Speaker 1: We're going to be doing a live stream that I
think you're definitely going to want to listen to watch.
It's going to be on February eleventh at noontime. If
you want to attend that, you want to notify us,
we'll get you the invitation.
Speaker 2: You are listening to Carrie Leutz's Financial Survival Network, where
you get valuable information you just can't find anywhere else
to thrive in today's trying times. You need the Financial
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Speaker 1: And welcome. You are listening to the Financial Survival Network.
I'm your host, Carrie Lutz. And well, the holidays are over,
the new year has come, and the holiday hangover, the
holiday debt hangover is just getting started. And well, our
good friend Paul Loster from Better Qualified is with us now.
And Paul, what t is different about this holiday hangover
season than most?
Speaker 3: Well, as you know Kerry, again, you and I have
probably had this very same discussion for the past. It
could be five years or more. I think time is
He's crazy. But this year, look, we've as a country,
as an individual, as a world, We've never been in
this geopolitical economic environment ever before. And I don't care
what the stock markets are doing. I don't care about
tariffs or anything like that. What we see are the
average everyday consumers are definitely starting to drown in their debt.
They're not treading water anymore. The early canaries and the
coal mine are always credit card delinquencies, auto delinquencies. Then
you have your pre foreclosures, mortgage lates are coming in,
so all of those signs are now pointing towards again
the average consumer is drowning in their own debt. And
when you have the cost of living, this crazy stubborn inflation,
all of these things and now weakening job market. All
of these things are going to add up sooner than later.
And you know, they do a great job at spinning
it so it doesn't look as bad as it is.
Again in our day to day life, we see consumer struggling.
So going into the holidays, there were surveys out there
that said over eighty percent of consumers we're already thinking
and conceding about using credit cards to get them through
the holidays. I think that number went well into the
ninety percentile. And when you now add in these buy now,
pay later programs, I think we're in trouble, you know,
moving forward, it's starting to come home and starting to
hit them very, very hard in the pocketbook and the
wallet because now they have to pay for these things,
and it could have you know, a lot of consumers
make the mistake of using fuzzy mental math. Yeah, I
think I'll be able to make four payments of seventy
five dollars moving forward. But could they really do that
while paying the minimums on all their other credit cards,
while paying more for every tank of gas, for every
grocery run. The cost, you know, the cost of living
has just spiraled out of control and the income has
not adjusted accordingly. So we're in trouble.
Speaker 1: Yeah, yeah, I tend to agree with you. And you know,
when I was a kid, I was on the buy now,
pay never plan.
Speaker 3: Well, listen, and again, I don't know how long these
companies are going to be around because they're default rates
are also spiraling out of control. So the big dogs
affirm Klarna, you know, their year over year defaults are
you know, rising exponentially. So what ultimately happens here and
the other thing is consumers don't realize that these buy now,
pay later programs, which all you have to do is
prove that you're not a bot. You click and I'm
not a robot, and you're going to get approved almost instantly.
And what happens is every time you use one of
those payment plans, they now get reported on your credit.
Speaker 1: Yeah I heard that.
Speaker 3: Yeah, so even if you make all the payments on
time and complete the loan, opening up all of these
new accounts in a short period of time is damaging
to your overall credit. The fight Go scoring model does
not like to see lots of new open accounts in
a short period of time. What happens is that the
scoring model says, why does Kerry Lutts need access to
all of these new lines of credit? And again it's scary.
It drops the score. Yeah, it drops the scores. And
now if they actually start to make late payments, it
becomes even worse.
Speaker 1: Yeah, yeah, well late payments are really bad.
Speaker 3: Huh yeah. Listen, you know, people again they don't realize.
You know, there's there's five factors that go into the
scoring model. Nobody knows the exact the exact formula and
algorithm But what we do know is payment history is
number one, and rightfully so pay all your bills on time.
You're going to have a higher score than someone who
doesn't pay all their bills on time. But what consumers
need to realize when I speak to someone they say, yeah, well,
you know, my credit's pretty good. I have some late payments.
I already know they're probably in the five hundred, if
not lower, because one thirty day lay payment can easily
drop your score fifty points. Now, if you're a younger
person with a thin credit profile, that damage could be
even worse if you max out a credit If you
max out a credit card by one dollar, you could
easily lose fifty points if you go over. The second
factor for our credit scores is called your utilization ratio. Income,
fortunately or unfortunately is not a factor. The Fyco scoring
model doesn't care how much money you make. What they
care about is how much money, how much credit you
have access to, and how much of that you're using.
So to give you an example, let's say you have
two credit cards and the credit limits are five hundred
bucks apiece. You have a total credit limit of one
thousand dollars. The second you go over. If your balances
go over three hundred bucks, your sures are going to
start to come down, and they're going to come down fast.
