Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Costa Mesa, California. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
Jason Hartman: Hello and welcome to another edition of Creating Wealth. This is our 78th show. Glad to have you with us today. This is your host, Jason Hartman, and before we get into today’s show’s topic, which is about maintaining a high credit score, where we’re going to talk about credit restoration, and by the way, I gotta compliment my guest, Danny. This was a great interview. He really provided a lot of in-depth, detailed information on what your FICO score is, how it’s tabulated. I mean this is so complex, this FICO stuff. How entrepreneurs and investors can maintain high FICO scores, even with multiple mortgages, what accounts you should close, what accounts you should keep open. If you have bankruptcy, foreclosure, tax liens, judgments, late pays – can they be deleted? When can’t they? What is the new FICO 2008 model and how is it being used to assess FICO score?
Just a lot of good stuff. In fact, one of the most insightful things I found really interesting, and I really try to pry a lot of information out of our guests and appreciate their cooperation in that when they let me do it. Danny really named the actual companies that are the easiest to deal with in terms of taking negative things off a credit report, settling debts, and what are the most difficult companies. You’re going to be surprised at his answers. So that will come up in the interview in just a moment.
First, I want to thank all of you listeners for going to www.jasonhartman.com and submitting questions in the Ask Jason section of our website at www.jasonhartman.com. Just thought I’d try to get over a couple of these. I know there’s a backlog on questions and we’ve had so many great guests lately and haven’t had time to get to all the questions, but we will get to them. They are in my file and they will be addressed. So let me just get a few of these out of the way today before we get into this rather in-depth interview about credit restoration and a little bit touching on debt settlement as well.
Okay, so Chester from Texas says, “I have learned a lot and Jason’s insights have encouraged me to keep investing in real estate.” Well, thanks, Chester. Glad you enjoy the show.
The next one comes from Grant in Canada and Grant says, “Jason, I listen to your podcasts, enjoy your perspective on the markets as a whole, in addition to just talking about real estate. Everything is connected, so one area of the economy can affect another, as we all know. I reside in Canada and was wondering if you ever do any seminars up here or have Canadian investment opportunities.
“Specifically, I live in London, Ontario, which is close to Toronto. I have been investing in the stock market of late and although there are opportunities, I dislike the need to constantly scour the news for what might affect my stock performance next. I have since decided that real estate is where I want to be, as it is far less volatile and easier to manage. I say this without any specific experience, though.”
Well, Grant, that’s a good comment. I definitely agree with you that you should get out of the stock market. I think the stock market is a big Ponzi scheme and it’s a pretty lame deal. I like things I can control and real estate – and when I say real estate, of course, we’re talking about income properties, cheap land, high packaged commodities value, in other words, where the structure or the improvement, the apartment building, the house, for four-plex, whatever it is, sitting on the land, is what you’re really investing in. And it gets the real estate label, so you get that terrific financing, tax benefits, and the ability to rent it out, etc.
Your question about Canada, personally, I love Canada. Canada’s a great place. Some of my favorite music is from Canada. You’ve got some good beer up there, too, and it’s just a beautiful country. We have not done seminars in Canada, although we would love to extend the invitation for you to come down here to sunny Southern California. And again, for all of our listeners, if you have to get on a plane to come to any of our events – the only one I must exclude is Masters Weekend because although we will offer you a big huge discount on that one – we will be happy to comp you in for free to any of our events.
So if you want to come to Creating Wealth on the 13th, jump on a plane. Airfares have gone down with the price of oil declining. We’d love to have you down here, Grant. As for Canadian opportunities, we have looked at a lot of investments in Canada actually, and we were particularly interested in the Alberta Oil Sands area. I saw a 60 Minutes program about the Oil Sands a couple years ago, and I got really, really excited because my typical philosophy is where this 60 Minutes piece was on the oil sands in Alberta, which is the largest deposit of oil outside of Saudi Arabia, as I understand it. So this is a huge, huge boon for Canada and it’s enriched the country a lot and will continue to do so.
And I instantly thought like in the old days of the California Gold Rush. Who was really making the money in the California Gold Rush? Was it the people mining for gold or was it the people who sold the blue jeans? Namely, that would be a company, Levis. Or the people that sold the picks and the shovels and the tools to the miners? So as I saw this story on 60 Minutes about how Alberta is going to be enriched and Canada is going to be enriched by these oil sands, I instantly thought, well, everybody, if they’re moving into this town, they need housing.
And so we went and looked at that market and we just kind of felt that we were a little too late. It was too expensive already. Financing, as I understand it, in Canada is not quite as good as the U.S. and I say that even in our current U.S. market, where financing is tougher than it used to be.
But we’ll continue to monitor the situation. We haven’t particularly liked anything we’ve looked at in Canada so far as an investment, but that’s always subject to change, Grant. And who knows what the future will bring, but currently now, we are in 39 markets around the U.S. You can check those out on our website, www.jasonhartman.com or talk to any of our investment counselors here at the office that will be glad to guide you. Thanks for listening and thanks for the question.
Tonya sent this one in. Tonya is in Georgia, I believe the Savannah area, and she says, “Please review and let me know if your company would be interested in marketing this project for us. To view the presentation with audio recording on the community, visit this website. Best regards, Tonya.”
Well, thank you, Tonya. I did take a very quick look at that this morning and I can tell you from the looks of it, it didn’t look like we’d be interested and the reason is that we are really all about very sustainable, conservative, prudent investments. I own a property in Savannah. I like the Savannah market reasonably well. We’ve had several clients buy in the Savannah area. However, these properties, as what it looked like at my quick glance, seem to be either vacant lots or more speculative nicer properties, where they were more expensive than we want.
We are looking – again, as we see a very bad economy in the future, we are looking at properties that are inexpensive, that are on really cheap land, that are basic housing. Not luxury housing, not golf course properties, not lake front properties. Those are the properties you want to live in, but not the properties you want to be investing in and renting out to other people. I think we are going to see an America of the future that is a lot less rich than we all thought we were.
Now, will there be opportunities for investors in that economy? Absolutely. Are there opportunities now? Absolutely. And by the way, that reminds me. Charlotte, North Carolina, one of our people here sent an email today around to the group of investment counselors and this is really incredible. I mean this is a bank repo property. I believe the price was about $108,000.00. The projected return on investment – and I don’t have it in front of me here – was around 40 percent annually.
Folks, we have got some incredible properties, properties that make sense the day you buy them. Nothing special has to happen. No big speculation. No big appreciation. Nothing special. Just buy them, stick a renter in there, hold onto that property, and it’s got a great future, even in a not-so-great economy that we’re facing. And I think the economy is going to get worse before it gets better. But our investment strategy works very well, especially given what’s going on in the U.S. and the world economy nowadays.
Next question comes from Steve in San Francisco. “Dear Jason, I have several rental properties in various states. Two of the properties were obtained with 80/10/10 loans.” So what that means is Steve got a first loan for the 80 percent, a second loan for 10 percent, and put 10 percent cash down. And then he goes on to say, “To avoid paying PMI.” Now, that’s mortgage insurance, so when you put less than 20 percent down, you have PMI. Today, you may not even be able to put less than 20 percent down, so of course, that is a moving target with the financing world out there.
