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America's Credit Is Breaking - Paul Oster #6367 · Financial Survival Network

• 0:00
  Speaker 1: We're going to be doing a live stream that I
• 0:02
  Speaker 1: think you're definitely going to want to listen to watch.
• 0:06
  Speaker 1: It's going to be on February eleventh at noontime. If
• 0:11
  Speaker 1: you want to attend that, you want to notify us,
• 0:13
  Speaker 1: we'll get you the invitation.
• 0:15
  Speaker 2: You are listening to Carrie Leutz's Financial Survival Network, where
• 0:19
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• 0:42
  Speaker 1: And welcome. You are listening to the Financial Survival Network.
• 0:47
  Speaker 1: I'm your host, Carrie Lutz. And well, the holidays are over,
• 0:52
  Speaker 1: the new year has come, and the holiday hangover, the
• 0:56
  Speaker 1: holiday debt hangover is just getting started. And well, our
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  Speaker 1: good friend Paul Loster from Better Qualified is with us now.
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  Speaker 1: And Paul, what t is different about this holiday hangover
• 1:14
  Speaker 1: season than most?
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  Speaker 3: Well, as you know Kerry, again, you and I have
• 1:19
  Speaker 3: probably had this very same discussion for the past. It
• 1:22
  Speaker 3: could be five years or more. I think time is
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  Speaker 3: He's crazy. But this year, look, we've as a country,
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  Speaker 3: as an individual, as a world, We've never been in
• 1:35
  Speaker 3: this geopolitical economic environment ever before. And I don't care
• 1:41
  Speaker 3: what the stock markets are doing. I don't care about
• 1:44
  Speaker 3: tariffs or anything like that. What we see are the
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  Speaker 3: average everyday consumers are definitely starting to drown in their debt.
• 1:54
  Speaker 3: They're not treading water anymore. The early canaries and the
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  Speaker 3: coal mine are always credit card delinquencies, auto delinquencies. Then
• 2:02
  Speaker 3: you have your pre foreclosures, mortgage lates are coming in,
• 2:07
  Speaker 3: so all of those signs are now pointing towards again
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  Speaker 3: the average consumer is drowning in their own debt. And
• 2:14
  Speaker 3: when you have the cost of living, this crazy stubborn inflation,
• 2:20
  Speaker 3: all of these things and now weakening job market. All
• 2:23
  Speaker 3: of these things are going to add up sooner than later.
• 2:26
  Speaker 3: And you know, they do a great job at spinning
• 2:31
  Speaker 3: it so it doesn't look as bad as it is.
• 2:33
  Speaker 3: Again in our day to day life, we see consumer struggling.
• 2:38
  Speaker 3: So going into the holidays, there were surveys out there
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  Speaker 3: that said over eighty percent of consumers we're already thinking
• 2:46
  Speaker 3: and conceding about using credit cards to get them through
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  Speaker 3: the holidays. I think that number went well into the
• 2:53
  Speaker 3: ninety percentile. And when you now add in these buy now,
• 2:58
  Speaker 3: pay later programs, I think we're in trouble, you know,
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  Speaker 3: moving forward, it's starting to come home and starting to
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  Speaker 3: hit them very, very hard in the pocketbook and the
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  Speaker 3: wallet because now they have to pay for these things,
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  Speaker 3: and it could have you know, a lot of consumers
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  Speaker 3: make the mistake of using fuzzy mental math. Yeah, I
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  Speaker 3: think I'll be able to make four payments of seventy
• 3:20
  Speaker 3: five dollars moving forward. But could they really do that
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  Speaker 3: while paying the minimums on all their other credit cards,
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  Speaker 3: while paying more for every tank of gas, for every
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  Speaker 3: grocery run. The cost, you know, the cost of living
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  Speaker 3: has just spiraled out of control and the income has
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  Speaker 3: not adjusted accordingly. So we're in trouble.
