Talk Wealth to Me

#071 The Unusual and Crazy World of Credit Scores with Crystal Williams

February 05, 2021 Felipe Arevalo, Chase Peckham Guest: Crystal Williams Season 3 Episode 20
Talk Wealth to Me
#071 The Unusual and Crazy World of Credit Scores with Crystal Williams
Chapters
Talk Wealth to Me
#071 The Unusual and Crazy World of Credit Scores with Crystal Williams
Feb 05, 2021 Season 3 Episode 20
Felipe Arevalo, Chase Peckham Guest: Crystal Williams

The #1 most misunderstood topic in the world of personal finance (outside of investing) is consumer credit. We are constantly asked how to improve a credit score, and people expect that there is one clear answer, and they will be able to fix or build it with a tweak here or there. Many people don't even know that they have a credit rating and are shocked if it's not a good one. 

This week we sit down with DebtWave Credit Counseling's Consumer credit expert and coach, Crystal Williams. She has helped hundreds of DebtWave clients and many others navigate their credit, guiding them with knowledge and sharing skills to improve it. We discuss the steps people can take to improve their credit as well as what to avoid.

Support the show (https://www.sdflc.org/help-sdflc/donate/)

Show Notes Transcript

The #1 most misunderstood topic in the world of personal finance (outside of investing) is consumer credit. We are constantly asked how to improve a credit score, and people expect that there is one clear answer, and they will be able to fix or build it with a tweak here or there. Many people don't even know that they have a credit rating and are shocked if it's not a good one. 

This week we sit down with DebtWave Credit Counseling's Consumer credit expert and coach, Crystal Williams. She has helped hundreds of DebtWave clients and many others navigate their credit, guiding them with knowledge and sharing skills to improve it. We discuss the steps people can take to improve their credit as well as what to avoid.

Support the show (https://www.sdflc.org/help-sdflc/donate/)

Speaker 1:

[inaudible] Welcome to Talk Wealth, to me, a safe space podcast, where we chat about anything and everything related to personal finance, the information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting , legal tax or other professional advice.

Chase Peckham:

[ inaudible] Welcome to another edition of talk w ealth to me this week, Phil and I got an opportunity to sit down with somebody very special that we actually work with, u h, on a weekly basis. Although it doesn't feel like it Phil, when we're all at home. In fact, I was saying, I haven't seen you for so long,

Felipe Arevalo:

Right. It's something where, you know, it's interesting, there's an interesting office dynamic that a lot of people are starting to experience where you have these people that you work with constantly who normally we see all the time and you see them in the break room and you know, who's , who's a coffee drinker. Who's not a coffee drinker, but we haven't seen our coworkers , uh, many of them for almost a year now.

Chase Peckham:

Yeah. And what Crystal does is so vitally important to all of the constituents that we work with.

Felipe Arevalo:

Yeah. I think it's a, it's a great resource for people who want to take advantage of it and, and it's there and it's something that, you know, it , it, it can be a great tool , uh, that can have some really positive long-term financial impact .

Chase Peckham:

[inaudible] . So crystal, if you could, in your own words, give us an idea of what it is you exactly do in your role.

Crystal Williams:

So on a daily, I call clients it's whether it's their one year, two year, however, at their yearly anniversary. And I congratulate them on the progress that they've made. And I encourage them to go over a credit score analysis report with me just to see their progress throughout the duration of being on the program. Um, I also do the credit score coaching where clients first enrolled within the first 60 days. They're interested in seeing what else could be now that they've enrolled onto the plan. They're interested in seeing what else could be done to help improve their credit. So I'll look at their credit and I'll kind of give them tips and , um , recommendations on what could be done to help their credit throughout the duration of the plan as well, or even just helping clients that call in, just say, Hey, you know what? I just noticed my credit score has gone down. They have a concern or a question in regards to their credit. I'll go ahead and I'll pull it. And if something has changed, I'll be able to pinpoint why the score has gone down or why there's been a difference or change within their credit score.

