Speaker 1: You know, to the tune of about fifteen million Americans,
this should have a very positive impact on their credit reports,
credit scores, credit ratings. It's about forty nine billion dollars
in total debt that's being reported, So it's an awesome thing.
One of the projections is that they're thinking, you know,
when you look at what's going to happen with their scores,
and I think two things. A, it's going to be
an even better and greater impact than what they're forecasting.
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Speaker 3: Ever, and welcome. You are listening to the Financial Survival Network.
I'm your host, Kerry Let's. Hey, we're in mid January already,
can you believe it? But things are happening. New administration
coming in old one, leaving old one, trying to do
as many things as they can before they are shown
the exit, which is imminent. But perhaps one positive thing
that they're doing is eliminating finally, medical debt from your
credit report. And what does that mean to you? How
does that help you? Well, our good friend from better
qualified dot com, Paul Oster, is with us now, Paul.
So this is a victory for consumers, isn't it.
Speaker 1: This is probably one of the biggest victories for consumers
in a couple of decades. So it's been a long
time coming. They've they've you know, modified and played around
with this ruling for quite some time. That the message
was clear from the beginning. They you know, the administration
understands that medical debt shouldn't really continue to harm a
consumer's credit rating. There's been numerous studies and surveys and
all sorts of things that were done. It proved someone
who you know, has a medical debt collection. Unfortunately, usually
they are a collection account by the time it winds
up on some mu's credit report is not indicative of
who they are as as a consumer and their credit rating.
So this is a big move.
Speaker 3: Yeah, it's kind of like they took tax leans off
a while ago, because it's not a consumer debt, and really,
when you get down to it, hospitalization or medical treatment.
It's not something you as a consumer, said, Oh, I'm
just going to blow a fortune on my credit cards
and you know, my credit score be damned. This is
something you had to do or your life could be
in jeopardy.
Speaker 1: Right, absolutely, So you're talking, you know, to the tune
of about fifteen million Americans. This should have a very
positive impact on their credit reports, credit scores, credit ratings.
It's about forty nine billion dollars in total debt that's
being reported, So it's an awesome thing. One of the
projections is that they're thinking, you know, when you look
at what's going to happen with their scores, and I
think two things. A, it's going to be an even
better and greater impact than what they're forecasting. So right
now they're saying the average person is going to see
a twenty point jump in their scores. Look, I've been
doing this for over twenty years. If somebody incurs a
collection from a medical debt, it could easily lose one
hundred points. So I think the score jumps are going
to be greater than what they're predicting. But even if
it was twenty fifty points, they're thinking that that could
lead to about twenty thousand additional mortgage approvals applications every
single year. And that's really big because the housing market
is one way that we could pull ourselves out of
this funk that we're in. It's not a recession. The
market seemed to be doing well, but the average consumer
is not. We're treading water and we're starting to drown.
And you and I have spoken about it. I don't
trust the job market numbers. I think they're too easily manipulated.
So at the end of the day, we're stuck with
higher interest rates, inflation, cost of every goods and service
is hosting the average household in the United States, it's
over six hundred bucks then it was two years ago.
So that's a lot, a lot of money on top
of everything else. So this really couldn't have come at
a better time. Again, the one message I want to
make very very clear is that this is not debt elimination.
This is not debt forgiveness. This is just a move
by the administration, the current administration to say to the
consumers medical debt is not going to have a negative
impact on your credit rating moving forward, which in turn
would have costed more money for everything else. You know,
the lower the scores, the higher you pay for every
single financial transaction. So again, couldn't come at a better time.
This is a great bipartisan effort from the administration, working
very closely with the Consumer Financial Financial Protection Bureau the FTC,
And again this is a win for the for the consumer.
Speaker 3: Now let's just fast forward. I want to get some
of your forecasts here for the incoming administration. We're not
talking politics, we're talking economics here. Is this a plus
for consumers incoming admin?
