Money Rehab with Nicole Lapin - Does Good Credit = Good Partner?

Episode Date: September 16, 2022

Today Will Lansing, CEO of FICO, joins Nicole to cover a controversial topic: should credit scores appear on dating apps? Nicole and Will say yes. If Chase Bank doesn't trust your boyfriend, should you?

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Find a co-host at Airbnb.com slash host. Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. Are you ready for some money rehab? Wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. I've been teeing up this episode for a few weeks now, and I am so excited to finally share my full conversation with Will Lansing, CEO of FICO. As I've mentioned,

Will and I are going to be talking about the controversial topic, adding credit scores onto dating apps. But don't worry, you won't only hear the perspective from two finance nerds. I also have testimonials from people outside the money world. But more on that at the end of the episode. Now, let's hear the conversation with Will. Well, Will, I'm so excited to say welcome to Money Rehab. Oh, thanks so much. It is great to be here. We did a panel together on non-obvious approaches to financial inclusion, and we bonded, I would say, over one particular topic related to dating apps, which I really want to get into. But first, I want to help people get a sense of you. You are the CEO of FICO,

making you one of the VIPs in the financial world. So I have to ask, was there ever a time in your life where you needed your own money rehab? No, I guess I've been one of those people who was really hardworking. I grew up poor, but very hardworking and focused on saving money. Even like in my teen years, I started out picking tobacco, working for ag wage, $1.37 an hour and saving my pennies. And so I've been fortunate that just, you know, work against it for long enough and eventually it adds up to something. So you've always had a good credit score? I think so. In the old days, I don't know what it would have been. I mean,

the credit scores that we know are only released since about 1987, and I'm a little older than that. So what's your credit score now? Do you know? It's over 700, and that's about as much as I'll disclose. I'm sure there's people listening to this podcast who have higher scores than I have, because it's not about how much money you make and it's not about how good looking you are. It's about, you know, really, it's about are you responsible in your payment behavior? You and I are on the same page about this potentially controversial topic, adding credit scores to people's dating profiles.

I'm biased, but I think someone's financial situation is a much more important thing to know going into a relationship than their height or where they went to college or how many miles away they are from you at that moment. I want to know if they're in the red. What do you think? Well, look, I think that that's exactly it. I think that, first of all, it's got to be optional, right? This is going to be an election that people of all, it's got to be optional, right? This is going to be an election that people make, and it's going to be an elective disclosure. But at the same time, it can't be self-reported because who knows what people might report.

So it's got to be authenticated in some way. So we have to work this out in such a way that those who want to share it can share it and have it authenticated. who want to share it can share it and have it authenticated. But I do think that there's a lot, you know, if you think about the dating, think more broadly about the social networks, you have this continuum. At one end, you have, you know, you've got the hookup networks. And then at the other end, you've got really professional networks. And then there's everything in between. But a lot of the in-between networks, social networks and dating apps, and I think of dating apps pretty broadly because I think it's not just the dating apps, right? It's like all the social stuff. A lot of them you really are focused on. What's the nature of the person I'm interacting with? And a lot of people are looking for that relationship. And of course, they're interested in, is this person financially responsible? Is this a person I want to spend my life with? I mean, these are important questions. And you get a little bit of insight into that looking at someone's Instagram or the photos they post. But I think a three-digit score that sums it up is not a bad thing.

I agree with you. I think opinion is going to be split, of course, if people were asked whether they want this or not. It probably comes down to two things. First, whether someone's financial health is a deal breaker in a relationship. And second, how people understand their credit scores and how fixed they actually are. So I'd put this question to you, the ultimate expert. If someone is dating someone with poor credit or a poor credit score, what would it take to raise their score?

You know, it can be repaired. So your credit score is a dynamic thing, and it's all about you and your personal behavior. It takes time, and you can't fix it overnight. But the bottom line is pay attention to your responsibilities. If you owe money, you're supposed to pay it back. You're supposed to pay it back on whatever schedule you agreed to pay it back. If it's a credit card, you know what your minimum payments are.

If it's an installment loan, you know what your payments are. And it doesn't stop there. I mean, people have hard times. People wind up out of jobs. They're in between. They have rough spots. But even in situations like that, what I would advise is work with your bank. Talk to your bank and work something out. I mean, during COVID, lots of people lost their jobs. And we encourage them to talk to their banks about putting a program together. You know, let's split. I can't pay you now, but I can pay you later.

