Money Launderer, Terrorist, or a Guy with a Low FICO?

Before restoring my own credit to what it is today, I had an eye-opening experience that changed my career, my life, and my business. Is bad credit affecting yours?

Written Jun 25, 2008, read 822 times since then.

Before restoring my own credit to what it is today, I had an eye-opening experience that changed my life in ways I could not possibly have imagined. I was looking for a new bank with which I could open a new savings account, for the specific purpose of building new credit.

I did a little research, and then I chose a bank in my neighborhood, since it was convenient and seemed like a good company. I sat down with the bank’s new account manager, a sweet lady with a nice disposition, who explained that due to bank policy and the Patriot Act (you ever read this thing? It's scary!) ~ they would have to run my credit.

I was a little surprised, and I asked her why my credit report had to be pulled for a simple savings account? She explained that the credit check would be run just to make sure that I was not a money launderer or terrorist. I assured her that I was definitely not either of those, and I said that I was just a guy with bad credit trying to open a new savings account. She told me not to worry, that it was just a formality.

The new accounts manager printed off my reports. She reviewed them and within seconds, her kind disposition turned to something similar to that of a guard in a prison movie.

She lifted her eyes from my credit report and said in a very disrespectful tone, “You have been denied.” I noticed a distinct shift in the tone of her voice, as though her nose had been lifted way up in the air, and it seemed as if she was looking down at me as she spoke. I truly thought that she was joking.

I gave a courtesy laugh, but then I realized that she was not joking. She told me that I was in the high-risk category, and that anyone with a FICO score of less than 550 could not do business with their bank.

I went home feeling crushed, angry, and depressed. How would I ever reach my goal of buying the house I had been renting and providing a stable environment for my family? I had worked hard to scrimp and save $10,000 in cash, yet no bank in town would allow me to open a savings account.

First, I felt down and defeated by the system. Then, I got angry.

I decided to fight to get my credit back. I learned everything I possibly could about the Fair Credit Reporting Act, an intimidating 86-page tome about the ways credit can be used for (or against) you. And I discovered the ways in which I could use it to escape my credit quandary.

Within seven weeks of starting my own credit repair, I removed 22 of the 38 negative items from my report. After six months, I had removed all but two of the negative items. In less than six months, I substantially raised two of my credit bureau reports.

One went from a 485 score to a 687, and the other went from a 505 score to a 707!

I was so amazed by this that I changed career paths because of everything better credit did for me. (And if it did for me, it would for other people.)

- Half of the negative marks on my credit were from parking tickets! I never used to pay them, and they went to collections.

- I found a half dozen discrepancies that were just plain wrong.

- I discovered that the big three: Experian, Transunion, and Equifax are for-profit companies! They trade in the business of my (and your) information. When you call and complain about an error, you're an expense to them! No wonder they make it as difficult as possible to get things removed.

So I'm writing this article for the Biznik community with a plea. Especially now that credit is tight and the economy is souring, you simply cannot afford to guard, protect, and (if necessary, repair) your credit to the highest levels you can honestly and ethically achieve.

This isn't so much a plug for me as a wake-up call for you. Use me, use someone else, attempt to do it yourself, but leave this article and go pull your credit reports. (The Federal government required this of the big three and it's free. Click here to get yours.)

If your scores on any of the big three are under 600 (and certainly if under 550!), you've got to do something about it now.

In the end, it will save you thousands in lost opportunities, higher interest, and perhaps even the disrespect of a snarky bank manager.

Learn more about the author, Paul Medrzycki.

Comment on this article

Posted by Joe Hage, Seattle, Washington | Jun 25, 2008

I rarely "get controversial" on Biznik but I have a not-so-flattering-about-myself admission to make.

(I share it because I think I'm not alone on this.)

I do tend to think of people with bad credit as less trustworthy. That, if they weren't responsible enough to manage their credit, they aren't responsible enough for ME to trust on MY BUSINESS.

I value your article here because I think you bring something very important to light especially for solopreneurs: your personal credit is inextricably tied to your business' credit.

So there may be Biznik members out there losing business opportunities because, like you, they didn't pay their parking ticket back in 2003. And why we have to be so vigilant in keeping it clean to keep our businesses running smoothly.

Good article, thanks!

>> An inbound link for you if you need it <<
Posted by Ben L, Bozeman, Montana | Jun 25, 2008

Joe,

I appreciate your honesty but it did sting a little to read it.

I have credit I'm not proud of and I think the reason I'm reacting the way to your comment is because I suspect you are right - you probably aren't the only person who thinks that and I wouldn't be surprised if it HAS cost me business.

Paul, your article and service might be the kick in the you-know-what I needed to act. I had been putting it off but, like you said, with the economy souring I better take every preventative measure I can to shore up my business.

I'll check out your website because I suspect I will need your help.
Posted by Ted Rubin, New York, New York | Jun 25, 2008

Bizniks take note: I absolutely know people who did not get hired for jobs because of their credit.

Ben, you're making the right move. And as a relative newbie, I'm impressed how the advice on Biznik can change someone's business trajectory.

