird!!!!!!
Not A Slave To Debt
FICO is indeed the I love debt score keeper that benefits in its methods of accounting not the consumer but the lenders of all sorts. I''m urging my children and grandchildren to pay off debts sensibly and keep it that way, ignoring gimmicks to affect their FICO scores.
I also agree the FICO score is nothing but a measure of your willingness to get in debt and stay in debt ... But unfortunately...it is a necessary evil to have a good one... Who gave a private company all this power over the individual consumers by having your worthiness as a human being...in some cases your ability even to get hired!! ?? A low FICO score means extra hardship in obtaining the above-mentioned services and products.. Why complicate your life even further...? It''s hard enough to find a mortgage company to obtain a mortgage from(specially after the tougher credit standards after the crunch)let alone the extra effort to find the one that does manual underwriting...Why pay more for insurance?..Why risk not getting the apartment you wanted? Just pay your cards and don''t over-extend yourself..
Point one, the only thing that can hurt getting hired is possibly bankrupcty. Don''t even tell me that if you have several hundred thousand in the bank, no debt, a paid for house, but a low fico score, you won''t get a job. Second, Most credit unions, do manual underwiting, all you have to do is ask. So if the big companies, hire dopes, that can''t think and must use a computer program only, and won''t lend money to a otherwise debt free person, go somewhere else. Last point- why complicate your life being saddled with debt? How many times do the scum credit card compies hit you with late charges for not paying by 12:00 noon on the due date? Doesn''t that sound more complicated than just paying with cash? Also the extra money that you might have to pay for insurance, doesn''t come close to late fees, finance charges, over the limit fees, and the fact that people who spend money with credit cards, spend 18% more than cash payers. Personally, I haven''t use a credit card in over two years, (And have been paying down all my other debt) and can tell you all you can live without credit! One day, I hope to have a zero FICO Score!
Not a save to debt
IN THE USA YOU ARE JUDGED BY YOUR CREDIT SCORE, WHAT A LOAD OF CRAP, I AM A RENTAL AGENT AND HAVE BEEN BURNED BY A GREAT CREDIT SCORE OF MANY OF MY TENANTS, GREAT ONE DAY, BANKRUPT THE NEXT, JUDGE ME BY MY NET WORTH NOT SOME FAIRYTALE THAT IS CONTROLLED BY THESE REPORTING AGENCIES THAT MAKE BILLIONS ON FIXING AND SCREWING UP AN IMAGINARY RATING. I AM WORTH $10,000,000 AND I CANNOT BORROW A DIME BECAUSE I NEVER USED CREDIT TO BUY ANYTHING, I PAID CASH AND MY WORD IS WHAT I AM TRUSTED AND RATED ON.
This article can help our loan officers explain ways for members to improve their credit scores in a more knowledgeable manner. The article is concise and to the point. Thank you for runningit.
Clear, concise, and relevant to questions our members are asking about their credit scores. Thank-you.
What are the rules about using this info as the basis for a newsletter article? I agree with Catt; how do we get the info into our member's hands.
This is exactly the type of information we need to know on the front lines to educate our members. Love the graph, I will refer to it when educating.
excellent article, and to the point, this definately needs to get into the hands of our members.
We use this with members and even offer an incentive, that if they improve their score they are welcome to come and we will relook at their credit and if they qualify for a better rate we will change the rate on their loans with us. We find this helps both the credit union and the member.
It is great information to be able to share with your membership. So many times you tell what you know, but they find it hard to believe. by having this information and putting it in a handout to them makes it more real to them and more willing to work with you.
Educate the value of creating a credit history to our children and share this with them. I have started a borrowing plan even though we do not need it for my daughters future. This was such a wonderful tool to assist. Also we dicsussed the values of guarded identities as a protective part of credit histories. Thanks , Harley
Before you all sing the praises of FICO scores you need to read my book (The Great FICO HOAX) and go to my website www.ficofraud.com
IF CREDIT SCORES AND FICO WORKED, WHY WOULD WE BE IN SUCH A MESS WITH SUBPRIME? WHAT ABOUT "NINJA" LOANS (NO INCOME, NO JOB / ASSETS)? GET RID OF CREDIT SCORES, AND BRING BACK COMMON SENSE.
The emphasis on credit history and credit scores in the US is just weird. No one around the world do this. As someone said above, its just banks being lazy - probably because there is so much demand for debt, banks have no time to go through all loan applications carefully. Hopefully someone wakes up one day, and opens up a bank that do traditional creditworthiness checks rather than credit scores, and make a million bucks. Until then, we''re stuck with the current system. I assume with the problems with the financial system now, this day is a long way away.
FICO is a joke. You have to play with debt to have a high score. My score horrible, yet I have no debt and plenty of cash. I would rather fund myself then the bank/FICO.
It doesn't matter how they calculate your score because it is a huge scam either way, and even if you have good credit, lenders will still find some way to stick it to you.
You have to be kidding....FICO scores are the biggest hoax and fraud in American History....go to my website www.ficofraud.com and read my new book The Great FICO HOAX....
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