CW 354: Jason's Mom on the Importance of ‘Grit’ & Credit Re-Scoring Techniques with Steve Paige Credit Repair Expert

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Welcome to the Creating Walt show. This is your host, Jason Hartman. And this is episode number 354. Thanks so much for joining me today. Today our guest will Steve Page, who's going to talk about credit enhancement and credit improvement. But before we do that, I've got a guest back on the show for the third time and that is Mom. Yes, my mother's back on the show. I know you always like it when I have her on the show and she's one of the most gritty people I know. And what I mean by grit is, you know, I always describe my mother as someone who gets up quickly when she falls down. And it's always impressed me her perseverance and tenacity. So we'll talk a little bit about that today as it applies to real estate investing. And then we'll get to our guest. Hey, mom, welcome. How are you?

Hi, Jason. I'm fine, thank you.

Good, good. So where are you now?

In Pensacola, in front of the Dillard's department store.

Okay.

To do a little shopping.

Pensacola, Florida. Now what is a rich lady like you doing shopping at Dillard's? Isn't Dillard's kind of like Macy's or something?

No, it's the only major department store we have around here.

Oh, really? Okay, well. And Gulf Shore is where you're. You're building your big house. Well, I guess I should say it's built. You're not building it anymore, thank God. Is in Gulf Shores, Alabama. So how far is that from Pensacola? You're what, about 30 minutes, 45 minutes away or an hour?

About 45 minutes from where I am right now.

Yeah, I know that. We did that drive before when I came to visit you. We drove down the Florida Gulf coast there and it's really nice over there. So anyway, hey, you were recently out to visit me here in Arizona, and you were going to LA to deal with one of your rental properties. And I'm constantly amazed, you know, I give you a hard time about it. I don't think it's a very good idea the way you do it. You're like the ultimate do it yourselfer. You just like to do everything yourself.

And so you were doing something, though, that involves some level of grit. So what were you doing in Los Angeles?

Well, I was evicting a tenant. Actually, the tenant had already been evicted and I was simply there to put the pieces together to make the house rentable again. And that simply involves hiring people to get the job done and putting up my signs. If you want to talk about gritty, that's really grit going out and putting up those signs.

I know, I know, you crack me up. I manage some of my own properties, but most of them I have managers for. And you, I don't think you have any managers anymore. Are you doing everything yourself now, all of your whole portfolio?

No, I got rid of all of them and I'm very happy to have done so.

Yeah, you just, you just like doing it yourself. And, you know, again, just for newer listeners who may not know my mother's background, she started real estate Investing back in 1976 in Southern California, where I grew up and has been in the last few years. You've purchased some properties in Alabama and do you have one in Texas, too? I can't remember.

No, I have. I have one in Gulfport, Mississippi.

Oh, okay. Mississippi and Alabama. Yeah. So anyway, you know, I'm hoping to get you out of California and do 1031 exchanges on those properties. And we always argue about this RV ratio thing that you somehow don't seem to want to understand. But you know, we've talked about that on past shows, but we don't need to go into that because I want to talk more about this concept of perseverance in the face of problems and setbacks and the concept of grit and play a little Ted video for the listeners on the subject of grit. So, first of all, you know, when I invited you on the show today, you said, well, Jason, do you want me to talk about my recent eviction and how easy it was? Why don't you address that for the listeners? What were you. What did you mean when you said that?

Well, it just happens so fast. You know, I was thinking what a terrible time of the year to have to re rent a house, Thanksgiving and Christmas. But within four days the house was rented after it was cleaned up. So it just Gets easier each and every time. At first it was hard and you have to, I guess, show some grit in order to learn how to do things. And then it just gets easier for you.

So did you, you hired an eviction service, right?

Oh, yes. You must always hire an attorney. And the thing that I'm really beginning to learn is once they don't start paying their rent on time, the sooner you move, the better off you are. Because when people don't have the money to pay their rent on time, they start to let your house deteriorate also. And that's where you have the big cleanup messes.

So in other words, act quickly and decisively and get a bad tenant out rather than horsing around. Right?

Yeah. Whether it's through an actual eviction or you simply persuade them to go and say, look, I'll be happy to pay your moving expenses, whatever. You know, sometimes that's the easiest way to do it. Make the decision and move and get rid of that tenant.

Yeah. Okay, so now when you say hire an attorney, some people have visions of, oh, well, I've got to go to an attorney at a big law firm and sit down in their office and explain the whole situation. But evictions are done by what I call attorney mills, usually where they process hundreds, maybe even thousands of them every month, and they just charge a low flat fee. How much did it cost?

Yes, that's exactly who you go to. You never go to a general attorney to do an eviction. Always go to an eviction attorney, a specialist. And you know, there's a few hundred dollars for this and a few hundred dollars for that. But basically the eviction ends up costing you $600 if it is uncontested.

Right, right. But that's in higher priced Southern California you're talking about.

Yes, that's what it costs in Southern California.

Yeah. Yeah. So it's generally less in other places around the country. You know, and I've. I've noticed about $400 is kind of the marker.3 to $400, even $300 for some of the less expensive areas. Now, do they follow through and go and get the judgment against the tenant or just do the eviction the one that you used?

Well, I usually serve the three day notice to pay rent or quit. That's the first start of it. But I hire a process server for $50 to do that for me. Now because I'm not, you know, right next door, I'm in another state. And then once you have the proof of service, you simply turn that over to the eviction attorney and they take everything from there.

Yeah. Yeah. Okay. All right. And so how did it go? You said it was so easy. I mean, tell us what happened.

