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Why Having ZERO Debt Is Ruining Your Credit Score
51 Plays17 days ago
The financial system is rigged against those who don’t know the rules, and traditional "credit repair" has become a multi-billion dollar scam that leaves families lost in the sauce. In this episode, Juan "JP" Bergas from UQual pulls back the curtain on the hidden algorithms behind homeownership and why being proud of having "zero debt" might actually be keeping you locked out of the housing market.
Host Matt Rhine sits down with JP to debunk the myths around debt, credit scores, and lending. They discuss the difference between bad consumer debt and wealth-building leverage, why the rich keep getting richer through financial education taught at home, and the massive legal changes designed to clean up the scummy credit repair industry. If you are tired of hearing "no" from mortgage lenders and want an actual action plan to change your family's generational legacy, this is the transparent conversation you need to hear.
📍 Serving Baltimore, Towson, and surrounding Maryland areas
🏡 Matt Rhine Group | Real Estate Experts
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Transcript
Introduction and Sponsorship
00:00:01
Speaker
This episode is sponsored by First Home Mortgage.
Barriers to Home Ownership
00:00:08
Speaker
I want to talk about the system behind home ownership, about lending, about debt, about financial habits, and why so many of us feel like we're literally locked out of the home buying process. Because I hear it all the time about how nobody can buy a home
Credit Score Myths
00:00:22
Speaker
anymore. Your your credit score is not a representation of your financial wellness. Let's start there, right?
00:00:29
Speaker
You apply for something. The Phy Congarhythms simply thinks you're getting a more debt. So just in case, let's clip for couple points.
Guest Introduction: Matt Ryan and Juan Burgess
00:00:42
Speaker
Hi, everybody. This is Matt Ryan on another episode of All Roads Lead to Real Estate. And I have a guest with me today that I think is probably more informative of a topic than some of the others. I recently had a very impressive guest to kind of make a different path than some of the usual ones. I had my nine-year-old with me. There you go. We were talking all you know all things real estate through the lens of a nine-year-old. So you missed that episode. I could have had you on there. I think. I'm sure will we'll check it out on Spotify for sure. Yes, please do. Like and subscribe, of course. um
00:01:16
Speaker
But the guest I have today, I was just going through how I should pronounce his name, and of course I say it horribly, but um it's Juan Burgess. There you go I said it pretty well. There you go. says everyone calls him JP. um And so he is the regional director of a company called UQual.
Skepticism of Credit Repair Industry
00:01:31
Speaker
And the reason why I wanted to have you on today is because, to be truthful, I have no one in my little bubble here in Maryland that I actually refer to and trust consistently. I've had people come and go that are in what I refer to as credit repair.
00:01:47
Speaker
And boy, is it a scammy business in general, from my experience. And it's not always very helpful. It can be expensive. And many of the people I've referred out never come back because they just get lost in the sauce. They get discouraged. It's a mess.
00:02:03
Speaker
And so I want to give you a proper introduction before we start going back and
Financial Education and Systemic Issues
00:02:06
Speaker
forth. But I want to just start on the outside here. We're not just talking about credit. and It's not just credit scores, but I want to talk about the system behind home ownership, about lending, about debt, about financial habits, and why so many of us feel like we're literally locked out of the home buying process. because I hear it all the time about how nobody can buy a home anymore. right and so Too expensive, inventory, blah, blah, blah. right All those things. and I know that your company doesn't just help people with credit scores. They help people with education, coaching, the technology behind it, and action plans to get going.
00:02:41
Speaker
and I want to first say that this is not just a small space. and From my research prior to having you on, it looks like this is at least a six or seven billion dollar industry just in the United States. and every like the um the availability of credit is out is just everywhere now. yeah mean You can borrow money to go, obviously, to dinner. i mean just and It's not just a credit card. right It's on your phone. Yes, you're holding up your phone. so
Financial Wellness Importance
00:03:06
Speaker
It's everything. and so I want to help other people understand whether you're a first-time home buyer, a repeat buyer, an investor, or if you're someone that is looking to have better financial habits, even if you're not in the market today. like This is the conversation i' want to have with you. so I want to thank you once again.
UQual's Mission and Cultural Credit Differences
00:03:23
Speaker
JP, for joining me.
00:03:24
Speaker
Of course. cool and It's exciting to have you. I've never had this topic covered here on the podcast. Awesome. It's going to be fun. Yeah. so Well, first off, help me understand a little bit about you, a little bit about the business that you're in before I get get going. so Help me understand, how in the world did you get into UQOL and in the credit business? so so I moved here here from Argentina and with my mom and my two brothers.
00:03:49
Speaker
Unless you're coming nowadays from Argentina, Spain, and like some parts of Mexico, there's no such a thing as a credit system, right? And so when I moved here, the first thing my mom got told is, hey, you need to go get this thing called credit. How do you do that? Well, you gotta go buy a car.
00:04:06
Speaker
Obviously with no credit you go to a buy here, a pay here. yeah Let's save time and say that ended up horribly. Sure. Right? And then when I was 18 I got my first Capital One credit card, right? $300. Here i am thinking,
00:04:22
Speaker
It's free, it's free money. And then I started getting calls from the collection agencies, not understanding it, but the one that really got me is there was this little tent. I remember going to the store with my mom and you come out, a little blue tent, um and it was called Royal Prestige, and they sell pots and pans at very ridiculous interest rates. And I kind of saw how that hurt my mom. And the last piece of it is,
00:04:46
Speaker
I'm seeing these kids that I'm going to high school with driving this beautiful car. I'm like, I'm working at Bob Evans, man. yeah How are you doing it yeah And that's when I started getting into the world of credit. I later ah went on to work at a debt settlement company and you know there's a place for everything. sure And the more and more and more that I started learning, the more I realized like, hey, this is not available to everybody.
00:05:11
Speaker
Like, why am I not, just like in high school, they taught me how to balance a checkbook.
Credit Repair Industry Criticism
00:05:15
Speaker
Why am I not being taught what the credit system is? The fact that there is different algorithms, the fact that things are measured completely different. So that's kind of how I started there.
00:05:26
Speaker
And um on a faithful December 7th of 2020 is when I started with UQOL. And UQOL was a concept that was created by Kyle, our owner and CEO, super, super smart guy, heck of a person. And really what we wanted is to bring a holistic approach.
00:05:46
Speaker
to buying a house. And so we are a FinTech platform. We do use AI, but the biggest difference is we're the only loan readiness company, and we specifically work with mortgage professionals. It is a mortgage FinTech platform and really designed for loan officers, for real estate agents that are trying to take those clients who heard no and make that no become a no yet.
00:06:10
Speaker
Because we've all gone through it, right? Hey, I have a 620 credit score, but I don't have any money, the market's not for me. Or I have a lot of money, but I have a 415 credit score because of divorce, because of- Right, medical bills. Medical issues, whatever the case may be. So we're bringing and marrying, truly marrying financial wellness with credit improvement with the ultimate goal of getting people into a home loan.
00:06:33
Speaker
And again, being mortgage centric is the biggest key. When you talked about credit repair, yeah, credit repair has that scummy feeling because of companies that have done what they've done since 1993,
00:06:46
Speaker
They just take people's money and they keep them on the hook forever, and I don't think they get a lot of results. I've dealt with so i've just spoken to so many people over the last 20 years that have been through it a couple times, or they've tried, and it's almost like quitting smoking. You ever heard it's quitting smoking is the easiest things in the world to do? I've done it 15 times. you know it's like it's Credit is this thing I don't think most people understand. I'm impressed that you learned how to balance a checkbook in high school. um I don't think most people know how to do that. Heck, I don't know most people under 30 even have a checkbook. Yeah, we don't have to anymore, right? You don't have It's all done on your
Debt as Leverage and Financial Education
00:07:18
Speaker
phone. but I think it's what this does to me, and the reason I went into school to learn finance, that was my degree, not because I wanted to be on Wall Street necessarily, but I knew what I didn't know. I was smart enough to know I didn't know, and I think when people don't understand what credit is, and not just that, but how the financial markets work, and that not all debt is bad debt, and debt equals leverage when used appropriately. like there's there are It's these beautiful, wonderful aspects. and By the way, it's one of the reasons, I know like you just said how you you came to this country, it's one of the beautiful things about America is that we have access to relatively inexpensive ah leverage. yes
00:07:58
Speaker
And it's it's a way it helps people who understand it get really rich and have tax advantages. And if you just grew up in a household where, it like I did, we grew up on a farm, any debt was bad debt because they didn't understand it. Correct.
00:08:11
Speaker
Right? It's just like, yeah that's all that's a tough way. It's just like it's the parents protecting them saying, just don't look over there because I don't know how to help you. Don't get too close to the pool. Well, teach me how to swim. Exactly. Well, and and I use in your world, right? Yeah.