I'm looking for a job. And give me some forbearance. And the banks will work with you on that. And when you have a situation like that, it doesn't hurt your credit score. Your credit score kind of gets frozen. And it doesn't get frozen, actually. But the negatives don't hurt you because you worked it out with the bank.

So I would say, you know, if you're dating someone, if you're looking at someone who's got a poor credit rating, they definitely want to improve it because it affects the price of credit. It affects your access to credit. It affects, you know, whether or not you'll get a mortgage, whether or not you'll get a car loan. I mean, it affects so many things. You want it to be good. By the way, it doesn't have to be an 800. I mean, it really doesn't. I mean, 700 is good. And 600s can be good, especially if you're trending in the right direction. So it doesn't have to be a perfect score, but you have to show

responsible behavior. And if you don't have a good score, work on it, just work on improving it. It takes time, but you can get, get it better. So what number would you say somebody with a poor credit score would be? We put this on Tinder and we saw what number swipe left. I haven't, the wrong way. Okay. So I i'm not gonna i'm not gonna pine on whether people on tinder care about credit scores because maybe that's not their main goal but um but let's say you're on a dating app and you do care you know and you decide what app that would be um you know i think i think uh in the 600s and the high 600s is good. Anything in the 700s or 800s is very good.

You know, the banks tend to have cutoffs in the high 600s. And you can go lower. You can get car loans. You can get credit at lower numbers. When you're into the 500s, it's a lot harder. You have to prove yourself more. You know, someone will take a chance on you, typically for a higher interest rate, and then you have to prove yourself. But the thing to do there is, again,

show the responsible behavior and you'll work your way up. Because it's like your financial report card, but it's not set in stone. If somebody sees a lower credit score, because this hasn't happened yet, in our fantasies it has happened, but if they're dating somebody, you know, early on, they want to talk about their financial literacy and their financial plans, I'm all about that. If they have a lower credit score, what should people keep in mind around the time frame it could take to get better? So if they say, yeah, you know, I'm working on it, it's at a 600 or whatever, and I'm putting all these measures in place, I've been listening to money rehab, I've been following what Will has been saying, how long do you expect someone's poor credit to turn around? It can take six months to a year or long.

And some of the bad data points will stick around longer than that. But here's what I would say. A ton of people have poor credit scores because they never paid attention to it. They're not bad people. They just were sloppy. They just weren't really focused on it. I mean, it's easy to be late paying your bills. I mean, you know, a lot of people are late paying their bills. It doesn't make them bad people. They're just not really on it. And it's a shame because the consequences are bad. And so, you know, I think that, I think the step one is being aware. Step one is knowing the components and knowing the things that will influence your credit score. And then step two is get on it and, you know, pay your bills on time and don't overextend yourself.

And, you know, kind of the obvious things, build a budget for yourself. And I think that it can be turned around relatively quickly, not instantly. But people recover from bankruptcy. I mean, you know, there are people who have good scores who were bankrupt five years ago. So you can recover from a poor score, but you got to start somewhere. Well, the first step to any recovery is admitting you have a problem. And the only financial problem you can't fix, we say here all the time, is the one you don't admit you have. Let's look into the future. Credit scores are, of course, hugely important as a part of personal

finance right now, as a part of upward mobility in all senses and have been for quite some time. Do you think the industry will ever move toward including more or less factors into determining a credit score? Oh, I do. I do. And we're working really hard on that. So, OK, so the way credit scores work today, for the most part, is you have your credit cards, you pay your credit card bills, the bank reports that information to the credit bureaus, the credit bureaus say, okay, this person paid on time, this person did not, that goes into your score, and then the score becomes available to other lenders who may or may not extend credit to you. That's today's system. But most of the data on which the score is built is your credit card payment history. That's the number one thing. It can

include auto payments. It can include student loans, other installment loans, especially nowadays, you know, you have buy now, pay later. Some of those loans get included. But for the most part, the lion's share is credit card bill payment behavior. I think that there's lots of things about a consumer that could contribute to a better score that the bureaus don't know. And we all are looking for ways to extend credit to more responsible people. And so we're constantly, like at FICO, we're constantly looking at new credit scores built on alternative data. So for example, you pay your phone bill on time, you pay your utility bill on time. We incorporate that. We will use that in your score. And things like your rent, most landlords don't report whether or not you're paying the

