EP 568 – Busting Down Credit Myths And Other Falsehoods In The Industry With Merrill Chandler

NCS 568 | Busting Down Credit Myths

NCS 568 | Busting Down Credit Myths

 

While there are many good people in this industry, there are still some out there who are willing to take advantage of us. Especially in the credit world, there are so many schemes that go undetected. That is why you have to know what you’re getting yourselves into before jumpstarting on anything. Scott Carson has Merrill Chandler from Get Fundable in this episode to discuss some credit myths. He breaks down even those unthought-of and unbeknownst falsehoods in the industry, including credit lines, debt consolidation loans, and other credit misconceptions. Learn about some tips and tricks to overcome these myths. Let Merrill’s guidance help up your fundability game.

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Busting Down Credit Myths And Other Falsehoods In The Industry With Merrill Chandler

I’m excited to be here. As always, I’m jacked up to have our brother from another mother. Our good buddy, Merrill Chandler, is joining us here on this episode. We’re excited that Get Fundable is a sponsor of the show. I’m excited to see him out here. He is joining us from Salt Lake City. Merrill’s coming off from his class, his two-day Funding Hackers Bootcamp. Are we calling it Funding Hackers or are we calling it something else?

It’s Get Fundable. It’s the Funding Hackers private Facebook group. It’s the Funding Hackers who we’re supporting, but it’s still the Get Fundable like in everything, the book, the podcast. It drives getting fundable and we want everybody to be able to get fundable.

If you have not heard him on one of our episodes before, he is the author of The New F* Word. I encourage you to go out there on Amazon and grab your copy of it. It is the credit Bible. He is the Messiah out there of sharing and breaking unthought and unbeknownst myths that are falsehoods in the industry. It is a great book, a must-read.

I’m giving it out free to people who read Scott’s blog. If you go to GetFundableBook.com, it’s free. You cover shipping, I got the book for you. You can come and check it out because as a high-performance fundability coach, I’m getting rave reviews and I’m proud. I’ve got to tell you, Scott. My mom calls me up and leaves me a message because I couldn’t take the call. I called my mom back. My dad is with her. She’s like, “Merrill, I’m proud of you.” I was like, “Thank you. I love you.” She was like, “I could understand your book.” It was a mission accomplished because it’s readable. I did tell you once upon a time, Brad, my business partner, has software that reviews all of the languages. I was writing at postgraduate, grade sixteen level. We got it down to a lower than that. My mom was thrilled. It’s not simplistic at all, but complex ideas, being able to deliver those. I’m thrilled that people are eating it up. Take a picture of your book. Take a selfie with the book and send it to me. I’d love to know your comments.

Make sure you get it, take a picture, send it and tag him in it. He’d love to hear your comments for sure.

Put it on the Get Fundable Facebook page.

It’s hard to believe that the year is already a tenth of the way. A lot of people have had that post-Christmas, New Year’s blues because they’ve got a credit card statement and they’ve got other things that are sent to them. I’m seeing this pop-up and it becomes rampant on Facebook and become rampant in other places of people reaching out, “Let us help you fix your credit or credit repair your stuff. Let me help you with a credit consolidation aspect.”

They say, “We’ll help you consolidate your debt.” Then you’re thinking that it’s a debt consolidation loan, which is helpful if you do the right kind. There are some push and pulls when it comes to debt shifting strategies. An installment loan is always better than high-revolving account balances if you don’t go charging up your account balances again. This credit consolidation or debt consolidation houses is pure evil. We’ll be doing on my podcast that they are liars, cheaters and thieves because they make it sound like, “We can almost half your credit card payment,” but they don’t tell you any of the truth.

