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John Ulzheimer, President of The Ulzheimer Group

 

Introduction

He is a nationally recognized expert on credit reporting, scoring and identity theft. He has served as a credit expert witness in more than 370 cases and has been qualified to testify in both federal and state court on the topic of consumer credit. John Ulzheimer has 27 years of experience in the consumer credit industry, including former positions with Equifax, Fiko and Credit.com. John has been quoted in, published over 4,500 times on the topic of consumer credit. He’s a frequent commentator on credit related issues from various outlets including CNBC, CNN, Washington Post, Wall Street Journal, and more. He is the author of You’re Nothing but a Number, Common Credit Mistakes Made by Ineffective Credit Expert Witnesses, and The Smart Consumers Guide to Good Credit. Meet the leaders shaping the new era of credit. This is The VantageScore Podcast. Today we talk to John Ulzheimer, President of the Ulzheimer Group.

John Ulzheimer

I grew up kind of all over the place. My father was in the US army. I was born in the southern part of Alabama. My father was stationed at Fort Rucker in helicopter school at the time. Credit was very different obviously than it than it is today. I mean, I grew up in a time when that predated the Internet as we know that there was no email, there were no iPhones or on our laptop computers. When I was in college, I didn’t even use a computer to write my papers. I used a pen and a piece of paper. I really was not exposed to any form of credit when I was growing up. The minimum wage when I got my first job was $3 and 35 cents an hour. How was a janitor at the same middle school that I actually used to go to. After I was done with my high school day, I would actually walk to the middle school with a friend of mine and we would clean the school.

Very, very little exposure to credit. When I was young, I didn’t have a credit card when I was little, there were no such thing as debit cards are prepaid debit cards. When I was growing up I didn’t get my first banking style account until my father co signed for us to open up in a deposit account with a local credit union. And I want to say that was maybe in 11th grade and so that was actually my first relationship with a legitimate financial services company, but I didn’t get credit from my father, added me as an authorized user. My actual first relationship with a form of credit was a credit card that was sitting in my student mailbox when I got to college. I want to say I was 18 maybe 19 at the time today. That would be very difficult to do.

The Card Act, which was passed in 2009, prevents credit card issuers from opening accounts for people who are under 21 unless they have a job or a co-signer or otherwise can prove that they have the ability to make payments. Every penny that I made went into my bank account. I wanted to put money down to buy a house. The homeowner wanted $109,000 for it and I was so far out of my price range. The real estate agent actually came up with a pretty creative plan to go in with a developer. We would actually divide the cost. I was in for about a little under two thirds of that and he picked up the rest and in exchange I got two of the lots with the house and then he got the other lot. In 1991 there was no obligation to give mortgage applicants copies of their credit reports or their credit scores.

Frankly, I had no clue what my credit score was back then. I do know that today it’s completely different since the fact amendment to the fair credit reporting act back in 2003 everybody who has gotten a mortgage along since then has gotten what’s called a score disclosure notice, which is basically just a listing of the scores that the broker or the lender pooled as part of the mortgage underwriting process. But since my first loan predates that, I never got it and as such I have no clue what my credit score was back then. My interest rate was around six or seven percent. in today’s standards, that’s not a very good interest rate for a mortgage. Actually that’s kind of closer to a subprime mortgages for straight back then. However, I do recall that it was a pretty competitive interest rate.

My father actually sent me to the local library and you could actually grab a book off the shelf and this book was basically a resource. There’s a list of every single registered company in the state of Georgia and contact information and I started mailing out resumes and cover letters to all these different companies. I got an interview with Equifax. Part of the interview process was I had to take a typing test. I had never used a typewriter in my life. I don’t think I had ever used a computer keyboard at the time either. And there was a requirement to type 30 words per minute, but I don’t know if you’ve ever heard kind of the search and destroy method of typing where, you know you’re like staring at the keyboard and pecking away with one finger from each hand as fast as you possibly can. But that’s how I typed cause I had never typed before. I got 29 words on my first try, which it was one word, short of the minimum requirement and the human resources person who was kind of facilitating the interview process with me told me that she was going to let me take it again.

And so I was really excited about guess how many words I got the second time around 29 they let me move on to the next step of the interview process. And I did well enough in those follow up interviews to actually get the job. That’s how I got involved in the credit industry. My first job out of college was with one of the generally recognized major credit reporting companies. I worked my way through Equifax. I worked in the consumer services people called in or wrote letters and challenging information on their credit reports and I would help with the dispute resolution process. And in the last couple of years I actually moved from the consumer group over to the group that dealt with their customers, which were the people who actually purchase credit reports and use them for underwriting – so lenders and such. I left Equifax and I went to work for FICO. Survived the implementation of credit scoring in the mortgage industry.

That was a fun few years trying to explain to mortgage brokers who had been in the business for three and four decades, how their practices were going to change because of this mysterious score that they didn’t know anything about. And one of the things that I quickly learned was that I was always the least popular guy in the room, not an enviable position, but nonetheless it sure as heck taught me a lot about credit scoring. I left FICO at the end of 2004. I spent a good deal of time doing work for the website, Credit.com I left Credit.com at the end of 2010. From that point on, I just do contract work for a variety of credit related entities either as a content creator, I do some media work on television, online print radio, and then I do a whole lot of expert witness work.

So whenever there is a credit related lawsuit, like a fair credit reporting act lawsuit or a fair debt collection practices act lawsuit or some sort of civil litigation. I had been retained in almost 370 of those types of lawsuits. Last year, President Trump signed a bill and that bill among other things touched the Fair Credit Reporting Act and it amended the fair credit reporting act in such a way that it made credit freezes free. So all of a sudden my phone starts ringing off the hook and it’s reporters one on to talk to me about what does this mean for consumers. Even though I think my role is going to be content for the next week or expert reports for the next week. You just never know when your role all of a sudden becomes a media source because some massive story just hits. If you think that being self employed and working out of your house is the greatest thing in the world, then there is some truth to that, but you know you eat what you kill, right?