00:08:26
Speaker
Dave Ramsey. yeah As a Christian, I love half of the content, the other half is I'm not one to tell you don't use credit, I want to teach you how to use it. yes right and That's my thing when, for example, credit cards. You and I know that, yeah, credit cards is a very simple way to get into debt. We owe more money on credit cards than we ever had, but that's because we never taught people correctly how to use them and how to leverage them because for the sake of your credit score, you have to have a credit card. You should have a credit card. Everyone should have a credit card. I mean, my mother, for example, had no debt. She was very, very proud of that later in her life. Zero debt, no house, no nothing. Very proud of that.
00:09:01
Speaker
Her credit score was not good because she had zero debt. She didn't have a cause she had nothing. Correct. And she did not have a great credit score. So she had to get an education to figure out, how do I even have a good credit score? She thought she was doing well. She had money in the bank, you know not rich or anything, but she had money and she had no no she didn't owe anything to anybody. Correct. And she thought she was doing really well in that respect, but in reality, you have to show people that you have the capacity to pay them back, to have a credit score.
00:09:25
Speaker
And it's a data set. yeah Hey, how can you manage a 30-year mortgage? How can you manage a five-year car loan? Can you manage a revolving account that you're making purchases and payments every single month? right Without that data, if you are the bank, you're not going to have the data set that you need to feel comfortable lending to that person. um But just to put a pin on the whole,
00:09:47
Speaker
credit a repair thing we'll move on from that. um There's big changes in that industry coming July because of the fact that it has that bad name. yeah One of the biggest things we're hearing um that is currently in effect, like they're not allowed to sell credit repair via phone.
00:10:02
Speaker
And on top of i know that, you are not allowed as a credit repair company, you are not allowed to charge people upfront any type of fees for six
Regulatory Changes in Credit Industry
00:10:12
Speaker
months. Interesting. And on month six, I have to come back to you and say, hey, Matt, here was your credit score.
00:10:19
Speaker
Here's a copy of your credit report. Here's what it looks like six months later. If you do not have tangible results you're not allowed to charge that client.
00:10:30
Speaker
You mean touch the client or charge the client? Charge or the client. You cannot charge the client for whatever you... And this is going to take place in July of 2026? That's already in place. The one that's coming in July, it's it's the same going to apply to companies that do this via internet, right? So, all websites. um Again, right that's why we came up with the concept of loan readiness, and really it's when the best type of client you're going to get that are going to go through that journey. Because it's not, hey, here's the magic wand, poof, now you have a 760 credit score.
00:11:05
Speaker
It's people that are looking to buy a home, which is why we work with mortgage professionals. So just being that being intentional about the type of client that we want to help. Well, and I think the the issue that I think can become a hot topic here is that it is actually... the I believe the people that have the financial education, it's it's why the rich get richer. In my humble opinion, I think some folks that were born in this system that had the education at home, it's easier. It's like ah it's a big step up. and I think certain neighborhoods have ah ah more of a challenging time, like socioeconomically, to step out of it because there's no education there.
Home Ownership as Financial Growth
00:11:39
Speaker
And um so I think the internet and specifically companies like yours might offer people an opportunity to know something that maybe was never taught at home. Correct. And that can truly help them get into a whole different world. Like their life and their kids' lives can be totally different than maybe what their parents had. Well, and and and for, again, you being an agent, right?
00:12:01
Speaker
You have the opportunity to literally change the legacy of the family by helping them get into a home. right like People take that lightly, I think. Yeah, it it it is. Now, granted, I work for a brokerage that has the name Legacy attached to it, so yeah, some people lean into it maybe as a marketing ploy, to be quite frank, but the reality is it does, and it's one of the reasons why I went into real estate to begin with is because I started to understand how leverage can allow you to change the generational path of your family tree.
00:12:33
Speaker
And it's true, it can absolutely do it. And there's it's wild. I know it's wild what I've been able to amass with very humble beginnings, and ah and I'm continuing to do It's getting easier. the The older I get, the more I already have, it snowballs. It's becoming easier to do things than
Podcast's Educational Role
00:12:50
Speaker
it ever used to be. correct and I think the way that I'll judge how I feel about myself you know my golden years, it's it's like how am i able to then it's one of the reasons I do this podcast.
00:13:01
Speaker
How can I help give back in a meaningful way? right It's a service. It's like I managed to get a few more rungs on the ladder than I even thought I'd do. Can you extend the ladder back down to those and help more people up?
00:13:14
Speaker
And I think that's an opportunity that people, even the little podcast like that, it's just ah it's another voice that might someone might resonate with someone if they don't listen to Ramsey or these other folks that have been out forever. Yeah, and and think that if out of this podcast, three people decide to make or figure out the right steps to take in order to, oh, maybe home ownership is for me because I heard these two guys talk about the steps that I should take to get ready. Right.
00:13:39
Speaker
Because you said something about credit earlier. that people don't participate or something like that. But it's really funny because when do people truly start caring about credit? Yeah, when they want to buy typically a house.
Challenges with Low Credit Scores
00:13:53
Speaker
Oftentimes it's a car. I hear people way overextend themselves, these car sharks that get you because you don't have great credit.
00:14:00
Speaker
and you If you have a pulse, you can get a car loan. Yeah. Right? I just saw somebody in this I've never seen before with an 84-month car loan. Oh my Lord.
00:14:12
Speaker
84 months. Most cars are most scars are not going to last you 84 months. Let's start with that. And the fact that you have companies that are giving out 14, 15, 16% rates on a car loan, yeah but here we are complaining about a 6.25% rate on a mortgage. It doesn't make sense. and and Kick it up a step. right yeah You're paying 27% on your credit cards. yeah None of those things are value creating asset like a mortgage is.
00:14:39
Speaker
Well, we're at odds. As we go through this, it's as I say things, we are a consumer-based economy ah for now. and so We've been that. so We actually need to keep spending. and so The government and actually incentivizes all of us to spend. I don't think there's an incentive for them to necessarily teach us to not do that. um so it's really It's interesting. The more I've been in this this world where I get to understand people's finances, the more this topic means to me because I'm dealing with people's conversation. The worst is when I see they haven't even opened the book, so to speak, to learn about this, and they're 50 or 60 years of age, and it's tougher. they have a lot less time to get you know They still have time, but it's not as much. If we can help educate people earlier, i think the the profound ah compounding effects of time.
Understanding the FICO Algorithm
00:15:27
Speaker
is is impressive. And I would 100% agree with you except for one thing. There is no book. yeah If there was a book, I wouldn't have this job. yeah right I wouldn't be here, because everybody would be...
00:15:39
Speaker
running around with an 800 credit score. Now, yeah what would happen to the system if all of us are running around with an 800 credit score? They'd have to change the system altogether. Well, when I would say book, I'm i'm really referring to they have enough enough understanding to recognize that they should be thinking about it more in a more meaningful way. That's kind of what I meant by that. like Sure. What I would want, like if you asked me, like hey, what do you mean by a book? Why are we not giving the basics of finance and credit in high school? And then you go deeper in college. Sure.
00:16:09
Speaker
and understand what is FICO, what is manage, what is this, what is that. It's never discussed. What's crazy is my I have a finance degree, i have a business degree. At no point in that education did I ever learn anything you just described. I learned about board of directors, I learned about the larger financial industry that to be honest has doesn't affect me in any capacity at all today. like I didn't have even a basic understanding and I took all these economics courses, none of it pertained to real life. I learned that after college.
00:16:38
Speaker
and One of my best friends, Donovan, um shout out to Donovan Lewis. yeah One of my best friends, he managed a bank. right And he, same thing, investments and IRAs and all this different stuff. And then he came to start working with us and his brain was hurting after a week because he couldn't understand like why are we not making this public?
UQual's Loan Readiness Services
00:17:02
Speaker
yeah And again, it comes down to, if you and I are credit card companies, we're not gonna go in business to make a missily 5%, 10%.
00:17:10
Speaker
why We want the 20s, we want the low 30s. If people are running around with an 800 credit score, we can't charge 20%. Because guess what? I don't have any of my credit cards that are over, let me think, 17% because of my credit score. yeah Well, it's ah it's all really interesting, but I want to kind of focus this a little bit so people understand. so if If they want to know what your company specifically does, help explain it in a nutshell. I'm sure you do it every day of your life. so what's the What's the elevator pitch as to specifically what you guys are able to do and why why someone might have call your company in the first place? Yeah, so we work with loan officers, real estate agent, and mortgage professionals to help clients that got declined, whether that is because of credit or finances. We put them within the UQOL ecosystem, as I like to call them, give them all the tools that they're going to need to get them back to that loan officer, to that real estate agent right that originally referred them to us. I want to throw that out there. appreciate that. So that they can then go apply and get qualified. The whole point under you qual is you qualify. right
00:18:16
Speaker
And that's the that's the goal, right? And I love the idea. It's like you're getting them ready. it's not just it's not your It's with a purpose. It's not just for the sake of having a higher credit score. That's great. But it's what does it represent?
