CW 199: How To Improve Your Credit Score with Edward Jamison Founder of the Jamison Law Group & Creator of CreditCRM

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Welcome to the Creating wealth show. This is your host, Jason Hartman. And this is episode number one 99. Yes, we're almost at 200. So today we've got a great show for you. We're going to talk about credit management and things like that. A couple quick announcements before we get into it. And show number 200, by the way, will be world famous T. Harv Ecker. As we talk about Secrets of the Millionaire Mind. That's a big milestone for us to have show number 200 after broadcasting and recording for, oh, I don't know, I think it's been over five years now or somewhere around there. And T Harv Eker will be a good celebration for show number 200, Secrets of the Millionaire Mind. So that's coming up on the next episode. But on, on this episode we're going to talk about credit restoration, credit management. We've got a new guest. We've had this topic before, but a new speaker and that is Edward Jamison, the founder of Credit CRM. I think you'll enjoy this. And before we get into that, I wanted to tell you that I am here in Kansas City, Missouri. I woke up this morning and the temperature was negative two. Yes, minus two degrees. So it's pretty chilly here. But not to worry, it's warming up to very toasty 30 degrees later today. I'm just bothered that I forgot my shorts and my flip flops. Darn it. Anyway, I'm on my way to Aspen, Colorado next for a mastermind meeting with some Internet marketing friends and a little bit of skiing and then coming back home. So be sure to register for our Meet the Masters event that is in March and this is our twice annual event and this spring it will be held at the Hyatt Regency Irvine where we hosted it last fall. However, we were lucky and we just reserved the conference center room this time. It's I really wanted last time but it wasn't available. And this is just a super nice room where we've got built in tables and big leather chairs. It's like a college lecture hall. So it's just a really, really comfortable, great setting for learning. This is a three day event. I had breakfast this morning with one of our local market specialists, Zach from St. Robert, Missouri. He met me here in Kansas City and he is going to be presenting at the event and he's got some great properties I own in that market myself. And anyway we'll have specialists from around the country. We'll have expert speakers on asset protection and so forth. Mark Kohler, who we've had at our last two Masters weekends, he has agreed to speak at this one as well. We've just got a really exciting event for you planned. If you fly into Orange County Airport, John Wayne Airport, the code is sna. You do not need a rental car. You can stay at the Hyatt Regency Irvine. We've got room rates, I think they're around $100 or even a little bit lower. So fantastic room rates, beautiful hotel and the shuttle from the hotel can pick at the airport. And it's just a really, really easy, convenient trip, really. No hassles whatsoever. So fly in, join us for that or if you're local of course, join us. Do not miss that. Get in on some early bird pricing. Register directly at the website@JasonHartman.com that's Jason Hartman.com click on store then events and you'll get the early bird pricing for Meet the Masters, a three day event, Friday, Saturday and Sunday, first weekend of March. We'll look forward to seeing you there. We'll be back with Edward Jamison and let's talk credit in just less than 60 seconds.

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It's my pleasure to welcome Edward Jamison to the show. He is the founder of Credit CRM and Jamison Law Group. And I think you'll find this interview very useful in terms of managing and improving your credit score. Edward, thanks for joining us today.

Thanks for having me, Jason.

Well, good. Tell us what's involved in the whole game of having a good FICO score. That FICO score is just so important nowadays, isn't it?

Yeah, it's. Well, the key is, I mean, you have to have the banks are obviously looking for people that are low risk and the FICO score is trying to predict whether or not they're going to go 90 days late over the next two years. So you have to have and Fair Isaac has done the research obviously to make their scoring model and their scoring model is very good at predicting whether or not somebody will be 90 days late over the next two years. By analyzing different behavior patterns that people have on their credit reports, like, for example, if somebody is maxed out on their credit cards, Fair Isaac has found in the past that people that are maxed out on their credit cards are at very high risk of going 90 days late. Therefore, you're going to have a lower credit score as a result of having maxed out credit cards. So the key to keeping your credit score up is knowing what's going on, factors that bad credit risk have in common and making sure that your credit report stays away from those factors.

Give us some real advice on. Well, before we do that, and I'm not sure you can answer this, but I'm thinking maybe you can. What are some of the sort of statistical trends going on nowadays with people's credit? And I'll tell you why I asked this. I have long been saying that credit or FICO scores sort of follow a bell curve. They kind of follow the theory of relativity in a sense that so many people around the nation are experiencing trouble right now. And I would think that on a, on a national average type basis, credit scores have got to be just falling, falling, falling in the past year or so. Would you agree with that? What's going on out there?

Yeah, I would say, well, it's, you figure the economy, when the economy goes down, people have less money, they tend to get in more debt. And that's compounded by the fact that when the economy took a hit, the banks were getting less credit out. So people that were managing their credit at a reasonable level all of a sudden find themselves where they were maxed out on their credit cards due to their credit limits being reduced. So there are several factors that go into it, but definitely in the past two years, people's credit scores on average have went down because they became more of a risk due to the fact that they couldn't keep up with their obligations.

So when a bank, I mean, obviously banks are finally looking for low risk borrowers. And I say that because they were so irresponsible in the past when a bank is looking at this, I mean, they only get to pick from the broad population anyway. So wouldn't banks in the future, I mean, if they want to lend, be willing to accept more damaged credit or do you think they will be able to be as picky as they would like to be?

Yeah, I would say that in the future if there's, it's not going to be like it was before. I mean there's, I'd say as soon as, as soon as the economy starts doing very well again, the banks are going to be able to take certain losses because when the economy is doing well, more people are going to pay their bills and the banks will have higher profits. Therefore they're going to be able to be a little bit more riskier with who they lend to. But until the economy starts doing well, they're going to have to be. It's one of those catch 22s. It's like they have to be picky because they can't afford to lose more than they're already losing. And the only way for them to prevent themselves from losing more than they're already losing is to make sure that they cut back and they're giving less money to people that they feel are risky because obviously these people don't have enough money to pay the bills because the economy's down.

