It’s the holiday season, and on top of that, we’re in a pandemic. These two combinations make you vulnerable to distressing your credit without you knowing it. So what is the solution? How can we keep our holidays merry and bright without falling into this trap? Scott Carson talks with Merrill Chandler from Get Fundable to discuss the different ways to avoid distressing your credit profiles during the pandemic and holiday season. He taps into FICO, tier four lenders, zero low-interest rates, and more. Plus, Merrill then shares some advice for investors as they navigate the changing landscape of the country.
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How To Avoid Distressing Your Credit During The Pandemic And Holiday Season With Merrill Chandler
We are honored to have back our credit messiah, the man, the myth, the legend from Get Fundable, Mr. Merrill Chandler who’s been a gallivanting guy across the country with COVID. What’s up? How are you doing?
I’m doing spectacular. Thank you for having me on again. I’ve been in LA, Sarasota, Florida and then back to Newport Beach, California. A couple of masterminds and research conferences. Everybody’s reshutting down their state. I’m surprised that there’s no interstate travel on the airlines. I’m sorry, you cannot go from Indianapolis to Oklahoma. That’s no longer possible. A lot of travel and a lot of great research because regardless of how we feel about the pandemic, what the results of it are undeniable and we have to deal with those results. Ultimately, it’s less relevant why we have these results, but there are many things to have hope about in this pandemic.
We’ve bounced off of a W recovery instead of a V recovery. We’re heading down into another one. I saw another three governors be like, “We need to do the following.” They want to keep up mandatory mass, mandatory sequestering. How many people are being told not to go see their families on Thanksgiving? I thought, “Hold it. You’re saying that we cannot have groups of more than ten people and not see our families on Thanksgiving. Only small families can get together.” What are your thoughts? What’s been your experience out there, Scott, with regards to how the financial markets and the banks are responding with their REOs and the pending foreclosure mess? I keep telling people, I have 5 to 6 months before the moratorium stop. Talk to me. How’s that going?
Everybody I talked to is waiting for December 15th to see what happens with the executive order. Is it going to be extended? Is Trump going to give Biden the middle finger? Is it extended for six months? Is he going to stay? Is he going to let it expire and deal with something else? That’s where everybody’s at. There was an article on CNN talking about six million renters are facing trouble across the country because they don’t know if they’re going to be evicted come January 2021. It’s an interesting time. I’m not leaving the house very often. I live within a Tiger Woods drive away from my house to the movie theaters or grocery stores like Lowe’s and Home Depot.
Everything you need is within walking distance.
Pretty much if I want to. The thing is we got up and took a ten-minute drive and went north up to Cedar Park.
You wanted to see if there was more country left than the island you’re living in. Is there a zombie apocalypse outside of my neighborhood?
The funny thing is Steph was always like, “That place is vacant now. There’s a for lease sign there. That business is not there anymore.” The thing I keep seeing is more and more businesses are closing, more and more for lease and for rent signs. That’s the thing. I’m like, “They closed the Starbucks that was nearest. They closed the Taco Shack.” Here in Texas, tacos are important. They closed it and another Taco Shack moved in.
Has Torchy’s closed anywhere?
Torchy’s is still doing fine. They’re still rock and rolling.
It’s only because they have such a high rep that they could lose 90% of their business and now be busy instead of crowded.
They started serving alcohol. People come to get their margaritas.
That’s how we survive. We self-medicate. That’s what I wanted to address here are the cities that are being pummeled. The article we’re referring to is about the cities with the most financial distress, and what to do about it. I’ve got some tips and techniques that I want to share with your readers to make sure that we can protect everything we can as much as we can. Here’s the interesting thing. You’re going past your neighborhood and seeing more vacancies and people who are pulling up stakes. In Utah, we’re in a bubble but it’s not a real estate bubble. There are many companies that are leaving California and coming to Silicon Slopes instead of Silicon Valley. They are very intelligent and highly educated workforce, low cost workforce, low-cost housing, low-cost business expenses.