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  Speaker 1: Yeah, yeah, I tend to agree with you. And you know,
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  Speaker 1: when I was a kid, I was on the buy now,
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  Speaker 1: pay never plan.
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  Speaker 3: Well, listen, and again, I don't know how long these
• 3:57
  Speaker 3: companies are going to be around because they're default rates
• 4:01
  Speaker 3: are also spiraling out of control. So the big dogs
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  Speaker 3: affirm Klarna, you know, their year over year defaults are
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  Speaker 3: you know, rising exponentially. So what ultimately happens here and
• 4:18
  Speaker 3: the other thing is consumers don't realize that these buy now,
• 4:22
  Speaker 3: pay later programs, which all you have to do is
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  Speaker 3: prove that you're not a bot. You click and I'm
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  Speaker 3: not a robot, and you're going to get approved almost instantly.
• 4:31
  Speaker 3: And what happens is every time you use one of
• 4:35
  Speaker 3: those payment plans, they now get reported on your credit.
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  Speaker 1: Yeah I heard that.
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  Speaker 3: Yeah, so even if you make all the payments on
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  Speaker 3: time and complete the loan, opening up all of these
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  Speaker 3: new accounts in a short period of time is damaging
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  Speaker 3: to your overall credit. The fight Go scoring model does
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  Speaker 3: not like to see lots of new open accounts in
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  Speaker 3: a short period of time. What happens is that the
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  Speaker 3: scoring model says, why does Kerry Lutts need access to
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  Speaker 3: all of these new lines of credit? And again it's scary.
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  Speaker 3: It drops the score. Yeah, it drops the scores. And
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  Speaker 3: now if they actually start to make late payments, it
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  Speaker 3: becomes even worse.
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  Speaker 1: Yeah, yeah, well late payments are really bad.
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  Speaker 3: Huh yeah. Listen, you know, people again they don't realize.
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  Speaker 3: You know, there's there's five factors that go into the
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  Speaker 3: scoring model. Nobody knows the exact the exact formula and
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  Speaker 3: algorithm But what we do know is payment history is
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  Speaker 3: number one, and rightfully so pay all your bills on time.
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  Speaker 3: You're going to have a higher score than someone who
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  Speaker 3: doesn't pay all their bills on time. But what consumers
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  Speaker 3: need to realize when I speak to someone they say, yeah, well,
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  Speaker 3: you know, my credit's pretty good. I have some late payments.
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  Speaker 3: I already know they're probably in the five hundred, if
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  Speaker 3: not lower, because one thirty day lay payment can easily
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  Speaker 3: drop your score fifty points. Now, if you're a younger
• 6:09
  Speaker 3: person with a thin credit profile, that damage could be
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  Speaker 3: even worse if you max out a credit If you
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  Speaker 3: max out a credit card by one dollar, you could
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  Speaker 3: easily lose fifty points if you go over. The second
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  Speaker 3: factor for our credit scores is called your utilization ratio. Income,
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  Speaker 3: fortunately or unfortunately is not a factor. The Fyco scoring
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  Speaker 3: model doesn't care how much money you make. What they
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  Speaker 3: care about is how much money, how much credit you
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  Speaker 3: have access to, and how much of that you're using.
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  Speaker 3: So to give you an example, let's say you have
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  Speaker 3: two credit cards and the credit limits are five hundred
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  Speaker 3: bucks apiece. You have a total credit limit of one
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  Speaker 3: thousand dollars. The second you go over. If your balances
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  Speaker 3: go over three hundred bucks, your sures are going to
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  Speaker 3: start to come down, and they're going to come down fast.
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  Speaker 1: Mmm. Yeah, and then and then the fund begins huh
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  Speaker 1: yes sir, So all right, so I didn't even realize.
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  Speaker 1: But when you do buy and now pay later, you
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  Speaker 1: don't take possession of the goods till later after you paid, right.