I mean if you’re not hunting, I mean what if all my clients went away tomorrow? Then I’m not sure when I would do. When I started in 1991, credit scoring had just become tri-bureau, meaning that a credit score had just become available through three reporting agencies. There was a credit score available through Equifax in 1989 and it took a couple of more years before they were available through the other two bureaus. There was a time where you couldn’t get a copy of your credit report for free. Today you have the federal law and it was amended in 2003 that calls for free credit reports. You have so many different companies now that are willing to give you a credit report or at least a summary of your credit report if you’re willing to become a registered user of their website. I love the fact that we’ve almost become part of pop culture now that people are talking about these things and how it’s cool now to understand what’s on your credit report; and it’s cool to have a good credit score; and it’s cool and not try to live off the credit grid.

With respect to changes in the industry, I saw the acquisition of a credit bureau. Right? I mean Experian didn’t exist at one point in time. TRW Credit Services was one of the Big Three. In fact, the name was institutionalized. You know, you didn’t ask for a credit report at one time, you asked for a copy of your TRW. You have TRW spinning off their credit services division. I think it was purchased by Bain or Bain capital or Bain and Associates at one time and I think they ended up selling it. We know it as Experian. You know, at one point in time, the only game in town as it pertained to credit scoring was FICO. Right. And you know, they might be one of the best case studies to first to market domination other than Microsoft ever in the history of history. Right? And then boom, all of a sudden in 2006 we have another viable credit scoring platform across all three of the reporting agencies, VantageScore. And so it was kind of cool to see how the two companies have have battled it out with respect to market share and marketing and such since then.

You know, I’ve seen some of the downside as well. Obviously you have credit fraud is so common that the fact that you have an identity is what makes you a target, right? And you really can’t change that. You can do four things to reduce your exposure. Number one is the least useful of the four strategies, which is to do nothing and hope that you don’t become a victim of identity theft. Number two is to check your credit reports once a year. The next step is now we’re starting to get serious about protecting our information and our identity. There are a lot of places where you can either sign up to monitor some of your credit reports at no cost or you can actually pay the subscriptions that monitor all three of your credit reports for changes that are indicative of fraud. And number four, which in my mind is the best of the bunch, which is to place a credit freeze on all three of your credit reports. This law, the president signed last year removes the cost involved, you know, at least once a year, maybe more often.

Unfortunately as we have these massive natural disaster events, you know, you have a variety of protections under federal law as it pertains to deposit account instead of distributing your wealth and physical assets. You know, like things like cars and painting and cash and precious metals, which are, are perfectly fine to have, but you also need to be aware of that stuff can wash away if a piece of property that you owned floods. Your banks and credit unions are protected up to a quarter of $1 million through the various FDIC and NCUA insurance programs through the federal government. And so I think that’s one way to even kind of protect yourself from these natural disasters is, is to put your assets into places where they’re well protected. Natural disasters also have this other nasty byproduct, which is now you have to pay to get yourself back to where you were. And if you don’t have an insurance policy that covers things like flood and hurricane or wind damage to your property, you may be coming out of pocket for those types of things. You can either walk away from the asset and just let the bank come and take it back or you can try to pay to have it kind of refurbished in such a way that you can continue to use it. It’s really great to have that solid credit report and credit score as that safety net if you do need to leverage it and get back on your feet. You know that’s, these are major natural disasters, right?

They happen, there’s nothing we can do about them. Then you have other scenarios that are man made. The meltdown of 2008 when tons and tons of people lost their jobs because all these, you know, these companies are going out of business or they’re letting off so much of their staff. Or more recently we had this government shutdown. Didn’t last long enough to go into some sort of massive default or you know what we really saw after the 2008 mortgage market meltdown or the economic meltdown where you had these values plummeting and people walking around, you know, strategically defaulting on the loans. You really shouldn’t be teetering on going into the fall if you miss one or two paychecks. If your monthly obligations are so dependent on you not missing even a single paycheck, then you are too exposed to your income and to the job market. Because I mean you can lose your job next week. If you know it’s going to take you between six months, nine months, a year, year and a half to find a new job, then that’s the amount of emergency funds that you need. We all should choose to have emergency funds that are relative to the amount of time it’s going to take us to find a new job based on the statistics of our industry. People often ask me, “where are some reputable places to go to find information about credit reports and credit scores?” There’s so much good advice and some of these websites, you know, giving consumers tips on how to improve their credit scores, how to protect an already solid credit score. Kind of the[ maintenance strategy if you will.

The minute you start taking money to help people with their credit, you become a credit repair company. And that's straight out of a credit repair organizations act. I don't want to be a credit repair company. But I'm happy to give people advice, but I'm going to give it to them for free because I don't want their money. If you could avoid anything negative hitting your credit reports, which almost always come out of you not paying an obligation on time, then you are well on your way to earning a killer credit score under any credit score on brand, whether it's the VantageScore brand or the FICO brand or whatever brand. It's not a secret that paying your bills on time is incredibly influential and highly predictive and therefore towards the whole lot of points. So bills on time. Maintain low credit card debt. Only apply for credit when you really need it. If you can do those things, you're going to be really happy with your scores. If they can maintain those solid scores, you're going to have mainstream high quality lenders throwing money at you at really, really competitive terms. And that's really where you want to be as a borrower. You want to have options and you want all those options to be really, really good because then you can choose between some killer deals.

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