Speaker 1: Negative? Or doesn't matter? Well, it definitely matters. But again,
it seems to me that people, especially if you know,
it's hard to separate church and state and politics and
the economy. But people look at the markets and you know,
the growth, our GDP and all all this stuff. But
at the end of the day, I look at it.
You look at it from the consumer side of things.
So until we can get wages, you know, caught up
to where they should be, the cost of living, you know,
it's it's really out of whack. So somebody asked me
the question the other day and he said, Paul, when
was the last year that we actually had a good economy. Well,
when you look at all on them. I'm thinking you
got to go back to like the seventies, because you know,
when was it When was it more affordable for the
average consumer to buy a home, not just by the home,
maintain it, you know, fuel it put energy, electric, gas,
durable goods, washers and dryers, you know, buying a car.
When was all of that stuff actually, you know, affordable
for the consumer. It's been decades. It's been decades. So
we're behind, you know, the eight ball when it comes
to wages and you know, affordability for goods and services.
You know, when you look at that against what the
markets are doing, and look, I think after January twentieth,
the markets are going to go bananas. He's so prow business, right,
and not just domestic you're talking about foreign relationships and
foreign trade. I think the markets go bananas. But that
doesn't always trickle down, you know, to the consumer.
Speaker 2: Right.
Speaker 3: And so what about inflation though, you know, inflation doesn't
just you don't just take a pill and it goes away, right,
It's it's a very intractable thing that often lasts decades.
Speaker 1: Yeah, and that's that's kind of where my mindset is.
It's very very stubborn. We're very, very resilient where we
continue to spend money that we don't have. So the
market always sets the price, so it's it's almost impossible
to walk it back once you know, price uh price
ranges are set in place for a reasonable amount of time,
it's almost impossible to walk them back to where they
you know, used to be. You know, it's just a
matter of playing catch up with with everything else. So
I think we're in for the a little bit of
a long haul here, you know, much longer than you
know most analysts and and people who you know watch
the market and and do forecasting and projections. They want
it over right now. But like you just said, inflation's
not just going away tomorrow. You know, the ten year
note is at like a all time high. So what that says,
and that's why the market tumbled. You know, at the
end of the week last week, we might not we
might not get one rate cut in twenty twenty five,
And in Q four of twenty twenty four, people were
thinking maybe four to six rate cuts, which would put
us back into you know, maybe the five percent mark
for mortgages, and you know, the prime rate would have
just been so much lower, and I don't think that's happening.
We might not get one rate cut. The jobs reports,
the growth and the economy continue continued to almost defy
the odds.
Speaker 3: Yeah, well, you have to look at the rest of
the world's doing way worse than the US. And money
is safe harbor, you know, money looking for a safe
place compared to the rest of the world.
Speaker 1: Where else is it going to go?
Speaker 3: And right, you know, since I've been talking about this show,
he always said the dollar, the US dollar, would be
the last currency to go. It's the best looking house
in the city of Baltimore.
Speaker 1: You know, No, that's it's absolutely correct. And again one
of the safest investments tried and true, you know, decades
and decades and decades is real estate. So that's where
I've seen it before, where the real estate and the
housing market has certainly you know, led the charge or
been a significant impetus into digging us out of the
hole that we're currently in. So I would love to
see that happen again. Get people into homes that they
can afford, to get approved for mortgages with you know,
credit scores that are more indicative of who they really are,
and that could help everything. With every home that's sold,
there's like one hundred and nineteen indirect transactions that happened
every single year. So if a person buys a home
wherever that local market is, the local banks, the local
grocery stores, you know, all of those local markets benefit
from one person, you know, purchasing that house. And again,
whether it's maintenance in the house, lawn care, every single
thing that happens within that home helps drive the local economy.
So the more the more times we can you know,
rinse and repeat with that, the better off we're going
to be all right.