• 7:19
  Speaker 3: No, so unfortunately you you can take the goods right
• 7:23
  Speaker 3: at the point of sale. And these are happening with
• 7:26
  Speaker 3: online merchants and online purchasing. So as soon as you
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  Speaker 3: say that you want to buy a widget on Amazon,
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  Speaker 3: on any online retailer, and they give you the option, Hey, Kerry,
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  Speaker 3: how would you like to pay zero percent and pay
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  Speaker 3: this off in four or five payments, people say yeah,
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  Speaker 3: and literally again, the approval process takes seconds, and then
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  Speaker 3: you get the goods will be delivered. Your widget's coming,
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  Speaker 3: It's going to be delivered in the mail. Now are
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  Speaker 3: you are you really in position? Did you actually sit
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  Speaker 3: down put a pen to paper or did you use
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  Speaker 3: your computer? Can I really afford this? And again, what
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  Speaker 3: happens is these marketing geniuses have created it. They're now
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  Speaker 3: thinking about using buy now pay laters for rent payments,
• 8:16
  Speaker 3: carry rent payments. So that's how does that happen?
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  Speaker 1: That's completely insane here, Well, there should be a law
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  Speaker 1: against this. I mean, I hate to say that I'm
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  Speaker 1: a capitalist, but to me, you know, it's no better
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  Speaker 1: than a kid, an eighteen year old kid or seventeen
• 8:39
  Speaker 1: year old kid taking out the student loans. You know,
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  Speaker 1: they have no idea of the potential future impact of
• 8:49
  Speaker 1: those loans, do they. Now, it's exactly right.
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  Speaker 3: Very unfortunately, very few families actually sit down and have
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  Speaker 3: that conversation before they actually apply. Because what happens, and
• 9:01
  Speaker 3: it happened to me, you could get approved for above
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  Speaker 3: and beyond what your expenenses actually are, the cost of tuition, housing, books,
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  Speaker 3: throw that all in and let's say it's, you know,
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  Speaker 3: for an easy loan number conservatively, let's say it's twenty
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  Speaker 3: thousand a year. You might actually get approved for thirty
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  Speaker 3: thousand dollars a year. Yeah, sure, and you and your
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  Speaker 3: parents might say, hey, we're going to take it because
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  Speaker 3: at five percent interest or seven you know, that's a
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  Speaker 3: good you know, that's a great interest rate, and I'm
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  Speaker 3: going to take that money. Okay, you graduate, and your
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  Speaker 3: hopes and dreams don't materialize and you don't get the
• 9:44
  Speaker 3: job that you wanted. And the deferment on student loans
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  Speaker 3: is only six months, and that's that's less than a
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  Speaker 3: blink of an eye. So now you have, as we
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  Speaker 3: see right now, tens of millions of student loan borrowers
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  Speaker 3: who can't pay the loans back, right, And that's the
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  Speaker 3: situation now, Like you're saying, should it, should we change
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  Speaker 3: the process? Absolutely? It's like health care and insurance. How
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  Speaker 3: how did we even get here?
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  Speaker 1: How?
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  Speaker 3: How has the cost of tuition exceeded every other you know,
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  Speaker 3: marker in the economy. It's just it's out of control.
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  Speaker 3: But we have student loan lenders who are willing to
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  Speaker 3: pay those exorbitant costs, but at the end of the day,
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  Speaker 3: who can really afford it? You know, twenty five percent
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  Speaker 3: of the overall student loan portfolio is either in long
• 10:37
  Speaker 3: firm delinquency or they've defaulted.
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  Speaker 1: Yeah, unbelievable.
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  Speaker 3: And so Belie, there's good news is the good news
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  Speaker 3: is this carrier. And again I've said it on your
• 10:48
  Speaker 3: show numerous times, it's never too late to put a
• 10:51
  Speaker 3: plan in place to figure this out. No one goes
• 10:54
  Speaker 3: to debt or prison. But debt is something you have
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  Speaker 3: to deal with squared away head on. You can't just
• 11:00
  Speaker 3: bury your head in the sand and hope for the best.