So credit will be important either way. If it is a bell curve, which I think it is, the better your FICO score, the better off you're going to be. So you want to put yourself in that position of power, obviously. But what can people do to improve their credit? And then if they've got major derogatories, are there ways to deal with those? Are there ways to manage them? Are there ways to get them taken off the report?

Well, number one, the key is to make sure that you keep your credit card balances as low as possible, as close to zero as possible. Ideally, when you have very low revolving debt, as far as your ratio goes, your credit score is going to be a lot higher. Obviously pay all your bills on time. So if you pay all your bills on time and you don't have judgments and tax liens and other type of public records that go against your record, you'll have a good payment history. That's the number one part of the credit score, that's 35% of the credit score is how you paid your bills in the past. The second most important factor in the credit score, which is 30%, is your revolving debt ratio. So your debt ratio on your credit card. So if you have, and it doesn't matter how much of a balance you have, it matters how much of a balance you have in relation to your limit. So if you have $200,000 of available credit card limits and you owe $10,000, you're only at 5% of your debt ratio. But if you, at the same time, if you have $10,000 in debt on credit cards and you only have $12,000 total available credit, in that situation, you're like 84% on your debt ratio and your credit score is going to be very low. So it's not the balance that's important, it's what is the ratio in relation to your available credit. And that's what you want to keep. Very low. I tell people as close to zero as possible. Obviously, the lower the better. If you're at 60% right now, being at 50% is better than being at 60. But you're not going to get your full maximum benefit of your credit score being high until you get it as close to zero as possible.

Now the odd question is going to be, you said, you've said this in sort of a very measured way. You said keep it as close to zero as possible. So that begs the question, do you want it to actually be zero or is it better to be borrowing something but not too much?

Yeah, technically 1% is where you want to be.

So that's the way.

But I tell people zero because it's easier at zero. You're still going to have an extremely high credit score. We're talking only maybe a few points better if you're at 1% compared to zero.

But literally, if you have a thousand dollar credit card bill that comes in the mail tomorrow, it's better to pay $990 and not pay 10 bucks than it is to pay it all. Technically.

Technically, yes.

That's interesting. Anything behind that you want to mention?

Well, the reason that is, and this is only a surmise, because Fair Isaac doesn't, then I'll tell you exactly why their scoring model works out the way that it does. But when you really know the ins and outs of, and you've seen thousands of credit reports, you can sort of take a guess at where this is happening through logic. Also, if somebody is at zero historically, they might not know that they have credit available. So that person may have been a credit risk, but they didn't know that they had that Chase credit card in their sock drawer because they forgot about it. So, I mean, it might have been zero for a long time and there's still a credit risk. But somebody that has like a little balance on there, they're getting a bill. Every credit score basically knows this person is definitely aware that they have a credit card with this money available because they're getting the bill every month. So that's why the person being at 1% is historically a better risk than the person that's at zero.

That is very fascinating to me, and I guess it shows that you can responsibly use credit if you have this small, tiny balance. That's very interesting. That's an interesting theory about that. What else can you tell us about improving credit scores?

Well, the first two, as we know, you want to make sure that you pay your bills on time, don't get sued and get judgments put against you, and don't get tax liens or foreclosures, bankruptcies, anything like that. And of course, don't pay your bills late or have collections thrown on your credit report. So if you can keep your payment history good and you can also keep your revolving debt ratio very low, 1%, ideally, but zero is okay, too. We're talking, we're talking a couple of points. And if your credit score is over, if your credit score is like 800, maybe it's going to be 798. If you pay it to zero rather than 1%, we're talking a very small factor. So those are the two biggest factors that basically makes up two thirds of the credit score. That's 35 and 30%. So the other 35% of the credit score, average age of the credit file. The older the credit file is, the better, and that's 15% of the credit score. So whenever you have credit cards that are old, you're better off not closing them because you want to make sure they keep getting older and older because you want to keep increasing and having a very good average age of the credit file. So that's definitely something you want to do. Don't close credit cards. If you have a credit card that's like a yearly fee and it's. And they're charging you 200 bucks a year to have it or something. And it's not that great of a credit card. That's a different story. But if you have a credit card that's costing you zero to keep open, just keep it open, you're better off. That's that 15% part of the credit score is do not close anything unless there's really a good reason to do it, which may be you don't want to pay the yearly annual fee on.

The credit card, but sometimes it's worth paying that fee because it'll give you that older card on your report, right?

Yeah, it is. But sometimes people just don't want to pay the fee. So if it's a matter of principle for them, that's fine. They're going to hurt themselves a tiny bit, but they'll save the money. So it's really a personal choice at that point.

Is there an optimal age? I mean, older is better. Is there a certain number of years where it sort of doesn't matter if you've had it over five years? Does it just not matter anymore? It's considered as older as it can get?

No, I think there's a lot of ways they average. They look at the oldest account on the credit report and then they also do an average of the account. So there's many different ways they calculate the average. The older it gets, the better off you're going to be in this area. I would assume that once you're over, like, let's say the average age of your credit file is well over 20 years and you have like a bunch of accounts that are over 10 years old, that's probably going to be a point where you're maximizing that area. But I don't think it ever makes sense to, because if you close a credit card, usually after 10 years of being closed, if the account is in good standing, it'll fall off the credit report. So if it falls off the credit report, the FICO score can't see it, it can't score it. So therefore you're going to hurt yourself. But if you keep it open, it's going to keep reporting and reporting and it's going to stay on there forever as long as it's open. So that's why it's really good to never close them. Because 10 years down the road, if you close them, you'll really see the. The detriment to your credit score as it might not have been the year before when it was still on there. Because even when the account is closed, as Long as it's showing up on the credit report, it's still getting scored in that area, but it's going to disappear faster. That's why you got to be careful now.

I thought I was doing the right thing. Years ago, when I first started to obtain credit as an adult, I got a bunch of credit cards. Like gas companies, those were very easy to get. Department stores, those were easy to get. And then MasterCard, Visa, American Express. Now I'm kind of listening to you. I'm kind of a little bit upset with myself that I let a lot of those what I called sort of dumb little cards. I just let them go. I let them just close. I didn't use them. I always just used the MasterCard, Visa, American Express type of card because it was accepted everywhere. It was simpler that way. Fewer checks to write every month. I thought it was being responsible by not having all these open credit cards, but maybe not, huh?