They’re coming over in droves. Our real estate prices, there are 10 to 15 offers on every single thing that comes up. My daughter who is also live and flipper, they had to go out to an area that they’re putting in tons of infrastructure but it’s more of a ten-year growth model than the 2 to 3-year growth model. It’s closer to where she is right now so she could afford the payment. She’s going to be out in Magna but in ten years, if things continue to go the way they are, she’s going to have 2 or 3 homes and an 800-plus fundable profile. I’m not seeing the same things that the rest of the country is in. In this list of cities with the most people in financial distress, there were several criteria like total credit score, the Delta in credit score or the change in credit score.
There are the actual people in distress, the quantified number of people in distress, the average number of accounts on a credit report. The people have not paid, 30, 60, 90 days late, bankruptcy filings and debt interest being paid. Each one of these, interest on revolving accounts and interest on installment loans. Salt Lake City is not even on this list of 50. It’s not even here because we’re living in a bubble. I did want to reach out to all my compadres all over the country so that we know what’s happening and what to do about it.
Distressing Your Credit: The tier four lenders are hard money lender types. FICO and lender software downgrade your fundability because what you’re applying for is a consumer finance account.
It’s coming from a year’s impact. You look at those 9 or 6 characteristics in the article. We’re talking about the article that WalletHub put out. We talked about it briefly on a previous episode. I called it the United Cities of Distress. We talked about the top ten but the thing that I wanted is, when you see that, in your background and your experience, what’s the one thing that disturbs you the most about that you see a big increase? Is it a drop in credit scores, increase in bankruptcy?
A credit score is sensitive but every one of these affects my clients and my students because there’s distress, late pays, then the resulting credit scores. For me, this is like a cascade falling down. The preceding ones affect the later scores. The thing that disturbed me the most is the smaller cities in rural America is being hit. If we look Delta in credit scores, we got Indianapolis, Oklahoma, Corpus Christi, Memphis, Tennessee. These are cities and then it’s gobs and gobs of countryside. I haven’t done any FICO statistical analysis but anecdotally, it’s weighted towards the cities that are influenced or are in parts of the country that don’t have a lot of borrower training and borrower education. There’s not a lot of sophistication in high finance. San Francisco is the last in line when it comes to the worst cities. New York City is way down because there’s a certain degree of sophistication. You may live in Corpus Christi, but if you’re a financier, you’re going to move to San Francisco or New York.
I grew up in Corpus Christi so I can speak directly to the Bay Area. Mom and dad later, we moved across and we lived in a small with 3,500 people across the Bay from Corpus Christi called Ingleside. Corpus Christi, the majority is Hispanics and also the oil industry and the natural gas industry are in there. Diamond Shamrock and huge refineries are down there. They’re expanding the port. They’re expecting Corpus Christi to become the number five port in the world. Houston is up on the road but Corpus Christi is a big one. The thing that falls in place there is you have all these layoffs. You don’t have a financially knowledgeable community.
It’s the financial sophistication, which is my mission in the first place. It’s the million borrower march. Educating a million borrowers who have not had previous education. We’re not talking about financial literacy or what’s the checking account, the rule of 72 where your interest doubles in seventeen years. I’m talking about how do you borrow money and how do you get a lender to want to lend to you? True borrower education, which is what boot camp or podcasts is all about. I can’t help but see where there’s less sophistication by the borrowers. I know what my dad taught me. That’s the only level of education of those are the cities that are being crushed, the number of accounts in distress. Here’s another one. There’s North Las Vegas and there is Madison, Wisconsin, Fresno, California, Omaha, Nebraska. They’re cities but they’re outside of the finance circles. They’re outside of that realm.
I would also be willing to bet there are also sites of major universities that have not brought back. You think of Fresno State. Lincoln, Nebraska is there. You have a lot of these college towns and major universities that stopped. They don’t have the infrastructure. The major employers are the university and kids aren’t coming back to campus.
