This is Jeff Rose, Good Financial Cents and soldieroffinance.com with another awesome interview with another awesome guest. My guest today is Phil Tirone who is what I would call a credit score expert, credit score “ninja”. I'm a financial planner, and I help a lot of people with investing and financial planning, but when it comes to credit scores I am basically, for lack of a better term, ignorant.
I actually had a blog post that I wrote about my experience trying to find my true credit score, and I was amazed at all the dead ends I ran into. Luckily, Phil here was able to shed some light on that situation and help me along.
I want to introduce Phil today as being that credit score expert and for any of you that are in the same situation I'm in trying to understand your credit, hopefully we can learn a lot by Phil's expertise today.
JEFF: Phil, how are you doing today?
PHIL: Great! I'm doing great, Jeff. Thanks for having me.
JEFF: Okay, I first want to just kick it off and for those that really don't know you, first introduce yourself, how you stumbled upon your own credit score or credit past and what that has got you today.
Discovery: My Credit Score Sucks
PHIL: Yeah, well it all started in the late 90s. I walked into a bank one day and I was depositing a check. The teller said to me, “Mr. Tirone, you're overdrawn in your checking account.” It's embarrassing to hear, okay and gee, I just didn't really know where to go with it. She said, “But you know, Mr. Tirone, you can apply for overdraft protection, $100 overdraft protection line. We approve everybody.” I'm like sure, do it. So she ran my credit and she said, “I'm sorry, we can't approve you. Your credit score is too low.” I'm thinking to myself whoa! The first thing was embarrassing. This is really embarrassing!
The thing is Jeff, I knew how important a credit score was. I was in the mortgage business at the time. I did loans for people. I saw how they overpaid based on their credit score. At that moment I looked at my credit score and I said gosh, what am I overpaying on my mortgage? I looked at it and if I raised my credit score to, at that time it was 720, I could refinance my home and save somewhere between $500-600 a month. It's just staggering.
I said I'm going to figure this out. I bought every book I could. I called the credit bureaus. I called my credit card companies. I called the banks. I tried to get as much information as I can. Just like you said, there's road block after road block after road block and what I learned after doing this for long is it's such a conflict of interest of what's going on here, okay. You go to your bank and ask how to raise your credit score, they're not going to tell you, okay. They don't educate their people, I should say.
I don't believe maliciously they're trying to hold back information, but I know they don't aggressively educate the people on how to raise their credit score because it impacts their profitability. You finance, you get lower interest rates, etc. etc. Long story short, after going to the banks and using my credit as the guinea pig I really figured out how to raise a credit score and it's not hard at all. I came out with a book. I used it as a business card to get more loan business. I said hey, I'll help you raise your credit score and then do the loan with me. That's how it started and now I focus on credit all the time.
JEFF: Wow! That's cool. You just mentioned with the banks and a lot of the mortgage lenders out there, and I think you had a video where you actually went into a bank and asked a bank lender some questions about a credit score. I'll have a link to that video because I think it is cool because that lender really didn't know anything and he tried to fill in some gaps with basically some information that was completely wrong. It's funny because I had a very similar experience with my own mortgage lender here in the area when we were going to build our first home. I asked him some questions regarding credit score and he really had no clue. He tried to pretend that he knew what he was talking about. I don't think it was done maliciously, but I just think that the information is not easily found out there.
Figuring Out the Credit System
PHIL: Without a question. I took that spy camera into four different banks. Four different banks said basically all different information. I know what impacts a credit score now. I look at tens of thousands of credit reports. I know. These poor guys are just clueless. Like I said, it's not their fault. They are trying to do their job. The banks don't educate them. I've put together a whole program and sent it to executives at banks and said, “Hey, look at what you could do for your clients.” I get crickets then I realized.
One thing about me, Jeff, I'm a little slow. Sometimes it takes me a little bit to figure it out. Then I realized oh, I got it. Why would they do it? There is just that disconnect, which is what it is and that's why I'm convinced we need to educate the American people on how to step up for themselves or else their bank is just going to rob them. It is literally a form of legal robbery. In my opinion it's how banks legally rob. It's completely unfair and absolutely reform is needed, but it is what it is. You're dealing with a huge bureaucratic political beast that I've tried to change.
I've offered to give books away to everyone. I wrote the president when he got into office because he was big into the entrepreneur. He said the entrepreneur is going to save us. He still probably is; I just didn't hear back from him. I wrote him and I said, “Mr. President, I've got the way to save hundreds of dollars a month.”
I mean, 80% of Americans, 80 8-0, have an error on their credit report. If we just solve those errors, the average person will save hundreds a month.
Just solve the errors, forget everything else. I said I would give my book away to anyone. We'll create digital programs. We'll just get it out to the masses. But the idea wasn't good enough, I don't know why. I thought it was a good idea, but whatever.
JEFF: You sent me a copy of your book and some of your manuals and one thing you just mentioned was 80% of the US population having an error on their credit report and how much that could save them if they just realized that. What are some other common things- all the programs that you've gone through, all the people you've helped over the years- what are some quick fixes that a lot of people don't realize that they can implement right away?