Well, the eviction is, you know, you don't even have to do anything. That's the attorney's job. That's what you're paying them the $600 or $400 for. But once the people vacate, and usually they do vacate before the sheriff actually has to come and physically remove them. Once they vacate, then you should be there to clean the place up and get it ready for rental again. And this time, all I did was I hired two individuals. One real estate agent gave me her general, a contractor type guy. I paid him $1,300. He completely cleaned up and painted the place. And then I paid another person $500 to haul away all the stuff. And that man really worked like a yeoman. He has true grit. I would say he worked for five days carrying out her trash, but it was totally clean after that.

And how long was that tenant there? How long did you have this tenant?

The tenant was there for probably seven, eight years. But I did. I had a really nice security deposit. I had almost $2,000 security deposit from them.

And how much was the rent?

The rent was. Well, this was the tenant whose husband became incarcerated. Originally, the rent was about $1,500, but I lowered the rent when that happened out of goodness of my heart to that tenant because she was a single mom and she had kids. And the rent that she ended up paying was 11 $38 a month.

Okay, so 11:38. Where do you get such a funny number like that? Was there a Section 8 involved?

Well, no, no, I was just doing percentage.

Oh, okay, I got it. I got it. Okay, so this tenant was there for seven or eight years, though.

Yes, but during that time, I practically had no expenses while she was there.

Right, right.

But the expense. The expenses came after she left at the turnover.

Yeah. In turning the unit. Yeah. Good. So, yeah. Interesting. So really, you probably did okay on that. By the time you paid for the eviction, paid for the cleanup, it sounds like you spent about $1,800 on rehab. And, you know, you had a good security deposit, so you were probably pretty much even on that deal, right?

Yeah, Well, I lost a month worth of rent. A full month.

Okay, so 11 $38 there for the month rent, Right, right, right. Okay. Well, let's talk about this subject of grit. Grit has been defined as courage and resolve, strength of character, the ability to keep going in the face of setbacks and incredible odds sometimes. What would you say about that, especially as it applies to real estate investing?

Well, I say that if you don't have any grit, then you don't belong in real estate investing because things do happen.

Hang on a second. I'd say if you don't have any grit, you don't belong in anything.

Well, Jason, most of my friends, they don't have any grit. They just don't see things through. If it becomes at all difficult, they just hang up their head and walk away. I can't believe them. Sometimes.

It's really amazing. You know, if you want to be successful in any endeavor, you've got to have grit. You've got to treat it like a marathon, not a sprint. And so many people, like, use up all their energy or their willpower so early in the game, and they just don't. They don't understand that this is. Life is a marathon. Right.

Well, I think it happens that we don't have any expectations of kids anymore. And when. And when people don't have anything expected of them, they just don't. Do they just kind of flop through life.

Yeah, I would agree. I would agree. Having some expectations, expecting someone to show up and do the job and keep their promises and be on time and be prepared or dressed accordingly, depending on what the job is or entails. Certainly, certainly true. But there's a quote about that, too. 80%. Maybe it was Woody Allen or something. 80% of success is just showing up. And you know, if you just get there and show up and do things, things tend to fall into place, right?

Yes. When you are there, when you're out there doing things, you know, you have to circulate to percolate. And that's what happens. Because opportunities occur when you're out doing things. If you stay holed up in your little environment, always taking the same route to work, always just doing the same thing at work. Things don't seem to happen to you and for you, so you have to just be out there and put yourself open to the world.

You know what constantly amazes me, mom, is how many people just want to. They want to figure it all out before they start. I mean, you know, when you first started investing in real estate, which has really been the key to your life success, it wasn't the businesses that you owned. I know that those were very tough experiences. And it wasn't like having a great job or anything like that. It was buying those properties and just managing them over the years that made you wealthy, right?

Oh, absolutely, absolutely. And at first, I didn't know how to manage them very well. I was just grateful that someone rented it house from me. I mean, I was so surprised.

The first house that I ever rented, those people said, well, I'll take it. I nearly faded.

I couldn't believe that you could make money like this. That was what I couldn't believe.

Yeah, it's. It's pretty awesome. But you've got something that has universal need. You've got housing. And everybody on earth needs a place to live. Not everybody has one. One as we know. But they're. They're just in such demand.

Right, Absolutely. And the fact that that housing is in such demand, I mean, it just, it came home again when I was in Long beach renting this house. I mean, this is like Thanksgiving and Christmas, and I rented that house in four days. And people call, keep. They keep calling and calling, and they're so unhappy that they didn't get a chance at it. So that rental market is very, very good.

Yeah, but you know what that means to me. Wait a sec, though. If it's that easy, it means your rent is too low. You're not asking enough money. I mean, what do you say?

Well, I was just going to say, on second thought, I should have rented the place for $1500 a month instead of 1400.

Right, right. And you know what I think about the whole California thing? And I know that after your house is totally finished, I mean, I guess, I guess your big tell everybody about your house update. Everybody always asks me about your mansion you're building, but I mean, it's built now. But that was a pretty gritty project, wasn't it? Yeah, I know it was, Jason.

If anything ever took true grit, it was seeing that house through to the end. But you know what? I always had this dream that I would live in a great big beautiful house with columns. And that goes along with your saying, you know, it's a marathon. It's not just a sprint. Because if it were just a sprint, I never would have gotten that house built because I had problems that I couldn't believe would happen.

Yeah, right, right. You know, I say to anybody, just don't get into, don't build a house. I mean, it's just if you're married and you want to get a divorce, just build a house together.

Yeah. I would say that would happen to anyone.