Speaker 3: Well from your mouth, So as far as other things
that people can do, TOSUA try to mitigate or lessen
the effects of inflation. What are the top three things
you recommend? Well, obviously credit is a big driver here, right,
so we said it before, So consumers have to understand
a couple of things.
Speaker 1: A most people don't know what's on their credit report.
So one of the good hangovers and leftovers from the
pandemic is that consumers can now check their reports on
a weekly basis. You know BC Before COVID, consumers only
had access to those reports once every year. So we
went from annually to weekly, so you could literally go
to Annualcreditreport dot com. I say this with a caution
because a lot of I say Annual Credit Report dot com.
You get a free credit report. People start searching free
credit reports and you go to free credit report dot com.
That's not this website. Annualcreditreport dot Com is the FTC's website. Again,
you now have weekly access to those reports. You don't
need a credit card to verify ninety nine cents a
penny nothing. If you're on a site that's asking you
to enter credit card information, you've gone to the wrong site.
So Annual Credit Report dot Com is the best way
for consumers to check the reports. You don't get your
scores for free, which again we've been fighting this forever.
You should also get your scores, but you don't need
the scores. What you need is to pay attention and
manage the information that's on those records. Your scores are
going to change, basically, they change every thirty days when
the bureaus update their reporting. Maybe you get your score
from your existing credit card or something like that, but
the information is always going to drive the scores, So
just focus on that for now. Go through the report.
If you have late payments, charge offs, collections. You have
to be very proactive in your approach. So checking your
report is like number one. Number two is being proactive
in building a new report can literally add open octive
positive accounts. There are credit builder accounts. There's some great
companies out there. Self is one of them self. You
can get secured credit cards, you could do credit builder loans.
You could have your rental history added to your reports
for free, by the way through self Sure. So they
charge a nominal fee for the credit builder loans, but
it's worth every single penny. I suggest when you if
and when you use self and you take out a
loan quote unquote from them, that you take the longer
the longest term available, because you want the credit history
for as long as you possibly can. So if you
had the option between twelve or twenty four months, take
the twenty four months right as long as it makes sense,
take the longer term because it's that monthly payment history
that's going to drive your accounts. And the last thing,
if you have ten dollars in credit card debt, you
have to eliminate the credit card debt. And if you
can eliminate it, you have to work as you as
hard as you possibly can to try and decrease it. Right,
so we're talking about the markets and interest rates and
all this crazy stuff. There is no better return on
your investment than paying down credit card debt. Most people
are up over twenty percent, some people are twenty nine percent. Right,
So every single dollar that you decrease your credit card debt,
it's like getting a twenty percent or higher return on
your money. No, there's not a lot of markets that
are producing those kind of returns. So if you have
credit card debt, you got to try and focus on it.
You want to get it below thirty percent of your
credit balances. That's your first goal and benchmark, and then
ultimately it's to you know, completely eliminate. You might want
to try to use a zero percent balance transfer card.
You can only do that if you've gone over the
number and formula a thousand times and you will be
able to pay off the new debt. Right, So you
move money from one or two cards to a card
with zero percent interest rate, you might get eighteen to
twenty four months to pay that off. You have to
because if you don't, you have now just cost yourself
even more money because you pay a balance transfer fee
no matter what, somewhere between two to five percent. Then
if you don't pay it off in time, you get
hit with all the deferred interest anyway, So as long
as you can pay it off, and a lot of
times people are much more successful at zero percent because
most of the money that they're paying isn't going towards
the principal balance. So if you can get a zero
percent of balance transfer card, use it, only make sure
you can pay it off before the end of the term.
It might be a time if you can refinance. Even
at the today's interest rates, a seven percent mortgage is
a thousand times better than a twenty percent credit card.
Right ork, you take a short term loan borrow from
your four to one k borrow from a family member.
You know, if you work, most people can afford the debt,
right so they're paying all the minimums, but they're just
treading water. They're not paying off their debt. So if
you say, you know what, all my credit cards together,
my monthly payments are four hundred and twenty five dollars
a month, but I'm not paying off the debt. I'm
just them treading water. So if you can borrow money
and make that same payment four hundred and twenty five bucks.