00:18:29
Speaker
And I think the first step is home ownership. And to me, of course, I love real estate. It's my thing, right? So I think about it beyond just living in the home that you own, but also beyond that. I think it's a fantastic investment vehicle for a lot of people that they that you have to have access to credit markets in order to do it for the vast majority of people.
00:18:48
Speaker
yeah And if you didn't jump in NBITI at the right time or Bitcoin at the right time, you today cannot show me an asset that is going to get you the return on a mortgage. well it it well There's a lot reasons, but yes, that is in large part correct. No one wants to lend at these rates and give you that much money typically unless they have a real asset behind it. and so That's the beautiful thing about a mortgage. so um Help me specifically understand who your ah I guess ideal client is. do you i know It sounds like I know what the company does, but is there someone that sounds like it's a perfect fit for you when you speak to them?
00:19:23
Speaker
so I like to break it down into two buckets. right We have the person that didn't get declined, or the person that it's in the 680s, They're doing okay, but man, life will get a heck of a lot better if I can get to a 720.
00:19:37
Speaker
yeah So that's going to be my good to great type of client. Hey, we're going to look at what open and active accounts are there, what tweaks can we make? Is there a potential for maybe a late payment or something that happened two, three years ago that is not really dragging you down, but it's a pretty nasty stain to look at? So that's going to be the good to great. And then you have the person that did get declined yeah because they're a sub.
00:19:59
Speaker
590 credit score, most people can't get a loan under that. And you have a little bit of both. Obviously right now, unfortunately, most people are that sub 600 credit score.
00:20:12
Speaker
And the other thing is you have all these online scoring models that to me are just giving people false hopes, and then you and loan officers have to do the work to explain to them why
Improving Low Credit Scores
00:20:24
Speaker
there's that. So again, there's two buckets there. is there Is there hope for folks that are listening that have a 500 or below credit score that have been told... i like They can't, because some people have had this issue and they've been quote unquote, working on it for a long time and they can't ever seem to get ahead.
00:20:41
Speaker
So, is there you see people that are able to get ahead and this is a realistic path that they can they can catch up, so to speak? Yeah, 100%. It's knowing what to do. right like I have a car and I can't fix my own car and that's why we have mechanics. right A lot of people are like, well, I think I'm just going to work on my credit and do it on my own. Six months go by, you're up three points. That gets very discouraging. Yes, it does. Because you don't have the right strategies. Just like, I'm not going to go and try to evaluate the price of a home. I'm going to call you. You're an expert at that, not me.
00:21:14
Speaker
Yeah. And so that's that's the... ah I'll give you an example without you know a future promise of performance or whatever. I worked with a lady down in Dunkirk. It took us eight months.
00:21:26
Speaker
Yeah. But she started at a 412 credit score because not only did she have medical issues, but her husband passed away and a lot of stuff got dumped on her.
00:21:36
Speaker
And they didn't have money, they didn't have life insurance, they didn't have any of that. right Eight months down the road, I get a picture, you can go look it up in Google, there's a Google review with my name on it. We did it. It took us eight months. So help people understand what are some of... You don't have to give her specific reasons and how you managed to do it, but give me the overarching idea. Are you able to call these companies and say, listen, yeah I know you she's owed 50,000 for this particular bill. like She doesn't have it. Do you renegotiate these numbers or do you collect them all and try to put them into a single payment that you can get current with? What are some of the strategies people are able to to do? Or do you try to just fight them and get them dropped entirely? or
00:22:16
Speaker
what How do you do that? So there's three different models out there, right? And they all have, they can all exist. They're all, in a sense, true at the same time. Number one is gonna be debt settlement.
00:22:28
Speaker
So debt settlement is specifically designed in my eyes, right? Specifically designed for people that are drowning on credit card debt and their financial situation's not gonna get better. right great I usually will never tell somebody to go that route.
00:22:44
Speaker
unless you're 50, 60, or more thousand dollars in credit card debt. Go down what route specifically? Debt settlement. Okay. yeah And so if I owe 60,000, you say- it Let me rephrase that.
00:22:55
Speaker
i will in people I wouldn't tell people to do debt settlement unless you're staring bankruptcy in the face. Okay. Right? So at that point, what debt settlement companies do, and again, for some people, it's a very good thing. Hey, this person owes you $50,000. Unfortunately, you're going through this financial hardships. They're going to pay you back $25,000. It's going to take them 36 months. Okay, fantastic.
00:23:15
Speaker
That's that. The problem is that, as you know, paying a collection, paying a charge off or creating a new collection or a charge off impacts your FICO credit score directly. The other one, and I don't really know how available it is because of economics, is debt consolidation.
00:23:31
Speaker
right You have all these bills, these companies call your different creditors and try to arrange a new minimum payment for you. right There's that. What we do is we're actually utilizing an AI protocol and we are leveraging the Fair Credit Reporting Act.
Fair Credit Reporting Act and Credit Repair
00:23:46
Speaker
So it's 169 pages long. It's a federal law and it states put into one sentence. It states that everything on a consumer credit report by law has to be 100% complete, accurate and verifiable.
00:24:01
Speaker
The data tells us today that seven out of 10 credit reports have errors on them.
00:24:08
Speaker
So if a client has a late payment, I'm not saying they didn't pay late. What we're saying is prove it. It's the right of the consumer. So ultimately what we want is to take these items that are quote unquote questionable okay and get them removed from the report.
00:24:26
Speaker
So if I can't prove that I... that You can't prove, it's on you to prove that I didn't make that payment three years ago. it's the So it's the reverse of the legal system. Right. Right? You're innocent. Yeah.
00:24:37
Speaker
Well, in the legal system, you're innocent until you're proving guilty. The credit system is complete opposite. you You're guilty, Matt. Yeah. But okay, now it's a burden on them to prove to you that you are.
00:24:49
Speaker
Now, because because we know this, aren't they going to get better and better with technology to make sure in the future that, oh, I have all the proof for the last 20... I imagine with AI and cloud compute, they're going to get really sophisticated if it's this... Because I'm sure they're not they don't want to write off billions of dollars, I would think. You would imagine that? Yeah. um but For example, right since what November of 2025 or up to now, we now have 9.7 million people that got hit with late payments with student loans.
00:25:19
Speaker
The other day, there was a whole debacle, lawsuits going back between the state of Missouri, it's just a mess. And why did that happen? yeah Because people weren't correctly notified. So the way that it was explained to me in a sense is, hey, look, um the student loan holder either sent a letter stating that, hey, you're coming out of the farm and you're coming out of forbearance, whatever you had.
00:25:45
Speaker
and they sent that letter to your parents' house where you haven't lived for 25 years. right Or they sent you an email to your old high school AOL account. right Or your college email account or whatever. yeah whatever.
00:25:57
Speaker
And so did they technically try to notify yeah Well, you could have sent my team a messenger pigeon to get me on here. Well, did you technically tried to notify me.
00:26:09
Speaker
yeah So it's those type of practices, right? Yes, technology is going to help, absolutely. AI implementation, absolutely. But at the end of the day, it is on the creditors to prove that that client did A, B, andc um and And the second piece to that is that it's time-limited.
00:26:28
Speaker
how What's the look back typically? So usually they only have 30 to 45 days to return or to respond right to the investigation. Oh, I didn't know that. So if they don't respond in a month and a half? If they don't respond, they don't have the data, or they just plain and simple don't want to, that account has to be removed from the report. Wow. Right? That's how that works, which is the same time like a lot of people We'll try to call the creditor to try to quote unquote negotiate, and what's the first thing they're going to ask you?
00:26:59
Speaker
What's your full name? Oh, it's Matt Ryan. What's your birthday? Blah, blah, blah. What's your social? What do you think is happening? Yeah, they're getting all your data. They're connecting all your data. so So when your firm calls, do you give them all this information? We don't call, we don't write letters, we don't make phone calls, it's all done digitally. So we are digitally integrated with the credit bureaus. Interesting. interesting We're the only company that has that ability.
00:27:23
Speaker
And is is that a benefit to the consumer? 100%, because imagine the betting process that we as a company had to go through in order to be able to say that, hey, we have a digital integration with the three credit bureaus. That gives us speed.
00:27:39
Speaker
And when it comes to this type of process, time matters. yeah Time is super important, because how many times Are you working with ah with a buyer? right They're under contract, life is good, blah, blah, blah, I don't know where.
00:27:52
Speaker
Mystery medical bill. yeah Mystery loan from a buy now, pay later. And it happens, and then the deals fall through, right? Earnest money goes to waste. Thankfully, I don't see that particular ah issue as much. What I see is people call me, they they want to see... if you I'll teach you a life of a realtor
Financial Readiness in Home Buying
00:28:11
Speaker
very quickly. um I'd love to see this half a million dollar house down the street, just popped up. I'd like to see it today, immediately.
