My Credit Plan Blog

Why Lenders Struggle to Offer a Quality Credit Score Improvement Program

Fri, 15 May 2026 23:44:08 GMT

Over a year ago, I had a conversation with an executive vice president of one of the largest secondary credit reporting agencies in the country. He was talking about the lack of quality assistance to help their clients improve their credit scores. He stated that loan officers too often talk a big game but offer very little in substance. He called their so-called credit optimization, "Gimmick programs."

There are four primary reasons why banks, credit unions, and loan officers struggle to provide real assistance with improving your credit scores. They are:

1. Conflict of Interest - Improving a borrower's credit scores could require paying off or refinancing their own existing loans. They do not want to let you know that by paying off their existing loans, your scores will go up. So, they would rather you keep the loans open, keep paying interest to them, and end up with a higher interest rate on your mortgage or auto loan.

2. Avoid Liability and Missed Business Opportunities - borrower's credit scores may decrease during the process you take to follow their suggestion. They would not chance it if your credit scores decline and you end up with a higher interest rate or payment. You would go elsewhere for business. It is better to not say anything even if your mortgage or auto loan rate is a ¼ to ½% higher on the new loan you are applying for.

3. Credit Scores are Complex - FICO® Scores include 30+ factors, but loan officers focus on only a few (e.g., payment history, utilization, inquiries). If any credit score improvement program does not address all 30+ factors, the credit score improvement will be limited. In most cases, the loan officer does not know. But they don’t want you to know that they lack a deep understanding about credit scores.

4. Hard Inquiries - Lenders pull your credit scores multiple times to check for progress. Frequent hard credit pulls lower scores - up to 6 points lower per credit check. Any suggestion they offer will require a new score check, and that will lower your scores from that action.

My Credit Plan is managed by Family Financial Education Foundation, a 501 (c)(3) credsit counseling agency. You can check your lender’s scores through My Credit Plan without a negative impact to your scores, and you will get an authenticreview of the actions you need to do to improve your scores in the coming days and weeks.

Don’t Fall for the “Credit Builder” Loan Ad

Fri, 05 Jan 2024 23:54:56 GMT

Many lenders advertise that they offer “Credit Builder loans”. This is just a blatantly false advertisement. The sole purpose is to get you to open a credit card or take out a loan with them. Don’t do it. I’ll explain why.

There are several different lenders who advertise that they can build your credit – meaning your credit score. These are the different lenders and their advertisements to us:

Chime / Lyft states, “Start building your credit for free.”

Self states, “A fast, free way to improve your credit score.”

Creditkarma, “With Credit Builder, you could improve your credit score…”

Republic Bank states, “Our credit builder program may help you improve your credit

score within as little as 12 months.”

UUCU, “Credit Builder Loan…will increase your credit score.”

There are many more. You would think that everyone has a credit builder program.

Opening a new loan in most cases will not improve your credit scores. That is a true statement. Jason had mid-600’s credit scores and he went to Creditkarma to get help with improving their credit scores. Creditkarma suggested he open three credit cards with Upgrade and WebBank. His scores dropped and would only barely nudge higher month after month.

The problem? There are several problems here that are common for most consumers.

Jason did not need to open any accounts.

He had sufficient credit. In fact, he needed to close some of accounts that were hurting his scores from being derogatory, or recently opened. Opening new accounts only prolonged his efforts to improve his scores.

The wrong type of lenders

Opening the credit cards Creditkarma also recommended lowered his score even more because they are with “high-risk” lenders or as the FICO Score refers to them, “Too many finance company accounts.” Once these accounts are on a person’s credit report, they drop a lender’s FICO credit scores for ten years about 12 to 20 points.. That is a long time.

Too many active accounts.

One of the greatest, yet widely unknown, factors in a lender’s FICO Scores is the number of accounts open and the number of accounts with a balance. This will lower scores even more.

What does Jason have to do? He has to payoff and close those three accounts and his scores will recover to levels prior to taking out those accounts.

Credit builder programs are designed to have you open a new account in that lender’s name. In 90% or more of the cases, it will not improve your credit score until it has established a decent history which can mean at least one year.

Don’t fall for these mis-advertisements. They benefit them, not you.

If you think you need to open an account, go to MyCreditPlan.org and get your analysis. It will tell you explicitly that you need to open an account. Otherwise, you are wasting your time and money.

How Much Can You Increase Your Home Purchasing Power?

Fri, 07 Apr 2023 22:58:56 GMT

Everyone knows that interest rates are impacted by credit scores. The lower the credit score, the higher the interest rate. But hardly anyone understands the impact of a lower credit score to your home purchasing power. It is a lot more than everyone understands, and even mortgage loan officers.

If you have an average credit score of 690 and want to purchase a single family home with 5% as a down payment. You look at a particular home and figure a monthly payment of $2,500. including principal and interest, property taxes, home insurance and mortgage insurance.

Sales Price: $318,000

Loan Amount: $301,750

Interest Rate: 7.25%

Total Payment: $2,499.87

If the borrower raised her / his FICO® by 10 points – only 10 points, the borrowing power for that home buyer jumps $13,000, all for the same payment. Here is an outline of the new profile:

Sales Price: $332,000

Loan Amount: $314,750

Interest Rate: 7.00%

Total Payment: $2,498.63

An increase of $13,000 for the same payment!

This happens all along the credit score spectrum. But loan officers are not even aware of how much their purchasing power changes by increasing their FICO Scores just a few points. It is usually $10,000’s of thousands of dollars.

Mortgage FICO Scores are like grades. They are as follows:

780 and above

760 to 779

740 to 759

720 to 739

700 to 719

680 to 699

660 to 679

640 to 659

640 and below

Increasing your scores to the next grade can be substantial. Since mortgage lenders never discuss this with their clients, I will be talking more about this in the coming weeks and where you can find this great information.

What Credit Card Mix Should You Have?

Sat, 12 Nov 2022 00:58:08 GMT

Many times I hear consumers say that they need to have a certain number of credit cards to “build their credit scores.” Credit cards can both build, but also drop your credit scores. What is a good mix of credit cards you should have?

Depth is a huge factor in a FICO® credit score. The older an account is referenced in your credit report, the higher your FICO Scores. Any credit reference that is ten years or older brings a lot of value to your credit scores. I refer to them as ‘Golden Accounts’. The only way to develop such depth is through a line a credit, or credit card.

How do you develop such depth? There are a couple of ways. First is a major credit card account such as an American Express, Capital One or Discover Card. As long as you keep it open and periodically use it each year, that account reference will bring you many FICO Score points. The longer that credit card is open and the more ‘Golden Accounts’ you can develop, the better your FICO Scores will be.

Another option is a store card from a retailer you can periodically use. Such examples are a Home Depot, Costco or Lowes credit card. You have to use them once very couple of years to make sure they stay open. Credit card retailers like to keep your account open so that you will hopefully come back to the retailer for more purchases in the future. Retail credit cards don’t have to be used as often as regular credit cards in order to keep open. These type of credit cards can create a lot of value.

How many credit cards should you have open? Enough to drive your FICO Scores higher. A number such as 2 to 4. You should have enough to handle your personal and any business needs. But don’t have too many because you can lose track of all the open credit cards you have. Additionally, too many credit cards in some situations can actually lower your FICO Scores.