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					How to Have Perfect Credit
In an Imperfect World


            A Financial Seminar
           with The Money Coach
      All Material Copyright Lynnette Khalfani-Cox, The Money
      Coach®. Lynnette is the author of several books, including the
      New York Times best-seller Zero Debt: The Ultimate Guide to
      Financial Freedom. For more information, please visit her
      website at http://www.TheMoneyCoach.net, or find Lynnette
      on Twitter, Facebook and other social networking sites.

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
What Exactly Is Perfect Credit?
 Having FICO Scores from 760-850
   TransUnion, Equifax, and Experian
 Being able to get easy approval
 Having an outstanding credit rating
 Freedom from worrying about your
  credit standing
 What does FICO stand for? Fair Isaac
  Corporation, a public co. based in MN.
                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Your Current Credit Standing
If your FICO score is… your credit is:
760 – 850                   Perfect
759 – 700                   Good
699 – 650                   Average
649 – 620                   So-So
619 and below               Poor

Fair Isaac: Median score in U.S. is 723

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Who Sees Your Credit Report?
 Lenders
     Mortgages
     Student loans
     Automobiles
     Credit cards
 Potential employers
 Landlords
 Insurance companies
                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
What Determines Your FICO Credit
Score
 Payment History – 35%

 Amounts owed – 30%

 Length of credit history
  – 15%

 Types of credit in use
  – 10%

 New credit or Inquiries
  – 10%
                       Lynnette Khalfani-Cox
                  http://www.TheMoneyCoach.net
What Information is NOT used to
determine your FICO credit score?
 Your income, occupation, employer
  and employment history
 Your race, color and nationality
 Your gender, marital status and age
 Your zip code or where you live
 Any information not in your credit file
 Any info not proven to predict future
  credit performance
                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
General Tips to Increase Scores
 Pay Your Bills on Time
   Payment track record is the largest
    component of your FICO score
   Even if you must make “minimum”
    payments, do it!
   One late payment can drop your FICO
    score by 50 points or more



                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
General Tips to Increase Scores
 Maintain Low Credit Card Balances
   Don’t “max out” any cards
   Try to use no more than 30% of your
    available credit limit
   Spread out debt over several cards
    instead of carrying big balances




                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
General Tips to Increase Scores
 Keep Your Older, Established
  Accounts Open
   Longer credit history is scored favorably
   Resist the urge to close an account when
    you pay it off
   Closing accounts often LOWERS your
    FICO credit scores



                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
General Tips to Increase Scores
 Avoid “Bad” Forms of Credit
     All Debt is Not Created Equally
     Mortgage Debt
     Installment Debt
     Revolving Debt
     Say “No” to Department Store Cards
     For credit cards, national cards are best:
      AMEX, VISA, MasterCard and Discover


                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
General Tips to Increase Scores
 Only Apply for Credit When You Truly
  Need It
   Each “hard” inquiry can lower your score
   Inquiries stay on your report for 2 years
   An inquiry counts against you for 12
    mos.
   An inquiry can lower your credit score an
    average of 1 to 35 points:
     Source: National Assn of Mortgage Bankers

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
The Perfect Credit System
 Perfect Credit in 7 Easy Steps
 Works for anyone regardless of:
     Age
     Income
     Professional background
     Marital status
     Level of financial sophistication



                      Lynnette Khalfani-Cox
                 http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
P – Pull Your Credit Reports & FICO Scores
   Regularly
E – Examine Your Credit File Thoroughly
R – Reduce Debt and Manage Bills Wisely
F – Fix Errors and Protect Your Credit
E – Enhance Your Credit File Constantly
C – Contact Creditors and Negotiate
T – Take Time to Frequently Re-evaluate Your
   Options and Educate Yourself About Credit

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
P – Pull Your Credit Reports and Your
  FICO Scores Regularly

• FACT Act gives you access to one free
  report per year

• http://www.annualcreditreport.com
• http://www.myfico.com (ScoreWatch)
                  Lynnette Khalfani-Cox
             http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
P – Pull Your Credit Reports & FICO
  Scores Regularly
• Monthly Monitoring is best, but a
  minimum of once a year
• 45% of adults don’t know their scores
  and 32% have never checked their
  credit reports, according to Bankrate
• Reviewing your credit = “soft” inquiry
  and does not hurt your FICO scores
                  Lynnette Khalfani-Cox
             http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
E – Examine Your Credit Files
  Thoroughly
• Look for differences in reports
• Make a list of negative items
• Scrutinize any “public records”
  listings
• Identify Reason Codes/Statements
  and Risk Factors
                 Lynnette Khalfani-Cox
            http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
E – Examine Your Credit Files Thoroughly
 Watch Out for These Types of Negative
   Reason Statements
   Amounts owed on revolving accounts is too high
   Amount past due on accounts
   Serious delinquency, derogatory public record,
    or collection filed
   Time since delinquency is too recent or unknown
   Too many accounts with balances