00:28:17
Speaker
wonderful is this the price range you're looking for? Have you started the process? Well, I'll figure out the price later and how much I'm pre-approved. I want to see the house. and so they They always start with the house. right No one wants a mortgage, they want a house. and Then they don't want to see any of the finance they don't want to necessarily look the the mortgage side right financial side and it's really And then if they love the home and you allow them in, which is challenging to say no, so we often do let them in, and then they love it, right? a perfect house. It's what we've been looking for. We've been casually looking online for three years. We found it. It's the one. I want it. Get it for me, Matt.
00:28:52
Speaker
And then we connect them with the mortgage at that point because that's the first time they've agreed to talk to somebody. Then they find out about what you just described. And now they realize their... Last time I checked, it was 700 or 680. I thought it was good. And now it's 580, and then the house is gone in three days, and they're out of luck. Yeah. And it goes back to people only care about their credit score when they need it. Right. And your credit score should be something that you have it and you don't need it. And if you need it, you have it.
00:29:20
Speaker
Yeah. it's Now, i I don't know how many people get these services. I get something sent to me. I don't know what you'll probably say. It's horrible. But ah I have a credit monitoring service that once a month tells me my my credit score, and it monitors it. So if it gets if i my credit gets pulled, anything happens, I get notified. No, everybody should have something. And it's like $20 or $30 a month. It's not outrageously expensive, but or do you recommend those type of things that everybody should lock their credit scores like and have a system like this? I'm going to be super nice. Yeah.
00:29:52
Speaker
If you don't have medical debt, medical collections, you have credit score remodels on your phone that your bank is giving you? Yeah.
00:30:04
Speaker
Use that. and And that's free for most of us. That's free, right right. So it sits on the back of your credit card company or your bank, like Chase, Capital One, they all offer some type of... but It's not that I signed up for it, but why do I use it?
00:30:18
Speaker
I want to make sure somebody's not out there trying to take out credit in my name, number one, right? And then it helps me because something that to me is very key, especially when I'm getting ready to use my credit, it's going to be my credit card utilization.
Optimizing Credit Scores
00:30:32
Speaker
yeah right We all heard that credit card utilization is 30% or whatever your limit is. Lo behold, it's now 10%. I want to say that again? so They want to keep all balances at the 10% or below number? Is that what? Of your limit. so Let's call it the good to great difference. right and I never want great to get in the way of excellent. okay so When you're getting ready to purchase a home, let's call it tier one, you will want all your credit cards to be below 30% of your limit. Your credit card is $1,000. Let's bring that baby down to 300 bucks or less.
00:31:06
Speaker
The excellent tier, it's going to be 10%. Your credit card is $1,000, so let's bring that baby down to like 97 bucks. Right now you're at 9.7% utilization. That is 30% of your FICO mortgage credit score. Wow.
00:31:23
Speaker
No one's ever explained that to me. I've never heard of... ah and I'll get into it, that's a question I have. I've never heard a clear explanation, and to what to my knowledge, it's it's not really publicly available. Maybe you can dispel that rob rumor to me, that no one really knows exactly what it is. It's it's like proprietary. It's a soup that no one knows the ingredients to, is how it's been described to me. and They have general ideas of what the ingredients are, but you're not going to know KFC's recipe.
00:31:50
Speaker
It's KFC's recipe. right It's in- The Coca-Cola mystery. Right? it's It's the mystery, and therefore, but you know these are some of the main important things, but are you telling me they have now published, or is it is it still a a relative guesstimate as to what this is? Do you know exactly how to get a credit score out 20 points? I can give you the FICO algorithm breakdown in like two minutes.
00:32:12
Speaker
Are you kidding? And so this is public knowledge. This is not- It is. Well, I'm telling you, I can't tell people have told me that you... I can't tell you. So I just want you to imagine a pie chart. We're going to cut it five pieces. Okay. Right? And this is the average between FICO 2, 4, and 5. FICO 2, 4, and 5. Who uses FICO 2, 4, and 5? Okay.
00:32:33
Speaker
That's a question, sorry. I don't know. I couldn't tell you. Mortgage lenders. okay right We've been using the same algorithm since the late 80s. Same thing. um And for a long time, yeah, but then you have the internet and you have people that yeah quit their job at this particular company and go somewhere else and now they're angry and so the the information got leaked out. It wasn't really leaked. It should have been out forever. So pie chart. 35% of your mortgage algorithm is very straightforward.
00:33:02
Speaker
It's your payment history. Matt, do you or do you not pay your bills on time? right Do you or do you not have late payments, collections, repossessions? Well, it's not a repossession because I turned the car in.
00:33:13
Speaker
Same thing. yeah right The FIC algorithm does not know the difference. So do you or do you not pay your bills on time? That's 35%. 30% managing credit cards. And people don't like me for saying this, but you don't need more than one credit card to achieve excellent credit.
00:33:29
Speaker
Because somewhere down the line, somewhere in like TikTok University, they heard, oh, you need three credit cards. No, you don't. So 30% of your credit is now having an open and active account. And making sure that that open and active account stays below 30% or less.
00:33:45
Speaker
15% is going to be your length of history. If you had a credit card for 10 years, your length of history is what? 10 years. now Which is why I tell people when you go shopping and they tell you, hey, will you like 10% discount on today's purchase if you open our credit card? The answer should be no.
00:34:04
Speaker
Right? And if you got a cup of coffee or something, toss it in the air and run. Because if I have a credit card that's 10 years old and I said yes to that discount, now I have another credit card on this hand that's zero.
00:34:17
Speaker
Well, 10 plus zero is still 10. But I have to take those 10 years of history and divide it between my two credit cards. Everything about credit is an average and a percentage. Is it just credit cards or if I buy a... I have investment properties. If I get a home every year added to the portfolio, for example, does it reset every time I get a new mortgage? It doesn't reset. It dilutes your average.
00:34:38
Speaker
Got it. Because I see that even on mine. It says like the length of credit, but I got a credit card when I was 18 and I've never carried a balance. and it's still I have a lot of debt right that I have. I consider it all good debt. I have nothing that I consider bad debt. However, it says that I have a low like ah the length of history. um If you have a low length of history because you're constantly buying investment properties, yeah pat yourself on the back. Of course we want that.
00:35:04
Speaker
But what I'm saying is, if you're 26 years old and you had that credit card your parents made you get when you were in college, right, for $300, and then every other month or every time you go shopping, you take out a new credit card, that's a horrible strategy. yeah Because you're never going to get a solid length of history. So that's 15% of your credit. Okay, that makes sense.
00:35:25
Speaker
And then 10% is what we call new credit. So every time that I apply, and notice I said apply, I didn't say I get approved. Every time that I apply for credit, they're going to do what it's called a HARPL, and then my credit score is going to go down a couple points.
00:35:42
Speaker
Why? Every time that I apply for credit, the FICO algorithm, it doesn't matter how much money... your Your credit score is not a representation of your financial wellness. Let's start there, right?
00:35:54
Speaker
You apply for something, the FICO algorithm simply thinks you're getting a more debt. So just in case, let's clip you for a couple points. And then the last one is what is called a credit mix, credit profile, whatever you want to call it. um We like to use an acronym called RIMO, R-I-M-O. And these are four types of accounts that are ever going land on your credit report.
00:36:15
Speaker
Revolving Installments, Mortgage, Open or Other, AKA American Express. There's a bunch of online tools that you can do that show up as an Open or Other. So example. You have a house, a car, a credit card, and an American Express, and I have a house and three cars.
00:36:30
Speaker
Who has the better looking profile? You do. In order for me to look as good as you do to the banks and financial institutions, I will have to close two my credit cards, go get an Amex, and get a car.
00:36:45
Speaker
Or buy two more cars, take out three American Expresses, and buy two houses. Why is that? It wants a one-to-one ratio. Interesting. It wants a one-to-one ratio. and that kind of I kind of look at it as almost being like a binary um algorithm where it really likes the number one, but it hates the number zero, which is like, I tell people, like when it comes to your credit cards, don't pay them down to zero.
00:37:08
Speaker
Oh, well, don't want to pay interest rate. Cool. Leave a dollar. And why is that specifically? So think about this. If last month your balance was zero and this month your balance was zero, next month your balance was zero, what does the algorithm think is happening?
00:37:24
Speaker
Interesting. so it It thinks that you can't carry a balance. It thinks you're not using in it. but What if you do use the bananas out of it like I do for work and for business and everything else? I i rack up quite a bit on that credit card. code I just pay it off each month, but at all times I have a balance. It shows a balance, but I just i have it set to auto pay whatever the previous month's balance is. Is that a bad strategy?
00:37:46
Speaker
It depends on when you're making that payment. It's whatever the auto setting is. I don't know if it's the first, but whatever the fifth, whatever it is, it's it just automatically gets paid. But anytime I look, I always have a balance, but it gets paid every month. Is that a bad strategy? So it's when they report you. So what you want to learn is when do they report you.
00:38:02
Speaker
How do you find that out? You call them. You can call them and say, hey, Capital One, how are you? Matt. I just want to know what day do you report me. The 16 is fantastic. So two days before, right? Because it takes two days for that payment to process.