Well, it's not that you weren't responsible. It's just, unfortunately, there's a lot of things. Whenever it comes time to judge your credit, you want to have as many tools in the shed that you can have to assure yourself you're going to get a higher score. So if you close those credit cards, the problem is if you go and charge something on one of your credit cards, let's say you go and buy furniture and you only have a couple of credit cards, you might be 30% maxed on your limits that particular month because you don't have much credit available. So any charge you make is going to be significant as far as affecting your ratio. But when you have a bunch of cards, a bunch of cards open, it's going to affect you a lot less because that charge is going to be very minimal compared to the amount of credit you have available still.

So we've talked a lot about credit cards. I do have a question for you. Years ago, the utility companies, they would always report to credit bureaus. Do they still do that? Even though that's not really like what I would consider to be a credit account?

Most utility companies don't. Unless, of course, you don't pay them. Then it goes to collections or something. They'll report you that way. But most utility companies don't report.

How about cable tv?

I'd say a majority of them do not. There are certain areas where they do report, but there's, you know, that changes all the time. For the most part, utilities don't report.

All right, so now I want to get to the granddaddy and most of the people listening to this show, of course, are dealing with these. What about mortgages? Let's talk about, I guess first, any certain thing you should think about in terms of structuring mortgages, types of mortgages, paying them on time is probably a good idea. Yeah. What about the way mortgage companies report anything you can say on the mortgage world? Because most of the people listening to my show, they're real estate investors and that's what they're dealing with mostly is the mortgage type stuff.

Well, the key is, I mean, you have to watch like the. See, credit Fair Isaac has different scoring models that are out there. And depending on which tri merge credit reporting company a particular lender uses, they might have an older model with, let's say Countrywide, where Wells Fargo might be using a newer model of the fight score for a particular bureau than Countrywide is. So depending on who's pulling your credit report, you can see a different score for the same exact bureau. So that's number one. It's just like, just like Microsoft. Microsoft has XP, Microsoft has Vista. Now they're coming out with Windows 7. There's different versions of their operating system. The same with Fair Isaac. Fair Isaac updates their software the same. And depending on which version that your Trimerge company is using, you're going to get a different score. So with that being said, the final two factors are the credit score, which is only. They're only 10% each one of them is the mix of credit and the mix of credit is 10% of the score. Very small factor, but the mix of credit basically is you should have around three to five revolving credit cards. Although having more than that does not hurt your score much at all. I think you're better off having as many credit cards as possible because the benefit you get by having a very low debt ratio, anytime you make purchases, it'll still be low. Far outweighs the detriment of having a few extra credit cards.

I want to stop you on that for a moment because I want to make sure people understood that. So what you're saying is that if you have more than five credit cards on one hand, it actually hurts your score a little bit. I mean, we're assuming these are all accounts that you're paying properly and so forth. But on the other hand, it actually helps your score because it shows you have more available credit but a lower utilization ratio, is that correct?

Correct. So a good mix of credit is, they say three to five revolving credit cards, but at the same. Like I said, I wouldn't get too Caught up on that one. But the other part is like one mortgage and one auto loan. It's good to have like a couple installments, one auto, one mortgage. But if you have two mortgages, it's basically going to be the same as if you had one mortgage. But once you start getting three, four, five mortgages, you're going to see your score slightly decrease for each additional mortgage you add in addition to 2. Same with auto loans. Because it starts to get out of whack when Fair Isaac sees a mix that is very off, like too many of one type of credit where they don't have like other types of credit on there. Historically, those people have performed a lot worse as far as the credit risk goes.

Oh, very interesting. So let me tell you my personal experience with that. When I started really accumulating a lot of rental properties years ago, I noticed that there was one year I accumulated a bunch of them. And this is when financing was much easier than it is today. Obviously my credit score actually declined for about six months, but then it came way back up. I mean, of course I was paying promptly on those loans and so forth. And I had a whole bunch of mortgages. So the number of mortgages I have far outweighs the number of credit cards or I only have one auto lease in my personal situation. But I was really surprised because I went in to buy a new car and they had told me what the lease payments would be and so forth. And then the dealer actually called me back and I was so pleasantly surprised to get this call. And they said, your credit score is so high that we can even do better on the rate. It's very unusual that when you're like over 740 or 760 on the FICO now, they didn't. That probably wasn't a tri merge report. It was probably just one bureau, I assume for a car lease. But that was like really a nice call to get. I was really pleased about that. But first of all, on the mortgages, does the credit scoring model know if it's a second home or a rental property? Number one. And I have a feeling you're going to say no, it doesn't know that. But certainly the lender does when you get the loan. I mean, they know what you tell them, so they don't know that. But then does the credit score go lower forever? Because mine seemed to really buoy right back up in about six months. I was very pleased about it.

Well, there's a couple of things that are going on. Number one, whenever you get A new mortgage at first the mortgage usually gets reported as too new to rate. So when it says too new to rate and that usually goes away after the first month, the first month you're going to see a decrease in the sense that there is a new account, you have a new inquiry which is hurting you, which inquiries are the final portion which is 10% of the credit score. And I mean It's a catch 22, you have to apply for credit to get credit. But anytime you do apply it will affect your score in a negative way. So you do have the new inquiry that's hurting your score. And you also have the average age of the credit file getting hit and getting brought down because you have a zero year old account that's on there. But once you start to make payments like after about six months like you said, the inquiry effect basically is almost non existent. It goes away fully after one year. But after six months like the first six months of the inquiry do hurt the score more than the, the remaining six months that it does affect the score. So you're helping yourself in that area. You also have the two new to rate one away and it's in the average age of the credit file. You don't have like a brand new, you still have a pretty young account but it's not like brand new, it happened a month ago or anything.

Right. So that's why you're seeing that it's just like a credit card. You open up a new credit card and you haven't let the card season for a while. They don't like new as much as they like old. Right. So the mortgages got the same sort of thing going on with it. Alright, go ahead. What else can you tell us about mortgages?