Chase Peckham:

That's fantastic. So let me ask you, Crystal, when you are working with individuals, what is one of the most common that you hear?

Crystal Williams:

um , with most people, one of the biggest things that I've coming at that I've been coming across now, especially with COVID and people falling behind on payments. One that they can get late remarks removed from the credit two, in order to build credit, you have to carry a balance on all your credit cards, which isn't necessarily true. Um , carrying a balance every month. Uh, you know, some people they say, keep it under 30% utilization, which is great, but you do not have to carry a balance every single month just to rebuild your credit. Like, well, maybe I have to keep $25 in actuality. You're just getting, you're just giving these creditors free interest. You could use it, but paying in full every month and still build your credit.

Felipe Arevalo:

Absolutely.

Crystal Williams:

So that's another big thing that most people tend to think.

Chase Peckham:

People will come to us all the time and they'll say, how do I fix my credit? And that can be a very personal thing, right?

Crystal Williams:

Exactly.

Chase Peckham:

I mean, there's not just one way, there's so many things that go into the credit score and , and on their credit reports that, but when they come up , you can take a look at what they've got going on, so to speak and be able to give them at least guidance.

Crystal Williams:

Yes, exactly. Just being able to pull their credit and seeing exactly what's on the credit and what they've done in the past and comparing it to where they were when they first joined the plan. Because you know, when you're joining the program, you're we have the history of the clients , um, their credit history on file. So just, you know, if someone calls in and they're just wondering why their score has gone down or what they could do to help improve the credit, just having that side-by-side picture, it kind of helps you dig a little bit more deeper into a client situation to see what's actually going on because some people will tell you, well, you know, I'm not using the credit cards, but then when you see the balance, hasn't really changed on anything. It's like, okay, something else is going on to where you're either still utilizing cards. It just gives you more, more personal insight on what's going on with someone's situation.

Chase Peckham:

How difficult is it to almost redirect their thinking and how they can truly fix their credit if they truly want to.

Crystal Williams:

For some clients it's not that difficult. This is like most cases, even when it's like, well, when people have collections, for instance, we'll refer them out to like credit repair. Some clients will right then and there jump on board to get it done. Some clients, especially with, depending on the balances on the cards that they have, some we would encourage to add to the plan. Some don't want to make that jump or that move. A lot of people consider credit cards, the American way of living to where they have to depend on credit cards, to where they don't really want to do anything, but just keep doing what they're doing, which isn't going to make a big change. So it's, it's 50 50 when it comes to something like that.

Felipe Arevalo:

As far as like the action you can, and this is something we , we go over all the time where we can give the information we can educate, but at the end of the day, it falls onto the individual to put in some of that legwork. And , and honestly that's with so many things, personal finances, it's the follow through that is such a difficult thing to do. I mean, even us, you know, budgeting or, you know, making sure that you don't go over budget, making sure you don't go buy all the things you want. Uh, you know, it takes a constant , uh , reminder. Is that where you see the pushback? As far as, you know, the follow through like, Oh, thank you for the information. And then , uh , it does it kind of just fall apart after that or do you regularly re-engage uh , individuals?

Crystal Williams:

See, I see a lot of both. That's the thing, like what I'll look at CSA is like credit score analysis. From when we previously spoke to a client, we'll look at the client's credit report a year or two down the line, somethings have changed some clients that I do notice when they're just, okay, thanks. I kind of already knew that this is what I needed to get done. Nothing's changed. It's just, they want to keep hearing it, but they're just not, I think it's just more, so people just being scared to take that jump to either just stop spending or stop utilizing credit cards. The biggest thing I hear is I have the cash, but if something happens, I want to be able to still have that cash, but then you're putting yourself back in more debt by just using credit cards when you have the cash right then and there.