It might even be lower, but you'll actually start to
pay off your debt. Then that's that's what you got
to do. It's got to be priority one. Get out
of credit card debt in twenty twenty five. Do everything
in your power to do it.
Speaker 3: So I got to tell you a funny story here.
It's not really funny, but Mike, I have a really
good credit score. Well I took advantage. I bought a
new computer, you know, Apple, and basically it's like interest
free for the next year, and you know it's a
couple thousand bucks. Well I do it, and it raised
my utilization rate on that card, like, you know, a
couple thousand dollars, which made it up close to its
highest point, you know, almost to the max. And as
a result, I lost twenty four points off my credit
score just from that, even though it's all high, you know,
it went under eight hundred.
Speaker 1: So that's it's a great point carry because your utilization
ratio that people have to understand that your FIGHTO score
all scoring models and your credit score has nothing to
do with your income. Credit score is a big piece
of the puzzle. The biggest piece of the puzzle is
your payment history. Second biggest piece is your utilization ratio,
and that's the difference between your credit limits and credit balances.
So on your credit cards, it's both cumulative and individual.
So like you saw one card, you go over that
thirty percent is the magic number. If your balances go
over thirty percent of the credit limits, you will immediately
see a significant decrease in your credit scores.
Speaker 3: Yeah yeah, and it's nothing changed, you know, nothing has changed.
Speaker 1: Nope, you didn't write, you didn't make a late payment,
you didn't have a collection, nothing except that utilization ratio.
Speaker 3: Yeah, it's ridiculous. And you know, I have my old computer.
I'm going to sell it and just pay down the debt.
So I just said, you know what, I'll just pay
it down today. I paid it off fifty percent. I'm
sure the it'll bounce back up. But you really need
to be under thirty percent, don't you.
Speaker 1: You sure do? You sure do? And you know the
next benchmark would be ten percent. Uh. They actually have
a category of high achievers, and that's for folks that
carry small balances, anything less than ten percent of the
total credit limits. So thirty percent the first benchmark. Pay
your pay your cards down below thirty percent, all of
them cumulatively. But like you're saying, if you do have
one card that is higher than other cards in terms
of that utilization ratio, focus on that card and you've
got to pay all your minimums and the other cards,
but focus on that one card until you get you
can get it below thirty percent, and you will see
a significant point jump and an increase in your credits.
Speaker 3: Course, Yeah, it's just kind of ridiculous because you know
it's one card. My overall utilization rate. It said it
went up from one percent to two percent, So you know, like,
what are we talking about here? You know, predict your health.
Speaker 1: Listen, sometimes we scratch our heads. Again, over twenty years
in this industry, I've probably personally analyzed thousands, thousands of
credit reports. As a company, we've probably done it millions
of times, and sometimes we scratch our heads because it
doesn't make sense. Remember the algorithm and formula for the
FCO scoring model. It's a more closely guarded secret than
Coca cola. Write the recipe for Coca cola. We know
that probably as harmful, probably just harmful as Coca Cola
right eight. It's just a slower death, that's all. But
we know what the pie chart looks like, thirty five
percent payment history, thirty percent utilization utilization ratio. But there
are times when we look at a report and something
like that happened to you. The only change was a
slight increase in a utilization ratio nowhere near the thirty
percent benchmark, and the scores go down. Sometimes we look
at reports and I say, I can't believe the scores
are that high with bankruptcy or of short sale, foreclosure,
charge offs and collections. So it does work both ways. Unfortunately,
most of the time we're scratching our heads and saying,
I don't know why the scores are so low.
Speaker 3: These a simulator to figure out we're going to happen.