“Two of these properties have a second loan with a rate around 10 percent. My wife and I are in disagreement. I believe that we should use our HELOC” – home equity line of credit – “currently at 3.99 percent to pay off these second loans, at least whilst the rate is so low. She believes that we should pay them off with cash, as we have strong cash reserves and are only gaining 2 – 3 percent interest on our cash in a CD. Which is the most prudent decision to make and why? Many thanks, Steve.”
Okay, Steve, to totally be sure I’m answering this question correctly, I would need to just chat with your about it because I didn’t get quite all of the details here. But my general comment is this. You want to be a borrower in this economy. The strength in the dollar that we’re seeing right now is an illusion. It is not really there. It is a result simply of the unwinding of various assets, various funds, various hedge funds, and positions in the stock market that are denominated in U.S. dollars, and when they’re unwinding these positions, it’s soaking up dollars from all around the world, foreigners and Americans, companies and individuals both.
So what you have now is you have a temporary strength in the dollar that gives you a big buying power. Now, that’s good. But it’s very, very temporary. I think we are in for a very weak dollar and we are in for dramatic inflation in the future here, probably about two years away, but again, no one knows for sure.
So what I would say is keep your cash. Now, your cash is going to decline in value, so I don’t like the cash position. I only want you to do that very temporarily. But I want you to use debt, as much debt as you can possibly get, so long as that debt is fixed rate debt. Your HELOC is not a fixed-rate loan, so you could borrow from it on a temporary basis, but again, when inflation strikes and we see higher interest rates down the road, you’re going to see that rate go up a lot.
So I would just say if I were you, I would probably just keep your second loans at 10 percent. I would not pay them off because the real rate of inflation either is currently 10 – 12 percent in my belief. Now, we’ve seen a little bit of very temporary deflation here and strong dollar here. Again, temporary in my opinion, but we are overall going to see much higher inflation in the future.
And folks, think about it. These bailouts now, they are totaling – what are we up to now in the bailouts? Well, let me tell you. In terms of the maximum commitment to all bailouts, $8.5 trillion! That’s trillion with a T. That’s a 1,000 billion. That’s a lot of money. Currently, that has been tapped so far, $3.2 trillion. By the way, you want to see a chart of this; it’s on my blog at www.jasonhartman.com. There’s a whole chart that itemizes all of the bailouts. It’s pretty amazing.
So what does this mean? This means inflation is coming. It means a weak dollar and you’re going to love your debt, Steve, so I hope this doesn’t cause any more marital discord, but I would say be a borrower, be a debtor, so long as the debt is fixed rate. So hope that helps you out.
Okay, last question here from Brent. Brent is in Minnetonka, Minnesota, and he says, “I love listening. You’re doing a great job.” Oh, well, thanks Brent. Not much of a question, but I appreciate the positive comments.
And by the way, listeners, we would so appreciate it and I’m glad you all like the show so much, if you would go to – if you’re an iTunes listener – go to the iTunes store, look up our podcasts. We have three of them, by the way. There’s a video podcast that we do occasionally. We’re going to do that more, I promise you. And then the Speed of Money podcast and then our main show that is the Creating Wealth show. Now, please, go on iTunes and write us a nice review. We’d really appreciate that.
Anyway, let’s get into the interview now on managing your credit, a very, very valuable asset and after this, we will sign off and talk to you in the future because we got a whole bunch of interviews recorded. Last night, I just recorded an interview with Andre Eggelletion, who is the author of two books talking about the Federal Reserve fiat money and national security as well, so that’s quite an interesting interview. Just got a bunch of great guests coming up. So here’s the interview with Danny talking about managing your credit.
Interview with Danny Rosario
Jason Hartman: It’s my pleasure to welcome Danny Rosario from Starting Over LLC. Their slogan is “Target Your Credit.” Danny, welcome to the show.
Danny Rosario: Thank you, Jason.
Jason Hartman: Great to have you here. What is credit restoration?
Danny Rosario: Well, credit restoration is the process where we look at someone’s credit file and we study all three reports from Experian, TransUnion, and Equifax. And what I look at are parameters where the consumer could use some assistance. So if they’re in a situation where their FICO score is very, very low, or there are areas where they could need improvement, in other words, they have negative derogatory items, whether they be past delinquencies, tax liens, bankruptcies, a number of different items where it’s negative on the person’s file, my job is to come in and see if we can restore that credit.
Jason Hartman: Okay, great. I would assume that a lot of people right now in these tough economic times are in need of these types of services. Is business pretty good?
Danny Rosario: It is. It is. I have a lot of calls and a lot of clients are calling to not only look at restoration, but also, how can I improve my credit score and what is a FICO score. There’s not enough education out on the marketplace to teach them.
Jason Hartman: So just quickly, what is the FICO score? Tell us about that.
Danny Rosario: The FICO score is the score that’s tabulated by the Fair Isaac Corporation. It was established many, many years ago and it’s a score that tabulates the amount of data that’s on your credit file, and that formula takes into consideration different parameters of the consumer’s credit behavior. So that FICO score, as everyone always listens to, is calculated at the time you pull your report.
Jason Hartman: Okay, great. What is sort of the best general advice, and then we’ll drill down into it, to maintain a high FICO score, even when people have, for example, multiple mortgages? I mean we’ve got investors that own a dozen properties or more many times. That sort of weighs on your credit. What I’ve found, at least personally, is that it initially weighs on your credit score, but then after it seasons for about six months or so, it actually improves your credit score. Is my interpretation of that correct?
Danny Rosario: Yes. It usually takes a little bit of time, sometimes three months, usually 3 – 6 months before you start to see a change because a lot of times, the score takes into account the amount of debt, and there’s different types of debt. There’s revolving debt, which is the kind of debt that relates to credit cards. And then there’s secured debt, which is your vehicles and mortgages, homes, so those two individual ratios are calculated differently and are calculated in the credit score.
Jason Hartman: What about the multiple mortgage issue? I mean is there any particular advice on that more specifically?
Danny Rosario: With multiple mortgages, the secret is how it’s distributed out on your report. Obviously, with the more mortgages that you do have, the more debt you’re going to incur on the secured end of the loan. So the secret is to look at the parameters of your other revolving debt because revolving debt is really what –
Jason Hartman: Tell us what revolving is. That’s credit card, right?
Danny Rosario: Yes, revolving debt would be your credit cards, anything that’s unsecured, stuff that you’re using all the time, your credit cards, whether it be at the store. Regular lines of credit are also a revolving debt, store credit, just anything that you’re using on a monthly basis, where there is a credit limit, but it’s always changing. It’s always revolving.
Jason Hartman: So it’s important to close those accounts, right?
Danny Rosario: No, actually, that’s the worst thing you could –
Jason Hartman: Or keep them open.
Danny Rosario: Yeah, keep them.
Jason Hartman: Some people say close them. I’ve heard that advice before.
Danny Rosario: Well, that advice really comes into play because a lot of the times, the education that’s out there states that yeah, you know what, if I’m not using my card, just go ahead and close it. The problem is that when you close an account, you’re actually hurting your score because think about it this way, Jason. If I have had credit for 30 years and I decide to close an American Express account that I’ve had since 1973 because I don’t use it as much, but yet all of my current revolving credit cards that I’ve maybe applied for in the last ten years, it really affects the amount of credit history or life that you’ve had because the score looks at span.
So if all of a sudden, you kill an account you’ve had for 30 years and you only have accounts that you opened within the last 10, it now affects your score because it looks like you are a young –
Jason Hartman: A young borrower or a young credit, yeah.