Chase Peckham:

And it really is. Most people, they just, it becomes a habit, right? It's the way they've done things. They , they always look at the credit cards is this is what I'm going to spend on the, or I'm going to use the credit cards for, and they've always used to spending a certain amount or when paying back their credit cards monthly. And they're just used to that balance, right? Until when, till it gets a little dangerous.

Crystal Williams:

Yeah.

Chase Peckham:

Until all of a sudden they don't have the money to cover it.

Crystal Williams:

Exactly.

Chase Peckham:

So what do you tell them when , when you're reaching back out to somebody and they're on a, on a program such as a debt management program, how do you work with them to further benefit their credit and or at the same time, paying down more debt, they may have accumulated.

Crystal Williams:

Any additional debt that clients have accumulated. And I see that the utilization is significantly high. They're only paying minimums. I kind of gauge how long they've held the balance. I encourage them to add it to the plan. You always want to take a credit card or utilize a credit card that you're either going to pay in full every month or something to where you can afford to get the utilization down on those accounts. And most times I do ask people if they just pay the minimums , or if they're capable of paying more than double the minimum every month, if they're not for those accounts, then those are the accounts that they should reconsider actually having access to, because then they're never going to get themselves out of the debt.

Chase Peckham:

Right. It's just a constant merry-go-round.

Crystal Williams:

Yeah. You're going to constantly be turning, spinning. Your wheels.

Felipe Arevalo:

You mentioned something earlier with like store cards and that kind of thing. There's that marketing, we'll call it marketing where let's see how many points I can get. Let's see how much of a cash back rewards check I can get at the end of the year. Um, do feel that that's enough incentive for some people to just kind of throw caution to the wind and maybe overextend their spending with the purpose of, well, I got 5% off or I did get , uh , you know, however many points for , for this purchase.

Crystal Williams:

Of course, I see it all the time with clients that are on the plan, even when I've encouraged them to add it to the plan. Well, I have some rewards on there or what is your rewards really outweighing the amount of interest that's getting charged. And in most cases, when they're spending, they're thinking short-term and not long-term. So they're like, okay, I say the five to $10 now, or I got a $10 rewards cash, old Navy cash, whatever the case may be. But then over time, they're just not thinking about that interest. That's going to add up monthly until the account's actually paid in full. So rewards and benefits really do get clients.

Chase Peckham:

Yeah, they really do. And the crazy thing is, is the law protects them from that, that they don't have to carry a balance on that credit card to receive the reward rewards. Right? They're using it. They can, once they use it and they make the purchase, they get the points now and they can pay it off. They're not going to lose the points. It didn't always used to be that way, by the way, it , it did a lot of credit card companies had that rule that if you didn't carry a minimum balance , uh , they would then , uh, those , they would lose those points. But since , uh, the 2008, 2010 , uh, those, those laws have changed considerably. So people don't have to worry about that, but it's crazy how many think that , uh , it's kind of the same thing as if I look at my credit score or if I look at my credit report , uh, they're gonna, that their credit score is going to go down, which is crazy. I'm sure. I mean, how often do you hear that when you ask people, if, if you can pull their credit.

Crystal Williams:

All the time.

Chase Peckham:

And there's scared to death of it right?

Crystal Williams:

Often, yes.

Felipe Arevalo:

Is it something where do you think that it's gotten a little better? Because so many places provide you a credit report or credit score, whether it be your own bank or credit union, every different credit card that someone might have, do you feel that there's more , uh , acceptance of, okay. Yeah. I'll look at my credit or , or there's more awareness around it, or do you feel that people just kind of overlook those free scores that they're getting from their creditors?

Crystal Williams:

No. I truly feel that people just kind of overlook the scores that they're getting. Um, I even get it from clients. Yeah, I get it. But I just ignore it. I just, you know, just the fear of having to look at the credit itself or they just know they, they just carelessly spend and they just don't really want to see the damage that's been done. So a lot of people do tend to overlook those free reports that are offered.