Well, HELOC, you got to be careful with HELOCs.

Okay. That's a, that's a home equity line of credit. So what that means is it's a in second position on your property and it's typically an adjustable rate type of loan and those are much less available than they used to be. But some people still have HELOCs. So HELOCs are reported differently then?

Yeah, well HELOCs, it depends. Like the newer scoring models Fair Isaac are pretty good at and making sure they're not mischaracterized and treated as a big credit card. But if the HELOC doesn't say home equity line of credit or mortgage in the notes area where it's reported at the credit scoring model is going. Since it is a revolving account, a HELOC is A revolving account, it's not an installment like a regular mortgage or a traditional. Second is, it's going to look at it like a big credit card. And it's the newer scoring models. If the amount of the revolving loan is over $40,000, supposedly, which I've seen this not work out this way either. Supposedly firasc's model is going to treat it as though it's mortgage related even if it doesn't say mortgage in the notes area. But I've seen that not be the case. So I wouldn't rely on that statement right there. And this is fair Isaac talking. And I mean there's of course they want to have their own PR spin on a lot of stuff. So it's not that they're intentionally trying to mislead people, but at the same time they have the best interest of their product in mind and keeping its secrecy there. So I always tell people if you're going to get a heloc, be careful. Make sure that if it is reporting, make sure it says on there mortgage related or home equity or one of those buzzwords in the notes area. Otherwise it's probably going to be scored as though it's a big credit card. And being maxed out on a big credit card obviously is bad.

Right? But if you have that heloc, it's better than not having one at all. If you borrow say 30% of it and you have 70% still available, right?

Well, it depends. I mean, because even at 30%, I've seen people with credit cards at 60% max on their credit cards, pay their credit cards off and jump 100 points. So it depends. I mean it's not really a canned answer. That's going to be the same for everybody. If somebody has hardly any credit at all on their credit report, then that's going to be a positive thing. But if they already have established credit, they have several trade lines that are, that are older, they're not going to need that HELOC to show up and be at 30%. They'd be better off with it not being there at all rather than having it show up at 30%.

And what about business credit? Do you want to talk about that a little bit? We hear so many commercials, people saying you can develop corporate credit real easily and all of this type of stuff. I don't know if that's your area, but I did want to ask you the question.

Corporate credit is not, I mean it's developing, developing corporate credit. As far as the Dun and Bradstreet number as far as that route goes, no, that's not my area of expertise, but I know my way around it to be able to talk about it and understand it. Of course, but the business credit cards. Keep in mind, I'll talk about it in two ways. Business credit is a separate entity. To get business credit by signing with your corporation alone, you have to have established credit with your corporation and it doesn't happen overnight. It's not easy to get either. People mislead people into thinking they can easily have an employee ID number with their business. Oh, get a Dun and Bradstreet number and then before you know it, they're getting $500,000 lines of credit. That's not happening and that's misleading when people make people think that. Usually you have to sign personally to guarantee a business credit card, but it's still a good idea to do because even if you're signing personally, most business credit cards, they do not report to your personal credit unless you default. Now, if you default and you signed personally, they can report it to your personal credit. But let's assume you had a corporation that was able to get the credit on its own and you default. They can't put it on your personal credit unless you signed as a personal guarantor. So people will say to me, so why does it make sense for me to get a business credit card at all if I can't get it on my company's name in and of itself? And I tell people, well, the reason is because even if you're signing for it personally, as long as it's not being reported on your credit report, unless of course you default, you can have a maxed out business credit card that's not hurting your credit score at all.

Yeah, and I couldn't agree more. That's what I came to the understanding of, is that you're in a situation where the business credit is good as long as you can maintain it without default, then you're in great shape because you don't have a situation where it's showing up on your credit report. So you have access to a lot more credit. You just got to use it responsibly. Good thing to know. What else about business credit?

Well, business credit is. The beauty is if you, if you have personal credit and you can't get more, and you can't get more credit cards because you're, let's say, American Express for whatever reason says, hey, we, we gave you enough credit, we don't want to give you anymore. Even if you have a corporation that's only a year old. A lot of the times, if you're signing personally American Express, I'm just using them as an example, they'll decide to maybe give you credit in addition that they wouldn't give you on your personal credit. Even though your company isn't worth a dime, they'll still, they have like a different approval department and they have different standards. So some of the times you'll get approved for a business credit card by signing personally, where you can't get approved for a personal credit card with the same company. So that's another good thing about business credit is it still makes sense to apply.

Even if you're not getting approved for personal credit.

Can you at some point, though, get that credit card in your business's name where you're really off the hook? I mean, at what point, when the corporation's 10 years old, 15 years old, at what point can you really have true, what I'll call true corporate credit that is separate and distinct from the person. I mean, certainly gm. Well, that's a bad example, isn't it?

General Motors, formerly now called Government Motors. I don't know if they'd be able to get a credit card either. But certainly old established businesses, I mean, larger companies that they have credit cards and many of their executives, at least if not other employees, have, have company credit cards. And no one's personally guaranteeing all those.

It takes time. Usually it starts with if somebody has a lot of money running through their bank accounts. So like, let's say you bank with. You bank with Chase and you have hundreds of thousands of dollars going in and out. At some point, you can say to Chase, hey, listen, I'm personally liable for my company's credit cards. I want to be able to get the credit cards opened to where I'm only my company is the only one that's on the hook. But it's like, it does take time. It doesn't happen automatically. You have to, you have to build credit. I mean, it's still like you have to get a Dun and Bradstreet number. You have to go out there and try to get, get your credit established with your business first. And then once it is established, I'd say after probably about three or four years, you can start just inquiring with the different banks that you're working with and say, listen, I don't want to be a personal guarantor. The company's bigger than it was a few years ago. What I got to do to get the credit card in the company's name only without me being a personal guarantor. And there's still no guarantees, though, right?