Danny Rosario: You don’t have enough history.
Jason Hartman: So you want to longer credit cards. You don’t want to keep switching companies, in other words.
Danny Rosario: Absolutely.
Jason Hartman: Ah, got it. So when you get those new credit offers in the mail, well, they don’t send those quite so much anymore I’ve noticed, but they used to. Don’t just jump at very offer, right?
Danny Rosario: No, you want to be really smart about it. You don’t want to have 20 different revolving credit cards, which is very common amongst young people just coming out of college, who just don’t know.
Jason Hartman: So in other words, are you kind of giving the advice here don’t take the Macy’s credit card, “if you open an account with today, you’ll get 10 percent off your purchase or whatever,” right? That’s probably not worth it, unless you’re making a big, big purchase, right?
Danny Rosario: True and if you plan on using it because the problem is that people and consumers use the card once and then it goes dormant. The problem is that even if you don’t use it, that hurts your score, too.
Jason Hartman: So using it is better?
Danny Rosario: Using it is actually better because –
Jason Hartman: Because I have cards that I really don’t use very much at all.
Danny Rosario: Right, but the wise thing to do is to actually use them. That’s the worst thing you can do is even if it’s at a zero balance, use the card at least every six months. The best piece of advice, what I tell my clients, is to rotate through your cards. If you have ten different credit cards and they’re all at zero balance, maybe for the month of January, you use your Chase/Manhattan card. Pay that off. Then you use for February American Express. The third month, maybe use Macy’s.
Jason Hartman: How many cards should someone have? A dozen, three, one, what’s the optimum number?
Danny Rosario: Three to five.
Jason Hartman: Three to five.
Danny Rosario: Three to five credit cards.
Jason Hartman: And that includes the MasterCard, Visa, AmEx type, or like the department store or gas station type, right?
Danny Rosario: Correct.
Jason Hartman: Any difference between those?
Danny Rosario: No.
Jason Hartman: They’re all the same.
Danny Rosario: They’re all the same.
Jason Hartman: What is it you do? Your company has been around ten years and you basically improve people’s credit. How do you do that? If someone comes into you, they’ve had a divorce, they had a medical problem, they had to stop working for a while, maybe they just got laid off and got themselves into trouble. What do you do to improve their credit?
Danny Rosario: Well, one of the first things I look for is do they have any kind of past delinquencies, especially when it comes to divorce. A lot of the time, the behavior of one affects the good behavior of the other because the two files are connected together.
Jason Hartman: George Washington recommended that we avoid foreign entanglements. Maybe that’s why I’m still single. But I am looking. I want to say that to all of our listeners.
Danny Rosario: So one of the first things I do is analyze that to see if there’s any past derogatories, and also to look at, if it’s a revolving credit card, where’s their balance at? Have they exceeded the 50 percent limit? If there limit is $1,000.00, where are they at, $800.00? You want to pay down those accounts. It used to be if your debt to income ratio was 40 percent you owed in credit cards, that was okay.
Jason Hartman: In credit cards?
Danny Rosario: In credit cards. If you had 40 percent that you owe, versus how much you actually bring in.
Jason Hartman: Wait a second. So that’s unbelievable to me, if I’m understanding you correctly. Just for round numbers’ sake, if you make $10,000.00 a month and you have $4,000.00 a month in credit card bills, not including your mortgage on your house, your car payment, whatever else, that’s okay? That seems enormous.
Danny Rosario: No, it just depends on – aside from, let’s say, a mortgage or if you have other lines of credit, you just have revolving accounts and you didn’t have a car payment, didn’t have any kind of other properties or mortgages, that used to be the Golden Standard.
Jason Hartman: Okay, so you’re talking total DTI, debt-to-income ratio.
Danny Rosario: Correct, right, but then what happens is the FICO score treats both of them a little differently because they have one for revolving debt and then they have one for secured debt. So if your secured debt was rated at about 60 percent, which is pretty significant –
Jason Hartman: Secured would include a house or car.
Danny Rosario: A house or a car, correct.
Jason Hartman: How about a student loan?
Danny Rosario: A student loan comes under that, too, because that’s under a loan directive. It is secured. It’s not considered unsecured. Versus if you’re looking at revolving debt. Forty percent if you looked outside of that was acceptable, if you were looking to get, let’s say, an auto loan or even a mortgage loan. But considering if you have secured debt, such as a mortgage or a home, then obviously that revolving debt ratio you want to keep at least less than 10 percent, under current lending standards.
So really what the institutions are looking for is to see okay, you have all this secured debt, but what is he doing with his revolving debt? So you want to make sure to keep that ratio down, which is one of the things that I look at if somebody’s coming in to have their credit evaluated.
Jason Hartman: So I’m going to call that, and I don’t know if this is a fair thing to call it, but I’m going to call that your soft help. I want to get into your hard help. What do you really do? Like, someone comes into you, they went through a divorce, and speaking of that divorce thing, I don’t know why it is that our society comingles people’s credit. I just don’t think people stay married long enough anymore for that. Credit reports should go with the person, not the couple. It should be an individual thing. I don’t understand that, but I know married people obviously make joint purchases and they want to use both incomes to qualify for things. So I don’t know if there’s a solution really.
So someone comes in, they had a problem, a divorce, a health problem, a job layoff, whatever. They’ve got dings on their credit. How do you get them off?
Danny Rosario: Well, it’s a combination of doing some negotiation. If someone has, let’s say, more than 50 percent of collections. Let’s say they have multiple accounts that are collected they never paid.
Jason Hartman: They’ve got ten accounts and they just let them go and they never paid them, and so on their credit report, it says collection, meaning there’s an active collection. What do you do?
Danny Rosario: Well, the first thing I do is I consult the member and I say is this information accurate, first of all. If it is, then the next step is to go ahead and negotiate with the collection agency to get it deleted, if my client wants to go ahead and pay it. So in other words, if there’s a situation where the statute of limitations in California, per se, is four years on any written contract. If it’s beyond that amount of time and they have more collection accounts that are more recent, it’s better to settle and negotiate for deletion if the client says I’ve got $24,000.00, Danny, what’s the best route to go ahead and get my credit restored.
Well, I’m going to utilize those funds to settle and get deleted those items that are more recent, compared to something that’s maybe a little bit further away.
Jason Hartman: Okay, so is there sort of a typical metric for settlements of debt? If someone has collection accounts, say they owe Visa $10,000.00, I’ve heard the number is about 30 percent, where they’ll pay them $3,000.00 and call it a day. I’m looking for the secret to the collection industry here to find out what they’re willing to do.
Danny Rosario: If you’re looking to settle it, it’s a whole different story. They will give you a number and say, hey, okay, if your client wants to settle, then we’ll just settle this for $3,000.00. So what happens is –
Jason Hartman: Is that sort of a typical number?
Danny Rosario: Yeah, because it’s negotiation. I mean it sometimes can be a little bit more than that, but every collection agency, or whoever the initial creditor is, they’re going to be looking for different amounts. But Jason, versus someone who says Danny, I want to pay this account in full, then I’m going to fight for my client’s behalf to say okay, if you’re Chase and they want to pay $10,000.00, my client wants to pay this account in full, I want it go get deleted.
Jason Hartman: In other words, off their credit report.
Danny Rosario: Absolutely.