The truth is that the creditors, your lenders who have lent you money if you do not pay as agreed, you will get a 30, 60, 90-day late fee. It may not go to charge off, but if you have one of these debt consolidators come to you or go to your lender and say, “Can we reduce the interest and/or the payment? Can we do 70% of the payment?” Most of the time, lenders will agree. What the debt consolidators don’t tell you is that if they’re agreeing to that, you’re also going to get either a notation on your profile that says, “In credit counseling,” which is a debt that hits your profile as much as a bankruptcy does, a Chapter 13 Bankruptcy, or it’s going to go through and it’s going to tell you that you are not paying as agreed, so you’ll go 30, 60 or 120 days late.

NCS 568 | Busting Down Credit Myths

Busting Down Credit Myths: An installment loan is always better than high revolving account balances.

 

It could go out as a total before charge off of 180 days late. If you have a rolling charge going 180 late, you’ve butchered your credit profile. You completely ruined it and you thought you were doing a solid by trying to consolidate the debt. Using a consolidation house or a debt consolidator is no bueno. Beg, borrow and steal from your family and friends if you need to, but do not use a debt consolidator if you have any interest in keeping your credit profile in decent shape. The way and the strategies to do is to obtain a loan. Those loans are tricky. When you are doing a loan, if you’re paying your credit card at 4%, a $10,000 credit card may take you 23 years to pay off because you’re paying 4% of the total plus interest.

If you get a loan, you’ve got to be prepared. If you’re having trouble making payments of the credit cards, they’re going to take that entire debt, then they’re going to put it down to three years or maybe five years. You’ll pay less interest, but you’re going to have a higher payment over time. The best thing to do is, in the way back machine to November 2019 when we had our episode, don’t go into consumer debt under any circumstance if anything’s at risk in your financial future. We are mid-February 2020 and we’re looking at going, “What am I going to do?”

They talk about like, “We’re going to take all your credit card payments and cut it in half and put it into one payment.” They’re going to divvy up who gets that payment. It’s going to be partial payments and if it has three trade lines doing that, it’s going to show negative on all three of those.

You’re going to get delinquent ratings on every single account that you include in that. I was susceptible to this back in the day until I read about it. I was like, “I don’t want to do that.” For a very long time, I had good credit, then I had an exciting time in the big house. I didn’t have any credit and I’ve rebuilt an entire profile. The whole point of this is to create a manageable and intelligent way of having strategic debt and then only using debt to make money. That’s the funding game where you use other people’s money to leverage, fix and flip, buy a note, create and convert non-performing to performing. Anything that will make you money is debt instrument worthy. To get those debt instruments, we want to build our personal borrower profile so that we have the goose that keeps laying golden eggs. There is a strategy to it. There is a way of making sure that you choose wise and intelligent choices. We’ve got to know what we’re getting ourselves into because everybody’s willing to take advantage of us. Many people out there are no bueno.

Literally, the credit card companies were reinvigorating their budget because I’m getting hammered with pre-approvals in the mail.

That’s the other thing, don’t accept offers. Don’t put a code in, promotion code or activation code, whatever they’re saying, because they’re only phishing. They’re looking for susceptible borrowers and you’re showing yourself as a rookie. They’ll take advantage of you as a rookie borrower. One thing that I would like to cover that most people don’t know when it comes to settling a debt. If you’re something behind, you’re going to take a hit. I do recommend that if you did a collection on how to charge off something, if you settle it, make sure that you ask the lender to say, “Settled in full” and not “Settled for less than full balance.” Those are two different indicators that get graded differently after the fact. That less than full balance triggers another negative indicator. We’re going to have one more thing that goes sideways on us because we’ve been in debt or we had these problems.

That’s a good thing because they want their money or a portion of it and they are picking a button or two of what they say once you get that payment in. Should you send wine?

We send wine to clients who hit their funding targets. I have a little button on my database that says, “Congratulations.” When you click the button, it pulls up Wine.com and it goes to the champagne pages. My team clicks a button and it sends a nice little box out to the client to be able to celebrate.

There was a question about those debt consolidations. A lot of people, every month they’re like, “I’ll pay $75. I’ll pay $100. This other one is $80. I’ll pay $125 for this one. This other one is $200. I’ll pay $250.” What’s the best way? Was it better for them to look at which ones have a higher percentage? You always say, “You want to be down below 40% of your credit balance or available credit of your limit.”

