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Millennials Are the Worst at Managing Debt

Millennials Are the Worst at Managing Debt

Millennials Are the Worst at Managing Debt

(Dallas, TX-National-Credit-Solutions) Millennials have had a rough entry into adulthood: not only have they struggled to find entry-level jobs in a tough economy, but they are also the worst at managing their debt.

Most Millennials (ages 19-29) have piles of student loans to pay off, shaky job prospects, and a poor understanding of how to properly manage their credit. Experian’s “State of Credit” study found that the average credit score of Millennials is shockingly low: 628.

This low number is surprising, considering that Millennials own an average of only 1.5 credit cards and carry an average balance of $2,700. While other generations have higher balances than these Millennials (the national credit card balance average for people 30-65 is $5,300), this younger generation has little knowledge of how to properly manage its debt.

Although Gen-X and Millennials are just as likely to make late payments or max out their credit cards, Gen-X has more assets and longer credit histories than the Millennials, which means that their credit scores do not suffer like those of Millennials.

Experian’s study also showed that Millennials are the most hesitant generation to accept loans, which is largely due to the unstable economy and the poor job market for young adults. Yet despite the fact that more young adults are avoiding borrowing money, their generation still finds itself burdened with debt and at a loss of good debt-management skills.

It seems as though many Millennials were never taught how to properly build credit or how to manage their debt so as not to damage their credit score. So if you are one of the millions of Millennials struggling with debt, here are three ways you can improve your credit score:

1) Get a Credit Card

More and more Millennials are avoiding credit cards, perhaps because they fear they won’t be able to control their spending habits. However, since you need credit history to have a credit score, it is essential for young adults to have a credit card. Even if you only charge a small amount to your credit card every month, you are still building good credit!

2) Pay your bills on time

This one might seem obvious, but many young adults are juggling new careers, student loans, car loans, and rent, so many of them decide that making a late payment now and then is acceptable. Unfortunately, this is not the case. Since Millennials have a short credit history and few assets, it is important that you pay your bills on time. Start budgeting your money to ensure that you can make your payments every month.

3) Choose transportation wisely

Don’t splurge on that expensive SUV that will eat away at your bank account. Instead, find a reasonable, affordable car or rely on public transportation. This will help you save money so that you can pay off your bills on time and keep your credit score strong.

Although Millennials are facing a tough job market and are wary of borrowing money, it is important for them to learn how to manage their debt more effectively in order to improve their credit scores.

FICO vs VantageScore

FICO vs VantageScore

FICO vs VantageScoreFICO vs VantageScore


(Dallas, TX-National-Credit-Solutions) When discussing credit scores, FICO – the credit scoring company, Fair Isaac Corporation – always comes up at some point during the conversation. Because of FICO’s dominance in the lending industry, fewer people know about VantageScore, a second credit scoring company that started as FICO’s rival eight years ago. Both FICO and VantageScore provide lenders with credit scores, but each one takes a different approach to calculating the scores. Here is a look at some of the biggest differences between the two credit scoring companies:



1) The Scoring Models

FICO’s scoring model consists of combining various elements of your credit history to obtain a score between 300-850. The higher your credit score, the less of a risk you are to lenders, which means you will qualify for better loans, top cash back, and more reward cards. If your score is on the lower end of the scale, you are considered a high-risk borrower, and therefore you may have trouble getting a loan.

The VantageScore is largely based on a 24-month review of your credit report, which includes components similar to that of the FICO score – payment punctuality, your available credit, the amount of debt you have, etc. One of the most noticeable differences between FICO and VantageScore is the scoring model: VantageScore combines a three-digit number ranging from 501-990 with a letter grade to reflect your credit standing. For instance, if you have a VantageScore of 850, you will be assigned a letter grade of “B”, and if you have a score of 920, you will have an “A”.  Similar to the FICO scoring system, a high credit score is desirable, and a low score means you have poor credit.


2) Scoring Requirements

It shouldn’t come as a surprise that to have a credit score, you must have some sort of credit history. FICO requires you to have at least six months of credit history and at least one account reported in the past six months. VantageScore, one the other hand, requires only one month of history and an account reported to the Credit Reporting Agencies within the last two years.

