The Current State of Credit in this Economy - Expert Edition Episode 3

Have you seen some changes to your credit lately? I know I have! American Express just decreased the available credit on three of my cards by 90%. No late payment or other delinquencies. 

This is a timely episode to have my friend and the Financially Intentional Credit Expert, Shante Nicole join us to break down what’s going on. She shares why creditors are pulling back credit limits. She also breaks down what makes up a credit score and what goes into improving it. 

Make sure you follow her and join her Financial Common Cents Facebook group 

About our expert:

Shante Nicole’s passion for serving others has always been at the center of her life.  She is an author, financial educator, certified credit consultant, holds a degree in nursing, and is the founder of her nonprofit organizations: F.A.C.E. (Facing Autism with Children Everywhere), and her latest endeavor, Financial Common Cents.  As if that doesn’t keep her busy enough, she is also a wife and mother of a child with autism.

In January 2017, she started an online Facebook community, "Financial Common Cents", whose motto is “Education…Restoration…Liberation”.  It was her mission to empower people to rebuild, restore, and repair their credit.  She also helps individuals devise a consistent plan to manage their finances and their debt.  To date, her “FCC family” has grown to over 102,000 members from over 100 countries. 

Through her nonprofit organization, Financial Common Cents, she facilitates workshops, online courses, and personalized financial & credit coaching. As a panelist with SunTrust Bank’s onUp Movement, she educates her community on credit, budgeting, and debt management.

She’s also the founder of “Kids Making Cents”,  a financial literacy program that offers educational products and workshops in the community including schools, churches, and recreational camps.

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TRANSCRIPT:

[00:00:00] Naseema: What's up? What's up? What's up people? Thank you for joining me and I'm super excited to have our credit expert join us. Shante Nicole. What's up girl?

[00:00:10] Shante: Are you? It's been a minute,

[00:00:12] Naseema: A minute. Minute. But. I'm always excited every time I get a chance to catch up with you. Because not only are just you just a bomb person and super fun and a homie, but you have so much information in regards to credit.

And this is like, credit is one of the most like black hole kind of topics. Like nobody really understand how, understands how it works and most people don't even understand how important it is. , especially right now in this economy and how there's so much uncertainty. I wanna kind. Do like a general state of credit in a pending recession or whatever we're going into, or what, however people wanna categorize it.

Right now, I just wanna talk about like what is going on in the economy with, in regards to

[00:01:01] Shante: credit. So lenders are protecting themselves right now. You have a lot of people, especially when the pandemic hit, people are getting laid off. They're like, I don't know what I'm gonna do. So the mortgage industry, they're seeing a lot of people having to put their mortgage payments on the back end of their loans or put it in deferment or some type of plan where they can't pay, which a lot, which can help.

But what a lot of people don't know or realize until they inquire is that. Like a car loan. You know, they'll give you five times to defer your payment so you can put it at the end of the loan. Well, mortgage companies don't do that. They'll just say you can defer it for five or six months. But once you're, that program ends, they want all of that money at the same time.

And I'm like, well, if they didn't have it month to month, what makes you think they're suddenly gonna have six months worth to pay you all that once? So that's one thing. And so then people are going right back to 2000. You know, recession foreclosures even with mortgage lenders having a specific requirement for your score, you know, where it used to be six 20 for conventional when pandemic hit, they're like, oh no, we need to see six 70 because it's riskier, right?

You're asking us to buy a home for you. Was six 20, which was good pre pandemic, but now we need to see a little bit more responsibility.

[00:02:08] Naseema: I've heard 700 too, like some lenders won't talk to you unless it's 700.

[00:02:14] Shante: Right? Absolutely. And as we all know, or most people don't know, when you're applying for a loan, you know they're using your middle score of your, of your mortgage score.

And if you apply with someone else, they use the lowest middle score. So some people come to me and say, oh, I'm trying to get my credit right. Me and my husband are trying to buy a house. His credit sucks. And I'm like, well, if you're gonna apply together, You cannot just focus on you, you need to focus on both of you.

So that's another thing that hasn't changed. But yeah, even with, you know, conventional federally six 20 is the minimum, but lenders can decide what they wanna take and which they don't. Just like you said, some lenders say we want a 700. And so you have that side, then you have the credit cards. People are seeing, you know, I have my group and people are posting like, oh, they lower my limit.