Optimize Your Credit Cards
PHIL: Well, first of all you need 3-5 credit cards. You absolutely need 3-5 credit cards. There are people that say I only have one and that's all I need. Here's the problem with it; credit is about building roots, deep, deep, deep roots. If you don't have deep roots when one of those errors come on your credit report, it's going to drop your score much farther than it should. That's why you need three to five credit cards.
There's a caveat here. There are some credit cards that help your credit scores and some credit cards that hurt your credit scores. I'll explain that in just a second. If you just go out and get a credit card, that could have no impact on your credit score or could be having a negative impact on your credit score. You need to know which credit cards are the right credit cards to get. I can give you that link and we can put it on the blog post. We have gone through sites so we know which credit cards we recommend to our clients and which ones we don't. If you just go to creditcards.com and you pick whatever credit card, that could have a negative impact. Let me explain why.
The problem with credit cards is they don't all report the proper information. Here's why they don't all report the proper information: according to the credit bureaus, credit card companies don't have to report information to credit bureaus. They chose to do it. When they chose to do it, they have to pay to report. The credit card companies or your banks and stuff like that pay to report to the bureaus. Because of that, they report certain information. The bureaus are just a reporting agency. They just report what they report.
One of the things we talk about in our book, and this comes from a Federal Reserve board study, 46% of the credit cards that you have in your wallet do not report the proper credit limits to the bureaus. Just think about that. Forty-six percent do not report the proper credit limits to the bureaus and here is the problem with that.
Assume you have a $1000 credit limit and every month you pay your electricity bill on it that's $100. If the credit card company is not reporting the proper limiting and many times they report a 0 limit, when your credit report is run by your mortgage bank, your credit card company, your insurance company or your future employer, the algorithm of the credit scoring system looks at your credit limit compared to your balance. So on that limit that should be $1000 limit, $100 bill. That's a 10% utilization. But if the credit limit is not being shown and it's showing 0 credit limit and $100 balance, that's negative utilization. You're maxed out. That could have a 10, 20, 30 point impact on your credit score depending on what other stuff you have.
Help me out here, are you kidding me? That just makes no sense. That's the thing, I'm a real common sense type guy. That's just how I operate. There's certain things that are just unfair and that is unfair because nobody knows this. They think to themselves are you kidding me? How could this possibly be real? This is the way it works.
JEFF: I was one of those that had no idea. I've heard about the utilization ratio and I get that aspect of it, but I had no idea about the reporting of the limits and the error of the limits. It makes a lot of sense why it could hurt somebody score, but it doesn't make a lot of sense why that's the way it is.
More from GFC, Below
Proven System to Improve Your Credit
PHIL: Jeff, it makes no sense. That's why I have people that sign up for my program. We've had some people that have 100-120 point impacts in 30 days. Literally, they have 100-120 point swing in their credit report in 30 days and it's because they have two or three credit cards that aren't reporting the proper limits. It just drives me crazy. Here's the hard part about that. When they don't report the proper limit, it impacts your credit score which has a direct impact on how much you are going to over pay each and every month. Like I said it impacts obviously your mortgage.
If you had two brothers buying the same exact house, same exact location, same street, same everything. They have the same income, same debt, but one has a 720 credit score and one has a 719 credit score and they are buying a $300,000 home with an FHA. The one with the 719 credit score, assuming he is going to put 10% down and he needs mortgage insurance, is going to overpay $4500 in fees because of that one point. One point! So it impacts your mortgage. It impacts your car. It impacts your credit cards. It impacts any other loans you have. It impacts your car insurance, your home insurance in certain states. It impacts whether you're going to get a job. Inc. Magazine came out and said that 61% of employers are running a credit report before they hire you.
I just can't be more passionate about it. I guess sometimes I feel like I'm up on top of the mountain singing or yelling and no one is hearing. You would think that you get this information to the right politicians laws would be changed. I'm just waiting for you to run for office.
JEFF: That's great. For my audience and for everybody that watches this, that little nugget is worth hundreds a month, could be thousands a year. Over the course of their life time that's huge.
One Easy and Quick Fix
PHIL: I have tons of them. So let me tell you this. Everyone…. Well I don't want to say everyone, but the majority of people, 75-80% of people have some type of collection on their credit report. It's not because you didn't pay your bills. I recently moved to Scottsdale from California. I sent in a change of address form to the water service company in LA. They wrote down the wrong address. So what happen is I didn't know I had this $500 bill for water and they sent me to collections. I get the collection letter.
Thank God I know how to handle this stuff because, guess what, that one collection would have impacted my credit score 50, 60, 70 points. The thing is, one of the things we talk about in the program is make sure you negotiate before you pay any bill in collections. That’s what I did with this collection company.
What we do is take people through a process of validating their debt and then negotiating. What happens with these collection companies is they sell so many different times. So this company sells to this company and this company sells to this company. Many times the information gets skewed and lost. We need them to validate the debt so we can get the information from the collection company so we know they have my wrong phone number, they have my wrong address. They have all this wrong stuff. Then we come from a power of negotiation.