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  Speaker 3: No one's going to swoop in and save you. It
• 11:06
  Speaker 3: just doesn't happen. So how do you get out of debt? Well,
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  Speaker 3: it takes some planning, It takes discipline, It takes commitment.
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  Speaker 3: Unless you're going to get a windfall of an inheritance
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  Speaker 3: or you know where's the money going to come from,
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  Speaker 3: we have to cut expenses and that takes again discipline
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  Speaker 3: and commitment. And I'm not saying you have to do
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  Speaker 3: it for the rest of your life, or maybe you do.
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  Speaker 3: But right now, if you have any credit card debt
• 11:32
  Speaker 3: at all, you have to put a spending freeze, a
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  Speaker 3: new debt. Don't spend another dime on anything that's not essential,
• 11:42
  Speaker 3: and don't blore the lines. Essential is gas and groceries.
• 11:47
  Speaker 3: Essential might be gas and less groceries or different groceries
• 11:51
  Speaker 3: than you normally buy. Yeah, noore call foods right right,
• 11:56
  Speaker 3: a skit. You can skip hotlier than thou foods. All right,
• 12:01
  Speaker 3: So Paul, looking ahead here for the year. You know,
• 12:06
  Speaker 3: here all these economists saying things are getting better, the
• 12:10
  Speaker 3: economy is improving, incomes are going up.
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  Speaker 1: What effect do you think that's going to have on
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  Speaker 1: the credit out there? You think that's going to hurt
• 12:19
  Speaker 1: your business?
• 12:20
  Speaker 3: No, absolutely not so people. You know, I've been doing
• 12:23
  Speaker 3: this for twenty one years, and the market goes up,
• 12:26
  Speaker 3: the market goes down, it's stays stagnant. It doesn't really
• 12:30
  Speaker 3: matter because you know, your personal finances are so you know,
• 12:35
  Speaker 3: different than the macro economy and the global landscape. So
• 12:41
  Speaker 3: what's happening right now is the pressure from very very
• 12:46
  Speaker 3: stubborn inflation the cost of goods and services. You know,
• 12:51
  Speaker 3: it's we're just not keeping up with the increases in
• 12:56
  Speaker 3: what it costs for us to live, so that that
• 13:00
  Speaker 3: the cost of living adjustment for our personal finances has
• 13:05
  Speaker 3: just not been able to keep up with it. So
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  Speaker 3: then people they get on that slippery slope, and debt
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  Speaker 3: is the most slippery slope there is, so they start,
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  Speaker 3: you know, their credit card balances start going up, which
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  Speaker 3: drives their credit scores down, which then winds up costing
• 13:22
  Speaker 3: them more for everything else. Yeah.
• 13:25
  Speaker 1: So, so really it doesn't matter what's going on in
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  Speaker 1: the broad economy, even if the economy is improving, and
• 13:31
  Speaker 1: their incomes go up, their debt went up, and their
• 13:35
  Speaker 1: credit score is going down. So they want that new
• 13:38
  Speaker 1: house or whatever it is, it's either going to cost
• 13:41
  Speaker 1: them more or it's going to be unobtainable exactly.