Yeah, I mean. I mean, that's just an unbelievably difficult project. I just find getting the contractors to show up at a house, you know, where I'm like some of my new houses that I bought over the years and lived in, you know, to do the landscaping to. My God, what a hassle. The number of phone calls back and forth and emails and cost overruns. Gosh, what a hassle.

Well, you know what? If you are living in a metropolitan, a large metropolitan area, you can get work done a lot more easily because there are just people there who have the skills. If you're in the little dinky small town, that's when you have the problem because they will charge you a fortune and they don't have the skills. And there's no competition, there's not as much supply.

So you're referring to where you live, which is Gulf Shores, Alabama, right?

Oh, absolutely.

Interesting. Okay, all right, fair enough. So let me let you know, as we're talking about this subject of perseverance and. Well, one more question. I want to play this little Ted video, a little clip from it here. But you said when you started buying properties and renting them out to people, you didn't really know what you were doing. And I think one of the key points there is people have to somehow overcome this idea of, you know, I talk about the people who are always getting ready to get ready. Getting ready to get ready. Yeah, they're not getting ready to do something.

Paralysis of analysis.

Paralysis of analysis, exactly. And so getting ready to get ready. And you know, people who want to like figure everything out before they jump in and do it. But pretty much everything in life is on the job training, isn't it?

Oh, yeah, definitely. In real estate, yeah.

So you didn't know everything. But what did you know when you got into it? I mean, did you know anything or did you just. Did you just dive in?

When I was working for the Leukemia Society, I just heard that a lot of these board members made a lot of money in real estate. Now, I didn't have any idea what kind of real estate it was, but I had the simple minded concept. Well, if you started buying houses, eventually you would probably get pretty rich. And that's where I started from. And. And they were selling a lot of government repos at the time, and it just seemed like the thing to do because they were inexpensive how you couldn't make too big a mistake, Right?

Yeah, right, right. The mistakes aren't that big and they're pretty correctable when it comes to real estate investing. But you can still make mistakes. You got to know what you're doing and you Got to have a team. You got to have people that help you, advise you, can give you referrals and just support your effort in doing it. But yeah, getting ready to get ready, that just doesn't work. You never get anywhere in life with that kind of mentality. Hey, you heard a little bit of this video. Why don't play this Ted video and, you know, we'll have a couple comments and then we'll wrap it up. Okay, Mom.

Okay, great. Jason.

When I was 27 years old, I left a very demanding job in management consulting for a job that was even more demanding, teaching. I went to teach seventh graders math in the New York City public schools. And like any teacher, I made quizzes and tests, I gave out homework assignments. When the work came back, I calculated grades. What struck me was that IQ was not the only difference between my best and my worst students.

Now, to that I would say, duh.

You know, you need some highly educated academic TED speaker to say that that's a surprise, that it's not about iq, that it's not about brains. I mean, come on. It's about perseverance, it's about grit. And by the way, I didn't mention it, but this is Angela Duckworth giving this TED Talk. But any comments on that, mom, before we go back to the video?

Well, how come she didn't know this?

Well, because it takes a big research project to figure that out. And, you know, I'm not making fun of this speaker. I'm just making fun of the little point that she, I mean, I think she's a great speaker and she really does have some good insights and nuances in this, in the short clip we're going to play. But it's just like that's, that seems so obvious, right, to people with common sense. It's like the question, what would you rather have? Or what do you think is the best predictor of success? Is it academic smarts and book smarts, or is it street smarts? Now, I would say street smarts. I think you would agree, right?

Oh, absolutely. Tenacity, tenacity, tenacity. That is what you have to have. And I think that's a synonym for grit.

Yeah, yeah, but, but it, but it's, it's real world street smarts. And the problem is that in life, the only place you get the real world street smarts is from the real world. And that means you got to do things to learn them. You've got to have that on the job training. You've got to be willing to dive in without knowing everything and, you know, a lot of times without knowing much at all and just be a little bit reckless. I actually think there's a certain prudent amount of recklessness that is highly beneficial. And one of the books I really liked is by Michael Masterson. That's his pen name, but Michael Masterson, who wrote a book called Ready, Fire, Aim, and I gotta tell you, I just see over and over. I know in my own life, in your life, and in the lives of so many people I know and so many clients of ours. Those who succeed versus those who don't are the people that are willing to ready, fire, aim, and not aim first.

Yeah. Jason, Every time I would buy a house, there's always a thought, should I or shouldn't I? But I thought, why not try it? You know, do doesn't seem like, you know, it's a bad idea. It's a good idea. And work out the problems as they come.

Work it out as you go. Definitely. Okay, let's get back to the academic Ted speaker here. Okay.

Some of my strongest performers did not have stratospheric IQ scores. Some of my smartest kids weren't doing so well. And that got me thinking. The kinds of things you need to learn in seventh grade math, sure, they're hard ratios, decimals, the area of a parallelogram, but these concepts are not impossible. And I was firmly convinced that every one of my students could learn the material if they worked hard and long enough. After several more years of teaching, I came to the conclusion that what we need in education is a much better understanding of students and learning from a motivational perspective, from a psychological perspective. In education, the one thing we know how to measure best is iq. But what if doing well in school and in life depends on much more than your ability to learn quickly and easily? So I left the classroom and I went to graduate school to become a psychologist. I started studying kids and adults in all kinds of super challenging settings. And in every study, my question was, who is successful here and why? My research team and I went to West Point Military Academy. We tried to predict which cadets would stay in military training and which would drop out. We went to the National Spelling Bee and tried to predict which children would advance farthest in competition. We studied rookie teachers working in really tough neighborhoods, asking which teachers are still going to be here in teaching by the end of the the school year and of those who will be the most effective at improving learning outcomes for their students. We partnered with private companies asking which of these salespeople is going to keep their jobs, who's going to earn the most money? In all those very different contexts, one characteristic emerged as a significant predictor of success. And it wasn't social intelligence. It wasn't good looks like physical health. And it wasn't iq. It was grit. Grit is passion and perseverance for very long term goals. Grit is having stamina. Grit is sticking with your future day in, day out, not just for the week, not just for the month, but for years. And working really hard to make that future a reality. Grit is living life like it's a marathon, not a sprint.