                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
R – Reduce Debt & Manage Bills Wisely

•   Lower Your Credit Utilization Rates
•   Pay Every Bill – Even Library Fees!
•   Set up Automatic Bill Payments
•   Focus on Revolving Debt; don’t worry
    about Installment Loans or Mortgages

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
R – Reduce Debt & Manage Bills Wisely
Transfer Card Balances the Right Way

   Don’t close old accounts
   Don’t max out a new card
   Do know fees & when promo offer expires
   Do avoid the pitfalls of “Payment Hierarchy”
   Do limit transfers to 2 within 12-18 months

                      Lynnette Khalfani-Cox
                 http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
R – Reduce Debt & Manage Bills Wisely

•   Lynnette’s Story: I went from having
    $100,000 in credit card debt to Zero
    Debt in just three years

•   For advice on saving, budgeting and
    eliminating debt, get Lynnette’s books:
    Zero Debt: The Ultimate Guide to
    Financial Freedom and Zero Debt for College Grads

•   For professional, reputable help creating a debt elimination
    plan, contact the non-profit National Foundation for Debt
    Management (www.NFDM.org or call 866-409-6336)


                           Lynnette Khalfani-Cox
                      http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit

• 70% of credit reports have mistakes
• Errors cost you money
• 100,000 organizations supply data to
  credit bureaus; 2 billion pieces/month
• Average person’s credit file is
  updated 5 times a day
                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit

• Burden is on you to fix mistakes
• Dispute Resolution Process
• Fair Credit Reporting Act
  • Gives bureaus 30 days to investigate
  • Anything erroneous or that can’t be
    verified must be deleted

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit
                                   Equifax
                                   P.O. Box 740241
                                   Atlanta, GA 30374
                                   www.equifax.com
                                   800-685-1111

                                   Experian
                                   P.O. Box 2002
                                   Allen, TX 75013
                                   www.experian.com
                                   888-397-3742

                                   TransUnion
                                   P.O. Box 2000
                                   Chester, PA 19022
                                   www.transunion.com
                                   800-916-8800


                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit

• The Fastest Fix for Mistakes? Rapid
  Rescoring
• Can only be done via a bank/lender
• Only available 4 mortgage applicants
• Errors usually gone in 48 to 72 hours

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit
• Protect Your Credit From Identity Theft,
   which affects 10 million/year
• Shred Sensitive Documents
• Never Carry Your Soc. Sec. card
• Use a Credit Monitoring Service
• Consider ID Theft Insurance
• Take BBB ID Safety Quiz www.idsafety.net
• For help, see ftc.gov or idtheftresource.org
                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
F – Fix Errors and Protect Your Credit
Prevent ID Theft:
 On the job
   Lock/put away your
    purse or wallet
 At home
   Don’t give your SSN
    to callers
 In public
   Leave bank cards
    home when possible
                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
E – Enhance Your Credit File Constantly

• Concept: Add positive info 2 your files
  •   Loans paid off
  •   Current accounts not listed
  •   Credit card limits not reported
  •   Fed: 46% have at least 1 acct. like this
  •   Capital One just started reporting this
      info in 2007 for its 50 million customers

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
E – Enhance Your Credit File Constantly

Can deleting your old addresses/names boost
  your credit score? (Fair Isaac says “No”)
Carolyn Warren, a mortgage industry insider
  and author of Mortgage Ripoffs and Money
  Savers, says Yes!!!
Warren says this technique boosted her scores
  20-plus points from high 700s to above 800

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
C – Contact Creditors and Negotiate
• Top Goal: Get negative marks deleted
• Bring accounts current, set up pay plan, or
   agree on reduced amount
• Focus on recent blemishes or severe
   delinquencies & know Statute of Limitations
• Settlements resulting in a “Paid” notation
   won’t help your score; instead, try a PFD–
   Pay For Deletion letter, or a Goodwill Letter

