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## Jeanne Kelly

Posted: October 7, 2009 03:49 PM

# Credit Scores: Take a Lesson From Michael Jackson

Because there is an assumption that those with the worst credit make the least amount of money, I'm frequently asked how my clients are able to afford my services. When I explain that most of my clients have good incomes, they're left even more perplexed. Why, if they make so much money, are their FICO scores so low?

In the recent frenzy surrounding Michael Jackson's death, an MSN article revealed that he had low FICO scores -- 592, 524, 575. Well, to put it simply, Michael Jackson is my typical client.

Jackson obviously had a large income. But he must have also been sloppy when it came to paying his bills. And while I assume he had at least one financial advisor watching his investments, financial advisors don't usually spend their time thinking about FICO scores or loan rates. That's why much of my time is spent talking to my Jackson-like clients about the relationship between higher interest rates and unhealthy credit.

For example let's imagine that Michael Jackson had a \$5 million loan. Let's do some math on how much money I might have been able to save Mr. Jackson had he come to me for credit help:

The monthly payment for a 5 million dollar loan at 9% is \$40,231.13.

Let's say I helped him with his credit, put him on track to keep building better credit, and got his interest rate lowered to 7%. That 5 million dollar loan's monthly payment would be reduced from \$40,231.13 to \$33,265.12.

Then let's say, 12 months later, his FICO improved even more and he became eligible for a new rate of 5%. Instead of \$33,265.12 per month, the payment would now be reduced to \$26,841.08. The loan payments would be reduced by nearly half of the original loan.

We should all take a lesson from Michael Jackson. Whether your annual income is \$25,000 or \$10,000,000, being on top of your credit, or hiring someone who can do it for you, can save you an enormous amount of money.

Here is link to see how much money your FICO is costing you on a mortgage.

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08:33 PM on 10/08/2009
Credit scoring is color blind. It's no scam--its greatest beneficiaries have been minorities and the poor who were previously subject to the arbitrary prejudices of bank loan officers. Credit scoring provides upward mobility for the responsible poor and downward mobility for the irresponsible rich.
06:31 PM on 10/08/2009
I know people who are burning thru cash in order to maintain their score, on accounts that should be modified or negotiated for long-term viability. Creditors basically use credit reporting as a threat -- the system really needs an overhaul. Tried talking to a credit bureau lately? It's designed to ignore and avoid the consumer.
03:49 PM on 10/08/2009
Helpful advice and not just on the FICO front. The lesson here is to take control of your own personal finances.
07:08 PM on 10/07/2009
Credit scores are a way to pressure us all to pay usurious rates or else. Do away with credit scores, or seriously reform them. They are immoral in their current incarnation and have no place in the Economy of Integrity we will have to build in America if we want to keep any kind of economic relevance on the world stage. Already foreign investors are seeing though our debt-based currency and making moves to trade oil in other currencies besides the dollar.
We need to get real about what an economy is, what it should do for the people, and how to fix the income disparity. Credit scores are basically a scam.
04:01 AM on 10/08/2009
I agree. Credit scores are just another one of those "booby trap" schemes to gouge more money, similar to the credit card and banking fee gimmicks.
Now I'm supposed to watch my credit score all the time, which is on par with staying awake all night to guard my home against burglars.
01:38 PM on 10/08/2009
And your credit score is not the be-all and end-all in getting credit either. I have a great score (mid-high 700s), but I can't get credit because my income to credit ratio is too high (and I'm working on that).