Realize that this is just an outline of guidelines they claim to use and that access to the actual algorithm they run each credit file through to produce a score is known by few people on earth. And even if they know about it doesn’t necessarily mean they understand it or can explain exactly how it works, too!

Also, it helps to know that the WHOLE reason the credit scoring system was created was to help creditors calculate what your chance of defaulting on a loan given to you would be.

With that in mind, here’s the overview of what they look at:

1. Your Payment History: This supposedly accounts for 35% of your total credit score. This is related to whether you pay your creditors on time or if you have been late (30 days or more that is).

They factor in details such as how many accounts you have that are late, how long it’s been since you made a late payment, number of items that are past due and if there are any adverse public records like bankruptcy, judgments, liens, etc.

This is why being 30 days late on even one account can cause your score to drop so much, up to 100 points in cases I’ve seen. Payment History is the crux of the whole system since creditors only care about your ability and track record of paying others on time.

2. Balances Owed: The amount of debt and ratio of that debt to your credit limits accounts for 30% of your total credit score. This is a tricky one, because it’s not simply tied to how much debt you have, because I’ve seen people with millions of dollars of debt across
mortgages, credit lines and car loans and have a credit score over 750 and I’ve seen people with a $400 credit card that’s maxed out and a score of 510.

What matters here is really what the balances are on the accounts compared to their limits, which brings us all the way back to the #1 way to increase your credit score… Keep your balances below 50% of the limit on your revolving accounts (credit cards and lines
of credit.)

When you think about it, this makes complete sense. You don’t want to be penalized for buying property and having a mortgage since that has the potential to add to your wealth, and everyone in our society needs a car to get to work, so you can’t be penalized for
that debt either. So all that’s left is credit cards and lines of credit.

Since they’re unsecured, the more of it you have, the greater the risk of the creditor from not getting paid back, through Bankruptcy and unpaid collections. Over time the bureaus saw a correlation between high balances on revolving accounts and increased rates
of default on those accounts and others the borrowers had. So they ended up with a formula that factors this in and is now 30% of your credit score.

3. Your Length of Credit History: This is simply related to how long you have had credit accounts and the age of your oldest active account and it accounts for 15% of your credit score.

Notice I said this factor is also tied into the age of your oldest active account and how that ties back into one of the Myths I blew up in the first email I sent you. The last thing you want to do is close a credit card account that you paid off and is the oldest active account you have. I recommend keeping the 2nd oldest active credit card account open as backup in case the oldest one gets shut down for any number of reasons.

The credit bureaus made a change to their calculation of length of credit history in August of 2007 because there was a loophole that many people were exploiting up until that point. All someone needed to do was to be put on a credit card account as an ‘Authorized User’
and they would instantly inherit all of the good history from that account on their report as if it was theirs from day one.

It was a great way for parents to help their kids establish credit early on in life and was a big factor in my wife having a near 800 credit score when we got married when she was only 24. Credit repair scam artists also used this to build new credit for those with bad
credit by having them placed on accounts of the elderly who had
very long history that was perfect.

It worked like a charm and the scam artists were charging a lot to do this since it was the only way they could think of to get someones credit repaired and perfected. It is now obviously an ineffective method for helping someone’s credit score and is hopefully putting many scam artists out of business.

4. New Credit: This accounts for 10% of your credit score and is tied to the number of recently opened accounts and their type. This is why your credit score typically drops after you get a new credit card, buy another home or finance a new or used car. They want to make sure you handle every new account properly and pay it on time before they reward you for it.

This is also the section of the scoring model that factors in credit inquiries by creditors you apply for credit from.

Unfortunately there’s no hard and fast rules about inquiries and how much they affect your score when you get them, but there are some rules of thumb you can follow.

First, the more inquiries you have, the more desperate you look to creditors and lenders since those with perfect credit typically work with one lender and have everything taken care of by them and they get the best rate possible at the lowest price. If you’re shopping around and having everyone pull your credit, it looks as though your fishing for anyone that will bite and approve your request.