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
C – Contact Creditors and Negotiate

• Pay For Deletion
  • Best used for unpaid collection accounts
  • Also appropriate for a “soft” dispute
  • Involves an upfront, written agreement
    that you will pay “X” amount in exchange
    for all negative info being deleted
  • Critics say PFDs “game the system”

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
C – Contact Creditors and Negotiate

• Goodwill Letter – for a credit lapse
  •   Involves asking a company to make a “goodwill
      adjustment” to your credit file
  •   Useful when you’re a customer in good standing,
      but previously was past-due
  •   Take responsibility yet explain extenuating
      circumstances (divorce, layoff, medical crisis)
  •   Point out your good track record since, customer
      loyalty, desire to do future business, etc.
  •   Critics also dislike “Goodwill” letters


                       Lynnette Khalfani-Cox
                  http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
C – Contact Creditors and Negotiate

• Ask Creditor to “Re-Age” past-due accounts
  •   This gives you a credit “do over”
  •   Useful when you’re a customer in good standing,
      but previously had a late payment
  •   Negative marks will be deleted
  •   Account activity will start fresh, blemish-free
  •   Creditors/bill collectors can’t illegally “Re-Age”
      an past-due account to keep reporting you late

                       Lynnette Khalfani-Cox
                  http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
T – Take Time to Frequently Re-
  evaluate Your Options and Educate
  Yourself About Credit

• Should you switch cards?
• Are you getting best terms/rates?
• Have your credit needs changed?


                  Lynnette Khalfani-Cox
             http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
T – Take Time to Frequently Re-evaluate Your Options
   and Educate Yourself About Credit
Do You Know What These Clauses in Your Credit Card
   Agreements Mean?
 Double-billing cycle

 Grace Period

 Universal Default

 Binding Arbitration

 Default Int. Rate

                       Lynnette Khalfani-Cox
                  http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
T – Take Time to Frequently Re-
  evaluate Your Options and Educate
  Yourself About Credit
• Tips For Couples with Credit Cards
 Disclose – Discuss – Decide
    Communication is critical!

 Maintain at least one separate account

 Understand the perils of joint accounts

                        Lynnette Khalfani-Cox
                   http://www.TheMoneyCoach.net
The Perfect Credit 7-Step System
T – Take Time to Frequently Re-evaluate Your Options
   and Educate Yourself About Credit
Cash Advances and Blank Checks:
Big Bonanzas or Disaster Deals?
 Find out the true cost in dollars & percentage terms

 Ask about Interest Rates/Accrual Period

 Resist the Lure of “Easy” Money

                       Lynnette Khalfani-Cox
                  http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
     FICO “High Achievers” have FICO scores
      that range from 760 to 850.
     What’s their record on the following...

   Late Payments/Public Records
   Credit Utilization
   Account age
   Mix of Credit
   Inquiries
                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
 Late Payments
   93% have missed no payments at all
   Among 7%, the missed payment
    occurred an average of 4 years ago
   Only 1% have a 60-day late payment
 Derogatory Public Records
   Almost no FICO High Achievers have a
    collection account or public record in
    their credit files
                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
 Credit Utilization
   Most High Achievers have less than
    $1,200 in credit card balances
   Average total balance of $5,000 on non-
    mortgage accounts (revolving and
    installment debt)
   Most have 4 to 5 credit cards
   On revolving debt, utilization rate is 7%
   Most have paid 35% of installment debt

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
 Account age
   High Achievers opened their oldest
    account 19 years ago, on average
   Average age of accounts ranges from 6
    to 12 years for most High Achievers
   Newest account typically opened 27
    months ago



                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
 Mix of Credit
   Most have a mix of debt: including a
    mortgage, installment loans and
    revolving/credit card debt
   Just 12% of High Achievers have a
    consumer finance account
   High Achievers have an average of 6
    open accounts that are currently being
    used and paid as agreed

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Emulate FICO “High Achievers”
 Inquiries
   72% of High Achievers had no inquiries
    at all in the past 12 months
   Among those with inquiries, 20% applied
    for credit just once




                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
Use FICO Score Simulator
 The Simulator is at www.myfico.com
 It Runs “What If” Scenarios
 It Tells You What Your Score Could Be
  if you took any number of actions
   Paying off debt
   Making on-time payments for 6-12 mos.
   Adding accounts to your credit file


                  Lynnette Khalfani-Cox
             http://www.TheMoneyCoach.net
How Do “Inquiries” Affect Your Credit
Rating and FICO Score?