Yeah. A lot of that, I would assume, is more of a personal banking relationship type of status. And for that reason, it's probably good to have a certain small bank that's a community bank where they really talk to people versus one of these disgusting behemoths like Citigroup or something. Right? Or maybe a credit union as well would be something that would be appropriate. Let me take a brief pause. We'll be back in just a minute.

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All right, what else do we need to know about credit? What about fixing things? That's the really important part. What if someone has a ding on their report? Late payments on a credit card, late payments on a mortgage, a foreclosure on a mortgage, a bankruptcy. How do you deal with that type of stuff?

Well, there's. It depends. I mean, there's several ways to deal with it. A lot of the times when it's reported, the accuracy is not 100% accurate. So you can challenge the accuracy with the credit bureaus. And the credit bureaus in turn have to go back to whoever reported the information and verify whether the information is correct. Sometimes they verify it's correct, sometimes it comes back as being not correct. And they have to change a few things about the account. Or if they don't get back to the bank, if they don't get back to the credit bureaus at all, it can come off. So I mean, that's one approach. Another approach is, I mean, depending on what happened, I mean, there's not one answer because everybody's situation is different. And depending on what happened with the account, there's, I mean, there's any number of approaches and it's not really, I can't really give a canned answer on a situation because everybody's situation is Different. And what happened is different also.

Well, can you give us a few answers? I know that it's difficult, but whatever you can tell us would be great. I mean, we're, we're listening to the master here, so.

Well, okay. For example, if you have unpaid collections that are showing up on your credit report, a lot of the times, it's possible to call up the collection agency and negotiate it for a deletion. And most of the time the collection agency will say, oh, we can't do that. We're not allowed to. We're not allowed to delete accurate information. And there's several approaches you can use. One of them is, well, it's not accurate because my client didn't have a chance to dispute this debt initially whenever the dunning letter was sent out, because my client never received the dunning letter.

What's a dunning letter?

That's basically the letter where the collection agency says, hey, this is an attempt to collect the debt. And if we don't hear from you in the next 30 days, we're going to assume this debt's valid. Whenever the collection agency initially sends that out, you have 30 days to pay it before it goes on your credit report. So if you don't pay it within 30 days or dispute it, then it's going to go in your credit report right away. And it's. So if you, if you didn't have a chance to be able to say, hey, here's the money, or hey, I challenged the validity of this debt, then therefore it was actually placed on your credit report in error. And even though you owe the debt, you can still usually twist the collection agency's arm to accept your money in exchange for a deletion.

Under the circumstances, then we'll put that under the category of negotiation. Right, but negotiation typically is going to come with a payment. You got to pay it.

Oh, yeah, yeah. If you, if you owe the debt, you owe the debt. I mean, there's, and if you want a deletion, don't think you're going to call up and get a deal either. Like I tell people, if you, if you, if you want a deal, you want to get 40, 50 cents on the dollar, don't expect a deletion in return. I mean, after you settle it for 40, 50 cents on the dollar, there are ways to still get it removed afterwards by challenging the accuracy as the way it's reported on the credit report. But, I mean, but there's no guarantee, at least, I mean, if you're, if you're paying 100 cents on the dollar. So if it's like a $300 cable bill that was sent to collection, if you're paying 100 cents on the dollar and the company's in agreement to delete, you're better off paying the 100 cents because that's a guaranteed deletion. At the end of the day. Some people can't afford to pay 100 cents on a dollar. So sometimes it comes down to money.

Well, immediately it comes down to money. Yeah, it always does. So if they're promising they'll give you a deletion, then you pay the bill. That's one thing. And, and I would say to all our listeners, if you ever have that discussion, be sure to get it in writing. Right from the agency that is doing the reporting, the creditor or the collection agency. Right. Yeah. Okay. All right. So you can challenge accuracy. And wasn't there, like a thing. I used to hear about this years ago. People were complaining about it on both sides of the aisle. The creditors were saying, and I just remember reading this somewhere, I don't remember the details, but they were saying, people can go and just like every month, keep challenging accuracy, challenging accuracy. And it really puts the onus on the credit bureau or the creditor, I guess, to say, hey, yeah, this is accurate, our reporting is accurate. And if they don't, like in 31 days or something, it can come off the report. What is that all about?

Well, you got to watch. I mean, if you're challenging the accuracy and it gets updated as being, well, it comes back as being validated as though the information were accurate. It's very hard to get the credit bureaus to reopen the next month. If you send another letter, it's very hard to get them to reopen the dispute because they're basically going to say, hey, this was previously verified. So you have to have the right approach. I mean, if your approach was, let's say there's five different things that could be wrong with it, you're better off only disputing one of those aspects. So therefore, if you're going to go back and dispute a second time, you have something new that you can dispute without them being able to say previously verified. So, I mean, credit repair is a game of cat and mouse. I mean.

The bureaus don't truly investigate these things. They'll basically say, hey, Citibank, John Doe says they weren't 30 days late. And then Citibank will look on their computer screen rather than looking and finding out when their check was mailed. And actually going into a file or finding out when the check was cashed, they just trust their computer screen and they validate it based on that. So given the fact that the banks and the bureaus aren't really following the law the way it was supposed to be followed, you do have to play some cat and mouse when it comes to, to working on somebody's credit. And that's one of the techniques is don't actually show all your cards or like basically give them an A to Z detail of what's going on with the account. Because you always want to have a different approach to be able to come back with without you losing your credibility as saying, oh, this person is doing a complete 180. You don't have to do a 180, just don't give them all the pieces right away.

Other things people should know.

Well, one thing that I've noticed happened about a year ago, the credit card company, as far as those balance transfer offers go, they're not giving like, they're not limiting the balance transfer fee to $90 or $100 like they used to. So if you get like a 0.9% balance transfer offer on a $20,000 credit card, they're going to charge you 3% on the whole balance transfer. So basically make sure, if you're doing any type of balance transfer or doing anything, make sure you read the fine print. Otherwise you can be in pretty bad shape. Paying a lot of fees. As far as that transfer goes.