So what does this difference mean for credit card users? It means that VantageScore can score millions more people, which can be especially beneficial for those who have just recently started to build credit or those who have not used credit recently.


3) Late Payments

Late payments can damage your credit score, which is why it is crucial to always make your payments on time. That being said, VantageScore looks at the various types of late payments differently. If you are late on your mortgage payments, your VantageScore will be negatively impacted more than it would if you made a late payment on a car. Alternatively, FICO treats all late payments similarly; so paying your mortgage late won’t devastate your FICO score as much as it will your VantageScore.

Although many experts see great benefits in the Vantage scoring system, most lenders still rely on FICO. Since FICO remains #1 on the credit scoring scene, you should focus more on your FICO score than your VantageScore. However, it is a good idea to ask your lender which scoring method they use so that you can determine what type of rate you may qualify for before applying for a loan.


Books We Recommend You Read

Books We Recommend You Read

We really strive to help and educate our National Credit Solutions customers and friends. Here are some books that we have written and/or recommend:

From the Nation Credit Solution family of business and self help writers:

This is the first book by the NCS president, Brad Boruk. Brad collaborated with Ray Clark to write this book in 2013. Brad and Ray share their insight on how to manage personal finances and how to recover when you are in a bad financial spot. Let’s face it, most of us end up in a bad financial spot at least once in our lives. This book will help you organize your finances and get back on track.

This book is only available from Amazon in a Kindle edition. The great news is that you do not need a Kindle to read the book. You can read if from most computers and iPads. Click on the picture of the book to go to the Amazon page for the book:


From other self-help and business writers we recommend:

The 21 Irrefutable Laws of Leadership by John C. Maxwell is an indispensable book on leadership. Click on the picture below to see the Amazon page for John’s book:


The Five Dysfunctions of a Team: A Leadership Fable by Patrick M. Lencioni is a leadership book that is recommended by Brad and Boiler. Both credit this book with inspiring their leadership. Click on the book below to go to the amazon page for this book:


At National Credit Solutions we are avid researchers and readers. If you would like to recommend a book not on this list, drop us a line:

Credit Scores 101

Credit Scores 101

Credit Scores 101

“I got my credit score when I closed on my house, it was 726. I got my score from the electric company and its 478. How did my score drop so much? Is there something wrong?”

Have you ever experienced this situation? Like many Americans, the credit score is all they hear when it comes to credit; however, most consumers don’t truly understand what the score means. The purpose of this article is to give you a better understanding of scores so that you better understand how banks make decisions.

First let us define a credit score. A credit score, simply put, is a numerical reflection of what is contained in your consumer credit report.  It is used to predict future events. The meaning of that number is something we will venture into in a bit, but before we do that lets go over the different types of scores. There are three types of scores that banks and lenders may use. There is a risk score, which is used to gauge risk for the bank on how likely you are to pay them. That is most likely the score you’re most familiar with. The other two types of credit-scores-101-5score are less common since you may never see one, they are: A bankruptcy score, which is used to determine how likely you are to file for bankruptcy, and a profitability score, which is used to determine if the entity you are trying to borrow from or are borrowing from is able to make money off of the service your applying for or have with them.

We will start with risk scores as they are the scores you will most likely see and use. Risk for a bank is basically them determining how likely you are to pay them back or make on time payments. It’s used to determine future risk based on what is on your credit report at the time it was scored. Being high risk to a bank is having a low credit score. A low credit score is basically saying the bank has less faith that you will pay on time or pay them back. As a result, you may get higher interest rates or be charged a deposit or get denied all together. On the other end, being low risk to a bank facilitates in getting better interest rates and not being charged extra fees and deposits. The benefit is obvious; being less risky saves you money.