00:38:15
Speaker
two days before you're to pay down your credit card down to three bucks or whatever that is, right? You don't touch it for three days and then it's swipey time again, because that's how you're going to rack up your points, your miles, whatever your benefits.
00:38:26
Speaker
And you do that all the way again till the 13th of the following month. You pay it down, not to zero, you just pay it down to whatever you want. And then you don't touch it. You wait for them to report you with a very low balance.
00:38:39
Speaker
And that's how you're able to continually bump your score. The other thing that comes from that is, and I'm sure you see it, here's an increase on your line of credit.
00:38:50
Speaker
Here's another increase on your line of credit. yeah That's how you start with a $2,000 credit card and two, three years down the road, it's a $20,000 line of credit. Is that a strategy if you want better credit to request? Because you can request additional credit. Do you want to have as high as they're willing to give you?
00:39:05
Speaker
if If you have 20 now and you can get a $50,000 credit limit, do you want to ask for more? should always be asking for more. okay But the idea is if my credit utilization is 40% and I don't necessarily right now have the funds to bring it down to below 30%, well, what's the other thing that I can do? Ask for more credit.
00:39:24
Speaker
I can ask for more credit and then 40% whatever Well, it just went down because my line of credit is ultimately more. Sure. Right? And it's the same exact thing. So there's very few things that you can manipulate when it comes to your credit score. It's going to be paying down your credit cards, right?
00:39:41
Speaker
And the other one's your length of history. And this is something that your firm is able to look at to say, okay, what are your limits on each of these cards? This is a main consideration, I would imagine, based on what you're saying. The the number one thing we are going to look at is how are you managing your open and active accounts? yeah Are you over leveraging? Because look, if you're coming at me with a 90% utilization and all your credit cards are close to maxed out or over the limit, you're not going to get any more credit. yeah no right The banks don't work that way. So the first thing is we're going to coach you, hey, how many credit cards do you have?
00:40:13
Speaker
and we're going to give them a strategy to get out from credit card debt, because we ultimately want them to have that under 30%, because now they have picture. How do people get out of it at 27% interest?
Managing Credit Card Debt
00:40:24
Speaker
How do you get out of it when, I could be wrong, I'm sure you know, but I think it's what, $26,000 is the average American credit card debt? It's somewhere in that ballpark, I think. As a country, we owe $1.23 trillion in credit cards right now.
00:40:39
Speaker
Yeah, so how does the average family who's on a fixed income typically, how do you start paying down that debt? Because your kid needs braces, right? you' you're The engine blew and now you need XYZ. It's like there's always something. It's never convenient. So how do you get ahead of it? if it's like What's the strategy? So this is one of the things that I love about Dave Ramsey, right? He's one of the guys that made this noble approach very, very public.
00:41:03
Speaker
And what people do, I imagine, I kind of picture it as a garden, right? And each one of your little trees is a credit card and somebody just grabs the hose and goes in there and just goes crazy and hopefully everybody gets something.
00:41:14
Speaker
And then equate to that to people that make the minimum payment and then pay everybody else a little bit extra. You and I know that because of that 27%, that little bit extra is gonna get eaten up by interest rate. It's never gonna go. So the strategy is you pay everybody their minimum payment because believe it or not, most people are not making just their minimum payments. They are paying a little bit extra.
00:41:34
Speaker
yeah So let's just pretend you're five credit cards for the sake of easy numbers. Your five credit cards, your minimum payments are a hundred bucks. But then you look at your budget and you're paying 150 bucks every month. Well, that means you have a $50, what I like to call payoff power surplus. Okay. Okay. So we're going to put that $50 to the smallest balance.
00:41:54
Speaker
Once we pay that down to below 10%, you got that $50 plus whatever you used to pay to credit card number one. Let's call it 10 bucks. Now your payoff power became 60 bucks. You pull it towards the next one.
00:42:08
Speaker
From smallest to biggest. And here's the beauty. Paying down a $300 credit card to 30 bucks gets you the same amount of points than paying down a $30,000 credit card to $3,000.
00:42:22
Speaker
Interesting. and Because the utilization for each credit card. Averages and percentages. You know how many people are like, oh, i have a $100,000 credit card limit. Cool, how much of it are you using?
00:42:33
Speaker
Oh, it's like 70 grand. Cool, you're at 70%. My credit card is only $2,000 and I only use 50 bucks, dude. Guess what? I'm getting all those points. Everything is averages and percentages. So when you break it down, it's just five things. Do you have the right credit mix and how can you build it? right right Are you or are you not paying your bills on time? Everything in your life should be on auto pay, everything.
00:42:56
Speaker
How do you manage your credit cards and are they all, hopefully just one, but are they all? Average American has what, five or six? yeah Something like that. Credit cards. And then you have, don't get your credit pulled more than six times a month.
00:43:09
Speaker
Or sorry, a year. I was going to say month. Sorry, a year. Well, and I was going to talk about what happens to people that go car shopping. Oh, boy. Yeah. You know exactly where I'm going. and then I might not actually. I'm interested to know about it, keep going and then we're going to circle back. Yeah. um And then the last one's going to be your length of history. right That's why we don't open a bunch of credit and that's why we don't close all credit.
00:43:29
Speaker
Got it. it' it's That's your FICO algorithm in a pie chart, five pieces. That's it. Well, now explain to me the car, because now you have me interested. So I know from what I hear, this is what you're here to top spell potentially, when you're shopping, for example, for a mortgage, we're under contract, you do have good enough credit to get a mortgage, we know that, we have you pre-approved with bank number one before we even looked. You were a perfect buyer and you did exactly what we told you.
00:43:53
Speaker
But now we're under contract and they want to shop two or three or four other banks to make sure they're getting a good deal. They're going to have to get their credit pulled. Each one of these is going to require a pull. I've been told that these you know the the credit bureaus will allow you to pull the credit for the same category multiple times in a certain window, be it 30 days, and it only counts as one pull. Is that an accurate statement? it's Yeah. so The other thing- Does that apply to cars as well?
00:44:21
Speaker
When the FICO algorithm is looking at a mortgage pool and just to play this game very, very safely, i go with 15 business days. You can shop around for a mortgage for 15 business days. And again, you're gonna have people like, no, it's 30. Oh, I did it within 30. Cool, awesome.
00:44:39
Speaker
But let's be safe, right? 15 days. The problem with low score or low credit score buyers when it comes to a car loan You know this, they go to the dealership, they sign the application, and then the finance guy is back there doing his thing. What is he doing?
00:44:59
Speaker
If I have you own the car dealership, right? And both of us work for you. And I'm like, hey, Matt, I'm going to do this loan. Cool. What does it look like? Oh, blah, blah, blah, 490 credit score.
00:45:13
Speaker
Are you as the owner of that dealership happy to keep a loan from somebody with a 490 credit score? I don't want to give you that. No. And so now I have to go and find a finance company, so I got to go take the application to him and he's going to send it out to a bunch of different banks, right? They're going to pull it six times or whatever. yeah I have a client that got their c credit pulled 27 times in two days.
00:45:36
Speaker
Oh boy. Because it's Matt Ryan's Dodge and across the street is Matt Ryan's Chevy and across the street is Matt Ryan's Jeep. he jumped around to see who's going to give him the best- But who told him to jump around? Yeah.
00:45:49
Speaker
Hey, go shop around. What's happening during that process is they're literally getting your application out and you can ask car people, like you can ask people that work in the car and they literally call it shotgun.
00:46:01
Speaker
Shotgun. They take your application and it goes to a bunch of different banks. It's a practice that's been around forever. right and while And this can be changed because the bureaus, and not the bureaus, let me rephrase that.
00:46:15
Speaker
FICO can basically change the coding of algorithm whenever they want. It's their thing. It's like Microsoft can update, whether you even if you like the new outlook or you don't like it, guess what? Now you're stuck with it because Microsoft says you're stuck with it.
00:46:26
Speaker
You and I don't get to make that choice. But as a lender, When you see 27 inquiries on a car loan, what that tells me automatically is none of those people wanted you because you're a liability.
00:46:41
Speaker
So that's why it's a really bad look. And I tell people, look, when it comes to shopping windows, because that's what you're asking me, is there such a thing as a shopping window? Yes, it's for mortgages and to be safe, keep it at 15 days.
00:46:53
Speaker
And so it should count as one pull for a mortgage in 15 days, but what about, you just said cars, so what do I do in a car situation? If I'm shopping and I don't have great credit, sometimes they're gonna get the car that can be sold to them sometimes, right? It's like, who's willing to give me this car? it broke I need a car, I gotta go to work. People gotta go to work, people gotta go you know take the kids to school, church, whatever the case may be. That's why you're seeing people stuck in an 84 month loan with its 17% interest rate.