And they lowered it to what it, what my balance is. So now it looks like I'm using too much or they close the card altogether. Sometimes, most times they close it for inactivity, right? If you don't use it, they'll say, Hey, you don't need this. We'll close it. But they're starting to actually check your credit report.

And look at other cards that you have, not having anything to do with them. And so you may be a hundred percent responsible with them. Never late, never going over 10, 20, 30%. But they look at some other cards and they're like, she's been carrying this balance for a very long time over here, or she was late on this card.

And so as soon as she pays us off, we gonna close it out. And that's what they normally do. So people go, I paid it off. What happened? You carried a balance for a little bit too long Now. Pre pandemic. Pre-recession, pre pre inflation. That may not have been an issue, but. And then people say, well, how can they go look at my credit score?

I mean credit reports when I already have credit with them. Legally they can do that and they're, they will tell you that they can, but people don't read the terms and conditions and that's normally . That's very common. No one understands and reads so well. I actually

[00:03:57] Naseema: had my credit card company send me the terms and conditions again cuz I was like, How is it okay for you to drop my credit score?

90%. And it doesn't explicitly say that in the terms of conditions, it does say they can reevaluate. But it is really so let me just to give some context, it's, it's like, you know, I have these cards and I've been getting notifications that my balances are decreasing and I'm the person that pays off my credit cards every month.

But I like having. A lot of available credit just because I know how good it looks. Mm-hmm. on my credit score. And basically I went from having a huge available balance to them basically decreasing my credit score down to what I use. So I went from like a 10% utilization rate. To like a over 75% utilization rate across the board, which drops your credit score.

Yeah. . And so I'm like pissed off, like, are you kidding me? And it's not because of anything I didn't do. I don't have any lay payments across the board. I don't have, I pay them off in full. You know what I'm saying? They might not like that cause they don't get interest from me. Right. But that is not a derogatory thing to do.

Credit rise . Right. Right, right. So this is what this conversation's about. It's like, okay, like, oh, I was saying I would review my terms and and conditions cuz I'm just like, I don't understand how this can work. And really the language is really just arbitrary. Like we can kind of just review your other accounts and then just see, but when they review my other accounts don't see anything but me doing the same thing.

So it's just like, well what are they doing in this case? Sh. .

[00:05:38] Shante: Well, here's another thing too. I know like I have probably over $160,000 of available credit, which, you know, like you say, I'm sure you have about the same or more. Mm-hmm. and like this facility looks like I'm responsible. Yep. But that also can come with a risk as well, because it's like, well, you have the capability.

To max all that out. We don't know what's gonna happen with the state of the economy. We don't know your living conditions. We see your income, but we don't know how you're spending, you know, we don't know if you're a responsible spender, if you spend frivolously or what have you. So they also look at what's the, what's the likelihood that you will max out your cards.

Now it's unfair. They don't know you personally. They don't know the ins and outs of how you handle money. But you have to you know, millions of consumer. , they're trying to make the smartest decision for the company and not cuz they don't like you , right? So when you're doing everything you're supposed to do, when you're paying on time, when you're making sure you're not in collections, when you're making sure that you're not using more than you should now, not using more than you should is our benefit.

It's not their benefit. They want you to use more because they wanna get all that interest and hope you don't pay in full every month so they can get that money from. But it is really just what the state economy is. I see so many people in my group post about their scores dropping, and it's for various reasons.

Also, people aren't paying them back right now, so the amount of money that they have to lend out, they're like, well, shoot. Like, you know, think about the ratio of people that borrow money and don't pay back. And then the people who do, and these people, I'm telling you, I see it all the time. They'll say, I'm in collections.

I don't have it, or I don't care. I'm never gonna be able to pay them back. I'll wait seven years, it'll fall off. And then boom, it's. , and that is true. I mean, if you owe, you owe for life. But if it's not on the report and it's a zombie debt, meaning it can't be reported and they can't sue you because the statute of limitations has expired, then it.

They don't pay. So that's thousands and millions of dollars you can imagine. So they're really looking out for themselves. Like creditors are not our friends. They are not giving us minimum payments to pay because they like us. They want money from us. They give you more increases because yes, you may be responsible consumer, but they're hoping that you become irresponsible, not to the point where you don't pay 'em back, but to the point where they're getting that money from you.

So it is, it's so many factors into why that is happening. What I do every six months is just keep asking for more for more money. Yeah. Every six months, if I have cards that don't do hard increase when you ask for increases, because some creditors do, I just go and ask for money and then sometimes I just get a random, you know alert saying, you know, Congratulations, you increased and so that's good.