Yeah, I've seen, I've seen those things advertised. So what you're saying is when you move a balance from one card to the other and they offer you this low teaser rate, I thought the credit card companies made money on that by number one, getting a new customer and number two, thinking people probably won't pay it off at the end of the end of the teaser rate term, but they also charge you a fee to transfer the balance? Yes. I had no idea why that is such a ripoff.

Very rarely do they have times where they didn't charge a fee. There are occasions in the past that I seen no fees for the transfer. And it's usually the deals that aren't that great, like 8.9% transfer rate or something, it's not that great, which is probably better than their everyday interest rate. But at the same time, it's nothing to call home about. But it's like there's recently I haven't, I haven't seen where there's no fee situation at all. Like even before it was A really good deal. It was always 3% but it was minimum $5 maximum, $90 usually. But now they took every card company that I out there as far as ie as far as I can have seen so far has taken away that maximum and they'll charge you the full 3% on whatever you transfer.

Wow. So be careful of that folks. That's where they're going to get you. What about Obama? He has really been attacking the credit card companies which may have some validity. I think, I do think they take advantage of a lot of people that sort of don't know any better, although the person should be knowing better. They should investigate what they're doing obviously before they sign up for things. But what's going on in the current administration and the legal climate toward credit card companies and other creditors.

The good news is Obama, he's taking a harder stance against the credit card companies than anybody has in recent, well, basically ever. The banks are crying right now. They're crying file. They're saying that they're limited in the ways they can make money and it's going to, they're giving a parade of horribles where they're saying that everybody's going to suffer from higher rates because they can't be profitable. In other words, areas basically Obama's just saying, hey there's, there's enough ripping off and unscrupulous tactics going on here to make money where people aren't very, aren't aware of what's going on. So therefore it's going to end. And a lot of the things that a few of the things he did with the new, the credit card bill of rights that's going to go into effect next year. Basically there's a few like number one is gift cards, gift cards before, like they can expire after a year or they can reduce the amount that the person used each year if it's not used. The new law basically is if you buy a gift card it has to be available for at least five years. There's also like under 21, if somebody is under 21, they can't have a credit card unless they have a co signer. So a parent or a guardian is going to have to co sign for them for them to be able to get the credit card.

Oh, so you can't get credit at 18 anymore, huh?

Not unless you have a cosigner.

Wow, interesting. That's going to change the college credit card business quite a bit, isn't it?

Yeah, it's basically going to go away.

Yeah, right, right. That's the thing like people, people sort of listen to all this rhetoric from the Obama camp and they think this is great, it's going to protect the consumer. But the reality is it's just going to make less credit too. Credit, it will dry up. I mean if companies can't exploit money making opportunities, they're just going to do less of it. It's just going to be harder to get. So there's always a balance in this type of stuff and law of unintended consequences always in play, isn't it?

Exactly. I mean I didn't really. There's. I actually liked the way that things work. I think the people that are responsible, they get better deals because of the credit card companies making money in other areas. But I mean I don't really feel strongly about it. But at the same time it's just, I do realize that it is good for the greater good of the like the lower class and I'd say the middle class as far as people that might not be super savvy with their finances because like one of the things that really is just like the universal default rule is basically where if you have a credit card with Capital One and Capital One pulls a credit report on you and they see that you were 30 days late with your Ford payment, which has nothing to do with Capital One, they can, they reserve the right to increase your rate from whatever it is to the universal default rate of 34.99%. And Obama's new law that Obama's signed into effect is changing that in the sense that there's no more universal default unless the person is late with that particular creditor and they have to be at least 60 days late. So they can't do it by them going over the limit. They can't do that by them being 30 days late. And even if somebody's 90 days late with let's say on their forward payment, only Ford or the person that's giving them credit can charge them exorbitant fees for doing that. So there's a lot of things are getting cleaned up where people were sort of like basically blindsided into paying exorbitant interest rates because they didn't realize that being late on their Nissan payment or whatever was going to cause their credit card balances to be reassessed at 35% when it was maybe 15, 18% before.

That I would actually agree with. It's rare that I agree with Obama but I do agree with him on a few things. But that seems like a tying arrangement. And I remember in real estate school, we learned about tying arrangements as an antitrust violation where you say to one person, you'll make them one deal if they do another deal. And in, in some cases those are okay, I guess. I mean, certainly when you buy a cell phone, you got to sign up for a two year contract or whatever. But in some cases those become a real sort of restraint of trade. And I, I think that universal default thing is pretty unfair and I think it really blindsides people and it's a pretty dramatic thing. So that I would agree with. Back to the mortgage stuff. I'm not sure if he ever addressed the issue of like foreclosures or bankruptcies on credit reports. Did we talk about that?

No. Well, bankruptcies are the worst, are the worst of all, of course. I mean, you can see I've seen people get hit 250 points with a bankruptcy. And of course it depends on everybody's particular situation. If somebody already has bad credit, a bankruptcy is not going to hurt what's already bad that much more because how much lower can you go? But a foreclosure, foreclosures, short sales, deed in lieu of foreclosure, any of those, it's the same exact effect on the credit score actually. As soon as you go 90 days late on an account, that particular account gets hit as hard as it's going to get hit for like as far as the way that's reported. So if you have 90 days late showing, it's just as bad as if you, as if you have a foreclosure showing. Most people don't know that.

Oh, that's interesting. So there's almost, that's interesting. So there's almost an incentive if you're going to be 91 days late to just let them take the property back. Is that what you're saying?

Essentially, but no, in the sense that if you're 90 days late and then you bring a currency the very next month, the foreclosure might not, it might not show up for another six months or something on the credit report. So as far as being out of the woods, like at least if you had the 90 day late and you bring it current from that day forward, your credit is going to be good and the bad stuff is going to be further away in the rear view mirror as you're driving forward where like you might have to wait the severe negative event of the, whether it's a foreclosure or whether it's a 90 day late, it takes longer to get to the foreclosure but point. So therefore it's going to take longer for you to see light at the end of the tunnel other than that six month difference or whatever. Well it might even be three months. Usually the foreclosure will happen at the six month point. So we're talking a few different months. But also, I mean there's other reasons outside of scoring. It's like lenders don't like to see foreclosures. There's a lot of even if your score is good enough, you might not get approved depending on what the lenders guidelines are.