Chase Peckham:

They're just scared of finding out what they might see.

Crystal Williams:

Yes.

Felipe Arevalo:

We had a big thing on, on social media last week. Um, yeah , I do the social media for SDLC and for the podcast. And , um, at Twitter, particularly last week, Credit Karma was trending and you know , anything, anytime, anything financial is trending, I have to go investigate. Um, and in this case it was because someone tweeted out that their credit karma score was significantly higher than the score they got at the car dealership when they were applying for a car loan. Do you find that, is that a common occurrence where people will say, no, that's not my credit score, my credit score on this website or that website, or this other website that I look at is much higher , uh , than the one that maybe they might get from you.

Crystal Williams:

Yes. And that's the first thing they say. "This isn't right. This just is not accurate." Then I have to go and explain that most credit monitoring services, Credit Karma, Credit Sesame , um , any other apps typically through the banks, they're just using a different model. It's not the FICO score model. So the different factors that tie into how they get their credit score, it's going to be different. So I use that same exact scenario. I just tell a client, you know, if you were to go into a car dealership thinking you have a 750 credit score and they tell you that your score is significantly less or lower than what's been reported reported, it's because of the different model that Credit Karma is using now Credit Karma, but it could be good to monitor anything that could be coming on to the credit, but the score itself, you just don't want to pay attention to.

Chase Peckham:

Yeah. Basically not apples for apples, right? That's not what they're looking at, but it does give you a good gauge. I mean, it will give you a decent gauge from time to time. And it also matters how, and when you look , uh , when things are, because things are being constantly reported at different times, I'm going through a refinance right now. And because, you know, interest rates are obviously an all time low and we're going to be able to lower our monthly payment on the mortgage that we have. But our lender is just literally sending us daily reminders as we go through the process as we're going through escrow. And we're coming up on closing, these are the do's and don'ts, I mean, literally do not go spend money , uh , in a large amount anywhere don't go buy furniture, don't go buy a car. Don't go do anything like that. Because if anything comes out new from the first time that somebody looked on that at your credit report, credit score, and it changes significantly that could throw the whole entire refinance out of whack and just screw it all up, which nobody wants. But it also matters as I mentioned, when you do it. And a lot of times, you know , depending on who the organizations are, they're reporting all at different times and to which of the credit bureaus. Right? So it's interesting because what , uh , Bureau do you pull from?

Crystal Williams:

We pull through Experian.

Chase Peckham:

You do it, which is , uh , it's , it's a prominent very, very respectable Bureau. Um , but there might even be the case sometimes when somebody might have an account that's being reported to TransUnion and, Equifax and not , uh , Experian , is that, do you find that comes into play much?

Crystal Williams:

I have seen that happen a couple of times where we'll pull the credit and someone will go through , um , the mortgage or the home process. And our score will be a little bit lower. And it's primarily because on our report, it'll show a collection account, but whereas on TransUnion, the collection account is not there. So the impact is going to be different because Experian now has this collection , um , account on there, which is a pretty big dagger in your credit score and TransUnion doesn't. So I have seen it happen.

Chase Peckham:

It's crazy how lucky people can get sometimes , uh , depending on when they're applying for credit and where they look, you know, if Citibank is just pulling up trans union and trans union doesn't have that account, they might give you a great interest rate on something. Right. But if they were to look up that Experian just by chance, and that's what happens, a lot of these organizations, when they pull credit there , they might just pull the credits to the FICO score from one of the bureaus , uh, where if you were to buy a home, they look at all three. They basically it's like the gymnast, right? Th th the judges score, they'll throw out the top one , throw out the bottom one, and they take the middle one, which is the score that , that you live by.

Felipe Arevalo:

Yeah. With the mortgage, it's going to be something where they're going to have more fine tooth comb.

Chase Peckham:

Oh, yeah . It's a lot more than just a score.

