Welcome clickers from Train Wreck Central

aka IAmFacingForeclosure. I've decided to do this post backwards. The meat is up front. Introductory/explanatory stuff is at the end. Since you're here, read these "Intro to Credit Score Gaming" articles: Part I - Payment History, Part II - Balance to Limit Ratio, Part III - Length of Credit History, Part IV - Types of Credit Used, Part V - Recent Inquiries and Recent Credit. That's the core info. Other highly relevant posts: FICO vs. FAKO (I got "FAKO" from a commenter on IAFF. Thanks, whoever you are!). What to do if you're young and trying to establish credit. Get your credit reports (not scores) yearly from the government, but be aware of how the "annual" part works. I also discuss recent inquiries in more depth.

If you've read some or all of the above posts and want to find out your FICO score and maybe track it over time, please use this link to MyFICO.com (the best place to get your real FICO scores) which can also be found at the top and sidebar of every page. Oh, and there are coupon codes out there for MyFICO.com. Just use Google and you'll find them.

(Now the introductory/explanatory stuff -- I originally had this part at the beginning, but it started to run pretty long...) I have been keeping up with Mr. Serin's situation for quite a while now, and I had to temper my disgust at Casey (especially with this recent Australia bit) with my greed and desire to make some more money from this blog. I have mostly stayed out of the comments at IAFF, because you guys can be awfully intimidating.... but I've read a lot of the stuff on Exurban Nation (Duane posts especially), Nigel Swaby's blog(s), Caseypedia, etc. Anyway, back to my motivation in becoming a "Supporterz" (although if I had to, I'd say I'm a Haterz(TM)). That MyFICO.com referral link that you see at the top of the page is actually making surprisingly good money, even with the minimal amount of traffic that I'm already getting. I'd like to see if I can increase that, at least temporarily (who knows how long IAFF will be up).

Anyway, this blog has been fairly dormant for the past couple of months, for several reasons. One, my wrists are hurting, and I already have to spend most of my day at the computer for work (not a W-2 -- ha!). But really the main reason is that I'm pretty much out of stuff to say about FICO scores and how to improve them. I'm not one of those guys who can just retread the same old topics over and over when nothing has really changed. There's only so much to say about FICO scores, but I'm constantly surprised at how little people know. There are many misconceptions out there. I probably still have some misconceptions myself! I'm just one guy, and I don't know everything. So I may have gotten some stuff wrong, but I've been tracking my FICO score monthly for upwards of 3 years now, so I probably have a better grasp on it than most. If you disagree with anything that I've written about FICO scoring (or just have better information) then please leave a comment correcting me.

So, that's that. I hope you at least learn something while you're here, even if you don't get your FICO score at MyFICO (mercifully unlinked for your mental health).

Apologies and a Break

I apologize for the lack of posts lately. On top of being particularly busy (just bought my first real estate, which I may write up later), I also have started to feel symptoms of either carpal tunnel syndrome and/or tendinitis in my wrists. As my job requires me to use the computer, I am curtailing all non-job-related computer usage as much as possible. I am experimenting with different keyboards, trackballs, etc. and my wrists seem to be getting better. But still they start to hurt after a day at the computer.

I will still be reading other PF blogs, sometimes commenting, sometimes maybe even writing something here. But you should consider this blog on hiatus until further notice. Please continue to use it as a reference, as the important stuff (e.g. the Required Reading) will continue to be relevant.

GCS Required Reading

If you're a new reader, you should be sure to read through these "Intro to Credit Gaming" articles: Part I, II, III, IV, V.

These articles cover the components of the FICO score, which forms the basis of any advice that I might give. They really encapsulate the bulk of what I wanted to say when I started this blog. There is too much disinformation out there about the FICO score (which is the only score that matters). The most common advice that people will throw around in terms of gaming your FICO score is not to get new credit inquiries, which has a grain of truth but is hugely overestimated in terms of importance (as you'll find in Part V linked above).

I apologize for the infrequency of new posts in the past month or so. My job has kept me really busy, and then there's taxes, buying a rental condo, visiting family, and all kinds of other things going on. For now I am pretty much only writing new content when I have insomnia. Which, thankfully, isn't that often.... but that also means that I haven't been writing very often. Over time, my schedule will even out, and so will my blog activities.

The "Inverse Rule of 72" for Mortgages

Golbguru of The Tao of Making Money recently posted about the common "Rule of 72" for figuring out when your money will double, based on making an investment that makes a particular interest rate. If your rate is 7%, it will take roughly 10 years to double your money, etc.