Well, that's actually a very good point you bring up and listeners should make sure they heed that point. It's not always just about pure scoring in terms of FICO scores. It's that if they see a foreclosure on your record, they don't want to see that because that makes them think they might be the next one. Right. And so it's not exactly what the score number means, but it's what the human being sees on your record there, which is a foreclosure, which is bad. So can you get those removed? I mean how long do they follow?

Well, foreclosure stay on for seven years. Bankruptcy, bankruptcy stays for 10 years.

Now is that personal or corporate bankruptcy? Like if you have a company too and you bankrupt the company, does that get involved in your credit report?

It will if you have, I mean it shouldn't go on there. If you're just filing for a business bankruptcy, it shouldn't show up. But if you have a, if you have personal accounts that were included in that bankruptcy, you're going to have those accounts showing up. But if you're filing a bankruptcy just for like GM just did the other day, General Motors is filing for bankruptcy. There's no personal person on there obviously, so that wouldn't show up. Like for example. But let's say, let's say for whatever reason there was debt that somebody that worked for GM is a bad example because they're so big. But if you had personal debt, like you lent your credit to the company and you were trying to bankrupt that debt, you have to do a personal bankruptcy anyway to get rid of it. Like one's not going to get rid of the other. It's just like a husband and a wife. If a husband and a wife, you, if, if they both co sign for a mortgage and they're co signing on credit cards. If one spouse goes chapter seven, the other spouse is still on the hook for everything unless they also go chapter seven. So it depends on what you're trying to accomplish.

And so that would obviously be the case if you have company credit card, but you've personally guaranteed it, it'll show up on your credit report. When that, if that goes into default.

Well, you can't get rid of it with the bankruptcy. You're going to have to file a personal bankruptcy also, if you want to get rid of it. If you want to get rid of your obligation as the personal guarantor.

Right. But if you just have paid that card off and still file a bankruptcy, then it, it doesn't matter. That's not part of it. Right?

Correct. But then again, if you pay it off, you wouldn't be including that card in the bankruptcy anyway for the business. So that's. But if you, if you did include it for some reason, it can show up as included in bankruptcy, but you can get it fixed and you can say, hey, this wasn't, this wasn't my bankruptcy. And I mean, like, you can get, you can get it taken off. You just have to like, contact the bureaus.

I have heard stories, and I don't know if they're true, but I've definitely heard them. And they really make me mad, frankly, being a responsible person who hasn't gotten himself into this kind of trouble. I hear stories, people, they had a foreclosure or even a few of them, and they got them taken off their credit report. They had a bankruptcy, got it taken off. How do they do that? Is that really true or are they just telling stories? When I hear that kind of stuff.

A lot of the times, stories, I mean, it is possible to get any, get anything removed from a credit report, but bankruptcies are very hard to get off. So anybody that's telling you they got bankruptcies removed, take it with a grain of salt because they're very hard to get removed. But if you know what you're doing, the items that are included in bankruptcy, which are also a major drog, you can get those items removed. There's a lot of the times where the balances that were, the charge off balances were still showing as owed even though it was wiped out in the bankruptcy. I mean, there's a lot of things you can do to help somebody's credit score that had a bankruptcy. But getting the actual bankruptcy public record removed itself is very hard.

What about the foreclosure?

Foreclosures are not as hard. They're not as hard as bankruptcies, but they're not easy either. There is an element of luck involved in credit Repair and foreclosures, I've gotten those off hundreds of times, but I've also not gotten them off hundreds of times. So it just depends. There isn't. The element of luck involved is going to vary client by client. But if you know which, if you know which techniques to use to try to get them off, you'll probably have about a coin toss chance of getting a foreclosure off.

So that's a 50, 50, I guess is what you're saying. Your company Credit CRM basically sells a sort of a business in a box to people who want to become credit consultants. And you don't do this personally or your firm doesn't do the credit repair, but you have reps that do this, is that correct?

Basically the way it started off was I've been the credit repair industry since 2000. So the first five years I was in credit repair, I was basically going to realtors and mortgage brokers and I was saying, hey, I can help your clients get their credit score up. Please send me business, basically. And so that's what I've done. That's what I did for the first five years. And then with credit CRM I basically said, okay, rather than me going business to consumer, which is what I'm doing, I'm going to change it. And I'm going to teach the mortgage broker, the realtor or the opportunity seeker, whoever wants to start their own business, I'm going to teach them, those people, everything that I know and that I've learned about credit scoring and credit repair. And that's what credit CRM is. I basically give them over 30 hours of training. I give them unlimited support. They can contact our office anytime they want with questions. I have custom software that I spent over $500,000 to date developing that allows them to do the work of four people with the web based system. So generating dispute letters and keeping in touch with clients and everything is just very, it's streamlined and one person can do the work of four people, like the referral partners and the clients can log in online and see the status of the file. There's automatic updates that go out to people. So basically I made it so somebody can do the work of four people and have their own credit repair business without having to go through the learning curve. And that's what. And that's where Credit CRM is. Credit CRM is a business opportunity where I make you the credit expert, which affords you the opportunity to go out there and charge people for your services.

Okay, so the question everybody wants to know is how much does it cost to get one's credit report improved, fixed, however you want to refer to it, to hire a credit consultant to help you out.

On average, about $600. And for that $600, like with my system, the way that I teach people how to work on people's credit and give advice and everything like that, it's going to take them or whoever works for them because I mean, they don't even have to train their employees. Like their employees can go through my online training and basically they're ready to go. So it takes somebody about a half hour over a three to four month period to clean somebody's credit up. So at $600 a client, you're talking $1,200 an hour. That's more than Johnny Cotton made represent NoJ.

Not bad. And for $600, what does the customer get though? I mean, is this an ongoing relationship that lasts for a year? Is it a one time meeting, is it a how many letters do they write or how long do they work on the client's file?

If the client doesn't screw up again in the future, it could be a one time thing, but when I was in the business, I had tons of repeat clients that would keep just screwing their credit up and they'd be back every year or two.

