If you have looked for information about credit report repair or debt relief, you have probably heard that credit card debt has a negative effect on your credit score. Just about everyone that has problems with their credit has been advised to pay down credit cards and cut them up. That is not bad advice; however, usually with that recommendation, it is also advised to close the paid off accounts. That may actually be a bad idea.
Closing accounts can have a negative effect on your credit score. If you are thinking about closing accounts that deal with paid off debt, it will be to your benefit to contact a credit counselor. An educated, experienced counselor can take a look at your particular situation and help you to make favorable decisions.
What is considered in calculating a credit score?
There are five main categories that are generally calculated into your rating. They include:
- Your payment history
- Your new credit
- The types of credit that you have
- The length of your credit history
- The amount of debt owed by you
If you don't know who Steven Marshall is, let me tell you very quickly about him. Steven Marshall, and a few others in the same school of thought, came out with a very simple, but revolutionary idea about ten years ago. They found a way to teach mortgage professionals how to maximize their income by doing two major things: (1) learn how to originate more mortgages per customer, and a much less revolutionary idea (2) how to maximize the amount of commission you can make off the client for each transaction.
I'm obviously not at all concerned about the second idea, every commission based sales consultant for the past 200 years has been working on that one. But that first concept should have jumped out at you. That concept is something that Seth Godin might describe as an Ideavirus; a truly powerful, revolutionary, idea that can change how we think. If it didn't jump out at you, imagine if someone in the auto industry figured out a way to teach car salespeople the best ways to convince us that we needed to buy more cars for ourselves? I think car salespeople would be pretty excited about the idea. On a side note, if someone in the auto industry recently figured that one out, all I can say is, sorry. That global warming thing really killed your business idea. After all, timing is everything. But let's assume for a moment that someone did figure out a way to do that; in a pre-global warming hysteria era. Car salespeople across the world would pay that consultant for their books, pay to attend their seminars, and pay the person even more for their subscription services. And that's exactly what Mr. Marshall has accomplished. He's created a mini army of disciples. And he has bestowed the title of “Mortgage Planner" on them. And to some, he has bestowed the title of Certified Mortgage Planner®.
All I can do is tip my hat to him. It's an excellent concept. The teachings behind his concept are also impressive, and complex. It used to be that we as mortgage professionals would focus on providing excellent service whenever we originated a mortgage. If we did that, the next time that customer required mortgage financing, they would come back to us. Marshall flipped that idea on its head and took it to a completely new level. He redefined what a mortgage professional should be. His contention is the following: we should not simply be mortgage experts, advising our clients on different mortgage programs and their pros and cons. Marshall says that if we do that, we are simply falling into the interest rate and closing cost competition trap. He contends that what we should do is delve deeper into our customer's overall financial picture, figure out their goals and dreams, and then “wow" them with ways they can achieve those goals, by using a concept he calls “Strategic Equity. "
The concept is exactly what it sounds like, teaching borrowers about home equity and mortgage concepts that enable them to buy more real estate, and thus build greater wealth. And of course this concept bodes well for us. If they are buying more real estate, we get to originate more mortgages, and make more commissions. And in exchange for the Strategic Equity education we give to our borrowers, we get to charge a premium for our services and max out our commissions on every transaction. He wants mortgage professionals to become quasi personal finance advisors. And he'll provide you the education (for a good chunk of money) to become one.
I first learned about the Strategic Equity concept a couple of years back. I was a Loan Officer at a bank and I attended one of Mr. Marshall's seminars in Las Vegas. I think the seminar was around $ 600 bucks at the time. Right now, Mr. Marshall's seminars range anywhere from around $ 500 bucks to around $ 1,500 bucks per person. Depending on what type of an admission pass you want. I was plenty busy with my current loan volume and had no desire to learn about leveraging home equity for my clients. But it was a completely free trip to Vegas and I could learn something new. Do you really think I was going to turn that down? Gambling and learning are two of my favorite hobbies.
I got to the seminar and after about three minutes I knew this guy was not messing around. You could tell immediately he was a seasoned student of marketing and had been working with the best people in the business. For a marketing geek like me, I appreciated the seminar in the same way a sports fan appreciates a good game. It was everything a seminar should be; part rock concert, part sales event, part educational junket, and it had all the motivational components a good seminar should have. He had folks like Chris Gardner, Tony Robbins, and Todd Duncan as speakers. All amazing people that you should hear speak if you have the chance.