00:47:21
Speaker
yeah That person is never going to pay that car off. In fact, i I can tell you, I've seen profiles, because we see all this data. When we're coaching our clients, we see all this data. I've seen people borrow $40,000 for a car loan and they're going to pay back $87,000. Yeah, that's crazy. And so what when people are like, well, I don't know what else to do, nobody will lend me.
00:47:43
Speaker
Go to who knows you. yeah Find your local credit union right that is owned by their members. If you bank with ABC Bank, maybe start there. Nowadays, and it's not everybody, I'm not saying this is for everybody, but nowadays when you look at your banking app, you are pre-approved for something or other, right? yeah And it's already sitting on there. so yeah Understanding, and we can argue this both ways by the way, but understanding that your credit score is directly tied to absolutely anything you're going to buy for the rest of your life.
Capital Access and Wealth Creation
00:48:17
Speaker
yeah A number that I would love to quantify is what is the difference in a lifetime between a 500 and a 700 credit score? Because I bet you it's over a million dollars. In terms of how much additional interest expense they're going to have to pay? Or how much interest rate I'm not going to have to pay them put in my pocket. right right
00:48:34
Speaker
and like I like to believe that we're all millionaires. The problem is is we're not We're not leveraging our credit. Yeah. Well, I think about your access to the capital to do... once like How do you do ah these other exciting things to even have opportunities to grow your net worth if you if you don't have access to the capital markets? um and By the way, it's just to I'm a big geek when it comes to autonomous driving, Tesla, and all this other stuff. I do think ah what's going to change a lot of the financial aspects of this country is when we no longer have to pay for cars. and so As you look at what's going to happen in the country, in multiple cities now, autonomous driving is legal. and It's getting better very quickly. It's scaling. It's at a 200% clip of improvement, usually every 30 to 60 days. and so It's not going to grow by a linear fashion. It's going to be exponential. It's a hockey stick. yeah
00:49:22
Speaker
When that happens, I think the cost per mile isn't going to be paying what we pay for Uber, which... The only reason I'm bringing it up is because Uber is really quite expensive. You don't want to use that every day for everything if you have to drive with kids and work and all the things, but it's going to be so inexpensive once it's autonomous and there's no human in the car and it's always electric and there's no maintenance. It's going to go down so...
00:49:45
Speaker
fundamentally It'll be so fundamentally different that the cost per mile, you would never buy a car. You'll never want insurance. You're going to not want any of the maintenance expenses. It's there all the time. They're everywhere.
00:49:56
Speaker
they're They're ubiquitous. You want it, it'll be here in two minutes, and it'll cost you $2 to get to where you want to go. It's going to be wild. I think that's probably that reality reality is maybe 10 years away, not 30, 40, 50 years. you can But you can look at a model of that right now.
00:50:09
Speaker
Yeah. Look at Spain. Most people, I lived in Barcelona for a while, most people in Spain don't own a car. In fact, in in Barcelona specifically, depending on the last number of your license plate, you get to drive certain days and certain days you don't. wow So Monday, Wednesday, Friday, whatever, Sunday, if you end in an even number, you can go drive. The people that have an odd number their license plate, so you can certainly look at that model and you're right.
00:50:38
Speaker
It is ridiculously inexpensive. Well, it is going very cheap. This is going to be the most... I think it's good for a lot of people, their car payment is exceptionally expensive it's ah compared to the rest of their other expenses. some people That's why some people can't buy a darn a house because they're paying $800 month. sometimes to get these cars, like because their credit's horrible. It's not even like it's a Mercedes. it's not and so I think when that goes down to a variable cost, and it's inexpensive with no insurance or maintenance, I think it's going to help people if they channel their resources yeah in an intelligent fashion to maybe get a home. and so I'm just interested... i don't know. just As you were speaking, it's the first thing that mind, how this might be a paradigm shift in the country whenever this does take place.
00:51:22
Speaker
I really, really hope you're right. I hope so too. I hope you're right. um But the last time that I looked, the average car payment is $740. God help us. That's way too much money.
00:51:35
Speaker
And every time that an industry faces to lose too much money, something comes up, right? Yeah. Like look at the credit card companies versus buy now, pay later, for example. Yeah.
00:51:46
Speaker
Well, and that, so we're going to get into that. So that's enough about the cars, but I do think that's going to wonderfully interesting thing to observe
Impact of Autonomous Driving on Finances
00:51:54
Speaker
in the future. Imagine people having an extra $700 buying power, right?
00:51:59
Speaker
For most people, right That's right there, third of their mortgage payment. It's going to open up a lot of opportunities for people, but but what you just said, i want I want to hit on that. It's actually one of the things I wrote down that that fascinates me. the The basically buy it now, pay for it later system. I've done it one time.
00:52:17
Speaker
and I wasn't in love with it. Yeah, sorry about that. it was I think the company was a firm, and so I wanted to buy this workout device. It was expensive, and this I was a younger guy. I was like, i i don't I can't justify this, but I really want it. So I clicked the button, and in like three seconds, I had a $4,000 loan for this tonal thing. LeBron was ripped. I want to be ripped, so I clicked the button, right and I got it. and It was so easy. and From what my understanding is, they've opened that that bundle of financing option to like everything. yeah You can buy it it now and pay for it later, like for all kinds of things. You can order lunch for us right now and take out a loan on it.
00:52:53
Speaker
Really? It's like How was that impact? How do you see that? Let me tell you how old I am. how do i okay Let me tell
Buy Now, Pay Later Services
00:53:01
Speaker
you how old I am. When I wanted something that I couldn't afford, my mom would take me to Kmart and I would put it on layaway.
00:53:09
Speaker
That's how old I am. yeah Take that concept and reverse it completely. And we're going to leave company names, but one time, Affirm, Afterpay, Klarna, Cecil, Flexpay, you name it. right The model is instant gratification. Yeah.
00:53:28
Speaker
Dopamine hit, I bought it. Yep, feel great. I don't have the money for it yet. And so what intrigues me, it doesn't intrigue me anymore actually, after the numbers that came out, or it doesn't. So last year, i was trying to figure out what this was going to look like at the credit reporting level.
00:53:48
Speaker
Okay? Because I know people had them, people told me they had them, but I'm not seeing them on the credit report. And so... They didn't report them? No. Or just not enough people had them? That it wasn't... No. that Everybody under the age of 26 is using this right now. Oh, jeez.
00:54:06
Speaker
Everybody. So we didn't see them. And then I thought, oh you pay this thing on time every month, yeah? your Yeah, your phone... We all pay our phone on time every month, right?
00:54:21
Speaker
How come it's not on your credit report giving you points towards your payment history?
00:54:26
Speaker
So when does your phone bill land on your credit report? When is the only situation where your credit your phone bill lands on your credit report? It's when you don't pay it? When you don't pay it, exactly. becomes a collection.
00:54:39
Speaker
Right? So my thought is, okay, those are called negative contracts, by the way. So negative contract, your gym membership, any type of delivery service, basically things that you pay for that are not necessarily on your credit report until you don't pay them. That's why it's called a negative contract. Got it.
00:54:57
Speaker
That's the way I looked at them. When it came to buy now, pay later, all these applications. And then when I freaked out is when I was checking out of Amazon and I can use my Chase card, right? Which is already preloaded to my Amazon, or I had the option to do four payments, okay? On an espresso machine, man, 99 bucks.
00:55:24
Speaker
And I'm like, curiosity kills the cat. so I start clicking things and then I realize, oh, This is an installment. It's a sales installment. And is that appealing because it's not, because i already have credit card debt, I don't don't want more of that, so I can get this instead? what's the Why not just put it on the Chase card? Because most people, so Gen Z is specifically, because they grew up with the don't use credit card model, they've seen their parents drown in credit card debt, they're scared of credit cards. and
00:55:58
Speaker
I've had this conversation all day yesterday and today as I've been doing different meetings and stuff. I would love to know. I would love to know the amount of dollars, I'm going to say millions, but I personally believe it's billions that had transferred from credit card purchases into buy now, pay laters. Okay. I would love to know that number because it has to be millions. Yeah. I'm being conservative.
00:56:26
Speaker
The appeal is, it's right there. It's a button. How many times do we get things on our phone and there's the disclaimers? You don't read the disclaimers. You just click agree and continue. Yeah, right. Yeah, boring. And here's the problem. Because people are not seeing the hard pool when they're using this type of loans, they don't think that it's going to go on their credit report.
00:56:46
Speaker
So I'll tell you a story. I have a client, a current client, who has a $16 collection on her credit report. I asked, where is this coming from? Like I needed when I saw it, I called her. Like I don't deal with clients personally most of the time, but I call her because now my that's how my brain works. And I look at the credit report, she has a collection with a firm for $16, $42, $62, $84, and there's one more, $112.
00:57:13
Speaker
eighty four dollars and there's one more hundred and twelve dollars
00:57:19
Speaker
And I said, what is this? And she literally tells me, I usually make a voice, I'm not gonna make the voice. She tells me, oh, I ordered some Chipotle and I was too lazy to go get my credit card, so I just use um buy now, pay later.