rent on time. So that typically doesn't get included, but sometimes every once in a while, it does. If a landlord reports that information that can go into your score. At FICO, we developed a new score called Ultra FICO. And the idea here is you don't like your credit score. You think you're better than what the score reflects. Well, come to ultrafico.com and tell us a little bit more about yourself. And if we see that you don't have a lot of overdrafts in your checking account, you've had an average balance over a period of months or years, and there's things that we can look at that say, hey, this is a responsible person, even if you don't have a credit card, even if you don't have the credit card payment data. So yeah, we're constantly looking for alternative data. I think

more and more of those kinds of things are going to come into the mix for sure. Hold on to your wallets, boys and girls. Money Rehab will be right back. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start or even too complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of

high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. Now for some more money rehab. I think a lot of millennials and Gen Z folks would be happy to hear that because you're basically saying, hey, we'll make your case if you don't like what the score is. I guess I think a lot of those folks are trying to get their first apartment in a really competitive market. You know, they would love to have paying their cell phone bills on time count. I think all of that would really help contribute to the overall picture. What advice would you give Gen Zers who are more into renting and leasing and using debit

cards on how to build credit? I'd say one thing that they can do is if you go to Experian.com, they have a program called Boost, Experian Boost. And what they're doing is they're boosting your FICO score by looking at additional data. So if the consumer is willing to share a little bit of additional data with Experian, they'll boost your FICO score, assuming that it's good data. And so I would encourage people to do that. I think that that's a winner. That's just a winner. There's not a lot of downside. It's only upside. You might be able to get your score to come up 5, 10, 15, even 20 points.

And then ultra-final would be another path to doing the same kind of thing. What do you think the biggest misconception is about credit scores? A lot of people think that they're tied to income and they have nothing to do with income. I'd say that's probably the number one misconception. I'd say that's probably the number one misconception. And then, you know, like in my line of work, I'll meet executives and they'll say, my secretary has a better credit score than I do. It's like, she probably does a better job paying her bills than you do.

But I'd say that's the number one misconception. Because it's not calculating how wealthy you are. It's really calculating how responsible you are. Exactly. Exactly. And you know what's so interesting? We've learned that it's correlated with all kinds of other good behavior. It's really an industry.

It's because people with good credit lists are good drivers, are good students, are good this, are good, you know, it's like it crosses a lot of different things. That's why it should be on dating apps. Absolutely. Probably less likely to cheat. We haven't tested that one. We have not tested that one. Not yet. Okay.

The day is young, Will. Yes, please. I'm watching this show on Netflix right now. It's called Mo. I don't know if you've seen it uh we're seeing the advertisements it's uh this palestinian comedian um and i'm an israeli wannabe comedian so we actually have some interesting uh similarities on the show this guy's girlfriend uh can't get a bank loan because her dad opened up some credit cards in her name and messed up her credit. Something similar actually has happened to me. And I think with more and more single parent households, this happens more and more to people. And then they

have to live with the consequences that their parents' bad habits are affecting them. And of course, this is not how this should be. So what can people like Maria, whose parents have messed up their credit do? I mean, how can the sins of the parents because they of course know your social security number and your mother's maiden name and things that you would not give strangers? How can the sins of the parents not be bestowed on kids? I mean, it's a weird kind of case of fraud, right? It's, it's fraud by someone, you know, and, um, and I, I sadly the, the, about the best thing you can do is work with the bureaus to clean up the credit file. So, so what you want to do basically is contact the three credit bureaus. They have, they all have customer service numbers. Um, they get mixed reviews,

but I know they're trying harder and harder to, you know, to sort the stuff out because they don't like the flack they get from angry customers, from angry consumers. But what you have to do is basically clean up the credit file by saying, look, that wasn't me. It was me. It was my name. It was my social security number, but it wasn't me. And you have to sort that out with them. Yeah, it's kind of a messed up thing. Yeah, it's kind of a messed up thing. I mean, yeah, I've had to put a bunch of trackers on because even, you know, sometimes, unfortunately, you can have estranged family members who know this information that take advantage of you. I mean, you know, there's a lot of fraud out there. There's a lot of fraud out there. You know, and I guess if there's a preventative, proactive thing you can do, it's be, you know, sufficiently uptight and not casual about, you know, everything from your social

security number. Practically anyone can find it out. But and your birthday, too. And so be smart about your passwords and all that. But, you know, I say don't be casual about things financial because those are the kinds of things that can haunt you and they can mess you up in the way you just described. And the pain can last for years. It can take a really long time. I've heard so many horror stories. It can last for a long time.