As the seminar went on and I listened to the ideas, I was wowed just like everyone else. I had my notepad out and every time an idea came along that I thought was noteworthy, I wrote it down. But after a while I actually began to feel a little queasy. I started asking myself, “should mortgage professionals really be doing this?", “Are we qualified to do this?" - “Is this the real role for mortgage professionals?" I certainly didn't think his ideas were bad. And I saw the potential to make more money and help my clients. But it just didn't feel right for some reason. I went back home and was undecided as to whether I would pursue these strategies. I then read one of his books, The Millionaire Mortgage Planner, and I knew this wasn't right for me. I was very impressed with his ideas on personal finance and leveraging home equity. I was also impressed at the complexity of the ideas.
What troubled me a bit was this: the topics he wanted me to discuss with my borrowers fell right into the backyards of licensed realtors, Certified Financial Planners, Series 7 licensed stock brokers, Certified Public Accounts, and tax attorneys who had passed a Bar (BAR) exam. And I'm not any of those things. I have an MBA from a top business school, and I thought I had a strong grasp of his concepts. But ultimately I felt I was unqualified to do mortgage planning. So this is the first question we should think about, “what is the true role of the mortgage professional?" We can all debate that. And based on everything I have said thus far about Mr. Marshall, I have no problem with what he is doing. Let me tell you where I take issue with him, and where you should to. And most importantly, why his Mortgage Planners should take issue with him. Big time.
Over the past 10 years, Steven Marshall has transformed himself from a person that provides wealth building advice, to a person that teaches people to teach other people about wealth building. That makes him an educator one place removed. And those types of educators have responsibilities. In fact, Mr. Marshall created something called Mortgage Planner University®, a place where you can get a top notch mortgage planner education for about 60 bucks a month. Everyone gives personal finance advice from one end of the spectrum to the other: from Carleton Sheets to Suze Orman to Jim Cramer. And if people listen to those folks, and then lose money on their investments, that's the way it goes. But it's very important to see the distinction between what they are doing and what Mr. Marshall is doing. He in fact is educating the educators.
I'm sure that he provides guidance to his students about what they can and cannot say to their clients. And part of his plan does involve the inclusion of experts. He advises his students to create relationships with experts such as CPAs. Together, they can help the client build more wealth. In fact, it's part of his marketing strategy. He wants Mortgage Planners to work directly with people like CPAs so they can build referral partnerships, thus increasing profits for each of them. However, whether his students take that advice is up to them. If they choose to go it alone and advise their clients, who is to stop them? He has armed his students with an array of complex wealth building strategies they can use to not only help the client, but assist themselves originate more mortgages. The conflicts of interest inherent in such a system are obvious. Some of his students can go into the market place and really help their clients, as I know many have. But some of his other students can misconstrue his ideas and completely destroy their client's net worth. That hurts you, me, and most of all, his other Mortgage Planners. He has spent an enormous amount of money, and madean enormous amount of money, selling his ideas to mortgage professionals. However, he has spent very little time and money instituting evaluation, testing, quality control, and accountability mechanisms for his students. And that's what an educator of educators is required to do. And that is what his good students should demand of him.
If you spend money to acquire his educational information, you get to call yourself a Mortgage Planner. I suppose we can all start calling ourselves Mortgage Planners without any education at all? But if you are willing to spend about $ 500 more at one of his seminars, Mr. Marshall can designate you with a specific title: Certified Mortgage Planner®. The term seems to be registered and trademarked by someone. I don't know if Steven Marshall trademarked it or someone else. The term “Mortgage Planner" has been thrown around in one way or another by many organizations for the past 15 years. People can certainly get other Mortgage Planner certifications from other organizations. So Mr. Marshall is certainly not unique in using the term “mortgage planning. " But he is handing out his own certifications.
So what is Mr. Marshall's certification process like? How long do you think it takes to complete the certification process and posses the ability to use the designation Certified Mortgage Planner®? A week, a month, three months? Well, not exactly. It takes one day by attending a conference. And if you look at how he advertises the one day conference (certification process), he specifically uses the term “earn" in reference to obtaining the designation. He indicates attendees will be earning their designation. He also refers to those that complete the one day conference, as graduates. But no where in his literature does he mention any of the following terms: exam, pass, fail, application process, evaluation process, accreditation, compliance procedures, re-certification, course completion, etc. He does however advertise that if you purchase the VIP attendance package, and I am quoting here, you “Get Certified For Free!" You can find this info on his website. There are other organizations, such as The CMPS® Institute, which also provide a mortgage planner certification. The CMPS Institute® provides a designation known as Certified Mortgage Planning Specialist™ to qualified mortgage professionals.
If you take a look at the CMPS® site, you will immediately see some differences from Mr. Marshall's site. The CMPS Institute® is clearly making strides to educate and regulate their members. On their homepage, they have items such as “Code of Ethics" and an “Advisory Board". They also clearly state that the CMPS® designation is something obtained through an educational and testing process. They also don't emphasize increased commissions. That should make all of us feel more comfortable.