I think that's an incredibly important thing. She just said grit is stamina and grit is living life like it's a marathon, not a sprint. Any thoughts, Mom?

Yeah, I agree with that. I also agree think that you've got to have passion for what you want out of your life. And I know that my passion was this house. And you've just got to be passionate about things and you've got to get rid of the idea of everything should be instant gratification because some things take a long, long time.

They do. And you know, real estate investing is definitely the slow path to wealth. I don't know if there really is any fast path except for the very few people and the stories that you hear over and over of people who got lucky. And listen, I'd rather be lucky than good any day of the week, but. But most of us aren't going to get that lucky. I mean, I just kind of subscribe to the idea of the harder you work, the luckier you get.

That's the luck I have.

That's a very good thing to subscribe to.

I would agree. It's a pretty sure bet. You pretty much know that'll work. The other kind of luck of winning the lottery or having the startup business and having an IPO for a billion dollars or being Snapchat. I can't believe they turned down that offer from Google for $3 billion on a company that makes zero money and has no revenue and no plan to monetize. It's crazy. They were lucky. We'll see how lucky they get in the future. I don't know. That seemed like a crazy deal to turn down. But yeah, the other thing she said, the speaker here, Angela Duckworth, is. She said that grit is sticking with your future, sticking with your future. And that's the same thing you mentioned, mom, is about having passion for what you do. Right?

Yeah. And stick to itiveness. You know, one of my aunts always called that stick to itiveness.

Was that Aunt Bee that said that?

No, that was Aunt Edie. Stick to itiveness.

Stick to itiveness. That's a good. That's a good one. I like that.

But, you know, this gal who's speaking has a lot of grit. I mean, she was in a management job, and then she quits that, she goes to teaching school, and then she starts doing research. She has a lot of grit.

She could write a book about it.

Well, maybe she has. I'm not sure. If Angela Duckworth has written a book, she probably has. Okay, we got a few more minutes of this video. Let's listen in.

I started studying grit in the Chicago Public Schools. I asked thousands of high school juniors to take grit questionnaires and then waited around more than a year to see who would graduate. Turns out that grittier kids were significantly more likely to graduate even when I matched them on every characteristic I could measure. Things like family income, standardized achievement test scores, even how safe kids felt when they were at school. So it's not just at West Point or the national Spelling Bee that grit matters. It's also in school, especially for kids at risk for dropping out. To me, the most shocking thing about grit is how little we know, how little science knows about building it. Every day, parents and teachers ask me, how do I build grit in kids? What do I do to teach kids a solid work ethic? How do I keep them motivated for the long run? The honest answer is, I don't know.

What I do know is that talent doesn't make you gritty. Our data show very clearly that there are many talented individuals who simply do not follow through on their commitments. In fact, in our data, grit is usually unrelated or even inversely related to measures of talent.

Now, I just want to say something about that because I think it's kind of interesting. Being talented or being smart I think are almost disadvantaged in when it comes to success in life. And I'll tell you why. It's kind of like being born into a rich family. And, you know, neither of us were right, Mom.

Yeah. Well, Jason, you know, also another kind of analogy of this is when success comes to you in high school and you're the football star and you're the prom queen and everything a lot. When it's. When success comes too early and too easily, then it seems to have destroyed any chance that these people will ever have any grit or tenaciousness in pursuing their goal.

Yeah, right. I agree. I agree. And the idea of the football quarterback and the prom queen is. They peaked too early, they peaked too soon. And a lot of those people don't have much success in life because then they all think it's going to be easy. So really talented people or really smart people, they. They expect it. They think it's going to come too easily. They don't think they should have to work. It's almost like an entitlement attitude, really, or someone born with a silver spoon in their mouth. It just isn't the way the world works. And those people are in for a rude awakening most of the time.

Yes, they seem to their. Their whole future life is just a relive of what happened in high school.

When they were at the top of the world. But life isn't like that, right?

There's a lot more to it than that. Okay, we're almost finished here.

So far, the best idea I've heard about building grit in kids is something called growth mindset. This is an idea developed at Stanford University by Carol Dweck. And it is the belief that the ability to learn is not fixed, that it can change with your effort. Dr. Dweck has shown that when kids read and learn about the brain and how it changes and grows in response to challenge, they're much more likely to persevere when they fail, because they don't believe that failure is a permanent condition. So growth mindset is a great idea for building grit, but we need more. And that's where I'm going to end my remarks, because that's where we are. That's the work that stands before us. We need to take our best ideas, our strongest intuitions, and we need to test them. We need to measure whether we've been successful. And we have to be willing to fail, to be wrong, to start over again with lessons learned. In other words, we need to be gritty about getting our kids grittier. Thank you.

So interesting. You know, I just. I don't think that's, like, the best talk on grit, but I've never heard any other talks on grit. You know, I just. I just think it's good. It makes some great points on what it takes to succeed in life. So any final thoughts you want to wrap up with before we get to our guest mom?

Well, you know, I've never heard her talk on grit either. And I think she brings something valuable to world of education because it's not just the high grades that you get that does not always determine your success. It's what you do to keep learning and to keep doing in life that determines Your success?