What do you think about all those sites that charge you for your reports and charge you for all sorts of other programs to help improve it? You know, typically it's more than just your score. So there are a lot of credit report monitoring services. Experian has it. Equifax has it. We have it at myfico.com. And I would say you're getting more than just your score. So, you know, typically there's some fraud, fraud alerts that go with that. There's some other value add that you're paying for. But the core, the very core of it, getting your your score for free you ought to be able to get your score for free and you shouldn't have to pay for that if that's all you want you should be able to get that for free um that's not to say there's not value in these programs but it's just

it's more than just a score but what about the sketchy programs that aren't associated with Equifax and TransUnion and you and the legit places that will like pop up and say, you know, pay us whatever, $49.99. It's a mixed bag. So some of the, just because they're not a great big credit bureau doesn't mean they're bad. Some of those small firms actually do a really nice job of, you know, providing value, but they're sketchy ones too. So you have to do your research. But it's not that hard to find out which ones are the scams, right? You get on the internet and anybody who's not a big name that you haven't heard of, you can find out whether it's a scam or not pretty fast. Yeah, I think one of the things that has helped me the most was actually going through the report.

One of the things that has helped me the most was actually going through the report. I was so scared, you know, like you. I didn't come from money and had to figure all this scary stuff out at the School of Hard Knocks. Opening those reports was so scary to me. And then when I finally did it, ultimately it wasn't that scary. But there were some random mistakes on there. And so I had to put my big girl pants on and call them and let them know that there was a mistake. And lo and behold, they fixed it. And then it got fixed.

But if I didn't open the actual report, it never would have happened. Yeah, well, so I agree with that. I would say there's lots of mistakes in those reports, okay? I mean, they get data reported from so many different firms. And there's mistakes. I mean, I've been through my credit report, probably 70 pages long. And there's a ton of mistakes in it. And I don't correct them all.

It's not worth the time. It's not worth the bother. If your score is okay, so what if your credit report has some mistakes in it? I mean, that's okay. Don't lose a lot of sleep over it, honestly. But if it's something egregious, if it's clear that it's the thing that's dragging down your score, yeah, then definitely address it. And what about on the flip side of fastidiousness, I suppose? I've seen a lot of notes come into the show that people then become obsessed with, like, why did it go up or down 10 points?

Like, from this week to that week? And I'm like, yo, you have to chill. Stop refreshing. You don't need to know it all the time. Well, that's why I tell everyone who who asks me that my score is in the low 700s, because people will get on this kick that they have to be an 800 or better. And they're like an 830. And then it goes, I get email. You wouldn't believe the email I get. You know, I was an 830 and now I'm an 820 and I didn't do anything wrong. And what are you going to do to fix it?

I mean, the truth is that when you're in the mid 700s, you probably can't get a better price. You're probably not going to get more credit. You're not going to get a better rate because you're already outstanding. And so, yeah, although the scale does go up into the 800s, it doesn't make any difference. What you don't want to do is be down in the 500s.

And a lot of people are in the 600s and 700s. And the trick is to get yourself in the 700s. I mean, if you care about access to credit and the price of the credit, you know, being over 700 is really nice. And if you're in the 600s, good for you and keep going. And if you're in the 500s, you got some work to do. But do it. Do the work. It's not hopeless.

Do it. And when you're in the 700s, these are high class problems, of course. Just relax. Absolutely. Absolutely. You're not going to, it's not going to affect anything. Absolutely. You're not going to it's not going to affect anything. It's not going to it really is not going to affect anything. So whether it's 730 or 850, you're going to get the same interest rate, essentially.

That's right. Well, I can't speak for every single bank, but I would say that the vast majority you'll be treated the same. And how often should you check it? Oh, boy. Well, I think it's healthy to take a look every month on your bank statement. I think a monthly look is very healthy. I mean, does it matter if you miss a month? No. But I think monthly is a good, that would be a good, that'd be good hygiene. You love good credit hygiene around here. Well, this was awesome.