Felipe Arevalo:

Right. But like, with a car, for example, they may pull just the , they're probably just going to pull one of your FICO score for one of them, Experian, Equifax, or TransUnion. I know when we, when we went and got , uh , Sarah's car last Oh gosh, 2019. So I guess it wasn't even last year. Uh, yes . It's been a while .

Chase Peckham:

2019 still seems like last year to me.

Felipe Arevalo:

I know it doesn't it. We went in and the guy's like, yeah, we'll pull your credit, typical car buying process. And when he came back, he said, you know , here's your guys's credit scores. And I said, that's a Transunion. Right? And he's like, Oh yeah, how'd, you know, with, with them looking at , uh, one of the three , um, is it something where, you know, do you actually get people who have like little printouts and say, Hey, look, Crystal, or obviously in today's digital world , uh, let me email you. Um, I I'm , I'm not joking because we have people come up to us and like , my credit score is blank and they throw out a credit score and you're like, Oh, well, that's great. You know? Um, what is it? And I go, that's my FICO credit score. I'm like , FICO doesn't even go that high. Um, is your credit score higher than the highest possible score? Do you ever find where even just like the ranges are, are confusing to people?

Crystal Williams:

Yes. I've actually had a couple of clients that insisted that their credit score was something completely different and they've sent in reports, but unfortunately none of them were really FICO . They were all Vantage. So that's why it was so different. And that's when I got to kind of educate them on the models and explain why the scoring could be off because they will sit there and just insist that there's just no way your , your scoring is wrong. My score is not that low. It's just like, well, this is what I'm pulling up here.

Chase Peckham:

Do you, with as much as the credit world changes and information changes, do you keep up, how often do you study up, keep up with what's going on in the credit world, for instance, all the different models that are out there, but not only that, but then the versions of those different models that are out there. So for instance, most in FICO right now, right, is normal. The most commonly used is FICo 8. Yet there's been a FICO 9 out there for two and a half, three years. It's just not many people are incorporating it or using it. Same thing with the Vantage score . Vantage tried to, they changed their scoring model as well to 850 and to make it just like FICO , but very, very few are using it. So it's so interesting. What people, when they go out there on the internet, they think they can find, unless they're paying for it really typically, or they're using a professional organization as yourself. It's hard to know.

Crystal Williams:

Yes, it is. I feel like I'm constantly, every month I'm learning something new. I'm constantly looking up different things to kind of figure out how a client's coming up with a score or what is what's potentially changing, because even I've noticed either been clients that paid for Experian, even with using Experian, that's still not a FICO score that they're actually being provided with. It's still, you're still using a Vantage model. So just depending on how, who I'm speaking with, and who's kind of like get throwing out different factual, throwing out different information, opposed to what I'm providing them with. Then that's what I'm constantly just going up and looking like, just kind of doing the research to see what's changed.

Felipe Arevalo:

Do you talk to, obviously you talk to a wide range of people from all over the country. Uh, do you find, is there more interest in maybe a younger demographic and an older demographic, or is it just kind of randomized?

Crystal Williams:

I think it's just kind of randomized . And I find myself speaking to people more so that are looking to get a home within a year or two or people that are trying to refinance or who has commercial property, and that are trying to do some business with their credit. But it's, it's pretty random. It's all across the board. Do you find that people come to you or they start looking into their credit too late into the process where it's like, Hey, I'm trying to get a home, you know , this summer, but my credit score needs about a year or two years worth of work. Once you look at it, do , do you feel that it's kind of, they waited too long? Yes. In some cases there has been quite a few clients where, okay, I'm trying to get a home in six months or I'm trying to refinance. And within the next 30 days, and the client's calling back constantly just to see if maybe removing that one collection account has brought their score back up to where it needs to be. Credit is not a quick fix unless you come into all this cash and able to just pay everything all off at once. But even then it still takes some time. So yeah, people do wait until the very last minute to try to do something with their credit when they should have , um , they should have planned ahead of time.