Next, the weaker your credit report is, the more you will be affected by credit inquiries. Think of your credit score like a bridge, the deeper the footings are laid (like a long history) and the stronger the material the bridge is made of (like low balances and on time payments), the more weight it can handle and a credit inquiry is much like a canary coming to sit on the bridge. If your bridge is rickety (short history) and made of wood and rope (late payments and collections) and you’ve got a big truck (maxed out accounts) driving across it and then the canary comes and lands on the truck, it is possible that everything could fall apart and your score could go down quite a bit. How much? I have no idea.

Just realize that the urban legend of your score going down 3 points every time your credit report is pulled is simply that, an urban legend we all need to let die.

5. Types of Credit Used: This accounts for the final 10% of your credit score and is based on whether you have installment loans like mortgages, car loans or student loans, and if you have revolving accounts like credit cards and lines of credit.

Think of installment loans as the footings and foundations of your bridge and revolving accounts like the cables holding it all together.

Obviously you need both, but they are treated quite differently.

Installment loans are stable, typically secured against some type of asset and are treated as such with little fluctuation in your credit score for having them. Even though they don’t affect your score wildly (unless of course you pay one 30 days late or more!), they give your credit file stability that is very valuable.

Revolving accounts are unstable, unsecured, fluctuate wildly and affect your credit score significantly on a month to month basis. That’s why the #1 strategy for getting and keeping a high credit score is to keep your revolving account balances below 50% of their
limit.

It’s these revolving accounts that gives you a really high score and are necessary for having near 800 credit scores. The installment accounts are just not given as much weight to get you up that high.

It makes sense, too. It’s the revolving accounts that take more responsibility to manage properly and with more responsibility comes more reward and is true across every part of life, not just credit.
*Hint: That’s why I will forever be an entrepreneur.

So paying $200+ a year to get access to info about myself is absurd.

Thankfully one of the credit bureaus is starting to ’see the light’ and is allowing certain online services to give you your credit score absolutely free with their other content.

Of those I’ve come across, my favorite is www.CreditKarma.com

This site allows you to check your credit score with TransUnion as many times as you want without any cost whatsoever. The way they make their money is by offering you various promotions for saving money based on your credit score. An example is a new 0% balance
transfer credit card for your 720 score. They then get a referral commission from the credit card company for you signing up through them.

The great thing is that they don’t share your info with anyone and they don’t send you any spam emails trying to upsell you on something else they make money off of.

**If your score isn’t above 720, you have a problem and should address it right away. Go to www.thecreditconcierge.com/coupon.pdf and fill out the coupon for a free Credit Analysis to find out exactly what is keeping you from having perfect credit.

My only caution for using CreditKarma.com is if you have a hard time staying away from promotional offers or so called ‘deals’ since most people shouldn’t be getting new credit accounts since two is more than enough.

Other than that, the service is a great value and it allows you to stay on top of one of your three scores without throwing hundreds of dollars away every year just trying to track what others are saying about you and your trustworthiness.

As for accessing your Experian and Equifax scores, hopefully they’ll ’see the light’ soon enough and start allowing providers like CreditKarma.com to give you access to your scores with them. Even though you can’t access them for free right now, being able to see
your TransUnion score is thorough enough for most people since information across bureaus doesn’t fluctuate drastically in most cases.

You may have heard that the government now requires the three credit bureaus to give everyone a free copy of their report once a year, but you don’t know exactly how to do this. There are plenty of commercials on TV offering you the free report, but when you go to their website they require that you sign up for their $12/mo. monitoring service. Obviously they are just exploiting the free report law to make money off of unsuspecting consumers.

Fear not, there is actually a place you can get your 100% free copy of your credit report from all three bureaus. Go to www.annualcreditreport.com and click on ‘Request Report’ after you enter the state you are in.