Jason Hartman: So there are two things we’re talking about. One is they’ve got an account, it went to collection, they didn’t pay it; they owe $10,000.00, but one issue is settle it for a lower amount, and it’s going to show up on the credit report how, as collections settled?
Danny Rosario: Correct.
Jason Hartman: Okay. And the other option is pay the full amount, pay the full $10,000.00 and it just comes completely off the report and disappears.
Danny Rosario: Correct.
Jason Hartman: Now, can you do in between there, where maybe they pay them $5,000.00 or $8,000.00 and it comes off the credit report?
Danny Rosario: Sure, absolutely. That’s a great question because a lot of the time, Jason, if it’s an initial account that was $500.00 and all of a sudden, it’s showing up on the credit report as being $1,000.00, well, that’s because the collection agency has decided to inflate the price so that way, they make a commission if they can get all of their monies. So in other words, if I’m Jason Hartman –
Jason Hartman: They can legally inflate the price?
Danny Rosario: Absolutely yeah, because they can collect interest on a written contract anywhere up to 10 percent.
Jason Hartman: But that’s not really inflating the price. That’s the contract, that’s the deal.
Danny Rosario: If they’re collecting on it, true, but I’m always looking to say, okay, look –
Jason Hartman: Yeah, waive those – what you’d call those soft fees probably. These late fees, I mean some of these fees are just a total usury in my opinion. I mean they are just killing people that are the lower middle class, that don’t read their contract, and they’re just not sophisticated a lot of the times, and they’re dinging them with huge late fees. It’s ridiculous.
Danny Rosario: Yeah and I mean there’s a lot of hidden stuff that’s in the contracts and there’s some institutions that I would never even get a credit card from.
Jason Hartman: Tell us who those are. Who are the really tough, mean ones that are just bad?
Danny Rosario: No. 1 is Capital One Bank.
Jason Hartman: Capital One is tough.
Danny Rosario: I would never get a card with them.
Jason Hartman: Isn’t that the no-hassle card? That’s what it said on the commercial.
Danny Rosario: Yeah, until if you ever get into trouble.
Jason Hartman: Really? So Capital One wants their money.
Danny Rosario: Capital One is the worst, in my opinion, if anything were to go south. In my opinion, the best credit card, one of the best, is American Express.
Jason Hartman: They let you off easy, huh?
Danny Rosario: They do, especially if you’re on a 90-day situation, like a 90-day late. They don’t typically report until you’re past the 90-day decree. So in other words, if you’re 30 days late, 60 days late, they don’t really start reporting until you’re 90 days.
Jason Hartman: Does it matter – American Express has so many cards. Does it matter which card we’re talking about? Most of their cards are pay them off every month. They have some installment type cards, too. Does it matter or are they just sort of the same both ways?
Danny Rosario: Well, here’s the thing. With those two cards, between an installment and one that’s open, like a Platinum American Express or a Gold, there is no credit card limit. So here’s what happens. If you spend $2,000.00 in a month, the FICO score considers that as you’re maxing out on those $2,000.00 because it does not know what the credit limit is. So it assumes that you maxed out that credit card for that month.
Jason Hartman: That’s sort of a bad thing about AmEx.
Danny Rosario: If you’re getting a card that doesn’t have a credit card limit, but here’s the thing is that most of the time, you have to pay that at the end of the month anyway, so the negative is very short-term. Now, if you’re looking at an installment credit card, you want to make sure that you keep that below 50 percent of the total credit limit available on that card. So if you have a $10,000.00 credit limit, you don’t want to exceed more than $5,000.00 because that actually does affect the credit score negatively.
Jason Hartman: What about the good and bad cards? I want to hear a little more about those. So Capital One is really bad if you owe them money. American Express is great to owe money to. Who else?
Danny Rosario: I would say MBNA. They’re bad in my opinion. They kind of behave the same as Capital One. Those are really the two bad ones that I’m aware of, that always –
Jason Hartman: Who’s the other good one besides American Express?
Danny Rosario: American Express is good. Another good one is Advanta is a really good one. Chase –
Jason Hartman: Now, while we’re saying this, I always want to, in every arrangement, I always want to flip over to the other side of the coin. If you’re thinking of owning stock in any of these companies, these might be bad companies in which to own stock because they don’t collect from their borrowers. Okay, go ahead. So Chase, you were mentioning Chase.
Danny Rosario: Right, Chase is – well, another good credit card company. One of the biggest pieces of advice that I could give all of your listeners is that you don’t want to get a credit card that doesn’t report to all three bureaus.
Jason Hartman: Oh, that’s why the scores are different at the three bureaus.
Danny Rosario: That’s correct.
Jason Hartman: I never understood that.
Danny Rosario: The reason why there’s a discrepancy is because not all of them are speaking the same language, so you want to make sure that if you’re opening an account, that they will actually report it to all three bureaus.
Jason Hartman: But why? It seems like if you’re going to look to the future where you might get in trouble at some time and have a delinquency, wouldn’t you want someone who didn’t report to one of the bureaus?
Danny Rosario: Sure, that can beneficial to you, if they’re not reporting to one. But if you’re looking at a cumulative score and you’re looking to get that mortgage or that lending opportunity, they’re going to sometimes take one bureau or they’ll take the medium of all three. So the closer you are to having them all at the same score, the more beneficial it is to you. The problem is if you get into trouble, well, that’s a whole different story.
Jason Hartman: Okay, we talked about good and bad credit card companies. Are there good and bad auto finance companies? Which ones are more apt to be a little easy on the borrower versus difficult on the borrower? Any thoughts there? Maybe you don’t know.
Danny Rosario: Well, when it comes to auto lending, I’d say the credit unions are always the most lenient, in my opinion, as to loans.
Jason Hartman: Is there a reason for that?
Danny Rosario: Here’s the reason why is that credit unions have a different business plan than the banks. The credit unions are under a federal charter. The banks are owned by stockholders. Credit unions work for the shareholders, which are the members. So in other words, they have a little bit more leniency in working with you, if something does happen later down the line. They don’t have prepayment penalties, which a lot of the auto financing companies do have prepayment penalties, so that’s one thing to look at.
And also, if you get into trouble and you want to work out a plan, a lot harder to do with one of the auto finance companies versus, let’s say a credit union auto loan.
Jason Hartman: How about home lenders, mortgages holders? We did a show recently on loan modification and my guest said Countrywide was really easy. If you get into trouble, Countrywide wants to work things out. They don’t want to foreclose. They’re just easy. What about home loans in your eyes?
Danny Rosario: Home loans, definitely loan modifications, I’ve had that question asked to me within the last month and I’m starting to get a lot of clients who want to get more information on it. And actually, we are beginning to do loan modifications with my firm. Loan modifications are very easy to work with if you’re not in trouble. If it’s a situation where you’re 60 days late, your house is going to foreclose next month, loan modification more than likely is going to be very, very difficult, versus you’re paying on time and you’re just looking to get your loan modified. That’s pretty easy to do because most of the banks want to work out a plan with you because obviously, if your property is worth more than what you initially got the loan for, why are you still paying all that extra money?
Jason Hartman: So is it generally a best practice that if you’re in trouble, you lost your job, whatever, plan early, go to your creditors early. Maybe you’re still making the payments and you’re still current on everything, but you can see over the horizon it’s not looking too good. The earlier they contact you, the earlier they contact the companies they owe money to, the better?
