Tracy Becker Credit Expert and Author

Why is getting rid of old credit cards that you may not use much a bad thing?

How many times have I heard, “This card is so old and I rarely use it. I want to close it immediately and I know that will help my credit right?” Too many times is the answer!

This is false. Keeping credit cards open and making sure they are active at least once a year can keep credit scores much higher. The older your credit, the better it is for your credit score. Average age of credit contributes to your credit score number. Since being in the credit game longer shows you have had more practice at managing credit it makes you less of a credit risk and can add 10, 20, 30, even 50 points on to your credit score depending on your average age of credit.

Once you close an account it can drop off after two years of activity. If the account is very old it could have a major impact on your credit score once it falls off. Keeping credit active can prevent the creditor from automatically closing the account due to lack of use. Inactive credit usually closes after it has had no use for a year.

Scorecards & Credit Scores

“How can my credit score be so low? I have been paying all my important accounts on time for 10-20 years, doesn’t that count for anything?”

“I have millions of dollars in the bank and own many properties how can I have such a low credit score?”

“How can one account with a late payment for such a small amount of money do this to my credit score?”

The answer to these questions is vast and complicated since credit and scoring is determined by many factors, some of which are cloaked in secrecy.

Most mortgage banks use the Fico score to determine the risk of a potential borrower. Back in the 80’s, Fico, a bunch of lenders, and one of the credit bureaus came together to figure out a better way for lenders to predict this risk. They wanted a more automated system that complied with the laws and made it easier for them to approve more loans, helping more of those deserving to, fulfill the American dream of home ownership. The credit bureau provided Fico with data from millions of unique credit profiles over varied time periods. Fico studied this information zeroing in on trends and negative outcomes, while learning what symptoms occurred before these delinquencies manifested on credit.

Here is an example:

Individuals who opened many accounts within a year or two showed a much greater likelihood of default.

This trend could then become a variable that would make up a scorecard. The scorecard is used to define the amount of points assigned to the unique credit file based on the history of the consumers credit. If you had one new account you might get more points while an individual with 4 new accounts would get less.

There are many different scorecards that are used depending on the credit behavior found on a consumers credit. For example, there may be scorecards for those with no delinquencies, coming out of bankruptcy, having new late payments, and new credit or thin credit file consumers. A consumer with new accounts and over 4 inquiries may have a completely different scorecard than one with no new accounts and 4 inquiries. This could mean they have a totally different amount of points for each category of their credit based on the unique scorecard assigned.

As you can see once the right scorecard is determined the points then follow based on more detailed events occurring on the credit. So although we know debt, length of credit, history, variety of credit, and new credit all help determine scores, there are more layers of scoring that we cannot know. A great amount of information about scoring is proprietary and therefore a secret of the formula creator. The key for our customer base and potential referrals is to know their credit and scores, watch them consistently, take action to manage them, and use timing and strategy when making decisions that will affect them. Credit is an asset that can help build wealth, determine the home and neighborhood we live in, and even put a child through college giving them better opportunities. This is a powerful tool that if nurtured and used wisely can change lives.



Feel free to call us with any credit questions or feedback!

Making sure credit is analyzed with future financial goals in mind is a MUST before taking an action that can foil those plans and limit a consumers options for a better quality financial life.

Credit Question: How can I tell a credit repair company is legitimate?

Q. I am thinking of purchasing a property within the next year and I need to fix my credit. How can I tell if a credit repair company is legitimate?

A: This is a great question. When it comes to professional services, most people find that getting a referral from a friend or relative is usually the best place to start. Unfortunately, the majority of people who have credit issues do not acknowledge or advertise it to those they know. The next best referral source would be a realtor or banker, since they deal with credit reports/scores and will usually know of at least one reputable firm. After almost twenty five years in the credit repair industry, I have found that a good credit repair company will give you a thorough credit analysis and find out what your goals are before they decide they can help you. Once they review your credit, they should be able to give you a reasonable idea of what they think they can do based on their experience and expertise. Remember, BY LAW, they are not allowed to guarantee results. It is always smart to check their references and review their testimonials. Asking questions, finding out how long they have been in business, and searching the internet to get more information about the company is a great way to learn about their reputation and credit expert contributions.