So what makes up a risk score? I will get into that in a moment because the answer is not as simple as it might seem. Before I do, I want to clarify some misconceptions. Most people assume that because there are three major credit reporting agencies (Equifax, Experian, Trans Union), then you only have three credit scores, one from each agency. That is not actually the case. There are hundreds to thousands of different credit score models. Each bank or lender you apply with has the option to use whichever score model they choose. You could therefore go to bank ABC and apply, they would access your report and grade it 655. You could then go to XYZ bank next door, apply for credit and get a 607. Both banks accessed your same report, but they used different ways to calculate risk. It gives the appearance that the credit score went down but in reality it did not.

credit-scores-101-4An easy way to understand this is a comparison I use with credit scores to temperature. Here in the United States, most people are familiar with and use the Fahrenheit scale to determine if its jacket weather or not. Let us say you want to take trip to Europe and want to know how to pack. You check the weather in Europe and see that its 36° on the dates that you want to travel. You then decide to pack a heavy coat since 36° is near freezing, right? You board your plane, fly across the ocean, then disembark and realize it is shorts weather. What happened? Was the weather report wrong? The weather report was accurate, Europeans just tell temperature differently. They use the Celsius scale over there.  Therefore, if you had actually converted °C to °F you would have known that it was 97° there and packed shorts. You will not be able to convert score models to other score models since you do not have the algorithms used to create them; however, you now know they can be different depending on where you go. The disadvantage to this is that you do not really know what your score is until you apply for credit. The advantage is that since lenders grade you differently, you could get a better interest rate with one bank vs. another. You can also get an approval from a bank for a loan where another would not.

Now that we know that no two scores are identical, let us delve into what makes up the score. As I stated earlier, scores are made up of what is contained on your credit report. What is on a credit report then? A report contains three parts: your credit cards, loans, other debt, and public records; a list of entities that have looked at your report, more commonly known as credit inquiries; and your personal information (Names and aliases, addresses, employment history, DOB, spouse, and telephone numbers). With respect to your score, the only parts that affect it would be the first two sections mentioned above. Also, with inquiries, only the hard inquiries (inquiries for credit applications) can affect your score. Soft inquiries (when you check your report, account reviews, and pre-approvals) do not.

The Five Main Ingredients in Your Credit Score

There are five things that a credit score weighs based on the information found in the report. They are: payment history, amounts owed, length of credit history, types of credit, and new credit. I have this listed in order of what is weighted greatest to least. You can also look at the chart below to get an idea of how they are weighted with a basic FICO score. We will go over what FICO is further down.

Payment history is usually what’s weighted the most on your report. It includes accounts you’ve paid on time. Those bring value to your credit score. It will also include any late credit-scores-101-3payments you’ve acquired, any derogatory items (charge offs, collections, repossessions, etc.), or any public records (bankruptcy, tax lien, civil suit) that may have been filed in the courts. These items may negatively impact your score.

Amounts owed are basically your balances and how they compare to the credit limits or original loan amounts. To increase value here, you’ll want to keep your balances as low as possible with you limits as high as possible with respect to your credit cards and other revolving accounts. With loans, just continue to pay your monthly amount due. This will lower the balance and increase the distance from the original amount. Paying off large chunks on an installment loan won’t necessarily raise your score. The reason for that is explained next.

Length of credit history is the length of time items on your accounts have been open and active and the length of time since the last activity. The longer an item is on your report and in use, the more valuable it is to you, as long as it is a positively reporting account. credit-scores-101-2Closed or inactive accounts lose their value over time. Therefore, a good account that was opened for 10 years and then closed still helps your score; however, as time passes it helps it less and less. That is why it is important to continually use your credit and be judicious about closing accounts. With regards to amount owed, when paying your monthly payments on an installment loan, you are building positive payment history over the life of that loan. For example: You have a loan for $600 dollars and a term of one year.  Keeping it simple we will not do any interest calculations. Your payments come out to $50 a month over the 12 month term.  Let us say that you can pay it off in two months. That basically created 2 months of positive payment history. Now the value of that account begins to depreciate since it is paid and closed. On the other hand, if you pay it over the entire term, it shows 12 months of positive payment history before it begins to age. Keep in mind we are just speaking about credit scores and maintaining them. You aren’t required to wait the term if you do not want to. This is just to give an understanding of how a bank looks at your information on the report. In most cases, to a bank, paying a loan off more quickly does not look any better to them.

Type of credit is basically your credit mix. Banks and lenders like to see a variety of examples of how you use credit. By having only credit cards on your report, it doesn’t give a good picture of how you handle installment loans. It works the other way too. Continually using different types of credit is the best practice here. You want your credit report to look like a decathlete, not just a sprinter or hurdler.