There are two strategies out there. One’s called the waterfall or the cascade, but we don’t use that term. We have a funding cascade that we use to making traffic. If you’re looking to create fundability, we encourage people to pay down their tier-one cards first to 40%, then tier-two, tier-three, then tier- four cards. Sometimes, you may be paying a little higher or a little more in interest. If it’s purely a financial decision, if you’re rock bottom and you can’t do a thing, then you want to pay down the higher interest rates. That will lower your interest costs over six months to two years to get out of 27 years of debt because you add more and more payments to it. Those are the two models. It depends on what your values are or what your goal is.

If you’re trying to save money because we haven’t made the best choices when it comes to our ultimate long-term goals, then no harm, no foul. Look at your rate of return and look at where you’re paying the most interest. If you’re looking for fundability, there’s more to it. Our software does all of this, but I’m going to tell you, all tier 1 to 4 at 38%. Once you are at 38%, you can still use those same priorities from tier 1 to 4. The next threshold as we teach, you want to go to 20%, then ultimately the 7%. After that, there are the Bootcamp tricks that we do to start showing off to the lenders and FICO’s algorithm. I’ve never used that term before.

NCS 568 | Busting Down Credit Myths

Busting Down Credit Myths: The funding game is where you use other people’s money to leverage, fix and flip, buy a note, create and convert non-performing to performing. Anything that will make you money is debt instrument worthy.

 

This was a scenario that a friend of mine ran by me. I was like, “This is a good question to ask Merrill.” He’s got a vehicle. He’s got a truck that he’s had for years. It is almost paid off. His balance is $2,000 below the Blue Book Value of $20,000 to $25,000. His truck is low mileage and stuff like that. He was curious if it would hurt his credit because he’s afraid that 3 or 4 months after listing, he’s going to lose that trade line of having the vehicle and he’s got this higher interest rate. Would it be beneficial for him if he can qualify to go get a new loan, pull some cash out, do a new loan on the truck and use that to pay off the higher ones? Is it derogatory to pay off? A refinanced truck is always going to be a higher interest rate than a brand-new purchase?

It depends on whether or not you got it at your credit union or bank that has a relationship with you versus one of the finance companies like Toyota Motor Credit, Ford Motor Credit, etc. Generally speaking, the lower interest rates are also countered with rebates, which equals the same amount if you have a paper. Is this loan over 24 months old?

I think it is. I think he’s had it for four years at least.

I always bring that in consideration because one of the things that we talk about is for the scoring of installment loans, including auto loans, there’s a balance factor contribution to your score and there is a term. If it’s under 24 months old and it is above 50% balance, you’re getting both score contributions. If it has been over 48 months, then he’s flat-lined on his contribution to the term. That’s one more consideration to throw in a refinance. If he does have equity in it, you’re already losing points. There is no derogatory thing. Is he above 50% on the balance?

I think he’s at $2,500.

Refinance and get rid of the old one for fundability purposes. If he can pick up that extra cash or harvest some equity out of it, in my world, that’s a bonus. That would be a big deal for being able to help his ultimate fund by getting that tradeline back on there as an auto loan.

He told me he’s got it to Chase Bank. He didn’t do the 0%. He’s at 5.5% or 6%. It’s not bad. He didn’t need to do the 0% for 72 months and paying all that interest on the backend anyway.

That’s what I was referring to. He probably got to take advantage of the rebate because the 0% would have been with Ford Motor Credit or Toyota Motor Credit, etc. If you took the rebate, it lowers the price but it’s exactly the same amount of savings. If you have a paper view, you will qualify for that 0% interest, they’re trying to move product. That’s why they’re tier-four. They’re no different than the equipment leasing. They want to make a little bit of money, but their profit is in moving product. It is the same with the auto industry, but that rebate will equal the amount that he saved better than he would have to finance. It feels like he’s paying interest, but it depends on how much lower the price of the vehicle was.