But I don't increase my usage just because they've increased my availability too,

[00:08:11] Naseema: which a lot of people, and you know, that's a Chico cuz I do that too. And I, I'm so, I'm like in my feelings because I'm the one that gets those like, Hey, we just increased your, thank you for being a value customer. We just increased your cradle limits.

So now I'm salty because they're cutting back. Like what happened to me? Being a valued customer, you

[00:08:31] Shante: still are. Don't take it personally, don't. What you can do is just continue to use it the way you've been using it. You know, maybe you have to charge less because your limit is now dropped. Even if you charge more, always tell people you can charge as much as you want.

You can max your. Every single month. It's about how much actually reports to the credit bureau. So they only report whatever the balance is when your statement cycle closes. So you can use all $6,000, but before your cycle closes, pay it down to your 10 or 30 or whatever percent. And that's only, that's the only thing that's gonna report.

Now, of course, that means you have to be mindful of when does my cycle end and all that stuff. And for like me, but then

[00:09:07] Naseema: I can set an automatic, like pay it on this day.

[00:09:10] Shante: Absolutely. You can pay it on the due date you can. Pay on the statement. You know, the, well, normally, I don't know, like you can't set it up to pay on specific dates.

You can pay, pay the statement balance in. Yeah. Yeah, because you don't even have to do the current, the current balance. A lot of people think I have to pay the whole thing off, and I'm like, no. When your bill is due, you only responsible for paying the statement balance because your current balance may be more, but you won't be charged interest if you pay the statement balance.

So there's still some tricks and tips and you know, to maximizing the use, the availability that you have now that they lowered it, but still keeping. using the proper utilization. And if you use it for business expenses, it may be that, yeah, it was about 6,000 that I used and I don't wanna have to max that out every month.

But you can find that wiggle room with paying it down before the cycle closes. It just takes some extra effort. But we're not gonna be in this hopefully for much longer. And you know, I think then when the tables turn for everyone, they'll start to say, okay, we'll start to, you know, the people who are responsible, cuz they'll probably start reviewing accounts again.

Okay. Who. Going strong this whole time, even with the economy going to put even with inflation. And so they'll start say, okay, yeah, she's been a longtime consumer, she's never been late, you know she's very responsible and they'll start to probably bump you right back up. So don't think you're just gonna stay there.

It is frustrating though. I would be Is hella frustrating. Yeah. About to say hella bad that they would do that. I haven't had that happen thankfully, but, and I have about eight major credit cards. I use them all, every single.

[00:10:38] Naseema: Um, So that's my thing. I'm just changing it to the credit card that I use.

I, you know, cuz all my cards have an assignment and so I'm just like, you know, okay, well, so I'm just not gonna charge that much on that card. That's fine. Mm-hmm. , that's fine. So you know, I, but I have the option to do that and a lot of people don't have that option. So just in general, I want you to kind of like review like what are the major factors because every, you know, like I said, credit is like this dark hole.

What are the major factors that creditors. Look at when they're considering giving you credit.

[00:11:09] Shante: The biggest, biggest misconception is like, it's just about the score. And I tell people all the time, it is about more than your score. I see people apply for the same credit card at the same time, and the lower score gets approved in the highest score doesn't.

There are five factors that go into what calculates your score, and of course that comes from what's on your. No, some people don't even put that correlation together. I'm like, you know, if you have kids in school, they have a gpa. How is that calculated based on your grades? Where are the grades found on the report card?

So it's the same like grownup grades, right? Your score is calculated based on what's on your report, but the report is as just as important as the score. So your payment history is the highest component of how scores are calculated. That is basically plain and simple. How responsible are you with borrow money and paying?

On time, not just pay back. Cause people pay back. They pay back when they want to pay back on time. Your utilization, that's what we're talking about today. That's the second highest component. They don't wanna really see you teeter over 30%. The biggest question I get is, does overall utilization matter more or individual?

individual matters more. If you have high overall availability like we do, we can max out probably three cards and still have under 30% overall, but those cards are at 90 and a hundred, so people don't realize that either. When you check your credit report and they show you that dashboard. That dashboard, that utilization percentage is for your, all your cards.

And they go, oh, that's good. I'm under 30. I'm like, yeah, but two of your cards are at 90. So people need to keep that in mind as well, how long you've had credit. So your net of credit history it does away, you know, as much as the first two, but it does matter. And so where I see people get flustered, when someone with a lower score gets approved and they have a higher score, it's because they have longer longevity than you do.