New credit is the last piece of the puzzle. This refers to your new accounts and the credit inquires for new accounts. New accounts do not have any credit history associated with them, so they generally don’t add any points. They may actually take some away, since new credit usually includes new debt. Also your credit inquires factor in. How often you apply for new lines of credit can hurt your score. You may wonder why that would affect your score negatively. Remember that the score is to calculate risk. Inquiries to a creditor look risky for two credit-scores-101reasons: First, depending on how long ago the inquiry occurred, the end result may or may not be on the report. Since the creditor may not know the result of recent inquiries, they are making a decision on unknown information. For example, let’s say you apply for a Macy’s card. You get the card, make some purchases, and then max it out that same day. A few hours later you apply for a Target card. Target National Bank accesses the credit report and sees an inquiry from Department Store National Bank Macy’s. They notice it was done the same day. They don’t know that you just maxed out the card. They don’t even know if you were approved. That is why the inquiry can hurt your score; the result of it is unknown. The second reason is that multiple inquiries in a short time period may indicate financial duress. If a lender looks at your report and sees you applied at American Express, Bank of America, Discover, US Bank, etc. they may wonder why you need so many accounts in a short period of time. It may be that you just wanted to have an account from each one of those banks, but the lender doesn’t know that. To them it looks like you need money immediately. To them it looks more risky and your score decreases.

There are a few fail safes built into scores with regards to inquiries also. You have probably been trying to get a mortgage loan or auto loan and noticed multiple inquiries. Many scoring models take into account when buying a house or purchasing a home that you may need to shop around. For that reason, some models will limit the effect the inquiries will have on the score. They do this by counting them as a single inquiry when within a short time period or weigh it differently.

Now that we’ve covered what goes into a risk scores, let us go over a few of the scores you may see or use. We will start with FICO. This is the score most people are familiar with. You may have heard that term from a bank when working with them or from a news program covering credit. FICO is a an acronym for Fair Isaac & Co. It is basically the name of the company that created it. Fair, Isaac & Co actually has over 20 different models. The standard FICO score has a range of 300-850. In most cases that is the score you will be dealing with. It also can be under a few different names depending on which bureaus report it is applied to, namely: Beacon on an Equifax report, Experian Fair Isaac ver. 2 or 3 on an Experian report, and Empirica or FICO Classic for a Trans Union report. You may see modified versions of the basic FICO also. Since every bank is different, they may tweak the FICO score to their business needs.  Because they may modify the model, the ranges used and the significance of the 5 things that make up the score may be weighted differently. That practice isn’t exclusive to Fair, Isaac & Co either, most scoring vendors will have the score modified to their clients’ needs.  Even if two banks give you a FICO score, they may use different variations of the Fair Isaac’s model.

Some other scores you may have seen are PLUS, Vantage 1.0 and 2.0, and TEC.  There are actually too many to list.  Just keep in mind that every score has a name, the credit bureaus don’t track your score, and scores can come from a variety of different sources, not just the bureaus. Now that we understand differences let’s transition into score factors.

Scoring Factors

Have you ever gotten a denial letter for credit? If you have you know what they look like. If not, let me go over the verbiage of one with you. It goes something like this:

Dear {Your Name Here}

We regret to inform you that we were not able to open an account with you. The decision we took was made in whole or in part from a report obtained from {Credit Bureau Name}. You have the right to obtain a credit report from {Credit Bureau Name} within 60 days of this notice.

{Credit Bureau Name}

{Credit Bureau Address}

{Credit Bureau website and phone number}


Your Score is XXX

Factors that adversely affected your score are as follows:

  1.         Xxxxxxxxxxxxxx
  2.         Xxxxxxxxxxxxxx
  3.         Xxxxxxxxxxxxxx
  4.         Xxxxxxxxxxxxxx
  5.         Xxxxxxxxxxxxxx



{The Bank that denied you}


In the above example, you see the bank used your credit report and used a credit score, but what are factors mentioned in the letter? Those are called scoring factors. Scoring factors are basically reasons why your score is not higher.

There is another misconception we may need to clear up before we get deeper into factors. Most people believe your score starts at the highest number possible in the scoring model used. They also believe that as you miss payments and negative information is added your score decreases. This may also bring them to the conclusion, if they’ve never missed a payment, they should have a perfect score.  That’s not actually the case. As we learned when going over what makes a score, scores are not black and white. There is more to them than just missed payments or on time payments. When you start using your credit you have no score. It’s not until you have a few accounts on your report that your score can be calculated. As you use credit, add accounts, close accounts, miss payments, etc. your score is calculated and changes depending on the value of these items and the algorithm used.