Danny Rosario: Correct. It’s better because most of the creditors do have a debt management program and it can be anywhere from six months; it can be to 12 months. And it’s beneficial for you to act on that if you know over the horizon that something’s going to happen.
Jason Hartman: Now, will they ding your credit, though, for going into one of those programs?
Danny Rosario: No, they don’t.
Jason Hartman: Oh, that’s good.
Danny Rosario: So I mean if you’re financially in trouble, get on those debt management programs with the direct creditor to work out a plan because everything will still show that you’re current. The problem is when it’s too late.
Jason Hartman: So advanced planning is smart always in life.
Danny Rosario: Absolutely.
Jason Hartman: Are there any items that can’t be removed, Danny? What about bankruptcies, tax liens, foreclosures, judgments, late payments, anything you can’t get off a credit report?
Danny Rosario: Everything is always disputable. Most of the time, as long as it’s inaccurate information, 70 percent is my current success ratio in getting items deleted.
Jason Hartman: Well, if it’s inaccurate.
Danny Rosario: If it’s inaccurate.
Jason Hartman: The reality is a lot of this stuff is accurate.
Danny Rosario: Sure, absolutely.
Jason Hartman: How often are things inaccurate on a credit report?
Danny Rosario: Well, I always tell my clients that information is always inaccurate because they’re never speaking the same language.
Jason Hartman: In terms of all three different bureaus report different things?
Danny Rosario: Right because you could have one trade account, let’s say a mortgage loan, and you owe $177,000.00.
Jason Hartman: Why do you call it a trade account?
Danny Rosario: Trades are the different items that are on your credit report, so each individual item that’s on your credit report, in the industry, they call it trade lines. That’s what they’re called.
Jason Hartman: Okay, just curious.
Danny Rosario: No, no problem. The items that you cannot delete would be like your tax liens. If there’s one thing I could tell all of you is that tax liens are the worst thing you can get on your file because technically speaking, those never go away. However, most of the time, they do go away after 15 years. If you do pay the tax lien, it usually comes off after seven years. Bankruptcies –
Jason Hartman: Now, tax lien means income tax, property tax, what kind of tax?
Danny Rosario: That could be income tax. It could be your property taxes. It could be just anything that’s related to the government, whether it be state, local, or federal.
Jason Hartman: That’s interesting you bring that up. I had, from my second property that I owned, that I sold in 1989, I had a tax lien for $211.00 or something and I just didn’t know it. I must have missed the payment or I don’t even know if the account was impounded. We all get busy and things slip through the cracks frankly. No matter how hard you try, it seems like it always happens. And that damn thing haunted me forever. I was having to write explanation letters on this stupid little $200.00 thing that I could have easily paid, would have been happy to pay, and they were still asking me about it years later, the lenders. Every time I would go to apply for a mortgage loan, I had paid it. I paid it when the escrow closed. I sold the property and the government somehow never reported it or something. I don’t know how that works.
Danny Rosario: If you pay the tax lien or if there’s a lien against you, make sure that’s being reported accurately, that it is paid in full.
Jason Hartman: How do I do that?
Danny Rosario: Just by advising – making sure that whoever the institution is, if it’s your state or local tax recorder that they report to the bureaus that you paid that account –
Jason Hartman: How do I know they did that? I gotta look at a copy of my credit report all the time?
Danny Rosario: Yeah, you should always –
Jason Hartman: How often should someone look at their credit report?
Danny Rosario: In my opinion, I do it four times a year.
Jason Hartman: Every quarter.
Danny Rosario: Every quarter, just because of the amount of identity fraud that’s out there.
Jason Hartman: Yeah, yeah, that’s true. Okay, so back to what you were saying. Anything you can’t delete? How about a judgment from a lawsuit?
Danny Rosario: A judgment can be deleted.
Jason Hartman: How?
Danny Rosario: As long as it’s paid or if it was even settled.
Jason Hartman: Settled or paid, okay.
Danny Rosario: Yeah because usually what you can do is you can go into the court with an attorney and have that removed.
Jason Hartman: Bankruptcy.
Danny Rosario: Bankruptcies do come off after seven years, depending on which kind that you filed, if it’s a 7 or an 11.
Jason Hartman: Okay, explain to our listeners, reorganization or dissolution. What’s the difference and which one is which?
Danny Rosario: Chapter 7 is a total discharge. That means that all of your debts are – you’re not held liable for. On an 11, you have to reorganize. In other words, you want to settle your debt, but you’d like to have it all structured in some kind of a settlement.
Jason Hartman: I’m going to assume Chapter 7 stays on your report longer than Chapter 11.
Danny Rosario: That’s correct.
Jason Hartman: That seems logical.
Danny Rosario: A seven stays on for ten years and 11 stays on for seven. So what you want to do is on an 11, your debts are reorganized, so if you owe $40,000.00, you may ask the court or the court may give you X amount of years to go ahead and make these monthly payments to have all of your accounts settled and your debt paid off, versus a complete total discharge.
Jason Hartman: What about foreclosures?
Danny Rosario: Foreclosures.
Jason Hartman: The biggest word in the news nowadays.
Danny Rosario: Foreclosures, technically speaking, most of the time, you can’t get them removed unless there’s some kind of settlement or some kind of negotiation that goes into the process.
Jason Hartman: So a short sale, a loan modification, a workout, that may or may not even appear on a credit report at all.
Danny Rosario: Correct because you’re taking that pre-planning.
Jason Hartman: Right, advanced planning is key. How long does foreclosure stay on your credit report?
Danny Rosario: Ten years.
Jason Hartman: Wow, okay. In today’s economy, I’ve always said to people at my live seminars and so forth, everybody’s seen a balance sheet. On one side is assets; on the other side liabilities. And what people never seem to count as an asset is their ability to borrow and we love debt because we use it prudently. It’s diminished through inflation, which is a wonderful feature that very few people even understand or see or know about except our clients and our listeners. But the FICO score really is an asset. Talk just about that for a moment. I mean I agree.
Danny Rosario: It really is because the thing is in the future, the FICO score is going to determine insurance rates. It’s going to determine whether or not you get a job. It’s really an asset.
Jason Hartman: You’re saying employers are checking credit.
Danny Rosario: Absolutely. Well, because here’s the problem is that the FICO score is a determinant of risk, so it’s a risk factor. And unfortunately, in today’s world, everyone is looking to see how do you behave financially because that’s going to in turn maybe determine how you’re going to be an employee. Now, whether or not you agree with that –
Jason Hartman: It’s an indicator. I wouldn’t say it’s everything.
Danny Rosario: But it doesn’t mean that you’re not going to get hired because life events do happen and things do happen. So yes, the FICO score is an asset. It shouldn’t be – a lot of times, people pay everything with cash and they have no credit, and I will share with your listeners that having no credit –
Jason Hartman: That might be the best employee, but not the best investor, that’s for sure.
Danny Rosario: Sure, right. Exactly because then who’s going to give you credit? That’s the problem. So having no credit is as bad as having bad credit.
Jason Hartman: What is the FICO ’08 model? I guess they’re changing the way they calculate FICO scores for 2008?
Danny Rosario: Well, what’s happening – it hasn’t gone into full effect yet, but there is kind of a little bit of a loophole with the FICO score and the scoring model. One of the things that has helped a lot of consumers is if, Jason, you have, let’s saying, your son or family member that had bad credit, but yet you have exceptional credit. So one of the things you can do is to help your child or friend out is have them come on as an authorized user. So in other words, they benefit off of your behavior off of that one card.