You may have. Payment history and bomb utilization, but you've only been doing that for two years and this person over here has great payment history. Okay. Utilization, but they've had credit established for 12 years. So you wanna make sure that you know you are checking more than just the score. It's about the report.

It's about your entire history, period. Then you have your credit mix. Most people are like, what? What does that mean? What is a credit mix? And you have two types of credit. Installment and revolving. Revolving lines of credit are simply credit cards and installment lines of credit are things that are fixed payments.

So if you think about payments that are fixed, you have mortgages, student loans, auto loans, those payments are fixed. And so why f? Why that matters is because the way you handle revolving and installment are completely. Installment is easy. It's the same payment every month. That is easy. Revolving is different.

You gotta be a little bit responsible, a lot of bit responsible, because how much you pay back depends on how much you use. You're not using credit when you have installment lines, a bank paid for whatever you bought, and then you're paying the bank back. Well, if revolving, you're using it, you're paying back, you're using it, paying back.

So that matters. And the final. Component are inquiries. Every time you apply for credit, you get an inquiry. A lot of people tend to think that there's this magic formula. Oh, you just get a five point hit. I'm like, who? Where? Ooh, who said that? I've applied for things and got one point hit. I applied for something and got a 10 point hit.

So it depends. Yes. And this was recently math, so I was over 800 and it dropped one of my scores under, back under 800. Depends on, you know, when's the last time you applied for something? Are you applying for a lot of things in the short amount of time? You know all of those factors. And so those are the five components.

And so when people ask about what can I do to increase my score, I'm like, well, do you know how scores are calculated? They always say no. I'm like, well, if you know that, so then I say, tell me three ways you can get to the sum of 12. They. Six plus six, four times three. You know, 12, divide about two, and I'm like, so you can calculate how to get to 12.

But that three digit number, you have no idea where it comes from. You think it's like the lottery, right? They're not picking numbers out of a machine and then assigning you numbers, right? It comes from something. So I'm glad you had me go over that because it's such a basic. Tool that people don't know.

But they need to know because everyone wants good credit. Everyone wants favorable credit. Everyone looks, wants to look responsible. They just see that three digit number and they know they want it to be high. You know, I wanna be in the 700 club, but they have no idea how to get there. So and I always relate it back to school.

I say, how can you get a 4.0 all as ? You know, how do you calculate your gpa? A verse four points vis like, so it's all about understanding credit. So a lot, a lot of people, Know what goes into it, but we've been managing credit since we were 19 , you know, years old.

[00:15:44] Naseema: Right, right. But like I said, people are just like so confused and it, and the thing is, I feel like it's dynamic and it's something that you have to keep it kind of like a eye on and you have to be watching it constantly.

But I like that you have resources. So you have a, a Facebook group of over a hundred thousand members that's totally free where you drop gym. On a regular basis. And I mean, it's just a community of people when you can kind of see, just like you were saying, like people were posting that their credit limits are dropping, like kind of what's going on, engaging, you know, how you should be responding and what could possibly be happening to you.

And also just ask questions. And so I think that is an invaluable resource for people. So if you guys aren't a member of the Financial Common Sense Facebook group, Come on over and I'll drop the link in the show notes to how to join the Facebook group. But gym's in there on top of gyms, and of course if you do wanna work with Shante, she does have some ways that you can work with her, but she's booked and busy.

Just like me, . So come ready

[00:16:53] Shante: to work. Be like the group is there for a free resource, right? Yes. But a lot of people find it very overwhelming. It's so much information they don't know about credit. They're trying to learn from this person's post and this person's post. And I say, my group is a gift and a curse.

Because what people do is they tend to see somebody may pose and say, my score increase. And they say, well, what did you do? And they say Everything they did, and they go, oh, I'm gonna go do those things too. And I say, well, that doesn't mean you are gonna see the same. I said, if you're, if we're both trying to get to the Empire State Building and you're in Texas and I'm in Georgia, Our GPS is not gonna tell us to go the same direction, even though we're trying to get to the same destination because our starting points are different.

So I tell people her starting point is not where yours is. So even though you may do what she does, you may not see the same results. And so that's why I say it's kind of a curse, but I like the fact that people can bounce ideas off each other. Somebody may post and say, wow, are people's limits dropping?