Speaker 1: We do. We have an awesome credit reporting agency called
Smart Credit that we've partnered with them. There's you know
everyone talks about AI, Well, this credit repeat it's called
a smart credit for a reason. The credit report does
exactly what you're what you're talking about. It can analyze
all of your data and make some projections based upon trends.
If you paid this much, you're going to get this
jump and they actually have paydown dates so or not.
Within each billing cycle, there are certain days that will
give you, you know, more bang for your buck. So
if you're going to pay off a card paid off
in between these three days, it's called the best paid out. Yeah,
it's really it's it's really powerful. So good thing like yeah,
but you know, and I always say this too, especially
for for the younger generations. Uh, in today's world, they
have access to so many free, free technologies, softwares, mint
dot com. You've heard me mention this company or uh,
it's a great way because people don't they don't look
at all of their finances, expenses and budgets. They know
they get paid and they hope at the end of
the month there's enough money left over to make it
to the next paycheck, but they don't look at at
at an at an analysis of your expenses. Again, where's
the money going to come from. We're basically all on
a fixed income, So any additional monies that we're going
to you know, start this deat elimination process is going
to come from hutting expenses. Most people have no idea
what I mean, they know, Okay, I spend money on gas.
I spend money on groceries. But did you ever really
analyze it and look at it and say wow, If
I didn't stop at the convenience store every single day
to and from work, I would save myself three hundred
and forty dollars a month. If I cut all my subscriptions,
I would save one hundred and sixty bucks a month
if I did so. There are ways to cut expenses,
you just have to be aware of what those expenses are.
Speaker 3: Let me ask you this, is there a free service
or a nearly free service available that can look at
all your cards and list all your subscriptions and how
you can get rid of them.
Speaker 1: There are so being able to figure that out where
you know how you're paying for the subscriptions. There are
a couple of free things that people can do. You
can check your Apple subscription, your Google subscriptions. That's a
great way to figure out what subscriptions are there. But
then if you have Netflix, Spotify, Hulu, Xbox, Roadblocks, pH
four P one, you're paying for them somehow. So take
a book at your statements, credit card statements, bank statements,
figure out what you're paying for and then eliminate them,
and again you don't have to eliminate them all, or
maybe eliminate them all for the for the time and
duration that you're in this dead elimination program, and then
the ones back that you really really miss. But cutting
expenses is really the only way without taking a short
term loan. But even if you're going to take a
short term loan, figure out what your expenses are every
single month, look at a three or four month trail
trailing and figure it out what can I cut? And
people are always the here's the good news. People are
always surprised at how easy it was once they took
the first step, once they got some momentum under their
bell and they started doing it. They're every single day
we hear the same thing from our clients. I should
have done I should have done it six months ago,
I should have done it three months ago. I should
So start the process. Take a look at your expenses,
put a household budget together. Figure out how you're going
to eliminate debt in twenty twenty five, specifically credit card debt.
The other debts are kind of like, we have to
have them right. You have to buy groceries, you have
to buy gas to get the work. You have to
pay your electric. You have to pay natural gas. However,
you heat your home the energy. But most of the stuff,
if we're going out to eat, if we're stopping for drinks,
if all the recreation and leisure stuff, that's where you
have to start. You know these cuts for sure, agreed?
All right?
Speaker 3: Hey, oh it's always a pleasure. Just tell us again
where we find you. How we connect with you on
the web.
Speaker 1: Easy enough. Just go to better qualified dot com. All right.
Speaker 3: Links in the show notes to this interview on Financial
Survival Network dot com. We asked when you're there, please
sign up for your free newsletter, as over sixty five
thousand of your fellows FSN community members have. If you've
got a question for Paul myself, shoot me an email
klatcarrielts dot com. Paul, we'll talk to you again real soon.
Speaker 1: Thanks, Carry, have a great day.
Speaker 2: Thanks for listening to Carrie Letz's Financial Survival Network your
solution to today's trying times. For the latest, go to
Financial Survivalnetwork dot com. Financial Survival Network
Speaker 1: Now more than ever