Chase Peckham:

And isn't it crazy, even though you can tell people over and over and over again, that it's not a quick fix, but not only every action has a reaction. So even if it's something, for instance, again, I'll go back to the refinance. If I'm getting a new loan, basically, even though I am paying off another loan completely, I'm not really adding any more debt. And I'm actually with the refinance going to be able to pay off some doggy medical debt that we accumulated when my dog had cancer. And we're getting rid of that debt. My credit score is still going to take a dip for a little bit because I have taken on a new a big loan, even though I paid off another one. Now, once I start paying on that again in a month or two, as it goes in, then my credit score is shooting right back up and it's not going to go down dramatically, but it does take a hit. I mean, so everything that you do does matter good or bad.

Crystal Williams:

Yes, exactly. I actually just had a client call in and they'd actually just paid off their mortgage. And she said her credit dipped about any 80 points. I didn't really look into her credit because she wasn't interested in going over the credit report, but she did notice that paying off her mortgage early impacted her credit more than it did help her credit. And she was assuming that paying off one big loan was going to help her credit. A mortgage is considered positive debt. So paying it off early, there really isn't a benefit.

Chase Peckham:

Except for the fact that. Your not paying interest.

Crystal Williams:

I mean , you're going to save an interest, but when it comes to the credit, it's really, it's not going to have that. You're not going to see a tremendous impact.

Chase Peckham:

Right. Exactly.

Felipe Arevalo:

Isn't it funny how, how credit is is very much. And this is something we, when we do our presentations to high school , uh, college age students, where you have, it's like a catch 22 almost, you , you have to use credit to build it. And then if you don't have credit, no one will give you credit to start. Do you find that, you know, it's hard for people either they're they haven't used credit in the past, or they're relooking to , they're looking to rejoin the credit game. Uh , maybe they closed out their accounts paid off their debt, and now they're sitting there. I don't have any credit. Um, do you find that it's challenging oftentimes for , for them to get going again?

Crystal Williams:

I think it really just depends on what their score is like and what their past credit history has been for those who have delinquency on their credit report. It's going to be a little bit harder for them to rebuild, but if you had a pretty good payment history, you've paid off your accounts, the accounts are closed and you're trying to rebuild your credit by opening up a new account. I don't really, I haven't really seen anyone struggling to get a credit offer or being able open a credit card to kind of reestablish their credit going forward. So it just depends on what your overall credit history has been like. That leads me to a really interesting question. So you're working with clientele that is on a debt management program through consumer credit counseling, with people that are on the program. What is it that you see over a period of time? Does her credit go up or go down or is it kind of somewhere in the middle? For the most part, the credit is going up as long as no more additional debt is being accrued and you're not falling behind on anything, but for the most part scores are going up. There has been some times where scores have gone down being on the plan, the debt is going down. People are starting to get more offers in the mail. They open up those offers. They accept them. Now they've ran up additional debt and the score has gone down. So, but for the most part, if you're keeping up with your payments and you're not obtaining any new debt, the score is going up.

Chase Peckham:

So it could be something they're doing outside the program, not necessarily because of the program itself.

Crystal Williams:

Correct. So in the beginning, if there is any initial impact, it may be do the closing of the accounts. But after the first couple of months of being on the plan, if you're not noticing the credit scores are not going up, then there's, there's gotta be something that you're doing on the side. That's interfering with your score going up, whether credit cards that had zero balances are now holding balances, or you're taking out new debt or you're falling behind on something. There's always a reason as to why the score has gone down. But if you keeping up with the payments, no other additional debt is accrued . There should be no reason why the score isn't going up throughout the duration of the program.

Chase Peckham:

Do you have people that utilize your expertise on a regular basis that either in the program or outside the program?