I’ll be glad to pass it on to him because he was curious about that. He’s like, “I’ve got this truck with some equity in it. Is this going to hurt me?” I was like, “I don’t think so. You’re going to lose a tradeline in a few months, six months roughly, I guess.”

Normally, that’s a 10% to 20% point hit if that’s his only vehicle. We want to make sure that he refinances that out, especially since he’s flat-lined on both. That thing is not giving him any juice other than having the notation for an auto loan or vehicle loan.

He was also considering putting the $450 a month payment towards his credit cards and other things towards his savings too. I was sure when he dropped off it’s going to hit the score a little bit because he’s the one that got that tradeline for sixteen months or so if he was refinanced.

Is it cash or fundability? A strategic debt is important for fundability and that’s why we’re going to leverage other people’s money to make money if he’s trying to get out of consumer debt. Picking one fundability a thing out of $70 will help, but will that $450 towards credit cards or other things be better?

That’s the thing, getting knocked down by those higher interest rate credit card balances getting below 38%. People are always looking where can they find money and where can they put things to work? We talked a lot of people that they’ve based their bills on the fact that they were working extra hours or overtime. They were included in a salary. As things tighten up, people get laid off. They’re not making any and their budget is not working effectively.

We started on that. I did an entire episode on the value of a team member and of the employee here versus going somewhere else. I always taught my team, “I have moderate salaries and high bonuses. If you’re making things happen, I want you to be able to have a win.” Then I scold them and I’m like, “I don’t care if you have two years of bonuses, do not build your budgets to include the bonus. Do not live on your salary and then you’re going to buy things out. You put down payments or do whatever you want with your bonus money, but do not build your life on the salary.” I’ll share with you a little bit of what that was because I said, “Your value to me as an advisor, as a team member, as a strategist is more than you would get out there if you went and found a new job or we had layoffs or whatever it was. I want you to be rewarded for being a genius in this business. You’re making more here than you will make out there.” I’ve been called a little generous every once in a while. Wise counsel for both of us because we can’t do it. You’ll end up upside down and you’ve got to go find a job. To anybody who’s out there on a W-2, the longer you’re with an employer that continues to value, train you and raise your salaries, which may not necessarily translate in a new position somewhere else. What are you going to do?

That brings up something here. You don’t want to become a Clark Griswold around Christmas Family Vacation who get a coupon as a bonus.

That is the greatest movie. Mad props for a Clark Griswold reference, that’s the best of all pop culture.

He should be getting the annual bonus instead of getting the Jelly of the Month Club. Let’s talk about something else here. With us having many entrepreneurs, there are many real estate investors out there, especially people that are working a full-time job. They’re working at a job, they started an entity. We need about 24 months or two years of seizing on the LLCs to help you get fundable on the business side of things.

There are two parts to it. The age needs to be 24 to 36 months, depending on the institution before they’ll give you a business line of credit. You can get a business checking account, business credit card, even some loans, but 24 months for a business line of credit. That’s to get in the door, then we establish a relationship. We tell people, “Let’s start this thing at twelve months, but we need to build a relationship for at least twelve more months, so we can cross that finish line.” We’ve already done all the heavy lifting to build a good business lending relationship. You’re absolutely right.

NCS 568 | Busting Down Credit Myths

Busting Down Credit Myths: Beg, borrow and steal from your family and friends if you need to, but do not use a debt consolidator if you have any interest in keeping your credit profile in decent shape.

 

When they go into the bank or they’re applying for a line of credit, should they say that they’re self-employed or they’re employed? I know the answer to this. I know there’s an a-ha thing to this, but a lot of us were like, “I’m self-employed. I’m all excited to be self-employed versus working for somebody.” There’s a big no-no to that.