00:57:36
Speaker
collection for $16 and a collection for $16,000, if they hit your credit report on the same day, you lose the same amount of points. Yeah.
Loans for Everyday Expenses
00:57:46
Speaker
Wow.
00:57:47
Speaker
The problem now is that it's everywhere, right? If you buy a plane ticket, you can pay for it or you can split pay it. You can buy a dinner, right? And split pay it. I don't know i don't know who it was,
00:58:02
Speaker
I can't remember which of the companies was, but they reported that six out of 10 of their transactions is people buying groceries. Wow. That's not good. We're taking out loans to pay off for groceries. Are there people who need it? 100%. Is there a single mom that may not make it to the next two week paycheck? 100%. But I can tell you most of them are people buying crap that they can afford to impress people they don't care about.
00:58:28
Speaker
And then there's the second version of this. So because all this money has gone from credit cards now to the buy now, pay later, who's losing money? would imagine the credit cards. I'm surprised they don't own the buy it now. and Maybe they'll buy them and then they'll be happy. Why when I can just give you the same thing?
00:58:49
Speaker
Come on, man. I'm your credit card company. You know me, man. You trust me. Leave those guys. And let me ask you, have you noticed when you look on your phone at your credit card statements that there are certain purchases that says, this qualifies for pay over time?
00:59:04
Speaker
I have not seen that, no, but I'm sure it exists.
00:59:10
Speaker
any transaction now i just bought plane tickets i'm taking the kids on vacation i needed to get plane tickets 362 dollars i can go and um pick a payment and give me one second i'll put it up for you
00:59:31
Speaker
i can pick
00:59:36
Speaker
how many payments I want to make. I already swiped my credit card, by the way. So, one that so within your credit card. and so then that'll So, here's my credit card. I have your credit card number now, so I'm going to make a few purchases myself after this. Look, it's got LifeLock number. um yeah Can you see that remark right there?
00:59:57
Speaker
Pay over time eligible. There it is. Okay. Let's get curious.
01:00:04
Speaker
These are things I don't notice. Good. So you saw what I did. I just picked- One click and now you can do it over three payments, six payments, or 12 payments. But my point is, I don't understand the reason for this. Is this so it'll take it off of your credit card bill, so now you don't owe the three, four, $500 anymore on your credit card. You owe it separately and installment payments of $35. You said it so nonchalant, but let's say if I was a loan officer.
01:00:32
Speaker
Actually, let me play this game. I'm your potential buyer. I want to go see houses. What are the things I'm not supposed to do, Mr. Real Estate Agent? You're not supposed to do? The standard thing, don't take any debt on
Debt Management Before Home Purchase
01:00:45
Speaker
whatsoever. That's it That's all i want. Don't quit your job. Don't cuss out your boss. you know That's the first one I need, right? Yep.
01:00:51
Speaker
I'm not supposed to do what? Yeah, take out any more debt. out any more loans. So I already swipe my credit card. I show you the transaction. We click the button, and it gave me... Yeah. An option to take out a loan. So you're correct.
01:01:03
Speaker
The $300... But will it come off of your credit card statement? Yeah. it will copy It will go back into my credit card limit, right? That $300... So that goes back. So that goes back, but what just got created? Yeah. A secondary loan. But does it get reported, this PayNow? Does it get recorded yet? brand new installment.
01:01:24
Speaker
So it will count as a has a new loan. It's a new trade loan. And you just told me that while you and I are going to go be looking at houses, I'm not supposed to be taking out new trail lines.
01:01:35
Speaker
Every time you do that, yeah every time you do that, it's a brand new trade line. I'll tell you a story super quick. wow and My friend Morgan, so I do um classes for loan officers, right?
01:01:51
Speaker
And I was teaching them like, hey, this is how it works, blah, blah, blah. Here's what you quote can do for your clients, all of that. And then she she pulls my son's like, man, great person, thank you. And she goes, you know,
01:02:04
Speaker
I'm 28 years old and I've never had a late payment or a collection. was like, awesome. i'm Like I'm proud of you. Right? And she goes, but I've never been above a 680 credit score and my brain glitch, you know, like, eh,
01:02:18
Speaker
I'm like, no, that's that's impossible. If you tell me you have a 680 or you've never been able to go up above 680, I don't need to look at your credit report to know you already either have two delinquencies within the last 36 months or you have a collection in there.
01:02:30
Speaker
I don't need to look at your credit report. I already know. She goes, no, JP, never had it. I said, okay, let's do ah let's do a review. We do the review. my friend had taken out 27 new loans within the last three months.
01:02:49
Speaker
And she'd been doing this constantly for years. yeah And they're basically, it's not a joke, but the way that I try to get people to understand what's happening is I want you to imagine your credit card giving birth to new installments because they are an installment.
01:03:06
Speaker
Installment loan, same thing. So what's in it for the credit card company? Well, they just recover all that money that was going to the BNPLs, right? They might not pay later.
01:03:18
Speaker
But on top of that, when I swipe my credit card, that's a non-secure revolving transaction, right? If somebody doesn't pay their credit card period, there's nothing they can take from them.
01:03:34
Speaker
They'll send you to collections and it becomes a charge off. In the mortgage world, if you have a charge off, it up it affects your credit score, but it does not affect your debt to income ratio, right? Lenders do not look at charge offs towards your DTI, your debt to income ratio.
01:03:50
Speaker
When I do that, have we clicked the button and taken out that loan for that credit card swipe, now it became an installment. And when you don't pay an installment, it becomes a collection. And when you have collections, the loan officer, it's going to count it against your debt-to-income ratio.
01:04:07
Speaker
Wow. So the public service announcement here is Resist the urge, don't do that, instead use the credit card responsibly and keep it paid certainly below 30% and the goal of 10%. Is that essentially it in a nutshell?
01:04:23
Speaker
I'll make it easier for you. i did a video about this on Instagram and ah the first comment, my brother Fernando, if you can afford it, don't buy it. It's that simple. If you can't afford it, don't buy it. If you're not able to afford it, don't buy it. yeah right Because here's the problem, they're letting 18-year-olds run around with this. yeah and Again, like you can order Grubhub right now yeah and take cattle loan on your lunch.
01:04:53
Speaker
yeah it's That's crazy. and that's crazy well that's That's easily said, but hard to do, I think.
Credit Scoring System Changes
01:04:59
Speaker
but The next topic I have to get to, I know we're getting a little long here, but the Vantage score is changing, right? This is what I hear. And I don't know what the heck that means, but I know enough to say I got to ask you about it. is there Is the score changing in a different way? is I know you might have hinted at this before, but is it is there a a new new Vantage score? Is there a new way they're going to be looking at our credit? So it's called Vantage 4.0.
01:05:23
Speaker
Yeah. And everybody's making a big fuss about it because... I don't know where what the source is, to be honest with you, but it was basically, hey, our housing authorities, right? Freddie and Fannie, which and kind of finance everything, but Freddie and Fannie approved it.
01:05:38
Speaker
So now every loan officer, right, everything the loan officer gets, you guys get. yeah It's kind of like, it rolls downhill. And this got approved back in 2018.
01:05:50
Speaker
This has been a thing since 2018. What I believe is going to happen, because let me tell you how many loan officers I have met in my career that have closed a loan using a Vantage score and not a FICO score. And if you are one of them, like hit me up. I'd love to meet you. Yeah.
01:06:06
Speaker
Zero. I've never met a loan officer that has closed a loan with a Vantage credit score. So the way that I look at it is if it gets adopted, it's not going to be a smaller company, right? Like pioneers get arrows in the back.
01:06:21
Speaker
So it's got to be a really, really bitch big big mortgage company. And then what they're going to realize is, oh crap. What we thought was 800 looks more like a FICO 560. So what do we do? Well, now in order for you to get approved, you're going to need a 900 credit score. yeah right Something like that. It's just moving the post down the line. Got it. um So it's a nothing. Okay, I was curious because it's something I've been asked and i was like, maybe you should know a little something about it. So it's not something I'm going to lose sleep over, I suppose.
01:06:51
Speaker
No, but the way that it's being presented to the public is that it's way more forgiving. It looks at trending data versus, oh, your loan officer looks at seven years, and this looks at trending data. How have you behaved within the last 28 months or something like
Spanish-speaking Homeowners Market
01:07:05
Speaker
that? Right. Well, and so one of the last questions I have for you, it it kind of relates, because I know you're Spanish speaking, and and the last conference I went to described the fastest growing segment of homeowners in this country are all Spanish speaking. It is um it is not just a ah little transition. It's major transition. And they lag behind in home ownership at the time, at the moment, present moment, but probably not for long. yeah Or at least so so we all hope. So I want i want to know, i i just what you've seen now that you're in this industry, is there a way that that we can capitalize and help that market? Because I think at least here in Maryland, it is an underserved market. It's a market where Spanish speaking people oftentimes don't know how credit works at all. I can't tell you how many people wait until they have the cash to be able to buy the home, which is why they live in a rental for 25 years. I'm not kidding you. And they say, oh, I have 300,000 saved, Matt. I have to get to 400,000 before I can buy the home, but home prices keep going up, so I can't ever catch it. I had that happen a couple months ago.