Were they getting, when you say that though, I wanted to ask you, were they sort of getting a get out of jail free pass?

I mean, yes and no. Because the thing is, with credit repair, even when you know what you're doing, you're not going to get everything removed. Anybody that tells you they're going to get everything removed is lying to you. If you're really good, you're going to get about 65 to 70% of the stuff off that you're working on. That the client says, hey, work on this, because.

It'S inaccurate or misleading for one of several reasons. If you're really good, you'll get 65 to 70% of that stuff removed within a three to four month period. So the normal credit repair client, you work on their file for three to four months and that's just getting stuff removed. But initially when they come to you, you give them a credit consultation for like 10 minutes or something over the phone where you're telling them what's hurting their credit, what they can do to make their credit score better. So they're getting helped in two ways. Every client that comes to you when you know what you're doing and you're an expert is getting great advice so they win automatically as far as getting the negative stuff removed. Sometimes you'll do really good, sometimes you'll do a so so job, and that's what you can't control. But my average over the years was about 70% removal. Some clients I get 100% off, some clients I get 40% off. But my average was 70%. So that's what they're basically, they're getting peace of mind in the sense they're getting good advice. They're going to understand their credit and they're also going to have some of the blemishes removed that shouldn't be on there. Or even if they should be on there, if they can't be validated or they're being reported inaccurately. There's still ways to get things like that off too. But it has to be. You have to watch what you dispute, though. You're not supposed to dispute 100. You're not supposed to dispute 100% accurate items. So if the client tells you it's 100% accurate, for whatever reason, you shouldn't be working on those type of items. So it's just everybody's credit report has mistakes on them. I haven't seen an account yet that was 100% accurate. There's always something that's not accurate about the account.

So are you working with people, I mean, are your consultants working with people who they have a bad credit, their FICO score is 450 and they want to get it up to 600, or are you working with people where their score is 690 and they want to get up to 720?

Both. Yeah. There's anybody that I've had people that have had 715 credit scores, they needed a 7, they wanted a 740 because there was a program that had needed a 740 as far as qualifying for it. So I mean, it's people across the spectrum, I mean, usually like a credit CRM affiliate that buys my system. They work with bankruptcy attorneys. That's a good referral source. Realtors, mortgage lenders, auto dealerships, property management companies, if they join a networking group, just basically going in there and talking about credit scoring always makes people's ears perk up because are interested in the subject because people don't really understand the subject. So I mean, there's anybody, even if you're in a Starbucks, someone's standing next to you, chances are they either need your services or know someone that does. So I just basically tell people, hey, go through the training, you will Be an expert when you're done with the training. We're here to support you and go out there and tell people about your business and you'll succeed. And I mean, we have people that are making over $100,000 a month. We also have people that are making zero because they want, they get up in the morning and then I want to pick up the phone up. So obviously it's like, it's like any business, you do have to be serious about it. But if you're serious about it, there's not many businesses out there where you can make as much money as credit repair, especially on an hourly basis. I mean, the Money is over $1,000 an hour once the client signs up with you. And that's a lot of money.

Well, that's fantastic for the consultant, but I don't know for the client if it's as fantastic. That's expensive.

It's fantastic in the sense that if you're 600 bucks is just, that was just an average. I mean, some people charge 2,500 bucks. It depends on who your target audience is. If you're going after business managers, high end area, depending on where you live, the average is 600. But if somebody has a 1% change in their rate because their credit score got cleaned up, can be tens of thousands of dollars over the life of the loan. So the $600 is definitely a bargain compared to what it's going to save them or get them approved in the first place. Some people can't get approved at all. So the $600 will get them that car that they can't get right now or it's going to get them a better rate. So I think that it's one of the best valued products on the market when somebody's actually delivering it the right way. And the only way to deliver credit repair the right way is to educate the consumer, make sure they understand their credit and work on getting the items removed that you can get off. And then that's, that's a win win. At the end of the day in.

Wrapping up here, I just want to ask you one more question. This is sort of very broad and philosophical. I was talking to someone about two weeks ago, I think in South Carolina and we got to talking about credit and they were telling me that they felt that the credit bureaus are really a violation of privacy rights of antitrust laws. If you think about it, I never really thought about it the way this guy was talking to me about it. But why the heck do these three agencies appointed by who the heck knows who get to determine my ability to borrow and obtain opportunities in life. And you, and then you compare it to other countries where they don't have credit bureaus. Right. When you look around the world, it's a different deal.

Canada has credit bureaus. There's different countries do have credit bureaus, but as far as they're not appointed by anybody. They're private companies basically that the banks voluntarily report their experience with the consumer to.

Yeah. And I just want to state for the record, I understand that they're private companies, but they seem to have this pretty locked up. It's kind of like saying the Federal Reserve is a part of the government.

Yeah, it's pretty, it is pretty tough. It is pretty tough for anybody to try to get in there and compete with them, that's for sure.

But I mean, do you have any thoughts on that? Just as a sort of philosophical question? I thought you're the guy to ask.

No, I mean, I think that they're like Microsoft got sued for antitrust violations. I think the credit bureaus have just as much if not more power than Microsoft in that area as far as really being able to control what they want to control. And if they do go unchecked, it could be bad for everybody. So I'm with you on that. I mean the credit bureaus right now, they would love nothing more than Fair Isaac to go out of business and them to be able to take over with their competing product, which is the Vantage Score. The Vantage Score is a Fair Isaac competitor that the three bureaus went and formed Vantage Scoring Solutions llc. They formed their own company where they're equal owners and they developed their own credit score called the VantageScore. So they're trying to push Fair Isaac out of the business over time. Whether or not that's going to happen and they're going to be successful is a different story, but it is something they're definitely going for.

Very interesting. But that Vantage score again is controlled by the same three companies. It's an interesting business. This is a very niche topic, but it's so important to everybody's life. So thank you so much for all these, this sage insight into what's going on out there. And the website for anybody listening who's interested is creditcrm.com Edward Jamison, thanks for joining us today.

Oh, thanks for having me.

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