Now that we know that, let’s get back to the scoring factors. What does it mean, “Reasons why the score isn’t higher”? Most of the time, you will get four or five factors.  Each factor has a value assigned to it. They are listed in order of what is affecting the score the most to what affects it the least. They can have an effect of anywhere from 1 to 100 points against the score. Unfortunately there is no way to tell exactly how many points each scoring factor is affecting the score. They can also change every time a change occurs on the credit report each time it is scored. On the other hand, they do give you an idea of how you can potentially improve your credit. The factors can give you a starting point of where and how to proceed. Keep in mind those scoring factors are based on what your lender wants to see and the type of score they use, so just as scores are different the factors will be also. This is why you may disagree with the scoring factors at times also. Sometimes they seem a little nitpicky. Let us say you have an 845 FICO score. Remember the basic FICO score is 300-850, so it is a pretty good score, right? You start looking at the factors and see one that says, “Longest account open is too recent.” You think to yourself, “My accounts aren’t too recent.” Keep in mind, that may be true from your point of view, but according to the score’s (or the lender you’re applying with), it wants more time on the account to get those remaining points.   Here are some examples of scoring factors you may see:

Too many inquiries

Longest account opened is too recent

Balance to limit ratio on revolving account is too high

Balance to limit ratio on bank card account is too high

Not enough paid down on real estate accounts

Too many account opened recently

Too many accounts

Not enough accounts

No open bank card account

No open revolving account

Presence of a bankruptcy

That’s just to give you a taste, but there are hundreds of different factors you could see.

Scoring factors and scores can also be affected by the amount of data on the report. There are two ways this works.  Your report is either thick or thin, so the algorithms used into the score will look at the two types of reports differently.  It modifies the values of how your payment history, amounts owed, etc. affect the score. It would seem unfair that the model adapts to how thick or thin your report is, but I have a story to help clarify this. In July 2000 a Concorde jet crashed. This was the first and only crash of the Concorde. Before that crash, Concorde jets were considered to be the safest aircraft based on air miles and flight hours vs. fatalities because no fatalities ever occurred on one. It had a perfect record. After the crash, it became one of the more unsafe jets to travel on and the Concordes were retired shortly after (For the record, the crash was not the only reason for its retirement). The Concorde did not have as many flight hours as conventional jets to help maintain its safety record. Based on the story, a Concorde would be a thin credit report and a conventional jet airliner would be a thick report, since it has more flight hours and miles than its supersonic counterpart.

Now that you know how risk scores work, I want to go over the importance of making sure your report is accurate. As you learned, a good credit score can save you money. For most of us saving money is a good thing. You also learned that a score is a numerical reflection of what is contained in your report, therefore, if your report is wrong then your score is wrong. It is important to check the information on the report. FACTA, an amendment to the FCRA, allows you to request a free report from the credit reporting agencies once every 12 months. Go to or call (877)322-8228 to request yours. Remember the reports are free, but the scores that the Credit Reporting Agencies offer are not. That is okay though, based on what you’ve learned, that score may not be the same as the bank you’re applying to uses.

I also want to touch a little on credit monitoring. Credit monitoring is a tool to track your credit report and have the ability to check the accuracy of it. It also can be used to prevent fraud as you are notified of changes.  They also may provide a score and it probably isn’t the score a bank will use, but it give you a way to see what your credit is doing. You’re able to track the score they provide you and see which direction you credit is moving, positively or negatively. Since you are able to track a score with monitoring you may also see the score will fluctuate. Keep in mind your report is not a static document therefore the score is not either. It is normal for your score to increase and decrease a few points within a months’ time. Your balances and payments are not all reported at the same time which means as data is modified and changed at different times, your score will also change accordingly. Large leaps are what you will want to look for. If you are tracking your score with a service, it may also be a good idea to save the reports. Pinpointing the reason for a score change is difficult if you do not know what the report looked like before. If you have a score change you can look at the old report and compare it to the new one to see what is different. The differences will indicate why the score may have changed.

