Category Archives: Credit Management

Response to Las Vegas Business Press Article: “Mortgage ads misconstrued, lawyers say”.
It’s Creditworthy Not Credit Score…

Although Haines and Krieger are more comfortable in front of the camera than they were in their 2009 advertisements, conveying more advanced financial concepts sufficiently for potential clients to perform the services themselves may require something more.

1. Is it irresponsible to attempt to address a concept and describe services in 30 seconds?
2. Does addressing your target market’s desires in terms they understand need to be the central focus of the services you provide?

I am less interested in these 2 points than I am in fundamental inconsistencies. To indicate a mortgage default does: “About a 100-point drop in the credit score as a result of the first missed house payment, and another approximately 100 points off when the second mortgage payment is missed”:

1. Represents scoring model practices that, at best, are no longer accurate in general practice. Not since the 1980’s and early 90’s, when the predominant credit score available was the FICO credit score, was this more likely to be accurate. The FICO score was designed to predict credit default. In the 1990’s and up to the present day major banks have published that they

• Calculate their credit scores in house not using FICO. This is due to the availability of inexpensive database software and the increased customization and accuracy that it provides;
• Design their scores to predict revenue generation for the bank (late fees and penalties). As a result there are a large number of homeowners with delinquent mortgages exceeding 6 months that have credit scores greater than 720 – this obviously would not be possible implementing the mathematics from above

It would be better to direct consumers to perceive value in “Creditworthiness” which is a financially responsible goal instead of a “Good Credit Score”:

2. You can spend a great deal of time, money, and effort achieving a “Good Credit Score” while not being viewed as Creditworthy.

• Credit Scores result from algorithms.
• Being issued credit or Money results from passing a credit evaluation.

Credit Evaluations are composed of these algorithms And “Automatic Pass” and  “Automatic Fail” criteria. This means a person can have a credit score that is good enough to be issued credit but have a characteristic such as $250,000 in negative equity on their home that is an “Automatic Fail” for the credit application. So, a person who has successfully and responsibly managed 5-20 credit accounts over the last 5-20 years and has made their payments on time can very easily have a 750-850 credit score. But if any of these same people purchased or refinanced a home in Nevada 2005-2009 (or Miami, Phoenix, Los Angeles, Detroit…) they likely have a sizable amount of negative equity in their home which typically results in an “Automatic Fail”. If personal financial progress is desired these consumers should ask “How can I become more creditworthy?” Rather than “How do I improve my credit score?”

Avoiding irresponsibility may begin with not selling (or giving away) information that is marketable but not based in current financial fundamentals. For reasons why Consumer Credit Counseling Agencies may make fundamental errors that benefit big banks: http://youtu.be/yTA4JOBMC54

For more on Credit Scores and Credit Evaluations: http://youtu.be/4IG5ATEKgM8