Here are a few red flags to help you sort out some of the companies to walk away from:

They tell you they can help you without a thorough review of
 your credit and knowledge of your goals.

They offer to pull your tri-merged credit report without 
letting you know it will reduce your credit score.

They ask you to sign any forms before you hire them.

They are very aggressive and pressure you to start the process.

They promise or guarantee results.

They have generic websites and do not publicly list the names of the executives 
or employees.

They outsource credit repair services to third parties.

They bill for credit repair in advance of performing services.

Get more information on credit restoration and connect with all social media on our website www.northshoreadvisory.com.

Now is the Time to Be Aware of Tax ID Theft

Tax ID theft is an increasingly popular crime. Criminals can sit at their computer in the comfort of their own home relaxing in their pajamas, sipping a cup of coffee, as they steal your hard earned tax refund. In 2011, cases of this crime were up almost 100% from the previous year with about 700,000 victims totaling billions in stolen refund money. Some ways this crime is perpetrated are a completely legitimate refund for a return is redirected to a different account, or a false (early) return with only the social security and name remaining accurate is filed and a refund is sent to a false address, debit card, or account. Thieves have also used the social security number and name of minors, those who don’t normally file tax returns, and even those who are deceased. Since the IRS issues refunds prior to employers and financial institutions providing income and withholdings documents, there is no verification needed and criminals have an easy avenue to make millions.

One method of this fraud started when e-filing was on the rise in 2009. Criminals would set up fake store front filing locations and use the name of a well known accounting franchise to market their services. They would save returns and file them all in one grouping with a phony account. Once they knew the date of payout they would have all the funds directed to one account and then they would disappear. They also set up fake websites that looked like a popular accounting firm where they would attract tax payers who then updated personal information and this would be used by criminals to set up phony tax returns early in the year. Most people don’t find out they are victims until they file a tax return only to be told by the IRS that one has already been filed in their name with a different address or account for payment.

Those more vulnerable for ID theft occurring have exposed their personal information in situations such as hospital visits, filling out doctors office forms, losing or having a wallet stolen, and creditor or lending notification that your personal information might be at risk. The IRS has taken some steps to organize this growing problem. Those victimized or tax payers at a higher risk can fill out and file an IRS Form 14039, as well as contacting the IRS Identity Protection Specialized Unit at 1-800-908-4490 to report the problem. It could take over 200 days for a response and acknowledgment from the IRS, and a year or more for resolution.

The information the IRS provides on how to protect against this crime is general and does not address ways to find out if returns have been filed early. There are IRS sites that allow us to check on e-filed tax returns but consumers have to know the exact dollar amount the return is requesting for refund otherwise they cannot find out the status. If the IRS would set up an online filing check system where just name and social security can acknowledge status it would be an easy way for tax payers to tell if they are victims.

In many cases those who have had tax ID theft have also found accounts on their credit profiles that they do not recognize. Having a credit monitoring product or checking your credit twice a year www.annualcreditreport.com (free annually) can help to uncover issues early on. There are many products available online to monitor credit and alert consumers as to changes in their credit and scores. We at NSA have our own product as well: www.ecsprofessional.com.

The IRS gives tips on how to protect yourself from tax ID theft according to their site: http://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft-1

How can you minimize the chance of becoming a victim?


Don’t carry your Social Security card or any document(s) with your SSN on it.

Don’t give a business your SSN just because they ask. Give it only when required.

Protect your financial information.

Check your credit report every 12 months.

Secure personal information in your home.

Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.

Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

Feel free to comment or contact me with any credit questions and connect with North Shore Advisory on all social media: http://northshoreadvisory.com/contact.html

Part II: Aftermath of Sandy Credit Tips

All of us at North Shore Advisory, Inc are sending out our thoughts and support to all of you that have been affected by Hurricane Sandy. We would like to offer some credit tips to help guide you in these tough times and protect you from even more damage that poor credit can cause long after you have recovered from the aftermath of this experience.