In my course, the 14-day credit challenge, we talk about all this information. We give the actual letters to send for the credit limits, for the bureaus, for the collections companies, all that stuff so that you are put in control. The reality, no one teaches this information. You can't go to your bank like we said. You can't go anywhere. You have to find creditable sources. The sad thing is if you go to the books in the books store, we printed a book and the problem is we just kept going out of date. It wasn't relevant. Now we keep everything on line and basically with the 14-day credit challenge we send people an email once a week. It's once a week for 14 weeks. We call it 14 days because we send you one video per day for 14 weeks. The videos are 5-10 minutes long. It gives you exactly the nugget you need to learn and then it gives you 5-10 minutes of things you need to do if this applies to you.
At most a person is spending 20 minutes a week, at most 20 minutes a week, to learn about their credit. In most cases, 8-10 of the weeks are applicable. For this, Jeff, we have a free webinar that we can put on your blog post where people can hear. I literally give a 55-minute webinar explaining our challenge and they can sign up for it. We have the webinars once everyone's there.
JEFF: Okay, we'll definitely have that information for our viewers. Can you maybe share a success story of someone that has gone through it here pretty recently that maybe seems like a minor thing but made such a big impact on their life now that they understand their credit?
PHIL: I have so many success stories. I don't even know where to begin. Joe from Indianapolis, Indiana was bankrupt and divorced and never thought he would be financially free. He was in a rough space. One of the things we talk about is I don’t care if you had a bankruptcy yesterday, I can get your credit score over 720, over 750, 8-9 years before that bankruptcy falls off your credit report. Think about that. You had a bankruptcy, you can have your credit score up 700, 720, 750, 8-9 years before that bankruptcy falls off your credit report. My belief system is a lot different from typical credit repair companies. Credit repair companies typically say hey, Jeff, you have that problem with that Ford account. Let me get that off. I know someone at Ford. You're subject to their relationship getting an error off your credit report. If that error doesn't come of your credit report or that negative mark, than you can't recover. I believe completely different.
According to the FCC or according to the federal laws, if something happened to your credit report, it happened. You can't get it off legally. I don’t want to break any laws. That's just not my gig. What I teach people how to do is build their credit around those issues so it doesn't matter. Your bank wants you to think if you had a bankruptcy you're out to lunch for 10 years. Good luck. That's not the case. Steve got our program. He went from 540, if I recall, 540 to 735. This is with the bankruptcy on his credit report.
I have another example. Cindy, executive from Sony. I did all her loans. She called me one day and she said, “Phil, I have a problem. Something is going on with my credit report.” We ran her credit report and there was one error. She always had 750+ credit scores. One error on her credit report that had caused something like 750-580. It was a huge, huge drop. One error. It took us months to get that thing off. When we got it off her credit score just popped and she was able to refinance. The reason why she realized her credit score was low is because she was refinancing a certain debt like her car and different stuff like that. She was forced to get into things that she couldn't afford. When you have a 580 credit score and you're getting a car, you're paying like crazy.
One of the other reasons why was her other loans. She was doing investment property so she had to do a 1031 exchange. She had to get another mortgage loan with that credit score really high. She ended up saving when she refinanced those two things $900 a month. It was just staggering. I talked to a guy in Ottawa last week on the cell and he said, “Phil my score went from 620 to 732 in 30 days.” If you know the information it works.
JEFF: Wow! That's great. I think for anyone that has that situation where they have a low credit score and have nowhere to go, your program is one of the few I've seen out there that will actually educate them and walk them through it. You have some pretty bold claims on your site, but what it sounds like is that you also have some case studies to back that up as well. That's great.
A Guarantee You Can't Afford to Use
PHIL: Oh yeah. It works. I know it works. A matter of fact my guarantee if you don't save a $1000 the first year you can have all your money back. That's my guarantee. The credit guarantee is if your credit score isn't where you want it to be in a year, you can have all your money back. That's how confident I am. I just know because we've had over 10,000 people go through our program. Because we've had that many people I just understand how the system works so well and that's what's happening. I'm pretty confident about it and grateful to be able to tell the story.
JEFF: That's great. We're also going to have links to Phil's blog here. I know he's got a lot of great resources there. I'll also have a link to the webinar. Basically the link then is just to show them the next available live webinar that they can attend?
PHIL: Yeah, basically they sign up for the webinar and they'll be invited to the webinar whenever the times are and stuff like that. It's all on the website.
JEFF: I think also too if you will agree to this, I might have some readers regarding their credit score. Maybe we can post those as well and get those answered on the blog post here just to really, really show people how much they do need to go through your program to boost their credit score and what not.
PHIL: Whatever I can do, Jeff, to support you. I love what you're doing. I love your information and as I've told you I can't wait for you to come out with your product. After people finish the credit scoring process they need a financial education process, and there is one person I'm turning to and that's you. I love your blog. I love what you're doing. I love your book. I want to support you anyway I can.
JEFF: Just so everybody knows, I did not pay Phil to say that. That was completely unsolicited. Phil, I appreciate your time here and I definitely appreciate the nuggets of information. I actually learned a lot today and I'm sure a lot of people did too. I appreciate it.
PHIL: Talk to you soon.