Thank you so much. Is there anything else that you wanted to mention? Stay tuned, though, because I do hope that FICO score is coming to a dating app near you. That was my conversation with Will. And I know we covered a lot, but let's go back to the dating app conversation. After I talked to Will, I thought about that meme that went viral. It was a tweet that read, quote, cheating should affect your credit score. If Melissa can't trust you, why should Wells Fargo? I personally find that a hilarious take, and I'm kind of into it. I think anyone who disagrees with this stance values their finances over your feelings, which is a deal breaker. But I'm also interested in the flip side of this question. If Wells Fargo doesn't trust you,

why should Melissa? This question of whether financial responsibility correlates with personal responsibility is something Will and I touched on. But again, we also talked about the fact that credit scores aren't always an accurate representation of financial responsibility to begin with. There's fraud, there's errors, or just plain old bad luck that can affect your credit score that has nothing to do with who you are. It's a very nuanced topic, so my producers and I hit the streets to find out how people feel about it. Here's what we found. How would you feel if you had to put your credit score on a dating app? Why? I just don't think that's necessary.

I would feel like I was on the wrong dating app if I had to put my credit score on a profile. I don't think that a credit score is a strong indication of financial wellness or education. Like even if I was invested in that information about a future partner, I think we just use credit scores that way because we don't have a better system. Like it's not the full picture. It's a little bit like having someone list their number of exes on a profile. It's a

number without context and the context is hugely important. I wouldn't mind, but I would think it's a weird dating app. I wouldn't like that. I would get really nervous that someone would judge me for where I am financially and that my credit score would preclude me from going out with someone cute that I would maybe want to date. Personally, I wouldn't mind too much if I had to add my credit score on a dating profile. That's partly because fortunately it's in a good place right now, but I would only ever add it if it was mandatory. I would never kind of voluntarily do so. And thinking about if my credit score wasn't in the best place,

I would be a lot more apprehensive and worried about adding it. Mainly because I feel it may be an antiquated way of thinking, but especially being a guy going into a date, I feel like I might be perceived differently or maybe not even connect with some people that I normally would if I had to show a credit score. If you were a member of a dating app where you were matching with people based on their credit score. If you were a member of a dating app where you were matching with people based on their credit score, do you think that would be valuable? I would not. Uh, no. I don't see it as valuable. I'd probably eliminate people based on their credit score who might be a really good match for me. Someone might have weak credit because their parents weren't able to help them

with student loans or sign them up for loans with high interest rates or didn't understand the system or English wasn't their first language. It feels like in many ways these days credit scores are more an indication of privilege than anything else. I just don't see it as a valuable or accurate measurement on which to rule out a potential partner. I think that if I was looking for like a life partner then it could be if I was looking for a life partner, then it could be valuable because you want to make big life decisions like buy a house. But I don't know.

Credit scores aren't really sexy. I'd like to think that I don't really care. If it was up to me, dating apps would not put credit score information on because I think it's mindfuck in any way. Like you might not want to care about where someone is financially, but if you see that they have like a 50 credit score, you're going to be like, oh shit, I maybe don't want to go out on a date with them. I don't think I would really find it all that valuable. There's a lot that goes into what makes

up a credit score. And I feel like it's not always the best true full representation of where a person is financially. That being said, I do have a lot of hang-ups with money myself so if it was a feature on a dating profile or a dating app I would probably check it even though I know it's not the best thing. There's obviously a lot more important things when starting out in any kind of relationship other than finances. And I feel like if I maybe saw somebody had a lower credit score, I don't know if I would really necessarily not go out on a date with them, but I might go into any kind of date with preconceived notions that shouldn't really be there. It doesn't give that person a fair, fresh, kind of clean chance when first meeting them. Okay, so maybe this credit

score dating app integration idea could use a little bit of work. But one thing that did strike me is how much anxiety people have around being judged by someone by their finances. This is in line with what I've said all along. Money is personal. For today's tip, you can take straight to the bank. Next time you have a hard credit check as part of a loan application, for example, ask to have a copy. Reviewing your credit report is the only way you're going to be able to check to see if there are any errors. Like with anything else, you won't be able to improve with your blinders on. Money Rehab is a production of iHeartRadio. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson.

Our mascots are Penny and Minzy. Huge thanks to OG Money Rehab team, Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.