Speaker 1: Mmm. Yeah, and then and then the fund begins huh
yes sir, So all right, so I didn't even realize.
But when you do buy and now pay later, you
don't take possession of the goods till later after you paid, right.
Speaker 3: No, so unfortunately you you can take the goods right
at the point of sale. And these are happening with
online merchants and online purchasing. So as soon as you
say that you want to buy a widget on Amazon,
on any online retailer, and they give you the option, Hey, Kerry,
how would you like to pay zero percent and pay
this off in four or five payments, people say yeah,
and literally again, the approval process takes seconds, and then
you get the goods will be delivered. Your widget's coming,
It's going to be delivered in the mail. Now are
you are you really in position? Did you actually sit
down put a pen to paper or did you use
your computer? Can I really afford this? And again, what
happens is these marketing geniuses have created it. They're now
thinking about using buy now pay laters for rent payments,
carry rent payments. So that's how does that happen?
Speaker 1: That's completely insane here, Well, there should be a law
against this. I mean, I hate to say that I'm
a capitalist, but to me, you know, it's no better
than a kid, an eighteen year old kid or seventeen
year old kid taking out the student loans. You know,
they have no idea of the potential future impact of
those loans, do they. Now, it's exactly right.
Speaker 3: Very unfortunately, very few families actually sit down and have
that conversation before they actually apply. Because what happens, and
it happened to me, you could get approved for above
and beyond what your expenenses actually are, the cost of tuition, housing, books,
throw that all in and let's say it's, you know,
for an easy loan number conservatively, let's say it's twenty
thousand a year. You might actually get approved for thirty
thousand dollars a year. Yeah, sure, and you and your
parents might say, hey, we're going to take it because
at five percent interest or seven you know, that's a
good you know, that's a great interest rate, and I'm
going to take that money. Okay, you graduate, and your
hopes and dreams don't materialize and you don't get the
job that you wanted. And the deferment on student loans
is only six months, and that's that's less than a
blink of an eye. So now you have, as we
see right now, tens of millions of student loan borrowers
who can't pay the loans back, right, And that's the
situation now, Like you're saying, should it, should we change
the process? Absolutely? It's like health care and insurance. How
how did we even get here?
Speaker 1: How?
Speaker 3: How has the cost of tuition exceeded every other you know,
marker in the economy. It's just it's out of control.
But we have student loan lenders who are willing to
pay those exorbitant costs, but at the end of the day,
who can really afford it? You know, twenty five percent
of the overall student loan portfolio is either in long
firm delinquency or they've defaulted.
Speaker 1: Yeah, unbelievable.
Speaker 3: And so Belie, there's good news is the good news
is this carrier. And again I've said it on your
show numerous times, it's never too late to put a
plan in place to figure this out. No one goes
to debt or prison. But debt is something you have
to deal with squared away head on. You can't just
bury your head in the sand and hope for the best.
No one's going to swoop in and save you. It
just doesn't happen. So how do you get out of debt? Well,
it takes some planning, It takes discipline, It takes commitment.
Unless you're going to get a windfall of an inheritance
or you know where's the money going to come from,
we have to cut expenses and that takes again discipline
and commitment. And I'm not saying you have to do
it for the rest of your life, or maybe you do.
But right now, if you have any credit card debt
at all, you have to put a spending freeze, a
new debt. Don't spend another dime on anything that's not essential,
and don't blore the lines. Essential is gas and groceries.
Essential might be gas and less groceries or different groceries
than you normally buy. Yeah, noore call foods right right,
a skit. You can skip hotlier than thou foods. All right,
So Paul, looking ahead here for the year. You know,
here all these economists saying things are getting better, the
economy is improving, incomes are going up.
Speaker 1: What effect do you think that's going to have on
the credit out there? You think that's going to hurt
your business?
Speaker 3: No, absolutely not so people. You know, I've been doing
this for twenty one years, and the market goes up,
the market goes down, it's stays stagnant. It doesn't really
matter because you know, your personal finances are so you know,
different than the macro economy and the global landscape. So
what's happening right now is the pressure from very very
stubborn inflation the cost of goods and services. You know,
it's we're just not keeping up with the increases in
what it costs for us to live, so that that
the cost of living adjustment for our personal finances has
just not been able to keep up with it. So
then people they get on that slippery slope, and debt
is the most slippery slope there is, so they start,
you know, their credit card balances start going up, which
drives their credit scores down, which then winds up costing
them more for everything else. Yeah.
Speaker 1: So, so really it doesn't matter what's going on in
the broad economy, even if the economy is improving, and
their incomes go up, their debt went up, and their
credit score is going down. So they want that new
house or whatever it is, it's either going to cost
them more or it's going to be unobtainable exactly.