So if you’re performing very well with your credit, that positive indicator from your behavior actually benefits me, who’s the authorized user. Now, it doesn’t mean that I’m using your credit card. I’m just on there as an authorized user, but all of your history that you’ve had is now reflected on my credit report.
Jason Hartman: So this is what I call credit socialism. Wow, it’s just like on Wall Street and in Washington, credit socialism. There’s a new thing. You can lend your credit score to other people that don’t deserve it. Very good.
But that’s really actually interesting because if you have a kid who’s like an adult child, so you’re 55-years-old, you’ve got a kid who’s 25. Most of the time, younger people, they seem to always get – it seems like every other gal I date went through a stage in her early 20s, where she kind of had some credit problems. That just is common, I think. So the parents can lend their credit score to their kid to kind of help them get back on their feet.
Danny Rosario: Exactly or if they don’t have any credit at all.
Jason Hartman: So an 18-year-old, here’s the way I see that happening as a good business plan because we don’t want parents to do dumb things here. So the parent could add someone as an authorized user; in other words, they have an AmEx account. They call AmEx and say send me that extra card in my kid’s name. And then they put it through the shredder and they’re just on the paperwork. They have no way to really truly access it. Maybe the kid doesn’t even know. Oh, wow, sure. Okay. Does the kid have to sign something?
Danny Rosario: Well, yeah, when they get the card, yeah. You’d have to sign some kind of agreement. But where the FICO ’08 model is starting to come into play is that they’re wanting to restructure that so it doesn’t become a benefit anymore because they realize it’s a loophole.
Jason Hartman: Oh, so this is going away. This is not coming in.
Danny Rosario: The FICO ’08 wants to take that authorized user benefit as benefitting the other person. So in other words, even if you have an authorized user on the account, they don’t want that to impact your score, in other words, the person who’s an authorized user.
Jason Hartman: So is this moving toward the credit socialism or away from credit socialism?
Danny Rosario: Away from credit socialism.
Jason Hartman: Oh, okay, so we’ve had that all these years.
Danny Rosario: Yes and it’s still in effect because a lot of lenders, who still use the old model, which they’re still in effect, haven’t switched over because for them, if you’re an American Express and you’re still using the other software model, why are you going to spend $4 million to upgrade into the FICO ’08 model?
Jason Hartman: Oh, so they have to change all of their software and everything like that.
Danny Rosario: Exactly, so this FICO ’08 model is not in effect as of yet because it costs a lot of money to convert.
Jason Hartman: So it’s probably going to be the old way for quite a while because American Express just laid off a whole bunch of people and the news the other day, Citibank, 53,000 people laying off. I doubt these companies have a lot of money to spend on upgrading software right now.
Danny Rosario: No and I don’t foresee this happening any time in the near future.
Jason Hartman: Do you think credit restoration, Danny, has a taboo, kind of a sleazy image, and if so, why?
Danny Rosario: The problem is that you have a lot of individuals and companies that are doing this, trying to do a fly-by-night company, meeting with clients at a local Starbucks to go over their credit, thinking that they can just do this overnight.
Jason Hartman: Maybe you should check the credit report of your credit counselor.
Danny Rosario: Yeah, and you know just last month, FTC is doing an operation clean-sweep to attack these companies that are taking people’s money upfront and not doing anything about it. They never hear about it or they tell you yes, we can do this. All of a sudden, it’s removed and it comes back three months later down the line.
Jason Hartman: Oh, so wait a sec because that’s a concern. I know there are a lot of companies out there in the loan modification world, in the credit fixing world, that charge big upfront fees and then nothing happens and they’ve just gone away and they took the consumer’s money. So can they get something off a credit report and then it goes back on?
Danny Rosario: Yes because they maybe disputing something that a.) Is not really inaccurate, or b.) They’re disputing something that they shouldn’t have in the first place because they know that they needed the capital and money to do it. So in other words, this is what the law states. If you dispute something on your file and if the creditor does not respond in 30 days as they should, that item completely comes off the report.
Jason Hartman: And then it might go back on.
Danny Rosario: It might go back on because now, you’ve decided to wake up a sleeping giant that goes, oh, wait a minute; it looks like this person is still active on this account and wants to dispute this. You still owe me, Jason, so huh, uh, I want to refile that.
Jason Hartman: Okay, so as a consumer, if they’re using your service or one of your competitor’s services, how do they know they really got what they paid for because it may be off the report? They look at the credit report and hey, it’s gone. Good news. But it’s not and then it shows up again next time they look at their credit report.
Danny Rosario: That’s right, so one of the things that you want to make sure that you do is first of all, find out about the company. What kind of background do they have? Do they have credit law experience? What’s their warranty or the guarantee? At my firm, if we’re unable to remove more than 25 percent of the derogatory information on the client’s file, I give my members, or my clients, back 100 percent of their money. So it’s a performance –
Jason Hartman: How much do you charge?
Danny Rosario: It starts at about $695.00.
Jason Hartman: Up front.
Danny Rosario: Up front or they can do it in payment installments, usually two or three payment installments. And I work with my clients for six months.
Jason Hartman: Do you report to the credit bureau if they don’t pay? I’m just kidding. I won’t even ask that one.
Danny Rosario: Most of the time, Jason, here’s the reality of the situation. If it sounds too good to be true, it probably is, so you have to make sure that you analyze and really consult your client because some people are unhelpable. Not everything is magic.
Jason Hartman: So you can’t help everybody.
Danny Rosario: You can’t help everybody. There are some people that I can’t –
Jason Hartman: Whom can’t you help? Why can’t you help them?
Danny Rosario: If someone has more than 50 percent collection items and they tell me, you know what –
Jason Hartman: So you mean if they have ten accounts, five of them are in collections.
Danny Rosario: Yeah and they want it deleted, but they don’t have any kind of capital to get those settled. There’s really no point.
Jason Hartman: Can you improve it at all? Can you turn it from collection to 90-days late or is there any hope at all for them?
Danny Rosario: If there’s anything in that report –
Jason Hartman: Or does it even matter anyway? If you take one off, they’ve still got four.
Danny Rosario: Exactly. It’s really not beneficial. In my opinion, you have to be smart about it and I’m a very honest person, so I tell my clients up front, hey, this is what we can do and this is what we can’t. So you want to make sure that you have some kind of warranty. Don’t go with a company that says oh, we take your money, but there’s no money behind it. What kind of guarantee do you have for me? What are you going to do?
Jason Hartman: And get it in writing is my advice.
Danny Rosario: And get it in writing. You should have a contract. Always make sure that whatever agency you decide to work with that they have a written contract and remember that even after you sign that contract, you do have three days to cancel that contract. So no monies are collected until then.
Jason Hartman: Okay, so you charge $695.00 and then what, anything else? What does that cover?
Danny Rosario: That covers just if – it depends on how many items that are derogatory because a lot of the time, if someone has 18 different negative items, that’s going to require a lot more work. But usually, my starting cost is $695.00. If someone has a collection item, for example, Jason, that they’re looking to get it removed, then that’s just $250.00, if it’s just one item.
Jason Hartman: And you might help them settle it?
Danny Rosario: I would help them settle it for deletion.