Once you enter the site, you will fill out your personal info that they will need to access your reports. After that, you will be taken to a page that lists the three bureaus (Equifax, Transunion and Experian). Check the box next to each bureau as that will allow you to go through the process of getting your free report from each one.

When you click on the ‘Next’ button, it will take you to the Equifax website where you will be able to order your free report. Be sure to not select the credit monitoring service subscription and only request your free report. They will also offer you an option of
ordering your credit score as that is not part of the free report requirement. There are some states that do require the scores to be included with the report, but since we’re in California, it comes without it.

Once the report is ordered, select the option to view the complete report and save it to your computer. Typically, you can simply right click on the report after it is brought up and select ’save file as’ and save it to your computer. If that doesn’t work, I recommend using software that allows you to print a page into pdf format. You can get a free version at www.primopdf.com It works just like a printer, only it saves it to your computer as a pdf for easy storage and safe transfer since the contents are ‘locked.’

When you are done saving the report from Equifax, click on the link at the top of the page titled ‘Return to AnnualCreditReport.com’. This will take you back to get your Transunion and Experian reports through the same process you did for your Equifax report.

One other note, at each of the bureau sites, they will confirm your identity by asking about credit accounts that are on your report. The questions will ask about a date the account was opened and the type of account. The answers will be in multiple choice format and
will list multiple potential creditors and multiple ranges the payment for that account falls in. If you don’t keep track of accounts you’ve opened or what you pay, the it’s helpful that they only ask about open accounts, so that reduces your options to only the bills you pay currently and not ones in the past.

Each bureau lays their report out differently, but they all have the same basic info for each account.

Here’s a list of items to look for that may need to be addressed:
1. Do you have a number (1, 2, 3, etc) listed in the 30 / 60 / 90 section of any account?
If so, this means that you were late with your payment that number of times for that many days (30/60/90). If you feel that this is incorrect, you will need to find the record of the payment you made on that account showing when it cleared your bank account. This is
what the credit bureau will need to remove the late payment mark from your credit.

2. What is the ‘balance’ and ‘limit’ on your revolving accounts?
Remember that you want to keep your balance below 50% of your limit to keep your score high. If you have revolving accounts with a balance over 50% of the limit, you will want to work on paying that balance down, or off ideally, to help improve your score.

3. Are their any judgments or liens listed?
These are harder to find out information about if you don’t know why they are there. Usually it simply lists the ruling body that authorized them (local county court or the state) and may have info as to who the claimant was to help jog your memory. If a lien or judgment is legitimate and it was paid off, make sure it states that it was ’satisfied’ or ‘paid in full’, otherwise you will need to get the documentation showing it was taken care of to prove to the bureau that it needs to be reported differently.

4. Are there any accounts that are reported as ‘charged off’?
This means that you had an account that you didn’t pay on and the creditor wrote off the account for accounting purposes since they couldn’t get reimbursed for it from your payments. If this is a true account, again, make sure the balance owed reports as $0. There are numerous cases I have seen that show a charged off account still having a balance at or near the limit of the account and it is a giant boat anchor to the clients credit score.

Now if you get overwhelmed by reviewing your own reports or it simply bores you to tears to go over it, I completely understand. Credit reports can look like Egyptian Hieroglyphics at times. Because of this, I’m offering anyone that wants the help a FREE Credit Report
Review & Analysis. You can get your coupon for this free offer by going to www.thecreditconcierge.com/coupon.pdf

The reason I’m offering to review your report and provide a detailed analysis absolutely free is to help as many people as possible perfect their credit. In the process, potential clients will show up that need our Credit Concierge service to remove a host of negative items
from their reports so they can get a fresh start and have perfect credit the rest of their lives.

If you do take me up on the offer, my hope is that your review and analysis will result in having nothing significant holding your score down and that you will be able to go forward in confidence knowing exactly what you need to do to polish and maintain perfect credit!