Well, that got me to thinking, particularly when I had a conversation with my dad today about my parents' house. They have been in the house for about 10 years and have a typical 30-year mortgage (although they are making payments every 2 weeks in an accelerated payoff plan). We were wondering how much they still owed on the mortgage, and unfortunately such calculations don't come quickly in our heads, and I had no quick shortcut. I wondered: What if there is a quick "Inverse Rule of 72" out there? How long would it take to halve the principal when we're paying interest?

So tonight I used Bankrate's Mortgage Calculator to figure out a few tricks. In line with the "double your money" idea from the Rule of 72, I wanted to know how long it would take to pay off half of the mortgage. Taking it one step further, I wanted to see how long it would take to pay off just 25% of the mortgage. The formulae for the final approximations here are not exact, but they are quite easy to calculate and good enough for casual use. All of these figures are based on a standard 30-year mortgage. First we have a table of the actual values for the month/year when the mortgage will reach a certain paid-off point:

1/4 paid off
0%	6/07
1%	6/08
2%	5/09
3%	5/10
4%	6/11
5%	7/12
6%	8/13
7%	9/14
8%	9/15
9%	8/16
10%	7/17
1/2 paid off
0%	1/15
1%	2/16
2%	4/17
3%	4/18
4%	4/19
5%	3/20
6%	1/21
7%	10/21
8%	6/22
9%	1/23
10%	7/23

The 0% part is fairly obvious, and it forms the basis of our estimation formula. A 30-year 0% loan will be paid off halfway at the halfway point of the loan, or in the first month of the 15th year. One-quarter of the initial principal will be paid off one-quarter of the way through, or 7 years and 6 months into the loan. These form the baselines, and all other dates will be calculated from there. Now if you look at the tables, as you move up a percentage point, the target dates are pushed back by about a year per percentage point. At higher interest rates, there is a bit of compression at the back end of the loan, but a year is still a good estimate. There is only a 6-month difference between 9% and 10% to reach the halfway point (both occur in the 23rd year of the loan), but it is still 9 months between 6% and 7%. So as your interest rate gets above the "normal" threshold, the approximation will get less accurate for the half-paid scenario. For paying off one-quarter of the principal amount, each percentage point between 0% and 10% makes a difference of between 11 and 13 months, so one year is a very good approximation in that case.

So our final formula is:
1/2 Paid off: 15 years + 1 year per percent interest
1/4 Paid off: 7.5 years + 1 year per percent interest

Remember, these are all for 30-year mortgages! So, it will take roughly 22 years to pay off half of a 30-year mortgage at 7% interest and roughly 18 years at 3% interest. It will take roughly 10.5 years to pay off 1/4 of a mortgage at 3% and roughly 14 years at 7%. If you are interested in 15-year mortgages then you can just use the above formulas and divide your final answer by half.

Who just wants to be a millionaire?

A popular article on CNN.com talks about modern-day millionaires. And to that, I say: Who just wants to be a millionaire? The term has lost all of its cachet. Not to say that millionaires are losers; obviously they're doing much better than most of us.But it certainly doesn't mean what it used to.

The Oxford English Dictionary lists the first documented usage of the word "Millionaire" coming in 1816 from George Gordon, Lord Byron: "He is still worth at least 50,000 pds being what is called here a 'Millionaire' that is in Francs and such Lilliputian coinage." It is interesting that even back then, there was a question over what might truly be considered a "worthy" millionaire. Obviously currency conversion rates can wreak havoc with the term. you can be a Yen millionaire for roughly $8500. That's a pretty low bar to pass.

So, what's your own definition of a millionaire? Personally, I look back to roughly 1900 to 1920. The age of Robber Barons and The Great Gatsby.... the age when the term "Millionaire" was extremely impressive. Using the Inflation Calculator we can see the following current values for previous millionaires:

• 1900 Millionaire: $23.3M 2006 dollars
• 1910 Millionaire: $21.6M 2006 dollars
• 1920 Millionaire: $11.3M 2006 dollars
• 1950 Millionaire: $ 8.2M 2006 dollars
• 1970 Millionaire: $ 5.3M 2006 dollars
• 1980 Millionaire: $ 2.7M 2006 dollars
• 1990 Millionaire: $ 1.6M 2006 dollars

Based on this, I'd have to go with the nice round figure of $10M to be what I would personally consider to be a "modern-day millionaire." That's the kind of money that you can't get by being an extremely frugal teacher or janitor like those described in The Millionaire Next Door (the very fact that there can be a "Millionaire Next Door" is an indication of how much the term has slipped). That kind of money almost requires that you be very successful in what you do. Of course, there will always be lucky people like heirs, lottery winners, and early employees (as opposed to founders) of startups who end up with $10M+ net worth. But it's still a very rarefied group, and it's my goal to end up there.