Crystal Williams:

I do have some clients and these are the clients that consistently come back every couple of months or so just to check on their score. And for the most part, those are clients that are either trying to do something with their credit within the next year or so, just to kind of keep tabs on what needs to be done. But for the most part, most clients do take what I say and try to be proactive with it.

Chase Peckham:

That's phenomenal because it's so rare that people are going to have this kind of opportunity to meet with somebody that knows what they're talking about to help them along the process of building credit. Because most of the time, wouldn't you say people find out about their credit when they go to make a purchase or apply for something.

Crystal Williams:

Yes. Most people have no idea what their credits looking like, or what's even on their credit until they actually need to do something with their credit. And then they're shocked.

Chase Peckham:

And then they want it fixed real fast.

Crystal Williams:

Yes,

Felipe Arevalo:

It's that. Uh, and we hear it, you know , we see it all the time going over. People's , uh, finances where it's like, Hey, I have something this weekend. You know, I have my clearance for work where they're going to pull my credit. I have , um, I need to go buy a new car, whatever it is, and okay, great. When are you going to buy this car? Like Saturday and it's something, where do you feel it's like a wake-up call when people realize, I think because maybe they in the past have seen their credit take a very quick downward turn where they feel that they can cause that same upward turn.

Crystal Williams:

Yes, for sure. Even with it, it's just, I just see it happen way too often, way too often to where someone calls in and they're just like, okay, well, can we follow up next month to kind of see if my scores changed? And they're expecting this huge increase. If even if they do take the tips that I state, you know, maybe put this, charge this card down to bring this, reduce this balance down to this number in order to get you below that 30% utilization to kind of help your credit score or whatever the case may be when I'm looking at their credit, they do it. And they expect the change to be implemented on the credit right away. Or they just expect their credit score to just shoot up within the next month. Sometimes it just, it doesn't always work that way.

Chase Peckham:

Credit can be such a crazy thing in a situation like you're one of my favorite things is to hear stories. Do you have any like really good success stories of a client that you worked with that was just so bummed out about their credit, but did whatever they could to get it back and , um , have succeeded.

Crystal Williams:

This client. I believe she started around her credit score. If I'm not mistaken, it was around a 473, which is, which is, you know, at this point.

Chase Peckham:

Iv'e never seen that I don't think I've ever see a credit score under 500.

Crystal Williams:

Yeah, well, yeah. I'm starting to see a bunch of different numbers when it comes to the credit scores. And at that point in time, it's so easy to just say, you know what, just forget it. Like, there's just no coming back from this since being on the plan, she's now has a 745 score.

Chase Peckham:

The same Experian credit score. So you're pulling it from the same place.

Crystal Williams:

The same exact place. So seeing, she actually followed through with everything, she had one credit card that she consistently made on , um , payments on times with she took care of the collection accounts and had them disputed and she remained consistent with her payments on the program. Since then that's allowed her to get her to in a way better position with her credit score, being a 745 now.

Chase Peckham:

And the fact she's paying down debt, which is even like the best part. Right? She's killing two birds with one stone.

Crystal Williams:

Yeah. I mean, seeing that she was over, I believe she was over $50,000 in credit card debt. She just never thought she'd see the day where she'd be done with the debt. So speaking with her, it was really, it was really exciting.

Chase Peckham:

That's gotta be uplifting for you.

Crystal Williams:

It is. It is

Felipe Arevalo:

For parents out there as a credit coach and, and a parent yourself. I know you're , yours are little ones right now. What age do you feel like now at this point, you're going to be like, all right , let's sit down. We're going to talk about credit.

Crystal Williams:

I'd say high , the start of high school, because you know, that's when kids start wanting a little bit more, they just think money fall off of trees, you know, just teaching them . I think that's the biggest thing right before college. I knew, and I didn't know anything about credit cards and interest when I was in college, I just, okay. I have an extra $500. Let me go get my nails done. Let me go do this without really thinking, okay, now I'm paying an interest, a 25.9%. Oh, that's not bad. They're just adding a couple of cents of interest on every day . But then over time it really does build up. So I think the start of high school, when they start valuing money, that would be the perfect time to start teaching them about credit cards, because they're almost going to reach that point to where they can actually open a credit card. I mean, you could work with them in the middle school age, depending on eighth grade, seventh grade, but definitely by the time they're in high school.