They’re furloughing. That’s the terms you have to pay. I’m an employer or you’re an employer but there’s something to be said about taking care of your people and doing your best. When you furlough somebody so they can’t get unemployment benefits even temporarily. At the same time, you don’t lay them off. Then all of a sudden, they’re stuck in this middle ground of not being able to have resources to help them get through it, even if it’s a temporary layoff. This gets me amped up again. I’m already at 120% but we got to get this message out there. There is a way to navigate all this if you know what you’re doing. You don’t have to spend more money. Can I give a few tips to your readers?
Yes, let’s do that.
I don’t believe I’ve covered these. If you’ve seen it in my web classes or something, indulge me because you might have forgotten these. The first thing, if you have to do a moratorium on any of your payments, credit payments, mortgages, auto leases, whatever your bank is offering, the lenders are still trying to protect their interests. There’s what’s called a current. Even if you’re late, they’ll say it’s current but they will say, “Due to national disaster.” That comment is a negative indicator. Even though you have a positive account, and God bless the lenders, I was reading that they’re the most capitalized they’d been in 100 years.
That’s a direct correlation to having the most amount of savings being deposited in banks. The most amount of people saving for the day. What’s the bank doing? They’re giving that 0.01% because now they’re more capitalized.
What we need to remember is whenever we’re going to navigate or negotiate a moratorium, a deferral of payment, you want to ask them in a language that they can understand. You want to ask them and say, “Will it say current? Will it say paid as agreed? Can you not report the result of a natural disaster?” They have to manually take that comment off of your account. If you can get them to take that comment off your account, then it looks like business as usual, paid as agreed, moving forward. Remember, we’re playing funding game. They set the rules. We have learned the rules and know how to navigate this place. Our ultimate idea is to still stay current. By the grace of the funding gods, they’re allowing us to defer these payments, but make sure their notation is removed.
We don’t want anything associated with “resulting from a natural disaster” or any language similar. Keep that off your report. Your fundability score may not change, but the notation in the background. Remember pulling back the curtain and the little guy playing with the bells and whistles in The Wizard of Oz. You want to make sure that the fundability of your credit account stays high. Do remember that. If you can avoid not taking advantage of a deferment or a moratorium on a payment, then that’s your best play because they are keeping track. I have dozens. I attended the FICO symposium to see how the sausage is made. I literally am seeing everything that lenders are looking for to grade you as a borrower. You want to make sure that you don’t have any late pays where possible and make sure that that notation is removed.
The next thing is, if you’re stuck, if you only have limited income, if you’re borrowing from family or friends or your unemployment, if you’re limited on resources, you got to promise me to do this. Never make a minimum payment. This is only on your revolving accounts, your credit cards. This isn’t your mortgage. This isn’t your auto loan or your student loans. On your credit cards, in what we called revolving accounts, never make the minimum payment. You want to make $1, $2, $3, $5, $7 more than the minimum payment. What the software is measuring is it’s looking for what is owed as a minimum payment and what you pay. If they are the exact same number and you do it for more than three or more months in a row, you’re sending the message. The algorithms calculate that you don’t have any more money and that you’re going to be high risk.
Don’t make the minimum payment. Make $1, $2, $3 or $5 more than that and switch it up every month. $7, $2, $3, $8, $6, $5 more than the minimum payment. These are ways in which you can protect so whatever city you live in, you don’t end up in having a long-term, seven-year record of your financial distress. There’s the debt. There’s what you owe and there’s the evidence of the debt. There’s a way to have distress and remove the evidence for anybody to know about it. It’s vital. Also, the credit bureaus, Experian, TransUnion, Equifax, go to AnnualCreditReport.com. I believe they’re going to extend it, but until April of 2021, they’re allowing you to pull what’s called the consumer disclosure files, your raw data files, they’re letting you pull them for free every week.
That’s where you check it. It doesn’t cost you any money. It doesn’t cost you any credit score points. You’ll be able to see what the lenders are seeing, the raw data the lenders are looking at. Those notations will be there, due to financial disaster or otherwise or a national disaster. Those are a couple of things that I want to make sure your people know. If you’ve got an extra $1, $2 or $29.95, if you want to know the truth of your entire situation, go to MyFICO.com. You can get a subscription that updates quarterly. All three of your mortgage scores, auto loan scores, and your credit card scores. There are 28 FICO scores, the actual scores the lenders use to approve you. Monitor it. No other credit karma is a joke. That’s a complete FAKO score. If you’ve got a few dollars extra and you want to know the truth of your situation, go to that website.