Yeah, it's what you do with what you've got, whatever you've got. Voltaire said something like, you know, each player in life cannot choose the cards that life deals him or her, but must choose how to play the cards they have in order to win the game. And, you know, and that's the point. We've all just got to jump in, use what we have and move forward. But the people who will succeed the most are the people that keep going, that keep forging ahead, and just never, ever, ever give up. And I think that's, that's, that's the people the rewards come to. I mean, you know, how many times over the years have you had disappointments with your real estate investing and problems and things like that you talked about. Hey, Jason, do you want me to talk about how easy it is to evict someone? I'm thinking that's kind of a funny, you know, funny thing. But it's really like the first time that happened, were you really thrown for a loop and concerned and depressed and freaked out about.

Yeah, yeah. I didn't know what to do. I mean, I didn't know what eviction attorneys were. I had no clue. So you just, you just have to learn. And if there's little courses along the way, like local real estate associations, you know, the Investors Real Estate associate.

Well, how about my podcast?

Podcast? Learn from those. Learn from his lectures. No, it's. Life is a bunch of learning. And once you stop learning and applying yourself, nothing is going to happen for you anymore.

Well, Ray Cross, the founder of the McDonald's franchise chain, you know, he had a great quote about that. He said, as long as you're green, you're growing, and as soon as you're ripe, you begin to rot. And he was talking about making life an ongoing learning process when he said that. So it's a great quote. Well, hey, mom, stay gritty and I will talk to you soon. Thanks for joining us today and talking to the listeners again.

Okay, Jason, thanks for having me. Bye.

Be sure to call into the Creating wealth show and get your real estate investing and economics questions answered by me personally. We'd love to have you call in, share your experiences, ask your questions. And a lot of other people listening have those very same questions. So be a participant in the show at 480-788-7823. That's 480-788-7823. Or anywhere in the world via Skype. Jason Hartman, ROI. That's Jason Hartman, ROI for return on investment. Be sure to call into the show and we are going to enter all of the callers in a drawing for some nice prizes as well. So be sure to call into the show and I look forward to talking with you soon.

Hey, it's my pleasure to welcome Steve Page to the show. He is an expert in the area of credit enhancement and this is a very much talked about topic. In the last few years with the financial crisis, many people have had challenges with their credit. And we're here today to talk about how you can improve your scores. Steve, welcome. How are you?

I'm fine, thank you, Jason.

Good, good. Well, it's good to have you on the show. So first of all, maybe give the listener, Steve, an idea as to to the problem here and then let's talk about solutions the problem.

I've done this for 29 years and the problem seems to be the same as it was back in 1980 and that is the understanding that people have about credit and the misinformation that's out there that seems to just run amok and just exploited like crazy this lack of understanding credit and credit scores.

And so do you have any stats or are these even known? I'm not sure as to, you know, how many people have certain scores and how much of the population this affects.

Well, yeah, there was a study done a lot of times. There's a couple scores I look at. There's the illiterate survey scores that are put out by the gao. And it's not the Government Accounting Office, it's the Government Accountability Office. It's really funny to hear hear those.

Words combined, but it's an oxymoron, isn't it?

Accountability is interesting, but the literary surveys say that everybody reads at a seventh grade level. And the Federal Reserve did a study back in 2004 with a guy named Avery, Kalem and Kanner and came out with statistics and showed that kind of the knowledge that people had about credit. And then there was other studies done by what they call the pirg, US PIRG standard for Public interest Research Groups. And these are good studies in Consumer Federation of America. Here's the three things to look at. One, only 2% of the general public can name the three credit bureaus. So if you're in the if you can name all three credit bureaus, you're in the top 2% of understanding or knowledge nationwide. The other one is because we read at a seventh grade level, an independent study done by the government came out that said that in looking at bank statements and the backs of bank Statements and the fonts and they came to the conclusion that those were written on a 25 year education level. So 15 years, 17 years, so 15 years out of high school of higher education would require you to completely comprehend what's just on your bank statement. Now, collectively we read at a seventh grade level the Washington Post, Chicago Times, the New York Times, all those are written, believe it or not, at a seventh grade level. So it's very unconscionable for us. And the definition of that is the exploitation of the underprivileged, the unsophisticated or the uneducated. I mean, it's completely unconscionable to have us trying to understand credit reports, understanding bank statements as a nation that we read at a seventh grade level. And these things are written on a 25 high. You know, education.

This is, this is scary on so many levels. First of all, I thought newspaper at the eighth grade level, I always heard it may have been dumbed down since I heard that stat several years ago. But it is, that's just really scary that people have so little education. You know, a complete failure of our education system in this country. It's just a disaster. But that is another subject for another show.

There's a motive there though, Jason. There's a very clear motive and that is a study done by the Consumer Federation of America and wamu back in 2003 estimated that if me and you and everybody around could raise our credit scores just 30 points, we would save as a nation 20 billion dollars. Now, it's a 20 billion dollar industry to not teach you how to understand and understanding raising your credit score. And even using the word credit score is misleading because they market credit scores on TV as, and those are fake, fake, fake scores. They are of no value to anybody because they are not the same scores the banks look at. And they don't tell people that.

Okay, so let's talk about scores. So when people say scores, they're usually referring to FICO scores, right? Fair. Isaac scores? Absolutely.

No, that's when me and you talk about it in the circles of the banking industry and lending institutions. That's what we should say. That's not what the general public hears.

And what is the ideal score? Is it still 720?