Speaker 3: So what you just said, you know, your credit score
is going to cost or save you money every single
day for the saane things that we need, you know,
all of the things being equal, if you have a
lower credit score, you're going to pay more because in
the finance world, it's all tiered based pricing, So people
that have lower credit scores are going to pay more
and more and more. And I don't know, you know,
how quickly if there's a short term situation where you know,
they're talking about this credit card interest cap and I
don't know if that was just food for fodder, but
banks get very very sketchy, very very quickly. So do
they start to tighten, you know, if they start to chaten,
you know, the credit market, then it'll have the reverse
impact of what people thought it was going to be
a good thing. But what will happen is if you're
below a seven hundred credit score, you're not even going
to get approved. So then it's going to cut out
a tremendous amount of people who want to buy a
mortgage and right now they could afford it, but they're
not going to get approved. There'll be no programs available
for people unless you have an a rating for your
for your personal credit.
Speaker 1: Gotcha, gotcha. So so really it's going to make credit
harder to obtain. Well, they must know this.
Speaker 3: Right, yes, yep. No, the you know the average where
they find out when they actually go to apply, and
so they find out too late. So really our goal
is to try and get the message out there. And
it's it's like insurance. It's like asking for an umbrella
when it's raining. You have to have this in place beforehand.
You can't you know, find out in the in the
eleventh hour and the ninth inning that you're not going
to get approved because there's no overnight fixes for credit.
It takes time to rebuild, it takes time to manage it,
It takes time to demonstrate that you are credit worthy,
especially if you had hiccups in the past and you
and I spoke earlier today. It's not not always just
about mismanaging finances. There are life events that happen. The
number one cause for bankruptcy is still health, right, people
get sick, People get sick and they have to claim bankruptcy.
That's still the number one reason to this day loss
of jobs. So look at the job market, look at AI.
You know, the corporations are laying off people left and right.
So all of those things have an impact on the
average person who unfortunately didn't have the resources in place,
and they you know, they have to crash. So it's
not always about mismanaging. It's not always about the economy.
It's not you know, the personal impact of things that happen.
Life events are probably the number one cause for people
to you know, mispayments and I've said this before on
your show. A one times thirty day ly payment can
cost you fifty points. So you could have been in
the arena to get approved with a decent interest rate
and you lose fifty points. If you go over your
credit limit on a credit card by one dollar, you
could lose fifty points. A medical collection pops up on
your credit report, you could lose one hundred points. So
you know, people have to be aware and be aware
of what's happening with their credit. And I'll mention this
again because it's worth mentioning. One of the good things
that came out of the pandemic was our ability to
check our credit at Manualcreditreport dot com. You can now
check it every week BC. Before COVID, you could only
check it once a year, So now you could literally
monitor your credit for free. By the way, and this
is not like a credit karma situation or anything crazy
like that where you're going to get telemarketed to death
spamming text messages. This is the government's website host it
on the by the FTC and those are good reports
and good information, So you can go there once a
week and check it. And you should be looking for
red flags of identity theft. If there are addresses that
are on that report that you don't recognize, that's the
number one red flag for identity theft. So look at
your reports and figure out how you can get your
scores as high as you possibly can.
Speaker 1: I can't agree with you more. So, Look, we're going
to be doing a live stream that I think you're
definitely going to want to listen to watch. It's going
to be on February eleventh at noontime. If you want
to attend that, you want to notify us, we'll get
you the invitation. Just send an email to kl at
Carrie LUTs dot com. That's kl at Carrie LUTs dot com.
We'll get you up there the meantime. Paul, just to
give us your web address and how we connect with
you on the web.
Speaker 3: Please, Yeah, that's the easiest way to find us. And
it's better qualified dot com. Again, it's better Qualified dot com.
As always, we provide a free credit consultation and analysis.
We can tell you exactly what to do and what
not to do and allow our expertise and twenty over
twenty years of guidance to help you love it.
Speaker 1: And that's why we're having you on. That's why we're
doing this. All of you listening who are on my
email list, you'll get a notification of it. I don't
like to bog you down with too many, but I'll
send you at least one within forty eight hours of
when it's going to happen. And then you can just
click into it and sign up. And I think it's
really going to be informative. Paul's going to be talking
about things you could do without him right now immediately
to raise your score fifty point points almost immediately. I
think it'll be real helpful. Paul, we will talk to
you in a week. Thank you so much for coming
on and we will be in touch.
Speaker 2: Thanks for having me back on Kerry, Thanks for listening
to carry Letz's Financial Survival Network, your solution to today's
trying times. For the latest, go to Financial Survivalnetwork dot com.
Financial Survival Network now more than ever,