Let’s flip it up because we are coming to the end of the year. We talked about this. It was an exceptional episode. People talking about the biggest mistakes people make around the holidays. We mentioned a couple of things. One going in and out. You want to put on your credit card. I’ve been seeing that, “Save 10% today by signing up for a new credit card to pay for Christmas.” That’s a big no-no. Also, let’s talk about this. If somebody has been responsible for their credit and has done a good job. Maybe they want to buy a new vehicle. Maybe they’re looking to buy a new house or an investment property or looking at some lines of credit, what are some things that they’ve taken responsibility for their numbers or some things that they should probably dive into to take advantage of? Any ideas?
Distressing Your Credit: We need to stay to what we have power over. Whatever happens, invest accordingly, plan accordingly, and make sure that your strategies have the greatest likelihood of success regardless.
First things first, I do want to reinforce the fact that every store who offers what Scott is referring to, it’s get 10% off, 20% off. If you fill out this application, three very powerful negative things occur. Number one, you get an inquiry from what’s called a tier four lender. The tier four lenders are hard money lender types. All of your mall store cards, your online cards, anything that has the word finance in it, all of those are what are called tier four. FICO and lender software downgrade your fundability because what you’re applying for is a consumer finance account. Those are negative, bad juju. Don’t do it. I’d rather you ask for a limit increase than get a new card.
The inquiry for that card counts more against you than if you go to Bank of America, BB&T or PNC. The actual inquiry costs you more. It says that your consumers. It says that you’re not a professional or sophisticated borrower. It sends a whole slew of bad messages. The second thing is if you get approved for it, it gives you a big fat zero on its age. Let’s say you have 100 months in current credit cards, you’re looking good and you get a new credit card that’s zero months. Let’s say you have one credit card that’s 100 months old and new zero. You dropped from 100 months average age to 50 months average age. That will show up in a twenty-plus point reduction in your profile. The new card is low value but it’s also harmful to your credibility as a long-term borrower.
If it’s happening in November and December before Black Friday, which now they’re calling Black November, if it’s happening for Christmas, they know that those are spikes in credit requests, and 85% of those spikes are all for mall store cards and what are called low-value cards, tier four cards. You don’t want these on your profile. I want to cover that again because we talked about it last time. It’s so vital. You can literally hammer the soul of your credit profile by doing that one thing. Don’t do it. Ask for a raise in a limit of one of your current cards if you need to borrow money for Christmas.
It’s literally like giving yourself a lump of coal in January in your stocking.
You don’t need Santa to give you a lump of coal. You’re going to give it to yourself. It’s going to be a cold pit in the center of your fundability stomach, cold black heart. If you can avoid it at all costs, please do so.
I was going to ask, as they do, what are some things that if somebody does have responsibility, is it a good time at the end of the year to be buying a car? Is it a good time to go and take advantage of these zero low interest rates?
Remember, you’re going to talk to your tax people and/or your accountants. One of the things that you want to do is decide with them which purchases that you can put on credit. Let’s say you’re in good shape and you’re moving forward. There are certain expenses that if you buy it outright, you get to expense the entire amount before December 31st instead of amortizing it over the full period. The way credit works is that with the merchant, let’s say you’re buying a car on credit with your credit profile. You’re buying a new house. You’re buying essential materials for a flip that you’re going to be doing in January or February. The more you buy now, the transaction with the vendor of those materials, the house or the car is a completed sale when you use credit. That sale is complete.
To have payment plans with a third party does not necessarily get in the way of having to amortize it over time. You get to expense it. I’m all about expensing every possible thing I can. Talk to your accounts or your tax people for the details, but the transaction is complete when you purchase it on credit, whether it’s a revolving account, you’re buying a car or a new house. Whatever you can do, get it done by 12/31 because I don’t know if in 2021, we’re going to have the same tech structures that we have now. I blow neither way in the political wind. All I know is that we get to deal with whatever is in front of us. I’m a pragmatist that way. If I have no power or control over the political machine, then I’m not going to worry about the political machine.
