Thoughts on FICO

Do you know your FICO score? Do you know what factors affect your FICO score? Do you even care?

I have recently changed my answer to the last question to No. No, I do not care about my credit score.

Now, don't start assuming my score is bad. It's not. It's actually very high. I would have no problem with getting any type of loan with a low interest rate…personal, auto or home. And suddenly I am actually saddened by this fact. I have recently had a much needed change of heart toward credit scores and I'd like to share it.

Per FICO, the following criteria are utilized in determining your score:
- Payment History (35%): Payment information, delinquencies, accounts and amounts past due
- Amounts Owed (30%): Amounts owing on specific types of accounts, number of accounts with balances, proportions of credit used and installment loans still owing
- Length of Credit History (15%): Time since accounts opened (by account type) and time since activity
- New Credit (10%): Number of recently open accounts, recent credit inquiries, and re-establishment of positive credit history
- Types of Credit Used (10%): Number of various types of accounts

FICO wants to be clear that they take all of the above into account when determining scores, that the information comes from your credit reports and that they look at both positive and negative items on your reports.

That's great, but if you pay attention to what all of this is, simply stated, it's a score based on your interaction with debt and you have to have debt to interact with in order to have a score. Right at 65% of your score is based off how you have interacted with your debt and the amount of it you have in proportion to the amount of credit available to you.

This is not a score that shows you have been responsible with your money, or about how you have been able to provide for yourself instead of having to go elsewhere to get the financial backing for the items you wish to have, on your own personal financial standing. Instead it is a score based off the money you borrow from banks and other creditors and how well you've done paying it back. Now notice I didn't say, paying it off. They don't want you to pay it off. If they did, then the credit card companies wouldn't close your card accounts due to lack of use, which in turn will lower your credit score. I had this happen to me last year. Looking back, I've never been so proud of my score dropping over 30 points, ever!

I was turned down for my first credit card in my teens due to not having any credit. I had never had any type of debt with which to interact therefore my score was literally ZERO. As strange as it may sound, my new goal is for it to return to zero. I don't need affirmation from the banking world that I know how to handle my finances.

What about buying a house? You can't buy one with cash. No one could ever afford that! Really? Why not? Why aren't we living a lifestyle that allows us to save enough money over however long it takes for you to save the amount of money you want to pay for a house? It's the lack of patience. We live in a "I want it now" society. That's fine, buy the house you want and get a 15yr mortgage. Don't get a 30yr and pay an extra 15 years of interest on your loan. You can't afford that? Then maybe you need to look at the amount you've borrowed. Do you really need a house that costs that much? Do you really need to live in that area? Is it that important? Maybe to you it is, but it's definitely something to think about.

You can get a mortgage without a good credit score. You just need a lender who does their own underwriting. Check it out. It's an option. I know because I'll be utilizing this option.

Don't follow blindly. Educate yourself.

Today's message was brought to you by the number zero!

Monday Morning Leadership - Week 4

Hire Tough

As you can tell, this week is focused on hiring. I’ll highlight what Cottrell has to say about hiring and then, since I am not employed by a company that lets their hiring too far from HR, I’ll share what was trolling though my head while reading the chapter.

Ready?

Cottrell stresses that our most important asset isn’t people, but rather the right people. With the right people in place there isn’t a problem too big or a goal you can’t reach. He also talks about “The Three Rules of Three” when hiring. Those rules are: interview three candidates for each open position, interview them three times, and have at least three people assess the candidates. Many companies already do this or something very similar. It allows your options to be open, for you to “feel out” folks and for others on your team to give their perspective. All of these things, if done consistently will lead to not just filled positions, but positions filled with the right people. It will lead to success.

The thought I had while reading this week started with the “right people”. I think the right people begin with you. Are you the right person for the job? Honestly, are you? If you aren’t willing to make an honest assessment of yourself and the position you are in, then we’ve already got a problem. If you honestly believe that you are in the right position, then good, you can move forward. If not, then you really need to take a step back and think it through. What is it that you are good at? What do you enjoy? Is there something where you currently are that would suit you? If not, then it’s time to look outside. There’s a book called 48 Days to the Work You Love by Dan Miller – get it and read it.

Remember, most people spend the majority of their waking hours at work. Make them count.

Monday Morning Leadership – Week 3

Get Out of Management Land

Are you surrounded by egos? Have simple tasks turned into complex adventures? Have the mind/political games taken over? Are things not always what they seem?

If you answered yes to any of these, then welcome to Management Land!

Now find the nearest exit and run!

A leader needs to ensure they are always working on and for their team. So, you need to get out of management land and in touch with your people.

An exercise utilized in Cottrell's book is to list your people in the following categories: Superstars, Middle Stars and Falling Stars. Then see how you rated them on their last evaluation. Do the scores match-up with the category in which you placed them? Probably not. Most likely, you have a Superstar and Falling Star with similar evaluation scores. If you are not honest with your people on how they truly execute their jobs, how are they to improve? What will motivate them to do better? Why are you there?

By not improving your Falling Stars you have shown the rest of your team that the Falling Stars behavior is acceptable. It's almost as if you were punishing your Superstars with the extra work you have given them, since you refuse to give it to your Falling Stars.

Cottrell writes over and over again that "people will quit people before they quit their companies". Don't run your Superstars off by under appreciating them and overworking them. They will go to another shift, department or company. They will quit you.

Raise the bar and stop accommodating those pulling your team down. Coach them up. Make them better. Be a leader.

Don’t you want your “weakest link” to be someone you and the rest of your team is proud of, instead of the team resenting them and you?

If nothing else, complete the exercise above and see how your teams’ evaluations compare to their “Star Status”. It could be an eye opening experience.