So why is this important to all of us? The mortgage industry as we all know is in some turmoil right now. Senator Obama has been criss-crossing the country pounding the idea into everyone's head that the mortgage meltdown was largely our fault. We certainly share blame, no doubt about it. Federal and state agencies are clamoring to re-legislate and re-regulate our entire industry. And maybe that's a very good thing. And it certainly seems there may be a place for “mortgage planning" in that mix. But the mortgage planning phenomenon may very well cause unforeseen legislation and regulation that hurts all of us. We may be dealing with a situation where state and federal agencies start re-defining our “boundaries" as well as “what and how we charge our clients". I don't know what any of that means, but it sounds like it might be painful? We have already seen steps taken by the state of Minnesota “outlawing" yield spread.
There are certainly mortgage professionals who would never want to become “Mortgage Planners". It would simply not be conducive to their business operations. When I was originating mortgages, if I had taken the extra time with each of my clients to solve their entire financial future and plan for their retirement, instead of just getting them the best mortgage, it would have destroyed my entire mortgage operation. I simply would not have been able to operate.
Over the past couple of years, I have spoken to Certified Mortgage Planners® who are absolutely amazing. They're doing great things for their bottom line and are assisting their clients at the same time. I have also spoken to other CMPs® that I wouldn't trust to coordinate my morning bathing ritual, much less my mortgage planning. A few months ago, I ran across a Blog written by a man who purchased three separate properties in the past four years. He is upside down on all of them and facing bankruptcy. He specifically wrote that he was operating under the advice of a “Mortgage Planner" and didn't really know what he was doing. Is this Mr. Marshall's fault? Absolutely not. Was this even one of his students? Who knows? And it shouldn't matter.
But this is exactly the type of situation that should make Mr. Marshall's really good students, those that are taking his ideas and helping people, feel a bit short-changed about the money they've spent on their education, and the certification they have received. Why should their reputation suffer at the expense of others? And why should we all suffer because people took Mr. Marshall's ideas (and the ideas of other paid consultants), messed those ideas all up, and hurt their clients? Can Mr. Marshall and the others that have profited off the mortgage planner idea, actually fix this overnight? No. But let me suggest what I think they should do. And what I think they owe their students. And more importantly, what I think their students should demand they do. . . . . . .
They should re-invest some of the large profits they've made off their students, to help legitimize their students, regulate them, and weed out the bad ones. Instead of having a one day certification conference managed by high paid consultants, which costs students a lot of money, why not have an actual educator teach them, test them, and actually certify them? Why not put quality control procedures in place? Why not require CMPs® to provide disclosures to their customers that explain what they actually do for a living? Why doesn't Mr. Marshall send out mystery shoppers to test the capabilities of his mortgage planners and then take action on what he learns? Why not provide a website or forum for borrowers to provide feedback and grievances about individual Mortgage Planners? Why not provide an encrypted seal of approval for Mortgage Planners to use on their email signatures and websites, which he has the ability to take away if they don't meet expectations? Perhaps he is engaging in these activities? But he is certainly not telling anyone about them, that's for sure.
Mr. Marshall is attempting to completely redefine what mortgage professionals do for a living. And I admire him for that bold idea. I admire all people with bold ideas. But the potential impacts to borrowers are extraordinary, both positive and negative. He's invested enormous amounts of time and energy to market his ideas to mortgage professionals: as quickly, strongly, and suavely as any mortgage marketer I have seen. And he's profited from it big time. At the same time, he has done little to control the flow of his ideas or regulate those that have received his ideas. I think that's reckless, and yes, possibly dangerous. To all of us.
Perhaps this article gave you a new idea about how to operate your business. Perhaps you may want to look into mortgage planning? Again, if you are thinking, that's always a good thing. There is also a very high level business concept that revolves around Steven Marshall and his mortgage planning system. And it's this: If you ever land your big idea, the idea that can change your life and the lives of others. Think carefully about how you will unleash it in the marketplace. Who will you provide it to? How will it impact every day people? And can you control the idea? This is of course especially important if you discover a cheaper, easier, way to build a nuclear bomb. . . . . or send Cher on another comeback your. (I'm just saying).
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Credit card debt can drive down your rating; however, established accounts that you have used responsibly can actually increase it. A bad payment history will stay on your report for some time anyway, whether or not the account is closed. Therefore, you are likely to get into a predicament if you close accounts without knowing for sure that closing them will actually benefit you.
In some cases, closing accounts will be advantageous, but in many situations it will have a disturbing effect. It will be in your best interest to consult with a professional credit counselor before taking do-it-yourself steps concerning credit report repair.