I’m going to worry about what’s in my front yard and my backyard. This is a very favorable tax year. Maximize whatever you can through the acquisitions, sweep account. Whatever you’re doing, do it before December 31st. If anything, in taxes change, I don’t think they’re going to put it out to 2023. We will enact this in 2023. We’ll enact this in 2022. It might be June of 2021. For those of you who have real estate or note empires, I don’t want to be in anybody else’s lane. When it comes to fundability and using your credit, if you’re going to carry a balance, maintain and stay under 40%. If you want to keep asking for limit increases, stay under 30%. By and large, those are the rules. It varies but I’ve come to find out with all of the evidence on data from our clients and our students that you don’t want to carry large balances.
If you can deploy the capital, don’t get another business credit card, get a business loan and use that capital to do the work that you need to. Look at all long-term planning for 2021 and do what you can. If you’d like any advice whatsoever, come to my boot camp. It’s an open forum. It’s not like you’re listening the whole time. There are 32 strategies that we review. There are a huge Q&A after every strategy. Come and find out what those strategies are and how to do that. The next boot camp will be in January 8th and 9th. Make sure that you talk to your accountants about what you can do before the end of this tax year before we go into what might be a different tax environment.
I was going to ask you if you’ve read any of the things that so-and-so has up his sleeve to try to implement it. I know that he’s talking about removing the 1031 exchange policy for a lot of people. Nothing’s set in stone yet but still, that’s scary in a lot of ways.
All I know is no matter who’s in office, us plebs got to be flexible because there’s radical on either side. We got to know which way the wind is blowing. In fact, I was at a mastermind. I was listening to Eddie Wilson in a presentation that he did when I was in Sarasota. Somebody asked him about the political climate and he goes, “Here’s the thing. I’m not in charge of who wins this thing. What I know is I have investment strategies for whoever happens to.” He used the example of, “If one party wins, then I’m going into solar, wind and green initiatives and investing there. If another party wins, I’m going into oil, coal and other initiatives.” He’s going to invest based on who’s enacting or enforcing the law. I thought that was genius. I believe fundamentally, we need to stay to what we have power over. I don’t have power over all that mess. I got power over my decisions. Whatever happens, I’m going to invest accordingly, plan accordingly, and make sure that my strategies have the greatest likelihood of success regardless. It’s choosing strategy A over strategy B or vice versa.
You’ve got to be flexible. That’s the most powerful thing that we like to say and use your big picture. Be flexible and work it where you can because there is a different sliding scale and you don’t have to always worry about the one negative thing. A lot of times the other things can go around, make up and you will be on the negative thing. Everyone thinks about their own late pays while you beat that door. It’s not about your past. It’s more about what you do going forward.
It’s the next 24 months, not the last 24 months because there’s nothing that you can change. Hold on tight. If you like roller coasters, this is going to be a big one. Whatever happens, just keep the faith, take care of your loved ones, your families and implement. Come to my boot camp, learn how to protect your profile regardless of what’s going on out there. I would like to say this. This is the message that I have. We can either be right or we can be happy. Just because someone believes differently than you do, you never know who’s going to be having the next best deal to offer you. Don’t burn bridges.
I’m agreeing with you because I see this over and over on social media. The country is pretty much 74 million voters. It splits. If you start damning the other party that voted differently, you are burning the bridge with half the country.
Distressing Your Credit: You never know who’s going to be having the next best deal to offer you. Don’t burn bridges just because someone believes differently than you do.
I don’t get that. I’m a zealot for a lot of things but lambasting, shaming and criticizing another person’s beliefs, there’s no room in profit. If you want to be profitable, there’s no room for shaming your neighbor, business people or whatever. It doesn’t happen often, but when somebody comes to me and they’re not happy or they need to back out of an agreement that we’ve made or otherwise, I have found that rather than being right, I want to be happy. I want us to part as friends. Whatever the negotiation is, I have found that people have come back. Sometimes years later, they say, “Merrill, you treated me right. I want to introduce you to so-and-so.” It doesn’t matter if someone’s across the aisle or in a different church or different color skin. If you are open, if you are kind and respectful, then the goods will come your way. What you are waiting for is also waiting for you. I’m not going to shut any doors and I’m certainly not going to make a stand on something that I got no power over. I’ll get off my soapbox now.