You know, they can go, the ranges go like this. Fico. I'll give you the five second history of Fico. They were created in 1954 by William Ferrer and Earl Isaac. Came together almost like a crystal ball algorithm that could forecast, they call it regressional analysis technology. They've changed it now to what they call analytic technologies. And what they've done is be able to forecast how a consumer will within number. And the ideal score is 720 is good, but the scores range from 300 to 850. Generally there are some exceptions. With TransUnion Empirica score, FICO goes from 336 to 843. But in the ranges of between 720 and 820, it's just bragging rights. You're doing really well, but you have to know the source of it. And there are three scores to always look at. Each credit bureau has access to fico, which is an independent company that they have access to, they have to pay hard money for to get your three scores, like in the context of a mortgage. And there are three FICO scores. And so when you see a commercial or TV and people say my credit score is. It should be plural. My credit scores. My credit. FICO scores.

Because there are three of them.

There are three. Correct.

Okay, well, what can be done about improving credit? You know, you hear all these claims. I mean, can foreclosures and bankruptcies and late payments, can they all be removed? Collection accounts, can they be removed from someone's credit report? Or are those just big bogus claims?

You know, they can, and I've done that over the years. I think we've estimated 3 million things have been deleted through our efforts in the last 29 years. But you have a lot more control of raising someone's credit scores than you do trying to, to perfect the file. The goal in any kind of a context is credit worthiness, not perfection. Because I think people make a wild, wild claim when they start saying they can delete this and this and this. Deleting credit or the business of doing that involves a science and art and some luck all thrown in the same mix. And that's what helps people. So, yes, we've deleted all those things before, but the introduction of credit scores, FICO score scores has allowed us to measure and have some sort of a milestone to know when we've achieved what we're trying to get there. And that is to creditworthiness. And you said it best. The 720 range is where we try to target for everybody.

So how do you remove things from people's credit reports? I mean, and what I'm getting to here is how someone should choose a company to help them do this, or should they do it themselves? And what are the pitfalls of that? There are probably a lot of them, but first of all, what's the tactic? I mean I've heard it involves writing letters or inquiries to the credit bureaus and asking them to remove things.

When you hear people write letters, you want to put your hand on your wallet and run. The reason is because that technology. I started a company, I don't know if me and you can drop names but I started one of the world's, it is the world's largest credit report repair company even today. And.

I created that company and that was the strategy back then. This all started back in the 70s. A gentleman by the name of Senator William Proxmire pushed through what they call the FCRA formerly is known as the Fair Credit Reporting Act. And people have milked and used that over the years of realizing that. And it gave consumers the rights to to question for the first time to audit as you would anything on your credit report and what it means. The audit consists of a 30 day rule that says that you have the creditor as 30 days to verify. It falls under 15 U.S. code 1681. And it's nothing new. But when you hear, I should say if you're considering having someone work on your credit, what you don't want to do is have them use a lot of $10 words like that and tell them that they're to going, going to write letters and start doing that. That technology is old.

So what has it been replaced with then?

Well, there's different things called an acdv. These are things that the bureaus have tried to automate. And the reason the letter writing campaign isn't as good because traditional credit repair this is collectively everywhere is the problem here Jason, is that it requires a dance to be done between three people, the consumer, the credit bureau and us helping the consumer. And if anybody breaks that chain then it falls apart. And the one that normally always, consistently, historically has always broken that chain is the consumer not giving the report. So if you're dealing business with a company that says they're going to delete this first place the radical claims of deleting anything, I hear this all the time. 14 day deleting this and 30 day deleting that again, put your hand on your wall it and run. If you have someone telling you they're going to delete your bankruptcy and the word guarantee definitely run Sprint. Okay. So you have to be able to be able to say what are you doing and how are you doing? And if they start saying they're writing letters, they're old.

Now when I say writing letters, I'm using That as a bit of a figure of speech. Sure, it may be an email or an electronic inquiry, but they're disputing a charge. I mean, what is the actual mechanism? Do they do that electronically?

The mechanism is. The mechanism was back in 2004, back in there was a set of laws passed that were adjacent to the FCRA called fact, the Fair Equity Credit Transaction Act. And Liz figueroa, back in 2001, a senator woman out of California pushed through Senate Bill 1607 that created a chain reaction of giving consumers more rights. Senator Proxmire gave US rights in 1970 that let us look at, at the reports. Back in 2004, we even had more rights as a consumer to question these things. So the vehicle, if you will, and what you're alluding to and is correct, is that you first order your credit reports. But if a consumer does it on their own, there's a few problems. The credit bureaus, remember, they're not, they don't. They can't charge for this. So they're really not. Everything's government mandated. No one has stepped forward and said, we want to make consumers right. If they can market it and profit from it, they will. And so the strategy is to order the credit reports. Now, where do you get them, where do you buy them? And that's where the pitfalls come into. You've got to have a source to go to that's not going to sell you a fake score. Now the credit bureaus want to make money. Now, any of your listeners, any of your listeners listening to this, we will order a free credit report to. For any. We don't need a reason, we don't need any money, we don't need a credit card. We will order a free credit report to their house. It'll be sent to their home only if they can, if they connect it with you and through you. That way they know that the benefits of hearing this and that way we can sometimes get all three for free, but we can definitely get one, maybe two, sometimes all three.

But let's talk about correction. I mean, you know, everybody pretty much knows nowadays they can get their credit reports once a year. They can get them from all three bureaus for free.

We get them. We can get them any. We can get them once a week for free.