01:08:08
Speaker
I said, you have $300,000 saves? And they're like, yes. I'm like, you don't need that much. to like They just didn't know. And so I don't know if that's something you're aware of, and ah so I just wanted to get your thoughts in general on how this this is going to impact the real estate community in the country. Yeah, see for obvious reasons, that's where my heart is, right? like Helping the Hispanic community to shrink the gap when it comes to financial and credit education. That's kind of my calling, um which is why, you know if you look at my title, diversity relations.
01:08:37
Speaker
I was in Houston for an event a couple of months ago where we got the data from NARAP. Six out of 10 homes purchased in the state of Texas so far in 2026 were Spanish-speaking families. Wow.
01:08:52
Speaker
60%, man. That's not a small number, so learn Spanish, number one. Number two, yeah did joke you know like the the money under the mattress, the money in a shoebox, the money in the coffee can or whatever, that's not a joke. I know it's not.
01:09:07
Speaker
People legitimately have hundreds of thousands of dollars put away because nobody took the time to explain to them that homeownership is for you. right Because again, we come from a system where you couldn't get a home until you had the cash to pay for it. right right So we kind of brought that with us.
01:09:25
Speaker
But that's definitely an underset market and here's, here's I guess in a sense, my child not my challenge, to man I'm sure, my challenge to you is Definitely have that focus because I'm telling you, your business right now, the one biggest difference between the Spanish Latino client versus your American client is the American client is very well aware of what the Fed is doing, what the rates are doing, blah, blah, blah. The Spanish client just wants to put their family in a home and will deal with it and refinance it in six months or whatever the case may be.
01:09:59
Speaker
yeah That's wild. Well, i just I say purely from an economic standpoint, even if it's not your passion, which it clearly is for you, it's just like I think people need to wake up to the market in the reality that there's a group of of buyers, huge, that could be served in a meaningful way. It's rare you even have a lender who knows Spanish. it's very rare I know they exist, but it's not it's not often. no and i don't see advertisements typically in Spanish. It's just as such an underserved market. I love to get involved in that market in a more meaningful way just simply because I think it's untapped, and it's not untapped for long because people will catch on. Especially in Maryland. Yes. right like When I do this- In Texas, I can get that. In California- Sure, Arizona, but here, right like same thing here, at Virginia.
01:10:42
Speaker
Yeah. right and and That also has a secondary call to action. non-Spanish speaking buyers that are on the fence, yeah you need to get off your butt and get in the market because guess what? yeah If you don't do something about it now because of the rates, because of availability, because of inventory, because of whatever excuses you have, right and I get it, right when the market is what you want it to be, low rates and this and that, now you're going to be competing with 20 other people that have $300,000 cash You're that.
Starting the Home Buying Process
01:11:18
Speaker
yeah
01:11:19
Speaker
No, it's it's fascinating, but i I'm passionate about I would love to get more involved in it, and I think I'm not going to be the only one. so I think it's going to be massive. so um so My practical takeaway is I'd love to wrap this up a little bit. so For those that have hung out and listened to us for an hour now, how do they get started? they just go on the website? that How do they how do they at least get this conversation to begin? is there what's the What's the way you tell people to go? Yeah, for for me, the best possible way for them to connect with us if something that they need to work on is get with your loan officer and say, hey, um I want a connection with you, Qual, because when when it comes through a loan officer, we give them a discount, we put them in a better program, and so on.
01:12:04
Speaker
Got got it. Because, again, if you're trying to buy a car, yeah, you can call us, 833-497-825. We'll give you some tips and tricks on how to increase your score, but really, if you're looking to...
01:12:16
Speaker
to your point of go look at the house and then try to get qualified? No. Go to your loan office and say, hey, I need help, but I want to get loan ready. yeah Can you connect me to Uqual? We work with almost every single company in the United States in the mortgage business. wow So they will get us connected, and we go through a free consultation. We look at the report, we coach them, and then we look at what needs to be fixed. I was referred to you by Ayaz Rayamanji. He's a branch manager here. First Home Mortgage, shout Yeah, First Home Mortgage, shout out. They connected us and said, you're one of the only legit folks he's ever met in this space. Yeah, which says a lot coming from him, like, thank you, Ayaz, you're the best. Yeah, he's a sponsor of the podcast. Say shout out. There you go.
01:12:57
Speaker
There you go. But no, I think it's fantastic and I hope I can tell you how I typically see the chain. That's why I was saying, how do we start this? Most people don't go to the loan officer. Most people don't probably even come to you. They end up clicking the button online to Zillow or these other platforms because they want a house. What I'd love to do is start the chain so the people that are afraid to even click the button... So, they need to first probably reach out to an agent oftentimes to start the process. If you have a good agent, they better have a good lending partner. course. And then they can then connect you with Uqual and get the better rates and all the rest. So, I think that sounds like that's the loop we have to encourage people to go. Absolutely. And the other thing is that once you have a relationship with people like AS over at First Home Mortgage, he already knows the type of profile that we're going have. So it makes the process more speedily. And most importantly, it's a completely different thing to say, hey,
01:13:55
Speaker
Let Mr. Buyer, let me put you with your coaches, let me put you with ah Matt, your realtor, with your loan officer. have Have a team versus figure out, go fix your credit, come back in six months.
01:14:08
Speaker
Because that person's not
Credit Repair Costs and Legal Aspects
01:14:09
Speaker
going to come back. I have to say this directly, how do people pay for this? like do they yeah You said pay for performance, you have to wait six months now? Is that what you told me before you can charge anyone for these services? For credit repair, right they're not allowed to pay. What we do is depending, if you're coming to refer in this particular case, let's talk about First Home, they get an incredible discount um and it's based on every state. Every state is different. So the lender is going to be paying this? No, it's on the client, okay right but it's honestly extremely, extremely inexpensive. I'm going to speak for Maryland. okay In the state of Maryland, if you're being referred by a loan officer, it's only 99 bucks a month.
01:14:46
Speaker
And to your point, this isn't just credit, it's financial wellness. We have an AI that does the budget for you. My average client is saving over 270 bucks a month.
01:14:58
Speaker
We have people with 800 plus credit scores that only use the budgeting tool, like me. I'm traveling all the time, blah, blah, blah. I gotta to make sure my 17-year-old is not out there buying crap, right? yeah So it's it's the mix. But yeah, it's it's on the client. um I can tell you, I've heard horror stories. You probably know more than me, but credit repair companies that operate in Maryland charging people $1,500. $99 is the least I've ever heard, but you don't charge more for that if I have a very complicated situation with the IRS or with this or that? No.
01:15:33
Speaker
I deleted a medical... colitionsion Let me rephrase that. We corrected a medical collection of $700 from your report, your service is $99. Oh, we corrected a charge off for $2,700.
01:15:47
Speaker
99 bucks, it is illegal to charge people based on the size or the amount of that
Public Financial Education and Gratitude
01:15:52
Speaker
collection. You can't do that. Interesting. Well, that's fascinating. so ah well i appreciate i mean I've learned a lot. It's not every every ah every one of these that I learned as much as I just did today. so i really i really do appreciate it I had a bunch of questions and notes, and I think you managed to get through the gauntlet. so um I even think one of these days i might have to have you back with a different so series of thoughts and questions now that I've- worse we've started to peel this onion a little bit. No, of course. And again, right like if we don't have this type of conversation, that's why i love doing this, because at the end of the day, if we can bless people with knowledge, it's going to change their lives. I truly believe that. I think so, and i think I trust anybody when I can see the direct line to the business. And so I understand and it's in the interest of the lender, it's in the interest of the real estate community to help people be able to buy homes. Therefore, I then begin to trust what they have to say, because I can see the path. Yeah. So, I'm a realist in that capacity. So, I i think what you offer, as long as it's legitimate, which I know it is, or else I wouldn't be talking to you. you go. with them So, I'm excited for it. so um So, that's it. So, thanks again for joining me. Hopefully, wes but we've educated a few folks. And if you want to learn more, we'll have all your information in the in the podcast breakout. And if you want to reach out to us to help you with the process of getting ready to start that process, even if you don't have great credit, we have a solution now. We can help you work that through. So just reach out to the Matt Ryan Group. Our information is out here. And I hate to say this, but boy, the people at the podcast tell us to like and subscribe to this stuff. Do it. Yeah, it's a it's officially a thing. Do you know we're number 19 in Uzbekistan right now? Oh, there you go. We're very, very popular every day. So shout out to those folks listening to us.
01:17:32
Speaker
Get your credit score up in Uzbekistan. There you go. All right. Thanks so much. Thank you so much. And big thank you to our sponsor, First Home Mortgage. You can check them out at firsthome.com.