The “Lucky Guy”

Two clients in one week came in that were very similar. They had the same job, made the same money, had the same assets and wanted the same thing, to buy a home. Everything about their credit was identical. They utilized the same amount of money from credit cards each month which was the amount available to them and they both paid in full every month so they wouldn’t be charged interest.

Joe pays his credit card off on the 18th, Julie pays her credit card on the 20th. Joe has a 740 fico and Julie has 659. WHY? Because of one date.

Each creditor showing on your credit report updates the credit agencies once a month, usually about a week before the bill arrives in your mail. Whatever the balance is the day they report is the balance shown on the credit report. In this particular case, the creditor reported every month on the 19th. Joe pays his card on the 18th so the credit report shows non-risky credit utilization. The creditor reports Julie is using all of her available credit. She looks like a high risk and the score drops. Julie doesn’t realize the balance reported by that creditor is a third of what makes up her credit score. Joe and Julie apply for the same job but Joe gets it because of his credit score is higher. Joe ends up being Julie’s boss making 25k more a year. With Joe and Julie’s income and credit scores, Joe can afford a home for 300k. Julie can afford a home for 200k. Unfortunately, her credit scores caused a couple credit cards to increase the rate and now she just can’t seem to get them paid down. Home values increase by 10% that year so Joe’s home is now worth 330k and Julie’s home is worth 220k. After year two, they see another 10% increase in appreciation and now Joe’s home is worth 363k and Julie’s house is worth 244k.

Due to the high cost she is paying in home and auto insurance because of her credit score, she can’t afford to save so she borrows money for a car and because of her low credit score, her interest and payment are very high. Boy, how did Joe get so lucky? He went to and pulled his credit report and looked at the date the creditor last reported and then went to his calendar and added a recurring alarm to pay his bill off the day before. That one little financial discipline will save Joe hundreds, if not thousands in interest over his lifetime and help him to build a strong financial legacy.