Chase Peckham:

It's a little much to discuss that you can teach money and that kind of thing, but credit is a whole different ball game.

Felipe Arevalo:

It's funny that you mentioned though learning, you know, the way, I guess the hard way that many of us learned credit , uh, you know, because if you don't receive that education. At least both of us you've got us in , in your group , uh , you know, and it's something we share all the time presenting, we just didn't have that education. And , and that I feel, I like to think that if I had more of the education, more of the awareness, I would've made different choices, maybe , uh , 18, 19, 20 year old me, might've just walked right past the education. But , um, you know, if you can go back and teach, you know, young first credit card, Crystal, something about credit, what would you, what would you teach yourself?

Crystal Williams:

I would teach myself to narrow , never carry a balance. Don't swipe it if I can't pay it off, because you're just going to get, it's just going to become over your head to where, Oh, I'll just pay that off next paycheck. Next paycheck comes. You don't get it paid off. And then the balance just keeps increasing. And the interest this keeps accruing, pay it off in full every month. And if you cannot afford to pay it off, then you can not afford to charge it.

Chase Peckham:

That's great. Great advice. When you have people, do they ever argue with you when you, when you make a comment like that? Like, well, if I don't, because there's the old. Well Felipe, just discussed it . If you don't use it, you're not going to have credit. Right. You've got to use credit to establish credit and then keep that credit going. So what can people do to both stay debt-free and build their credit?

Crystal Williams:

Keep utilizing the cards, but just making sure by the time you get the statement that you're still paying it in full every month, a lot of people think that you're not building a credit history by not having a balance left on, on a monthly basis, which is not true. So just keep utilizing your cards, but just make your payments on time every month. I think that's just really the best way to kind of build and establish your credit from there . Lenders will then start giving you higher credit limits and that'll help your credit even more as well.

Chase Peckham:

That's awesome. What about, do you ever run into this is something that people will always say is like, they're scared to death of closing their cards. I've been told that I never should have closed my account. What re what , what is your, your impact obviously? Cause 10% of your FICO score is credit history. So how do you handle that scenario?

Crystal Williams:

It really depends on what your balance is at the time that you decide to close out an account. So say for instance, you have a $5,000 credit limit. You're only caring about a $500 balance. It may not be the best idea to close out that account because you still have a huge, you still have over $4,000 of available credit. Now, if you have a $5,000 credit limit credit limit and your balance is $4,500 closing out that account is really not going to be the biggest impact towards your score because you only have $500 available credit. That account is now hurting your credit more than it is helping. So closing it and getting it paid down is going to help your credit more than just keeping it open and not really being capable of reducing that balance.

Chase Peckham:

That's awesome. So you , you mentioned , uh , the balance versus the, on both ends of the equation. So can you explain that a little bit? Why is it that closing a credit card would not be as hurtful as a, as, as it would be if you left open an account that had a large balance on it that was close to its limit

Crystal Williams:

Because it all has to do with the availability of how much, how much credit availability you have. And then of course, that ties into the debt to credit ratios, the higher the ratios, the more of a negative impact it's going to have on your score. So that's why it's always important to kind of look at the balances compared to the credit limit, because that's going to determine if it's going to be a good option to close that account.

Chase Peckham:

Thank you so much, Crystal. I mean, it's been, eye-opening , it's been overdue that we've had you on the show we've been mentioning and that we wanted to have you on for a long time. And , uh, it's, it's been, awesome.

Crystal Williams:

Thank you. Thank you guys for having me I appreciate it.

Chase Peckham:

We hope you had a good time. [Inaudible] .