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  Speaker 3: So what you just said, you know, your credit score
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  Speaker 3: is going to cost or save you money every single
• 13:49
  Speaker 3: day for the saane things that we need, you know,
• 13:53
  Speaker 3: all of the things being equal, if you have a
• 13:55
  Speaker 3: lower credit score, you're going to pay more because in
• 13:57
  Speaker 3: the finance world, it's all tiered based pricing, So people
• 14:01
  Speaker 3: that have lower credit scores are going to pay more
• 14:04
  Speaker 3: and more and more. And I don't know, you know,
• 14:07
  Speaker 3: how quickly if there's a short term situation where you know,
• 14:14
  Speaker 3: they're talking about this credit card interest cap and I
• 14:18
  Speaker 3: don't know if that was just food for fodder, but
• 14:21
  Speaker 3: banks get very very sketchy, very very quickly. So do
• 14:25
  Speaker 3: they start to tighten, you know, if they start to chaten,
• 14:30
  Speaker 3: you know, the credit market, then it'll have the reverse
• 14:34
  Speaker 3: impact of what people thought it was going to be
• 14:37
  Speaker 3: a good thing. But what will happen is if you're
• 14:40
  Speaker 3: below a seven hundred credit score, you're not even going
• 14:43
  Speaker 3: to get approved. So then it's going to cut out
• 14:46
  Speaker 3: a tremendous amount of people who want to buy a
• 14:49
  Speaker 3: mortgage and right now they could afford it, but they're
• 14:53
  Speaker 3: not going to get approved. There'll be no programs available
• 14:57
  Speaker 3: for people unless you have an a rating for your
• 15:01
  Speaker 3: for your personal credit.
• 15:03
  Speaker 1: Gotcha, gotcha. So so really it's going to make credit
• 15:07
  Speaker 1: harder to obtain. Well, they must know this.
• 15:10
  Speaker 3: Right, yes, yep. No, the you know the average where
• 15:15
  Speaker 3: they find out when they actually go to apply, and
• 15:18
  Speaker 3: so they find out too late. So really our goal
• 15:23
  Speaker 3: is to try and get the message out there. And
• 15:25
  Speaker 3: it's it's like insurance. It's like asking for an umbrella
• 15:29
  Speaker 3: when it's raining. You have to have this in place beforehand.
• 15:34
  Speaker 3: You can't you know, find out in the in the
• 15:38
  Speaker 3: eleventh hour and the ninth inning that you're not going
• 15:42
  Speaker 3: to get approved because there's no overnight fixes for credit.
• 15:45
  Speaker 3: It takes time to rebuild, it takes time to manage it,
• 15:49
  Speaker 3: It takes time to demonstrate that you are credit worthy,
• 15:53
  Speaker 3: especially if you had hiccups in the past and you
• 15:57
  Speaker 3: and I spoke earlier today. It's not not always just
• 16:01
  Speaker 3: about mismanaging finances. There are life events that happen. The
• 16:06
  Speaker 3: number one cause for bankruptcy is still health, right, people
• 16:10
  Speaker 3: get sick, People get sick and they have to claim bankruptcy.
• 16:15
  Speaker 3: That's still the number one reason to this day loss
• 16:17
  Speaker 3: of jobs. So look at the job market, look at AI.
• 16:20
  Speaker 3: You know, the corporations are laying off people left and right.
• 16:25
  Speaker 3: So all of those things have an impact on the
• 16:27
  Speaker 3: average person who unfortunately didn't have the resources in place,
• 16:33
  Speaker 3: and they you know, they have to crash. So it's
• 16:37
  Speaker 3: not always about mismanaging. It's not always about the economy.
• 16:40
  Speaker 3: It's not you know, the personal impact of things that happen.