Paul, your site is impressive. Right up front, it answered all the questions I'd want to ask about credit repair.
Posted by Paul Medrzycki, Seattle, Washington | Jun 25, 2008

Ted, I have had my credit checked by a potential employer and was denied the job for being too high risk.
Posted by Chris Cliff, Lynnwood, Washington | Jun 26, 2008

Great wake up call. Most people don't know that banks won't accept accounts from people with bad credit. It really puts people in a catch 22 and pushes them towards poverty.

We had to work for several years to get a series of erroneously reported 30 day lates on our home loan removed. It took several rounds with the evil three, and after several times of them showing back up we finally have gotten them gone for good (knock on wood.)

DDIY Home Renewal - Find out what we do!
Posted by Tyler Kope, Seattle, Washington | Jun 26, 2008

I don't know whether to be scared of what's going on (i.e., the government's further control over us through the Patriot Act), or to be hopeful and glad there are people like you fighting for people like us.

On a similar note: the Patriot Act has kept me from opening a money market account in PayPal. My FICO was the major contributor to this. Imagine that! I have cash, and they won't take it based on my past credit history. How's a guy to ever get ahead, once you're behind?

For the first time in years, I have a tinge of hope. Thanks Paul. I'm on board.
Posted by Paul Medrzycki, Seattle, Washington | Jun 26, 2008

Tyler, I know how you feel. It took me getting mad about my situation to change it. Changing my credit not only changed how others treat me, but how I view myself and my future.
Posted by John Strong, Everett, Washington | Jun 27, 2008

It is interesting I have found that the majority of Fortune 100 & 500 CEOs I deal with have a lower fico score than probally a lot of us.
Posted by Joe Hage, Seattle, Washington | Jun 28, 2008

Just found this article on Yahoo:

Card companies are reducing borrowing limits for tens of thousands of consumers, which then can lead to lower credit scores.

>> An inbound link for you if you need it <<
Posted by Brian Crouch, Bothell & Seattle, Washington | Jun 30, 2008

Paul, just one clarification question: the banker stated that she was checking your credit due to the Patriot Act and bank policy. But surely the Patriot Act had diddly to do with your being denied the account, it was the FICO score in totem?

She was shifting blame from her institution to the govt., when in fact it was the bank's policy to check your score? I only ask because Tyler seems to be under this impression: "the Patriot Act has kept me from opening a money market account in PayPal. My FICO was the major contributor to this."

I get your point (clever title), that this invasive scrutiny, to determine if you were on an FBI alert list, was equated in the banker's attitude to a low FICO.
Posted by Howard Howell, Seattle, Washington | Jun 30, 2008

Paul... Thank you for your well written article. You offer such a valuable service. I hope many will read it. Your subject pertains to small business owners more than they might be aware.

It is remotely related to a couple of topics which I have been creating free Biznik workshops to address for the benefit of unsuspecting newbies in business.

Such topics as: How to avoid being scammed, swindled, or defrauded? and Getting control over your Biz Finances.

I hope you and I can co-host a live event and an online webcast soon to share some of these kinds of tips with Bizniks.

...Howard

Expert Sales and Profit Trainer - That Sales Guy
Posted by Paul Medrzycki, Seattle, Washington | Jun 30, 2008

Howard, I am glad to hear you enjoyed the article. Many of us do not realize the extent that our credit score will effect our business and personal finances. Financial institutions are making policy changes daily that effect our credit scores, credit limits and eligibility. Now is not the time to have a negative credit history or a low FICO score.

Let's get together to plan our future Biznik event.
Posted by Marty Grogan, Federal Way, Washington | Aug 14, 2008
Just a few comments...
1. Credit bureaus report what their customers send to them and with the exception of errors introduced in processing are not responsible or liable for content.
2. FICO scores are created by Fair-Isaac (http://www.fairisaac.com) at the direction of lending institutions...to each its own and they differ widely. Every bureau offers scoring as a service to their business customers attempting to predict risks of dozens of transactions types. For about $50k, you can have your own scorecard developed based entirely on the profile you want to target. Most scorecards can easily be replicated in Excel or Access...It ain't rocket science. They use a simple arithmetic called regression statistics to predict future performance from past performance hoping the large sample size will wash out factors not considered, i.e., local economics and government policies.
3. Credit bureaus offer fee-based as well as no cost services to consumers to assist with tracking and correcting account errors.
4. The Fair Credit Reporting Act provides for award of treble damages if you can prove errors in your credit report caused them and requested corrections were not completed as required.
5. Scores from different bureaus and sources vary widely because of inconsistent reporting and differing formulas.
6. Merchants and employers often substitute scoring for human intelligence when making business decisions.
7. Never accept "a computer error" as explanation of anything. Some person did not do their job, should be held accountable and expected to correct (pay for?) mistakes.
8. Your personal information stored in the vast reaches of credit databases suppies explicit details for marketing through lists sold by the bureaus.
9. Services like InfoUSA (www.infousa.com), Knowx (www.knowx.com) and many others assemble vast amounts of data about individuals from hundreds (thousands?) of sources and make it available to anyone who has a few dollars. Your local library may even subscribe.
...Alas, I rant.
Posted by Paul Medrzycki, Seattle, Washington | Aug 15, 2008

Right on.
Posted by David Losh, Seattle, Washington | Oct 16, 2008

Posted on August 15th, 2008, the beginning of trouble in the credit markets world wide.

You mentioned $10,000 late in you article. You could have oppened a $200 account easier.

It makes no difference as I am headed to a cash based system.