I had a coaching call with one of our clients about this. There are two things. When somebody says, “I’m still W-2 but I’m starting to kill it out here in my consulting firm or I’m investing in a real estate.” You put on the top line of your application whichever is making more. You are employed by your company if that is making more revenues than you’re making at your W-2. That’s the crossover point. If your W-2 is making more money than your business, you’re still going to fill out your business. You still want to be qualified for fundable entity. That’s where we’re going to focus the juice. People come to me all the time, their QFE or Qualified Fundable Entity isn’t making anything yet but they’re still W-2. I was like, “There is a way to do this in every situation. You prioritize for whatever’s making the most, including which you list on your credit profile.” If the top line is, in my case, CreditSense versus Echelon, then I’m going to order it that way. If Echelon is making more than CreditSense, then I’m going to make my fundable entity, my W-2 stay on top. That’s a powerful way to explain how you prioritize and where you know that you can cross over.

I tell people to stay at your W-2 until you make more money with your fundable entity for at least a year, then start considering whether or not you’re going to be employed only by your QFE. You’re always employed by a company. You’re never self-employed. Remember the QFE for those of you who attended the Bootcamp, those of you read my book, you know that the Qualified Fundable Entity is designed and created to be attractive to lenders. You are employed by it and it is separate from you. You are not your deals. You’re not your company or business. You’re independent of those. In fact, we’re working on building our Fundability app. I’ve got a meeting with some investors. I white boarded me versus the entities, who have the knowledge and where’s the subject matter expertise. It’s selling and getting a consulting contract. I do the exact same thing I teach every single one of our students. You are not your deals, so keep them separate. You’re always employed, whether it’s by an entity of which you have control or one that you don’t have control. You’re always employed. That makes you safe for lenders.

A lot of people struggle with this because I’ve seen this over and over again. I’ve seen it when people are calling me up, “I’ve got to refinance my house but I don’t have enough money to get refinanced. I don’t qualify for a loan because I’ve been self-employed. I haven’t been paying myself first.” I was like, “You’ve got to pay yourself first in some sort of fashion with paying a salary or paying is something that goes into a cashflow going in.” It may not need to be the full salary immediately. If you’re making $8,000 from your W-2, maybe start with $1,000 a month. Start getting that cashflow up.

You’ve got to do something. You cannot be self-employed. For those of you who haven’t gone to the Bootcamp, Scott’s literally casting a skipping stone across a 700-foot lake. There is so much to figure out here and there are answers that every one of us can use. We can implement the second we learn them.

I’m going to throw this out there at you as well. You talked about tier-one credit cards and tier-one lenders. People are starting off going to and building those relationships at those tier-one banks versus a local credit union. If somebody starts off on that stuff, I like the tier-one banks so that I can use them when I’m traveling if I have to go into a bank. Let’s talk a little about that. Are those immediate effects on that stuff if you’ve got to a well-known bank on your accounts or not really?

What are you referring to by immediate effects?

It helped boost things up and have an ease with accounts there versus a local credit union.

I explained this well in the book. The principles of fundability have been generated by many years of experience because we’re pulling in what we’ve learned from the FICO world, from lenders, and from our approval modeling. All these things to establish fundability. FICO doesn’t distinguish between tier-one, tier-two and tier-three banks when it comes to scoring, but a lender who sees tier-one on your profile and sees that you have relationships with those peer banks, then FICO doesn’t care, but all of a sudden we’re attracted to the peer lenders. Chase will take your relationship with Wells Fargo very seriously. Citi’s going to take a look at your bank and go, “I like these guys.”

While this is underwriting software, it’s still salient because what we’re trying to do is I always tease that it’s easier to marry down than marry up. If we have tier-one on our personal profile, then we can go to tier-two and tier-three banks and be like, “I’ll take you. I know you’ll accept me because I’m awesome. Have you seen my profile? It’s gorgeous.” They’ll play ball with us because of tiers matter. It’s a tier class system. I only date supermodels that are financial institutions. That is what we’re saying. We’re establishing a relationship so that others can see that we are playing the game with professional players. FICO does measure if you’re down getting a finance institution, even if you’re going one of these FinTech. The SoFi, Prospers, the Marcus, they’re tagging you with, “He’s slumming now.” They tag us with bad financial reputations, “He’s out with the harlots.” We need to do an entire show of the dating corollaries between building business relationships and the dating part of the world.