Jason Hartman: Okay, settle it for deletion. So does your firm have an attorney? Are you a lawyer-driven firm? Is that the right way to say that?
Danny Rosario: Yes. Yeah, that’s correct. I’m affiliated with the Jamison Law Group and the Jamison Law Group is strictly credit law. And the companies that are a part of the Jamison Law Group are completely surrounded and coached and get information on current credit law standards, what exactly is changing with the FTC, and also knowing the things that are changing in every state. In other words, every state has a different statute of limitations and different licensing procedures that are involved with credit restoration.
Jason Hartman: So is there a difference in price trying to remove a foreclosure, a bankruptcy, a tax lien, or a revolving credit account?
Danny Rosario: No, it’s all the same for those items.
Jason Hartman: So what is your success rate with the different three agencies?
Danny Rosario: Seventy percent is my current success ratio of getting items deleted.
Jason Hartman: Seventy percent of the items are deleted or 70 percent of the clients get something deleted? How does that kind of work?
Danny Rosario: It’s actually 70 percent of the file I’m able to remove for my clients.
Jason Hartman: So that improves their FICO score by a whole bunch. How much? Is there a certain point average that you improve their score?
Danny Rosario: The highest that I’ve seen is 200 points. I had one client that was at 550 and his file was probably my most –
Jason Hartman: And they went to 750?
Danny Rosario: It went to 750 because –
Jason Hartman: Wow, that is fantastic. I mean that’s a whole different life for that guy.
Danny Rosario: It is. It is because now, the whole entire world is open to him.
Jason Hartman: Oh, sure it is. All he has to do is be 720, not 750.
Danny Rosario: Exactly, exactly, but the reason why that was so successful is because that client of mine had a lot of capital.
Jason Hartman: So he had capital to settle accounts and what was the settlement he got? He had money and did he get settled for $.30 on the dollar or – it’s all different, I’m sure, on average.
Danny Rosario: You know what? It’s all different, correct. But he said to me, Danny, I want to have all of these items removed. So I said well, how much capital do you have? And he had about $30,000.00 and he says do what you can with this amount of money in the accounts that I have.
Jason Hartman: How much did he have in collections?
Danny Rosario: He had about 21 different collection accounts.
Jason Hartman: Totaling how much?
Danny Rosario: Totaling about $25,000.00.
Jason Hartman: But $30,000.00 would settle them. What’s the problem there? He doesn’t need you.
Danny Rosario: No, no, true. Yeah, exactly, he had a little bit more capital, but just in case.
Jason Hartman: But you did improve his credit report, so that’s something he might not have been able to do himself.
Danny Rosario: Exactly, that’s correct because a lot of the things can be done on your own, but in some other situations, you need to have some knowledge to know how to utilize the law and negotiation to your benefit.
Jason Hartman: There are some good books out there on this subject and they have sample letters, and one of them that I saw in a bookstore once came with a CD, and you put the letters on your compute and fill in the blanks, and that was pretty good. But all in all, things never seem to be black and white in life. There’s always little gray areas and there are people that just kind of know the tricks of the trade, like we do for our clients. We know our way around a lot of things that they probably don’t, so that’s why they hire us.
Okay, so how long does this process take?
Danny Rosario: Six months. I work with my clients for six months. Most of them see an increase in their score within about 30 – 45 days on average, about 50 points.
Jason Hartman: Oh, that’s good. For a young person or an entrepreneur or an investor, where should they begin in building and maintaining good credit and establishing credit, the whole thing?
Danny Rosario: The balanced file would have about 3 – 5 credit cards. If I’m 18 years old and I’m looking to establish some credit, I would definitely open up a credit card, whether that be a secured credit card, and what I mean by that is you put about $500.00 of your money into an account and what happens is the credit card is established for you. And you’re basically borrowing against your own money. After typically 12 months, the money is reimbursed back to you and then now you have a credit card that you’re utilizing not against your own money. So typically, you want to have about 3 – 5 different credit card accounts.
Jason Hartman: What else?
Danny Rosario: One mortgage and one auto loan. That is a nice balanced file.
Jason Hartman: Isn’t it amazing that you’re recommending that people have debt? I mean that’s so funny. It’s so contrary to all the traditional thinking, which I agree with you. The debt is an asset.
Danny Rosario: It really is, as long as you’re responsible about it.
Jason Hartman: In some ways, it is, yeah. As long as it’s prudent, that’s a whole different discussion, but yeah. Anything else on that? Balanced file.
Danny Rosario: No, just a balanced file and the other thing is to ask for credit limit increases every six months, even if you don’t utilize it.
Jason Hartman: Yeah, it’s better to ask when you don’t need it.
Danny Rosario: Right because here’s what happens, Jason. If you want to establish a certain amount of credit, so the more credit that you have, the more beneficial it is and easier for you to leverage yourself if you’re an investor. So if you have $1 million of credit available, but you’re not using anything of it, it’s a little bit more beneficial to that person versus someone who maybe only has a $1,000.00 of available credit.
Jason Hartman: You remind me of something there. When you have your own business and you have an entity, and you hear all these commercials on the radio about build corporate credit, all this kind of stuff. My company’s been in business 11 years. Now, I have other entities as well, that are newer. The second oldest one is probably 8 years old. And then I have one that is only a year old, another corporation. I didn’t find that I could get $250,000.00 in corporate credit in six months of starting a new entity. I have some corporate credit now, but I’ve been in business a while. Eleven years nowadays is an old company. What’s the deal about corporate credit and talk to us about that if you would?
Danny Rosario: Here’s the benefit. If you’re a business owner, it’s almost criminal if you don’t have corporate or business credit, the reason being that every time you establish credit, it’s being reported on your personal credit end. Business credit isn’t reported to all three bureaus.
Jason Hartman: But that’s if it’s true corporate credit it might not be reported. If you don’t have a personal guarantee attached to it, it’s not on your credit report.
Danny Rosario: That’s correct.
Jason Hartman: Now, it’s on your Dun and Bradstreet file, right?
Danny Rosario: Right, your D and B Street, yeah, but that’s completely separate.
Jason Hartman: Do you deal with D and B at all?
Danny Rosario: We do. We do.
Jason Hartman: So you deal with business owners and their Dun and Bradstreet report. But that’s maybe for another show. A whole different discussion. But can you even get a credit card solely in the name of the corporation? I think they all have personal guarantees in them.
Danny Rosario: They typically do, but as long as you have a really high credit score personally, they usually will give you the lending on the business end under just the company, even if you’re a sole proprietor per se, just under the business name.
Jason Hartman: Who has those corporate credit cards? Like does AmEx have them that are truly corporate credit cards with no personal guarantee?
Danny Rosario: They do. Advanta also has it, too. Capital One has them. But Advanta, I think in my opinion, is one of the best ones out there.
Jason Hartman: For corporate credit or in general or for settlement.
Danny Rosario: Yeah.
Jason Hartman: Okay. So what is this about bankruptcy here? You wanted me to ask you about this. Why is it important to make sure that after you file a bankruptcy, even though it may be a complete discharge like a Chapter 7, to make sure all of your credit is correct and reported correctly? What happens in that situation?
Danny Rosario: Here’s what happens is that once your file has been discharged – in other words, you’re released of all of your liabilities – this is what the credit companies do. They just close your file. They don’t report that –
Jason Hartman: That you were settled or paid?