The information we have just covered applies to risk scores. Fortunately, much of it also applies to bankruptcy scores and profitability scores. You may never see a bankruptcy or profitability score, but lenders are using them just as much as risk scores.  You may even feel the effects of them and not know it. Here is a scenario that happened to someone I know. This is the best example I have on how a profitability score is used. This person had very good credit. Their score was over 800 with the basic FICO model. They had a Wachovia Bank card. The bank card was very nice because the interest rate was around 5%. Wachovia sold their bank card accounts to Bank One. Bank One sent them a letter after purchasing the account. The letter was similar to a denial letter. It basically stated that they had to increase the interest rate to 20% because of the credit report. This person was concerned. They wondered what could have happened to their report to make Bank One react like that. They obtained the free report and nothing was wrong. What actually happened is when Bank One bought the accounts, they did what is called an account review inquiry (Which shows up as a soft inquiry on the report and does not affect the score). Based on the credit report and this person’s spending habits, they determined, a bank card at 6% would not be profitable for them. This probably sounds unfair, but remember, a bank is a business and by nature it is designed to make money.

Now I am going to give you a scenario to better understand a bankruptcy score. You have lost you job and your budget is stressed because you have less money coming in. To compensate you start using your credit cards more to extend your savings until you find new employment. You notice your balances are getting close to your credit limits. You continue to make your payments on time and aren’t too worried about it because you have some good job leads. You get your mail a little later and notice a mundane envelope from your bank card issuer. You open it and it is a letter similar to the denial letter above, except it says your account has been closed. Confused you call the issuer to find out what happened as you have not missed a payment with them. They tell you there is a problem with you report. You’re now stressed out because you have just been told there is something wrong with your credit report. You obtain a copy of the report and everything is as it should be. The balances are high, but you already knew that. What happened then? The bank did an account review for your report. The used their bankruptcy score model and it determined that there was a high probability that you might declare bankruptcy. The bank did not want to take the risk you might declare bankruptcy, so they closed your account so that you could not borrow more. By doing this, if you did declare bankruptcy they would only lose what you have already used, not anymore. Again, probably not fair, but a bank is business.

In conclusion, we now know a bank uses various score types and score models to make decisions. These models are based off of the information that can be scored on the credit report. There are many types of scoring models and to compare them would be like comparing apples to oranges. You have three credit reports, one from each credit reporting agency, but there are hundreds of ways they can be graded. It is important to check the accuracy of the report to make sure you get the most out of your score.  And a final note, a good score can save you money.  Make sure that you keep those three digits as high as possible!

Please feel free to contact me if you have any questions or would like a free credit consultation.


Brad Boruk
National Credit Solutions
(214) 504-7102 DIRECT  EMAIL






How Much Are Your Services?

One of the most frequently asked questions potential Clients ask is “How much are your services?”  We wish there were easy answers to that question.  Because NCS offers a wide variety of Services, we have several programs, with each program offering different services.  In essence, we have to understand our Clients’ needs in order to determine the right program for them.

Here are some of the factors that go into determining pricing:

  • Which program is best suited for your credit file and goals? We have several different programs here at NCS. Until we know which services are needed and which program best fits your individual credit file, it is difficult to determine the best program for you.
  • What do you have on your credit file that we will be addressing?  Credit reports are like fingerprints; no two exactly alike. While Client A may have a 550 credit score and 25 negative items, Client B may have a 550 score but only have 7 negative items.  Some Clients may be in our program for a very short time; while others may take much longer.

NCS offers a free evaluation of your credit file to determine the following:

  • First and foremost, will we be able to help you be successful in our program? ***
  • Which of our numerous programs is best suited for you?
  • What is our detailed Plan of Action that is recommended to increase your credit scores?

Because NCS is not a company that works on one or two items per month over dozens of months (or years), making money by charging a nominal monthly fee, our services are generally much more affordable than even the so-called “cookie-cutter” credit repair companies that utilize “not my account”, “never late” and online disputes. We work on the entire credit report from day one so we can get the fastest results possible, saving you money!


*** Although National Credit Solutions cannot help everyone with their credit file, we can help most folks.  The first and most important thing a consumer must do to have a great credit score is to pay all bills on time or ahead of time!