Creditors are very crafty with their messages and strategies to get you to charge up more debt and fill their accounts with interest fees, late fees, over limit fees, and annual membership fees. One of the most creative ways they do this is with the ‘No Interest, No
Payments’ offers they make through retailers like Mor Furniture.

How do you think they can get away with making these offers and still make money on them?

First off, it’s never the retailer that is carrying the credit, it’s usually Wells Fargo or some other creditor behind it. The retailer gets 70% to 80% of the purchase price in exchange for the creditor to extend the buyer the credit to purchase the merchandise. So if a furniture store sells you $5,000 worth of furniture, they’re going to get between $3,500 and $4,000 from the creditor, depending on the offer.

Then comes the fine print… If you don’t pay off the balance in the time frame given (12 months typically) then you start paying interest at ridiculous rates, typically over 30%. Some creditors even slap you with retro active interest covering the period (12 months in this case) that you didn’t pay any interest if you don’t pay off the balance. On top of this, the data shows that more than 30% of borrowers don’t pay the balance off in full after the 0% period, so the creditors make plenty at that time, too.

None of this is even what ruins your credit score though.

When you receive the credit line to purchase the merchandise, your limit is set almost exactly to the amount of the purchase price. This results in you having a revolving credit account that is now maxed out. If you remember from the tip a couple days ago about the
#1 factor keeping your score down, it’s having revolving credit accounts that have balances greater than 50% of the limit.

Having a maxed out revolving account drops your score like a rock and you wouldn’t have a clue about it until you pulled your score the next time.

So here’s the way to beat this. First, pay cash for merchandise because it all depreciates and very rarely is it required for daily living and falls under ‘discretionary expenses.’ Then, when you see an offer for ‘No Interest and No Payments’ and you are actually in the market for whatever they are selling, go in and offer to pay them 75% of the purchase price if you don’t use their financing. It’s the same exact amount they’d get from the creditor, so be sure to point this out to them if they balk at your offer. Get the manager involved if the floor clerk isn’t savvy enough to understand the details of their ‘wonderful’ financing program.

Yet again we prove that there is no such thing as a ‘free lunch’, especially in the credit world.

There is a secret arrangement that creditors have with the credit bureaus to gain access to your credit report without you ever knowing about it. This arrangement is setup so that the creditors can select prospective clients to send specific offers to and increase the results of their advertising. It’s what causes your mailbox to fill with ‘pre-approved’ credit offers that you’ve never applied for and didn’t come from having a prior relationship with that creditor.

The creditor doesn’t get access to your complete credit report, but they get enough to find out if you’re in the ballpark of their ideal client profile and can match an offer to who they think you are. There are multiple problems with this situation.

First and foremost, it has been shown that this access to your credit report actually causes your score to stay artificially low.

I’m sure you’re yelling out like I did when I first heard this, ‘That is so unfair!’ Well, you’re right, but since the creditors drive the credit bureaus with their monthly reporting fees and memberships, the bureaus are obligated to scratch the creditors back and help them out since the creditors are the bureaus REAL clients, not your or me.

The second problem with this arrangement between the bureaus and the creditors is that it puts you at risk for Identity Theft since your mailbox is filled with offers extending you credit that can be stolen very easily and used without your knowledge, until it’s too late. Mail theft is the #1 way that ID thieves attack.

Finally, getting ‘pre-approved’ offers that you are not actively applying for increases your chances of becoming an impulse buyer. In a time of weakness you may respond to a 0% intro offer on a new credit card and then go charge it up, putting you in a position of weakness financially with more bad debt.

So what do you do to combat this? Go to www.optoutprescreen.com and select the ‘Cl1ck Here To Opt-1n or Opt-Out’ link. Then fill out your information and click on either the ‘Electronic Opt-Out For Five Years’ button or the ‘Permanent Opt-Out By Mail’ button. By selecting the latter, you will have to print out the form and physically mail it to complete the process.