Got it? Got it. Okay, so, so what do we do, though, along the lines of improving credit, of getting these derogatory things off a credit report? I mean, I guess the first question really, before you even answer that is, is it legal to do this it seems sort of crazy that if someone filed bankruptcy or had a foreclosure or didn't pay something on time, that they go back and they ask the bureau to remove this item. I mean, on what grounds? Aren't they just going to look at you and say, hey, you're crazy. Why would we remove this? You didn't pay on time. Go take a hike.

Great question. Great question, Jason. And at the very beginning, when I started this industry back in 84, it was kind of a moral issue for me of, am I doing something wrong now? The law clearly said that you could. And here's the misnomer. I did a thesis on this, and this is called the Seven Year Myth. And it in the subcommittee hearings back in 1990 in the Clinton administration, early 90s, they had these subcommittee hearings of urban affairs and coinage. And Richard Lehman, who was the subcommittee chairman, asked William Kurth, the president of Associated Credit Bureaus, that question, that question was, why are things on credit reports for seven years? That's the myth. Because the credit bureau is in the same business I'm in, except they erase and repair credit every seven years. So the magic question is, why is seven years so sacred? Was there a study done? Did it say that people change their lives every seven years? I mean, if you put it in perspective, that's like not getting your diploma as a senior because of a test you failed in the fifth grade. I mean, the distance between that seven years is a reality. It's really not in perspective. And there was no answer to that. Other countries, Italy, France, Germany, none of them have adopted that same strategy. Because this country, when it adopted these rules and these regulations, Senator Prosmore said, here's what makes it legal. It couldn't be on there any longer than seven years. It could come off anytime it wants to. And the law says, and I've done this so many times, I can quote it, it's very, very easy. 15 years code 1681, 623, or actually 611, section A. If the completeness of the accuracy of any item of information contained in the file is disputed by the consumer and such dispute is directly conveyed to the consumer reporting agency by the consumer. The consumer reporting is. Shall, within a reasonable period of time, which has been defined as 30 days, reinvestigate and record the current status of that information unless it has reasonable grounds to believe that the dispute by the consumer is frivolous and irrelevant. Here's the key. If after such reinvestigation, such information is found to be inaccurate or can no longer be verified. The consumer reporting shall promptly delete such information. It's your moral imperative. Now, there's a couple caveats to this. One is the federal registry has recorded that the bureaus have every right to leave things on your file if they know it can't be verified. So the squeaky wheel gets the grease. Now, you asked another question. What should people do when they ordered their credit report? Believe it or not, 47% of all Americans are impacted by something that's very, very important. And that is it's something that's not on the credit that's hurting your scores, their real credit scores by 50 to 80 points. It's what's not there. And it was a strategy from some banks. And I don't know if I should say who they are, but there's one.

Of the biggest banks say who they are.

Capital One. Capital One had no hesitation to leave off. Here's the key. They left off your available credit line. And that affected Avery Kanter and Calum of the Federal Reserve caught this and found out that 47% of all consumers are missing an available credit line on their credit report. Now here's the strategy. Capital One. And we can only guess their intentions. Capital One is competing with all these other major banks. They send it in the mail. They buy your name. You're a commodity. They buy your name from the bureau at a certain credit score level. They market you as soon as you get that credit card from Capital One because there's no available. The available credit line is not on there. The moment you use that card for $1 or $10, guess what? The FICO algorithm assumes it goes down.

It says all your credit's used up.

You'Ve maxed your card for a dollar, and guess how it benefits Capital One. You fall off the radar. Now you're at a 620 when you're really a 720. They know that.

Okay, but. But what? Falling off the radar. What do you mean? You mean so other credit card companies don't solicit you?

Exactly. You perfect Jason. Exactly. Exactly.

Wow. And did they get in. Did they get in big trouble for that?

They did. Back in 2007, three this is America and three women out of Newman, out of North Carolina came together and sued the credit bureaus for allowing that to take place. I remember hearing the.

PR spoke about this on C Span and she said it was their proprietary right to report whatever as long as it was accurate. There was no law about omitting anything. It was what they said had to Be had to be accurate, verifiable, and it's very clear. And then they acquiesced and changed that and added it. And almost overnight 57 million consumers scores went up 50 to 80, 80 points by adding that available credit line on their credit reports. Amazing.

Very interesting. Okay, so let's go back to the enhancement and repair issue. Okay, what do we do? So I mean, how does your company do it? You do electronic inquiries to say take this item off kind of.

Kind of. So what happens is.

You need to order what it is, is you order the credit report and you first have to understand how to read it and understand it. So what we do as a company is we call it kind of a financial gps. And you order your credit reports and then teaching you how to read them because it's like reading three different languages. Be aware of what's there. Now there's a misnomer that inquiries are somehow hurting your credit and affecting your score. There's a reason why that is absolutely untrue and I can verify it a hundred times. But the prevailing way wisdom for everybody is that they are. And it's a paradigm I don't feel like changing. So I would tell people, don't pay attention to the inquiries unless you're afraid of identity theft. If your identity theft is something that's there and identity theft is not as prevailing as everybody thinks, AIG will sell you or me or anybody identity theft insurance as a wholesaler for a million dollars for five bucks a year. I mean it's absolutely. If identity theft was huge and an issue I there and Lifelock was saving everybody's lives. I don't think AIG would sell identity theft insurance for five bucks for a million bucks. It just doesn't make sense. So get your credit report, look at what the information is there. I always like to have people have one name. I always delete all your phone numbers. There's no reason for the credit bureau to have all your phone numbers. Remember, they're marketing all of this stuff. So we delete the phone numbers, we delete previous addresses, anything. Because you are being marketed. It's not like it's an application for a loan. The application for the loan has nothing to do with the addresses. It has to do with what's on your file. So look at the personal information. I personally do not like all that stuff on there because again, you're being sold to who knows where all the time. So give them just enough information to be able to be credit worthy.