1. Make sure all credit cards, car, mortgage, or any other payments associated with credit reports and scores are paid on time.

2. If you do not have access to the internet to make online payments call your creditor, or ask someone who has access to the internet to get you the mailing address for payment. Send a payment out by snail mail and make sure you put your account number on the check.

3. For future use have a list of all of your creditors names, phone numbers, due dates, and payment mailing addresses for ease of access in times like this. Do not put your account numbers on the list for security purposes. Your creditor can always find your account based on your SS#, name, and address.

4. Those who normally send payment out through snail mail who are using the internet for convenience must be sure to get a confirmation number. Without a confirmation number, payment most likely did not go through. Keep a note of the number for future reference in case there is a problem. Many individuals who are not used to paying on the internet wind up thinking they have completed the payment process when in fact they did not, finding out later on they have damaged their credit causing even more problems down the road.

5. If you do not make your payment on time make sure to document exactly what happened, with a time line of events, and why the payment was not made. Later on when the time and funds are available to make payments and update the creditor the more detailed information available could make the difference between North Shore Advisory, Inc fixing credit or not.

Please don’t hesitate to contact us for any of your credit needs by following the link below:
http://www.northshoreadvisory.com/contact.html

Financing & Credit Score Frustration

No matter how sophisticated the mortgage applicant, many find credit blemishes that leave them vulnerable, confused, and rejected for financing.

It seems lately we have had an enormous amount of highly successful professionals on the verge of purchasing or refinancing who have been left frustrated, angry, and ultimately turned down for a mortgage due to lowered scores.

Example 1:

Sam and Carol, both successful Attorneys in NYC had been looking for an apartment for well over six months. They were having difficulty compromising to find a place that met both their needs for practicality, style, neighborhood, and price. After much difficulty they finally found the perfect Manhattan Condo that brought all their qualifications together, while fulfilling their aesthetic dream.

When they first started their apartment hunting both their scores were well over the 740 fico requirement. With combined income of over a million dollars, good assets, and low debt ratio, it seemed like a slam dunk for loan approval. However, due to the length of time since credit was pulled the banker had to run new scores for loan application. Carol’s score dropped to a 652 which meant they would be denied mortgage approval. They were both astounded and angry when they learned that Carol had a tax lien recently updated on her credit which was placed in error dropping her score at least 60 points, as well as a recent late payment on a Bloomingdale’s card. By the time Carol and Sam found us they had only a week to get the score increased before losing the property. Carol was devastated and felt it was her fault they were going to lose the home of their dreams.

Example 2:

Jim, a high powered executive, and his wife Susan, an art dealer, were getting ready to refinance the $900,000 that was left on their mortgage. Since their Fico scores were around a 770 their current rate of 5% would be reduced down to around 3%. This would save about $1000 a month and around $300,000 over the life of the loan. Throughout the process of refinancing Jim was traveling and took a very long time to get all the documents the banker needed for loan submission. Since so much time had gone by the bank required a new credit report with the application. Unfortunately, when the credit was pulled Jim’s score dropped by 80 points. Jim had opened two new credit cards not realizing his average age of credit would be reduced by these new born accounts which would drop his scores. He had no way of knowing the two zero percent balance transfer cards would now be costing him $300,000.

Carol and Sam were very lucky and were able to qualify for loan approval. Within a week we had success removing the lien from Carol’s credit profile and her scores went up to 715. With the couples ability to put more funds down and the increase in score they were able to get loan approval.

Unfortunately for Jim and his wife there was nothing anyone could do to help. Once new accounts are opened only time could increase the average age of credit and ultimately the credit scores.

How often could this happen to your clients? Most individuals do not understand the confusing algorithms and counter intuitive rules of credit scoring. By the time they realize just how important their credit behavior is, it is usually too late.

Feel free to share these examples with your customer base to help give them the foresight to monitor and manage their credit consistently.

Contact us with any questions or feedback on credit challenged clients or credit in general!
http://northshoreadvisory.com/contact.html