With you going to the FICO event, was there a big a-ha moment from there?
The symposium was online. Technically, if it’s available, the FICO World is supposed to be in Orlando in April 2021. We’ll see what happens. In this event, the biggest message was how do lenders take care of their people? What are the strategies that fraudsters will do in this environment? The SBA has already run fraudulent PPP loans, EIDL loans, and they’re collecting that data to throw it in their mix. How do we protect ourselves was the big message for them? How do we take care of our borrowers? The borrowers are going to leave your bank and go find somebody who treats them well. In fact, there was one presentation that says, “We all think of the borrowers as the bad guy. What are they going to do to try and steal from me?”
The vast majority of their customers are good depositors who are looking for a leg up and looking to borrow money to do that. If you don’t treat them right now, they’re not going to be around to treat in any fashion later. Online banking and Google banking is coming down the pipe. There’s going to be a lot more competition than there is right now. It looks like Google, because of purchases of some banking assets, they may come in at a tier three or a tier two. Not normally like SoFi, Prosper, Marcus, all those FinTechs came in at tier four because they were financial companies. Google, maybe they listened to my podcast. They’re coming in at tier three or tier two right out of the gate. A lot of great things are happening. We got to be kind, respectful and yoga flexible.
How would that compare to the Apple card?
Apple is a tier two 80% because it came in with Goldman Sachs. It is a tier two. Since it’s co-branded, it’s a tier two 80% because we’d dock 20% off of that. Of course, Apple is massive. I still don’t recommend people get it because I want everybody to have tier ones. My entire business runs on Apple. We have Apple corporate accounts. In fact, one of my business leases is in Apple. They came in high at tier two. Whereas Google though Goldman Sachs was already a bank. They’re underwriting Apple’s card. Google wants to get into the personal banking business. That’s why they may have to work their way up.
What would Google do is a whole new idea out there.
WWGD, what would Google do?
They had a book I read years ago that helped inspire a lot of things in what we do. Google, when they built their platforms they’re like, “We’re going to share a platform so people can go create all these great apps and things off it,” versus trying to hide everything. That’s more of the open mentality instead of being closed and hidden aspect of the older.
It’s what Apple has been forever. You have an Apple. They have security updates. Those are additionally patented codes that you can’t touch their operating system. Yet Google, it’s far more open and flexible. Thanks for having me on the show. There’s so much going on. Dissing on somebody is not going to serve us. It’s never going to serve us personally. You can be right or you can be happy. Rarely are we both. Ask your spouse who likes to be right.
Sometimes being wrong is being happy.
Are they happy all the time because they’re right all the time? It doesn’t look like that to me.
That’s going to wrap it up for this episode. Check it out. If you have not taken a Get Fundable Bootcamp in 2020, first of all, shame on you, and second, make the most of the new year. If you not going to do it here, get online. Go check out GetFundableBootcamp.com. Start planning. Don’t wait until the new year to start making plans. If you want to do some big things in the next year and be flexible and build your credit and help you do it, start planning that now. Tickets start at $97. It’s the most affordable thing you can do and investing.
Go there, grab a ticket, write it off 2020. Attend 2021 and you’re solid. If you’re interested, if you’ve been watching the podcast, if you’ve been doing all this and you want some assistance in walking this fundability path, join as a client before 2021. Get on board now and we’ll figure out all the things that we can make a big difference in your fundability.
See you later. Be safe.
Thanks. Be well.
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About Merrill Chandler
Over 25 years ago, Merrill Chandler—a personal and business credit pioneer and co-founder of Lexington Law Firm—became dissatisfied with the ineffective results of credit repair. … He founded CreditSense and FetFundable.com to deliver this revolutionary technology to real estate investors, business owners, and entrepreneurs nationwide.
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