Makes sense. But what do we do Next, let's talk about improving the file so you.

Get your credit report.

I don't like consumers to try to take an initial reaction with it. I like them to be able to be aware of it and to make contact with you on the rest of it. I used to advocate that consumers did things on their own. The problem is they mess it up. And here's where you said it best about 20 minutes ago, 15 minutes ago, and that is that correcting stuff on the file. The misleading thing here is you're in the game of raising your score. If correcting things on your file is going to raise your credit score, then do them. If it's not, then don't, don't. Because sometimes there's things on credit reports that are to your benefit. And the illusion is that if I correct it, and these are things like, no, I paid this off here. If you had a collection account on your credit and you paid it and it didn't show paid, I wouldn't argue that it was paid because you bought seven more years from that date that you proved it. What I would argue is that it's incorrect and make and put the burden of proof on the bureau. You put them on the defense, not you. You're not on the defense, they are. So you take a defense, you take an offensive posture and you make them defend what they're saying. And in that process, Jason, it comes off your credit report many, many times. But admitting, you know, it's almost like being on a stand and the judge says, did you shoot them with a.38 caliber? And you're saying, no, your honor, it was a.45. You're not going to volunteer that information.

Okay, but I want to understand the basic premise here. What you're saying is you dispute an item with the credit bureau and then is there the creditor has a certain amount of time to respond, Is that it? And a lot of times they don't respond.

They've got about 30 days to respond. And in that 30 day period, and that sometimes that's interpreted as working days. So it could be 45 days. And they have that much time and they contract this stuff. 60 minutes did an article or did an expose three months ago. Really good. If anybody wants to see it, YouTube it, 60 Minutes. Credit bureaus or credit reports, they outsource this information to Philippines, India and Chile in South America. And consumers will get their reports, they'll write letters questioning the things on their file, and then it goes to one of these sources who sends it to the creditor. Here's the thing, it's exposed to a two digit number. So the law says that they're supposed to forward everything. If you were the victim of identity theft or something and it was on your report and you had all the documentation to prove it and you sent it to the credit bureau, they're supposed to forward all of your things intact to the creditor. They don't.

They condense it, they toss it. I don't know what they do with it. Crush it, destroy it, shred it. And they condense it to what they interpret one of possible 32 digit codes that represents what you're trying to say to the creditor that's in complete violation of it. You can watch that 60 Minutes and you'll have attorney after attorney after attorney.

On TV say over and over again they are violating 100% of the time the Fair Credit Reporting act because they are not forwarding all of your data to prove your point to the credit bureau. In a perfect world, that's how it should be done. In reality it doesn't work that way. And so there's so many different things to answer that question. So you get your credit report, when you question it and you forward it, it processes. They're supposed to send it to the creditor. The creditor has so many days to get back to the consumer and tells them. Now there's another interesting thing. What happens if they can't verify it and they delete it? Can they put it back on there? That's always a question they ask me. And they can, they do. But they got to give you five days notice under public 1181508 to tell you or 15 US code 1681. They have to tell you before they put it on back on the credit report.

Okay, so you can get something removed and then it goes back on.

Possibly that no, it doesn't happen the way we do it. But for all intents and purposes they have the right. They can happen, but there are administrative process they have to obey before they put it back on the file. I personally, we haven't had to deal with that in what we do. So I don't even know the process of that. I'm just saying in a careful reading of the fcra they, they do have that right.

So anything else someone should know about improving their credit score?

Yeah. Understand getting the source of the score, the best, the only source in the galaxy, in the universe for a consumer to get a real credit score is through a company called myfico.com. i don't work for Them I get no commission from them. Nothing. But that's the only source a consumer can go to any of these freecreditscore.com, annual.

You can get a credit report at every one of these places and they'll be consistent. If you ask for the score you're going to be in the land of confusion because the only place to get the real scores is myfico.com there's no second place. There's no second best. There's no other place.

A consumer can get it free for 10 days if they go there and ask for one of the three FICO scores. But that's it. There is no. They have such a hold on it. This company made $100 billion in the first quarter. Hundred billion dollar profit. They are huge. So FICO has turned into a huge company globally.

So is it used around the world? I mean I thought most countries don't have credit reports. I thought that was kind of a thing that was unique to the U.S. no, no.

In fact Italy to me as my studies. Italy has taken the very best of what we do. England copied what we do in Japan, Germany, France, Canada. And Canada has interesting laws. We have the Fair Credit Reporting act in this nation to protect us. Canada has a separate set of issues, the Ministry of Credit and a few different ministries that they refer to up there to be able to get to the rest report. But every country uses credit scores. Some are not relied upon. There are South American countries or the corruption and things. A lot of them they don't rely on the scores because of the information they get. They don't know where the source of where it's coming from is as reliable. But in every, every major power uses a credit system and credit reports and it's a little newer to them than it is to us. Ours have been around almost 100 years. In fact the country of Portugal, a consumer can opt out of the entire system. You can actually in Portugal bequest to be off the grid. You don't even show up on a credit system.

Interesting. Good points. Well, if you're interested in hearing more about Steve's services, you can contact your investment counselor through Jason Hartman.com and we can put you in touch and you can learn more. But Steve, just anything real quickly in.

Closing, just make that everyone should be able to make an effort to not be intimidated to contact through you and get a copy of their credit report and we'll help anybody that wants to understand and how to read these things.

Good stuff. Well, thank you for sharing this advice today.

Thank you.

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