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.