                 Lynnette Khalfani-Cox
            http://www.TheMoneyCoach.net
How Are Inquiries Evaluated?
 Number of recent credit inquiries
 Time since inquiry was made
 Number of accounts opened after
  inquiries were made
 Proportion of accounts recently
  opened, based on type of account
 Time since a recent account was
  opened, by type of account
                  Lynnette Khalfani-Cox
             http://www.TheMoneyCoach.net
Using Department Store Cards? Yikes!
 Higher interest rates
   21% - 29%


 No advantage if your
  credit is good

 Affects FICO score

 Drawbacks can
  outweigh benefits
                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
Sneaky Tricks Credit Card Cos. Play




   We’re Watching You …
   Mail Madness
   Time’s Up!
   Fees & Freebies

                    Lynnette Khalfani-Cox
               http://www.TheMoneyCoach.net
Scams, Illegal & Questionable
Credit-Boosting Tactics to Avoid
 “Buying” someone else’s credit
  history
 “Renting” a stranger’s tradelines
 Using a false social security number
 Applying for credit with a family
  member’s identity such as a child
  with no credit history
   5% of ID theft complaints involve minors

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
When Are You Most At Risk?
 Credit Problems Often Happen When:
   You go off to college
   You get married
   You face the “Dreaded D’s”
       Downsizing
       Divorce
       Death of a main breadwinner
       Disability
       Disease

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
Build Credit without More Debt
 Concept: Use existing payments to
  establish/build a credit track record
 Payment Reporting Builds Credit
 http://www.prbc.com
 Group 1 Payments: rent, gas, electricity,
  water, telephone & cable
 Group 2 Payments: insurance, daycare,
  Internet, cell phone, retail store obligations
 PRBC has FHA-approved credit report
 PRBC creates a FICO Expansion Score

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
13 Secret Credit Scores
   Application Score
   Attrition or Retention Risk Score
   Bankruptcy Score
   Behavior Score
   Collection Score
   Engagement Score
   Fraud Score
   Industry Option Score
   Payment Projection Score
   Recovery Score
   Response Score
   Revenue Score
   Transaction Score
                         Lynnette Khalfani-Cox
                    http://www.TheMoneyCoach.net
The Future of Credit Scoring
 New FICO 08 Score has big changes:
   You won’t be penalized as much for occasional
    mistakes; but repeat offenders will have much
    lower scores
   Higher scores for those who show a mix of credit
   Lower scores for those with high card balances
   Population grouped into 12 groups, up from 10
   Is “piggybacking” still allowed? Yes!
     60 million to 75 million consumers affected
     Most impacted will be women, students, those
       opening new accounts, high-risk or “subprime”
       borrowers, and those with “thin” credit files

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Future of Credit Scoring
 Fair Isaac to launch suite of new
  products, including the Fair Isaac
  Credit Capacity Index
   Designed to tell credit card issuers the
    degree to which card-members can
    handle additional debt
   Possible future use by mortgage lenders
    to predict which customers w/ARMs can
    handle higher payments as rates reset

                   Lynnette Khalfani-Cox
              http://www.TheMoneyCoach.net
The Future of Credit Scoring
 Consumer Behavior and Lifestyle
  choices will be scrutinized
   Where you shop
   What products & services you buy
   Whether or not you make “risky”
    purchases
       Cash advances
       Bars/clubs
       Casinos/gambling
       Marriage counseling

                     Lynnette Khalfani-Cox
                http://www.TheMoneyCoach.net
The Future of Credit Scoring
 Consumer Behavior and Lifestyle
  choices will be scrutinized
 June 2008, the Federal Trade
  Commission sued card issuer
  CompuCredit alleging deceptive
  marketing practices after the
  company cut credit lines for people
  based on where they made purchases

                 Lynnette Khalfani-Cox
            http://www.TheMoneyCoach.net
The Future of Credit Scoring
 Scoring will become more widespread
     Loss forecasting
     Determining pre-approvals
     Accept/reject decisions
     Risk evaluation
     Cross-promotion opportunities
     Credit line increase/decrease
     Collection activity
     Customer service
     Point of sale decisions

                      Lynnette Khalfani-Cox
                 http://www.TheMoneyCoach.net

				
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