Somebody may say, Hey, mine did too, and this is what I found out. So a lot of times I don't even have to respond because I'm just almost like the hall monitor at this point. , you know, the group runs itself and the members who didn't know anything, they've come in and learned, and now they're able to pass on the information to members who are new.

And so that's the whole thing. It's like a family, like it's not my group. I say it's our group. Like I'm the facilitator, I'm the owner, I'm the c e O of my business. But if it's you guys' group, but then the people who say, look, I want you to tell, I want you to be my G P S. Okay, look at my. Look at my starting point.

You know where I wanna go, tell me how to get there. And that is what I do. So if you want direct assistance, yes, you can always come to me, but people say, you know, it's, it's too expensive, I can't afford it. I do have payment plans, but I also look at people's budgets and I'm like, if you spend $700 on fast food, you can pay money you can afford.

Yes. Yeah. So I don't count people's dollars, you know, I just say, I'm here if you need me. You know, but I just really, my whole goal was to just create a community of people who like-minded people who. Struggling who don't understand credit, who you know, I want a house. I, you know, I'm the first generation of in my family to ever probably own a home.

I want, I wanna do that. Or I was 17, I was 18 and I got my first credit card. I made so many mistakes and I'm now 26 trying to clean up mistakes from 18. And I'm like, no. . Eight years of not understanding what to do because no one's teaching. Even credit repair companies, they are teaching you credit.

They're saying, I will write letters for you and pay us a hundred dollars a month. And they write letters very slowly so you can pay month to month to month to month. And then I have those same people inbox me and say, I have spent $2,400 on credit repair. My score hasn't moved, things fell off. They came back and I'm like, oh my gosh.

And so they're not learning. And so when they say, do you do credit repair? I said, no, I teach you how to be a credit repair. Yes.

[00:19:30] Naseema: Yes. So if they wanna work with you, what's the best way for them to get in contact with you? They

[00:19:34] Shante: can contact me on Facebook and find me Ashanta Nicole. Join the group. Sean, it's Financial Common Sense and Sense.

It's spelled like money, so C E N T S. And then I'm also on Instagram at Financial Common Sense. So that's how you can reach out and even if you just have a question, you know I can try to guide you to the resource that can provide the answer for you. I'm not gonna be like $30 for me to answer a question.

I'm not. Taking people money. I've been in a position where I had cancer at 22. I had tons of medical bills and collections. That's why I started learning about credit because they said, this is gonna go on your credit report. And I'm like, what's that ? Then I checked the report and they say, you wanna get your score for $8?

I'm like, there's a score too. I was like, what? No, I was really like, what? And so when I checked, I saw all the stuff I did when I was 19, laid on my car. Note they gonna get the money when they get it. They gonna pay, get this credit card payment when they get it. And I was like, okay, I gotta figure out how to clean this up.

So I taught. And so my goal is to not let all of my trials in my life go in vain. I went through 'em for a purpose, and so that's why I do what I do, and I love it. I love it. I love it. And

[00:20:36] Naseema: I love what you do too cuz like I said, I'm in the group and I still learn a lot. I've just, I've learned a lot in this conversation so I'm always honored to have you and talk to you, but honored to have you as an expert on the podcast and you guys see why I have her on the, as a expert, cuz she keeps it real.

But she knows exactly what she's talking about and she's been doing it for years and has guided hundreds of thousands of people. Yes. And you know, she's a great. For you to have as part of, you know, just your network and people that you need to just have in your wheelhouse. So thank you so much, Shante.

This is so good. We will see you. We will see you again on the podcast. But you know, I know that people will find this valuable and especially because just this is kind of a wonky time and people need to understand how to manage. Very unique credit situation because things are changing. That is pretty dynamic.

But this is really a time to check in and see where you're at if you haven't already, but just kind of see where you're at and kind of make decisions based off of that. So thank you so, so

[00:21:40] Shante: much. Shante. I was gonna say, don't get discouraged if you are a person who had their credit card limit drop and you know, you've been responsible.

We are not going to be in this recession in this. You know, this economy forever, right? We hope. And so the hope is that you still show that level of responsibility. So they see once we get out of it, okay. She was still one of our great, great consumers, great clients. And so or account holders and you know, and then maybe you can, you know, bounce back.

Yes. And you can always request increases. So just keep going. Yes, I'm talking to you too. Yes, .

[00:22:11] Naseema: Thank you. I needed to hear that .

Hey there I’m Naseema

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