Danny Rosario: Settled or paid in full, or Chapter 7 discharge. So what happens is that all of that –
Jason Hartman: You really want it to say Chapter 7 discharge on your credit report, though?
Danny Rosario: It’s better than saying that you’re 180 days late. So you want to make sure. That, actually, is more important than having it show that you’re still paying late. So it’s very, very critical that all the credit companies or whoever is collecting on you or you have an account with is saying the same thing because you don’t want it to say that you’re still late because that is actually hurting your score.
Jason Hartman: Okay, so in other words, if unfortunately you go through a bankruptcy, just make sure after it’s done everything is reported correctly. Follow up on it if it’s not.
Danny Rosario: Yeah, and even after a post-bankruptcy because I know with new bankruptcy laws – and that could be for another show, Jason – you want to make sure that your behavior after the bankruptcy is exceptional because it’s your opportunity. They basically start you out to where you were when you were 16 or 17 years old.
Jason Hartman: You get a fresh start.
Danny Rosario: You get a fresh start.
Jason Hartman: Talk to us about the bankruptcy laws. They changed them in 2005, I believe it was, for personal bankruptcy. They made it a lot tougher and the lobbyists lobbying for the credit card companies seemed like they wanted that. They wanted it to be harder for people to declare bankruptcy. And maybe rightfully so. A lot of people said it was too easy. What’s going on now? Are they changing them again?
Danny Rosario: There’s legislation on changing it to make it a little bit easier just because of the current crisis that’s occurring.
Jason Hartman: Will it be easier than it was before ’05 or just a little easier than it is now?
Danny Rosario: Well, they want to make it like it was before ’05.
Jason Hartman: Oh, just the old way.
Danny Rosario: The old way, yeah, that’s what they’re pushing towards and what the current administration – and actually, the incoming administration is trying to push to modify those bankruptcy laws.
Jason Hartman: Well, Obama’s not into accountability, so that will probably pass, right? I mean we’ve got Democrats controlling everything, so I don’t know.
Danny Rosario: It may pass. I mean if it’s in a democratically controlled Congress and Senate, well, then probably more than likely so.
Jason Hartman: We’ve talked a lot about doom and gloom and bad stuff today. What about people who don’t have credit challenges, who have good credit, really good citizens that haven’t had any bad luck, and everything’s going okay, and they’ve got a good strong credit report? What can they do to make it even better?
Danny Rosario: Like I said earlier, don’t close an account. Keep them open. Do not have all of your debt on one credit card. I always say to spread it evenly. The rule of thumb is do not exceed, at least in current standards, don’t exceed your credit limits more than 30 percent of what’s available.
Jason Hartman: In other words, if you have a card, $10,000.00, keep it under $3,000.00. By the way, I pay off all my credit cards every month and I’ve sort of wondered – I think the credit card companies kind of hate when you do that. They don’t make any money off you. I just use the card. I pay the annual fee. It’s a pretty nice deal for me, but a bad deal for them. I get a 30-day float on everything every month and I get those miles on the airline that you can never use. What a scam that is. Another topic, but the frequent flyer mile scam. Is it better to once in a while just not pay it and pay a month of interest, even if you can pay it?
Danny Rosario: Yeah, I mean what I’ll tell my clients, especially ones that are perfectly – there score is great, they don’t really have any problems – is maybe if you owe about $3,000.00, maybe just pay half the first month and then the next month, pay it off because what happens is that the score is looking at your behavior. And not that paying it off is derogatory at all, but to help boost your score, spread it out a little bit because the score is studying your behavior. So in other words, by you spreading it out, it’s showing that you actually can maintain having a little bit of debt. It does go against the traditional principle. You’re absolutely right. But the way this FICO score is tabulated, it’s looking at to see how you manage that debt.
Jason Hartman: Right. It wants you to have a little debt and manage it. That’s so interesting.
Danny Rosario: Because they want to see how you handle that. Are you financially or fiscally responsible on managing that debt over X amount of time.
Jason Hartman: And if you never have debt, they don’t like it. It weakens your score.
Danny Rosario: Exactly. If you don’t have any debt, or in other words, if you have no credit at all, horrible.
Jason Hartman: Counter-intuitive.
Danny Rosario: If you do have credit, use it. Don’t let accounts sit here for a year or go dormant. And don’t close them. So like I said, if you have 3 – 5 credit cards, rotate through them.
Jason Hartman: I have a couple credit cards I just never use. I stick them in my safe at home and they just sit there. You know what? I’m going to pull them out and I’m going to go to dinner or something just to use them.
Danny Rosario: And you know, Jason, I will tell your listeners that use the card that you’ve had for 30 years. Use that card when you first opened it for a little bit of time because here’s what happens. That’s an account that you’ve had for 30 years, so that is a huge amount of weight that’s utilized in your FICO score.
Jason Hartman: That’s a good point. So use the older cards the most. Good point. Okay, Danny, this has been very educational. You are going to send me a lot of great insider info that we’re going to put in the Member’s Only Section at www.jasonhartman.com and, in the show notes at www.jasonhartman.com we’ll link to your website and so forth. Thank you so much for being on the show. Any final words in closing?
Danny Rosario: Just make sure that you keep your credit as an asset and credit is not a bad thing. You just have to make sure that you’re educated, informed, and continuously monitor your credit. Not only for identity fraud, but also to make sure and find out where you’re at because credit is going to be so important, not only now, but for the future.
Jason Hartman: Good point. Okay, Danny, thank you very much and we’ll talk to you later.
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Jason Hartman: Attention agents, brokers, and mortgage people. Do you know that we cooperate? Do you know that our network is an open system, that you can refer clients and outsource your investor clients to us and receive passive income? It’s a really great opportunity. All you have to do is register your clients at www.jasonhartman.com and tell them to attend one of our live events, our live educational seminars, listen to our podcast, go to the website, and request our free CD at www.jasonhartman.com.
And if they invest with us per the terms listed on the website, you will get a referral fee. We have lots of agents, brokers, and mortgage people that receive surprise referral fees that they weren’t even expecting. They get a check in the mail and they are just happily, happily surprised. It’s a nice extra supplement to your income. So be sure to take advantage of our broker cooperation. Agents are welcome. We cooperate with outside people and we’d love to help you with your investor clients.
Hey, I just wanted to announce a couple of quick things for you. If you are able to come to one of our live events, we would love to see you and meet you in person. We’ve had people fly in from all over the U.S. for them. So hopefully you can join us for some of those events.
I wanted to mention to you that we have a new offering, a free CD, a free audio CD, that you will really, really like. We’ve had so many people that have given us really good comments about them, and you can go to our website at www.jasonhartman.com and just fill out a little quick web form and you can either download it or you can have the physical CD mailed to you in the postal mail. But get the free CD, especially if you are a new listener. You need this. And if you are a regular listener and you’ve listened to all the other old shows, you don’t need the CD so much, but it will be a nice review for you either way. But if you’re a new listener, you definitely want to go to www.jasonhartman.com and request the free CD.
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And this particular one that we just loaded in the video podcast is about Naked Short Sales and what goes on with this short sale and manipulation of the stock market. It’s a very interesting report from Bloomberg News and I think you’ll really learn a lot from that. So be sure to tune in and watch that.
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Anyway, we’ll talk to you next week. Thanks for listening.
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Duration: 67 minutes