• 16:44
  Speaker 3: Life events are probably the number one cause for people
• 16:48
  Speaker 3: to you know, mispayments and I've said this before on
• 16:53
  Speaker 3: your show. A one times thirty day ly payment can
• 16:56
  Speaker 3: cost you fifty points. So you could have been in
• 17:00
  Speaker 3: the arena to get approved with a decent interest rate
• 17:04
  Speaker 3: and you lose fifty points. If you go over your
• 17:08
  Speaker 3: credit limit on a credit card by one dollar, you
• 17:11
  Speaker 3: could lose fifty points. A medical collection pops up on
• 17:15
  Speaker 3: your credit report, you could lose one hundred points. So
• 17:19
  Speaker 3: you know, people have to be aware and be aware
• 17:23
  Speaker 3: of what's happening with their credit. And I'll mention this
• 17:28
  Speaker 3: again because it's worth mentioning. One of the good things
• 17:31
  Speaker 3: that came out of the pandemic was our ability to
• 17:35
  Speaker 3: check our credit at Manualcreditreport dot com. You can now
• 17:39
  Speaker 3: check it every week BC. Before COVID, you could only
• 17:45
  Speaker 3: check it once a year, So now you could literally
• 17:49
  Speaker 3: monitor your credit for free. By the way, and this
• 17:52
  Speaker 3: is not like a credit karma situation or anything crazy
• 17:55
  Speaker 3: like that where you're going to get telemarketed to death
• 17:59
  Speaker 3: spamming text messages. This is the government's website host it
• 18:05
  Speaker 3: on the by the FTC and those are good reports
• 18:11
  Speaker 3: and good information, So you can go there once a
• 18:13
  Speaker 3: week and check it. And you should be looking for
• 18:16
  Speaker 3: red flags of identity theft. If there are addresses that
• 18:19
  Speaker 3: are on that report that you don't recognize, that's the
• 18:22
  Speaker 3: number one red flag for identity theft. So look at
• 18:26
  Speaker 3: your reports and figure out how you can get your
• 18:29
  Speaker 3: scores as high as you possibly can.
• 18:32
  Speaker 1: I can't agree with you more. So, Look, we're going
• 18:34
  Speaker 1: to be doing a live stream that I think you're
• 18:37
  Speaker 1: definitely going to want to listen to watch. It's going
• 18:40
  Speaker 1: to be on February eleventh at noontime. If you want
• 18:45
  Speaker 1: to attend that, you want to notify us, we'll get
• 18:48
  Speaker 1: you the invitation. Just send an email to kl at
• 18:52
  Speaker 1: Carrie LUTs dot com. That's kl at Carrie LUTs dot com.
• 18:56
  Speaker 1: We'll get you up there the meantime. Paul, just to
• 18:59
  Speaker 1: give us your web address and how we connect with
• 19:03
  Speaker 1: you on the web.
• 19:04
  Speaker 3: Please, Yeah, that's the easiest way to find us. And
• 19:07
  Speaker 3: it's better qualified dot com. Again, it's better Qualified dot com.
• 19:12
  Speaker 3: As always, we provide a free credit consultation and analysis.
• 19:16
  Speaker 3: We can tell you exactly what to do and what
• 19:18
  Speaker 3: not to do and allow our expertise and twenty over
• 19:24
  Speaker 3: twenty years of guidance to help you love it.
• 19:29
  Speaker 1: And that's why we're having you on. That's why we're
• 19:31
  Speaker 1: doing this. All of you listening who are on my
• 19:35
  Speaker 1: email list, you'll get a notification of it. I don't
• 19:38
  Speaker 1: like to bog you down with too many, but I'll
• 19:40
  Speaker 1: send you at least one within forty eight hours of
• 19:44
  Speaker 1: when it's going to happen. And then you can just
• 19:46
  Speaker 1: click into it and sign up. And I think it's
• 19:50
  Speaker 1: really going to be informative. Paul's going to be talking
• 19:53
  Speaker 1: about things you could do without him right now immediately
• 19:58
  Speaker 1: to raise your score fifty point points almost immediately. I
• 20:01
  Speaker 1: think it'll be real helpful. Paul, we will talk to
• 20:04
  Speaker 1: you in a week. Thank you so much for coming
• 20:07
  Speaker 1: on and we will be in touch.
• 20:10
  Speaker 2: Thanks for having me back on Kerry, Thanks for listening
• 20:13
  Speaker 2: to carry Letz's Financial Survival Network, your solution to today's
• 20:18
  Speaker 2: trying times. For the latest, go to Financial Survivalnetwork dot com.
• 20:22
  Speaker 2: Financial Survival Network now more than ever,