I’d be like, “You’ve got three blind creditors,” and then you can flip it over, “We’ll offer this.” We call it the credit dating game.

That would be a great show. That would be fun because there are many similarities. It’s scary. How your wine and dine and romance a lender? It’s identical.

Merrill, what’s your schedule looking like? Are you going to be at a few events?

In fact, we want to announce to your audience our next two Bootcamps, depending on when you see this. It is on March 7th and 8th, Saturday and Sunday and then April 4th and 5th. Our May event may be a Friday and Saturday because the Salt Lake City REIA, Real Estate Investors Association, is hosting it but it’s in Utah. None of the LDS people want to do a giveaway on Sunday, so we may do it on Friday and Saturday. Go to GetFundableBootcamp.com. I will leave for the NREIA Cruise, the National Real Estate Investors Association. I’ve gone on this cruise for a few years now, and meet wonderful people. It’s in the Caribbean. I’m taking a couple of members of my team. Jess and Sky are both going, Bootcamp coordinator and referral partner. It’s a work trip but if you’re going to work, I’ll show you where you should be doing it right here.

NCS 568 | Busting Down Credit Myths

Busting Down Credit Myths: You are not your deals so keep them separate.

 

Everybody, you can find out and sign up for those three different classes on March 7th and 8th, April 4th and 5th, and May 1st and 2nd by going to GetFundable.com/bootcamp.

Also, GetFundableBootcamp.com, both of them will take you there. Get it now and then you can transfer for April because we’ll only post the dates on one. It’s transferrable. It’s an amazing time for us to be able to seriously organize a takedown of fundability. We will discuss the three pillars of fundability. You’ve got to have a fundable personal borrower profile, a fundable business entity, and fundable borrower behaviors. We discuss it all three of those in insane detail.

It is one of the most important classes that you’ll ever take, not only for yourself and your business but your future as well out there. You are going to be in San Diego in April as well for Magnify Your Wealth Summit too?

Yes, we’ll be there. We’ve got some online thing and I’m going to be on Marketing Madness with Tracy. I understand that Tracy is out there, she has other commitments. It’s only going to be me and Juliet.

Merrill, thanks for coming to the Note Closers Show. Have a safe trip. Watch out for that Coronavirus. Make sure you use plenty of hand sanitizer.

That Coronavirus won’t get me. It is always a pleasure, thanks.

Go check out GetFundableBootcamp.com. Check it out, it’s $97 for a two-day live online event. Save your airfare, your hotel bill, your food and learn credit from your pajamas for two days and get rock and rolling. I guarantee that the whole staff alone will not be wearing pajamas. That’s a good thing. We’ll see you all at the top.

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About Merrill Chandler

NCS 568 | Busting Down Credit MythsFor over 25 years, Merrill Chandler, a co-founder of Lexington Law Firm, has been the pointy-edge-of-the-spear regarding the education of Borrowers in how to improve their borrowing opportunities and success.

During that time, Merrill developed a process to optimize personal and business credit profiles to improve a borrower’s “Fundability.” Based upon this concept, he founded GetFundable.com to deliver his revolutionary technology to entrepreneurs, business owners, and real estate investors who want easy, no-hassle, approvals.
In 2016, Merrill met with FICO CEO, Will Lansing, to review the impact GetFundable.com optimization technology was having on a borrower’s “fundability.” As a result of that meeting, Merrill was authorized to meet with FICO’s Score Development Teams. After signing a non-disclosure agreement, Merrill was able to quiz FICO developers about their credit profile metrics so that he could better assist borrowers in accomplishing their funding needs. Merrill and members of his team have been to every FICO World Conference since then with a commitment to continually improve Fundability Optimization and significantly improving Borrower’s funding approvals.

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