At this point, creditors will no longer have access to your credit report to send you any more offers and your score will benefit from it within the next 30 days as the bureaus are updated of the
change.

Given the fact that I was your average college student who got a credit card at a baseball game because I wanted the free Giants towel they were giving away when I applied for one, I came out of college with less than stellar credit. As a matter of fact, in my second year of grad school I pulled my credit and my mid score was 510!! Pretty lousy.

I didn’t have the foggiest idea what to do to fix the problem, so I signed up to work with a company (a law firm in Utah) that a friend of mine had recommended because he was using them to try to get his credit cleaned up from his bankruptcy years earlier. He hadn’t gotten any results yet, but figured they must be decent because their website said they helped thousands of people and were only charging $39/mo.

After 12 months of being on their service I didn’t have a single thing removed or updated that was to be done from the $468 I had so willingly sent them. My friend and I both canceled the service that same month.

The problem is that we weren’t just some unique cases that the firm was stumped with… this is the norm! There is no accountability in this industry and no performance guarantee’s are required, and as a matter of fact, one law firm says they’re illegal!! How is that not the ‘Fox building the hen-house’? Telling you they aren’t allowed to guarantee their performance or the results and then charging you for it every month. It just doesn’t add up.

So you must be asking yourself how these firms stay in business month after month if they don’t get the results their clients are hoping and paying them for? One reason is related to a quote I will never get out of my head for the rest of my life from a statistics class I had in college and the professor, Mr. Nichols, said it over and over.

‘Causation does not equal Correlation’

What this means is that if a result happened (increased credit score) while doing an activity (paying a law firm every month), this does not always mean that the activity was what caused the result.

When someone signs up to get a law firm to clean up their credit, what do you think they do about their spending and bill paying habits at the same time? They get them in line, too, because it is consistent with maintaining good credit. So what happens is that over time, as they continue behaving properly (paying bills on time and paying off credit card and collection balances) their scores go up, regardless of what they are doing with the credit repair company.

The problem is that they instantly assume that the credit repair company MUST be doing something productive because their score went up, but they don’t realize they did it all on their own and could have saved the $450+ at the same time.

I’m not saying that these credit repair companies are committing fraud, although some do, or that they are deceiving their clients, because I think they truly want to help, but that doesn’t mean that I need to endorse them or paint a prettier picture. They can help clients who don’t know how to write a letter to the bureau’s
explaining how something is mis-reported and they can help get items that shouldn’t be reported any more due to the limitations in the Fair Credit Reporting Act taken off after their allowed reporting time.

Another problem I have with these companies is that they charge on a monthly basis with no end in sight. This is conveniently done because they’re hoping that you forget about the payment since it’s set up automatically to be paid on your credit card or out of your checking account every month and I guarantee they collect months
after your score is to where you want it or the items are updated that need to be updated. They definitely aren’t going to call you up after your score gets to your targeted goal and say ‘Well you hit your goal, so we’re going to stop charging your account, so thank you for your business and feel free to call us if you ever need help again.’

So what can you do?

First, start implementing the strategies in this email course, because I’m going to give you all the tips and tools I’ve used to not only increase my score from 510 to 700+ in just over a year, but also what I’ve done to increase my clients scores over and over to get them into better financing for their homes.

Second, if your score is horrible and there are a lot of things on your report keeping it down, start interviewing credit repair providers, but be sure to use the following questions that all have to be answered:

1. What is the fee for getting my credit report cleaned up? Is it a flat fee or a never ending monthly charge?

2. How long will this take?

3. What items are you willing to guarantee that you can get removed? When they are removed, do you guarantee that they will never come back or that you’ll get them removed again for free if they do?

4. What will you do if you don’t meet the objectives and goals we agree to when you start my file? Do you have any type of refund process or other guarantee?

If they can’t answer these in a way that gives you 100% confidence, don’t move forward with them and start giving them your money and time.

For most people, this one single tip is all they need to follow to have perfect credit for the rest of their lives. I’ve seen clients have everything else in place, except this one and have their credit stuck at 680.

Here it is…

Keep your balances on your revolving accounts (credit cards and credit lines) below 50% of the limit of the account. So if you have a $5,000 credit card limit, keep the balance that is rolled over month to month below $2,500. The real goal is to have the balance at $0 at the end of every month, but I realize that may not be a reality for you right now.

This is also the most responsive strategy to get your score up, meaning if you have a current balance over 50% of the limit and you pay it off in full, your score could go up as much as 50+ points in the next 30 days. I’ve done this myself over the past few years and by paying off a couple small cards that were maxxed out, my score went up as much as 80 points in a month.

There is one potential issue with this strategy. If you are a heavy credit card user and charge a substantial amount to your account AND pay it off every month, your score could still get stuck around 680.

Here’s why… let’s say you have a $5,000 limit like we stated before and you charge $3,000 on it for the month of April. May 1st you get a statement showing a $3,000 balance and you send in your $3,000 check around May 20th since it’s not due until June 1st. But between May 1st and May 20th when the creditor gets the payment,
you charge another $2,000 on the account. Then the creditor reports your account to the bureau on the 10th, after charging another $1,000, but before they get your $3,000 payment. You now show a balance of $4,000 on your account with a $5,000 limit and the credit scoring algorithm slaps you with a nearly maxed out account
calculation and your score goes down.

It’s happened to numerous clients I’ve worked with and took a while to ferret out the root of the issue and create the solution to it.

So, if your score is below 720 and you don’t know why your score isn’t going up and you pay off your balance every month, then here’s what you do…

You can either a) send your payment in the day you receive the bill so the gap between the statement and receiving the payment is reduced as much as possible or b) when you do send in the payment, go online or call the creditor to get the total balance as of that day. Then send in a payment for that total amount so that the
account goes to $0 when your payment is received.

Don’t worry, you won’t have to do this forever. You just need to do it until your score gets up to the 750+ range and gets a stronger foundation under it. Then you can go back to just paying what’s on the statement before the end of the month and you’ll be fine.

Myth #1: Close all of your credit cards once you become debt free.
Big mistake! 15% of your credit score comes from the history of your accounts. A big part of this 15% is how long you’ve had credit. Once you close your oldest account, your history moves up to the next oldest open account. It’s a lousy system and should look at all of your accounts over your credit history, but that would be too logical, so we have to play by their rules.
A client of mine in his 60’s did this BEFORE he came to me for help and his perfect credit score of 750+ dropped to 675 within months after becoming debt free. It was because he listened to the advice of some ‘know it all’ and closed all of his credit accounts, some of which were over 20 years old.

Myth #2: Having low interest rates on your credit cards helps improve your score.
False. Your interest rate has no bearing whatsoever on your credit score. I think this was originated by some creditor offering 0% interest programs who wanted to scam clients into
signing up for the offer since they said it would help their credit and cost them nothing with the 0% rate.

Myth #3: Your score goes down when you have a late fee penalty.
This is almost true. Most creditors charge a late fee the day after the payment is due if they haven’t received your money yet. Mortgage lenders are more generous and give a 15 day grace period before slapping you with the penalty. The truth is though that you have a 30 day grace period with the credit bureau’s before your score is affected.
One way to wrap your head around this is if your next payment is due by May 1st and you don’t pay it on or before then. With the credit bureau, that May 1st payment must be received by the creditor before June 1st, otherwise, the creditor tells them that the payment is now ‘30 days late.’ The 30 day late is what shows up on your credit report and causes your score to drop. There are 60 and 90 day milestones, too, both being even worse for your credit score.
Please don’t use this as an excuse to push the limit on late payments, but realize that you do have some grace period before your score is hammered.