Equifax Inc. (EFX) Earnings Call Transcript & Summary

Hi, everybody. Good afternoon. We'd like to welcome you to Equifax' Consumer Webinar, You Ask. Bev Answers. I'm your moderator and co-presenter, Ilyce Glink, and I'm here with Beverly Anderson, who's President of Global Consumer Solutions Division of Equifax. Hey, Bev?

Hey, Ilyce.

You can type your questions to me and to Bev at the bottom of the screen. And we already see that some people have figured out how to do that. So that's great. We're going to get to those questions in a little bit. I just want to sort of say that we probably don't want to ask really specific personal questions, and please don't put personal detailed information in there so that we wouldn't want anybody to have an issue. So with that, let's get started. So Bev, this has been such an incredibly unusual tough year, physically, financially, emotionally and health-wise. We've had COVID, a pandemic recession, and now the protests.

Ilyce, you're right. It has been an emotional few months. And I just wanted to acknowledge that even in the midst of this pandemic, which in and of itself has been horrific, there is also significant racial injustices that the country needs to address. And I believe until all members of our society are free and are treated equally, then none of us are truly free. I just really needed to say that.

I'm so glad you did. And you're right, Bev. These are such incredibly difficult times. And it feels though now when COVID is starting to ease up and people are feeling much more hopeful that the pandemic is causing fewer infections and deaths nationally that now the economic ramifications of COVID are becoming better understood. And while we're getting good news on that front, we're also seeing businesses open up and the real estate market is starting to have traction. And I have to say, I mean, for me, it's very encouraging, especially from where we were 4 or 5 weeks ago when we last did this. People are spending money and some in different ways than others, but overall, it helps everybody.

And that's a great segue because over the next hour, we're going to talk about what's been happening. What programs are available to consumers, what updates have been made to existing government programs, some of which we talked about the last time we had webinar. And we will answer your questions about credit, paying your bills, making ends meet as the country starts to open up. We're also going to talk a little bit about the automotive industry and some deals we think are here now and some that we think may be coming up early in the fall.

We're also going to do some poll questions again. You may remember if you were with us a month ago or so that we did that. And again use the Q&A button at the bottom of your screen to send us your questions, and we're going to try to get to as many of them after our main part of the presentation as we can.

So Bev, do you want to kick things off?

Yes. Let's get going. So let's start with the first poll question. People can see that. 40% of families earning $40,000 a year have lost their jobs so far. Have you or someone in your house has lost a job, then furloughed or experienced a pay cut? And feel free to choose all that applies. And you can see the options here. Either you've lost a job, been furloughed or had a pay cut, or someone else had.

So it's interesting. Over the last month, we've watched the month of May, every week, there were 2 plus million people who lost their jobs, and we saw that in the weekly unemployment numbers. And sort of the overall numbers of jobs lost was about 9 million for May, but what we saw last week is that overall, over 11 million people got called back to work. And so it was like 2.5 million jobs were created, but these are extraordinary numbers.

It's unfathomable but I'm looking for silver linings, and here's the good news. And that is the trends are going down. So things -- the unemployment has been trending down from the 6.9 million the first time unemployment claims were filed in the last week of March when everybody was really, really panicked about the pandemic and what it might mean for the economy. So we're headed in the right direction it seems. Let's see what the poll numbers say.

Sure. So that's pretty interesting. We see about 37% have taken a pay cut, 1/4 of the people who responded have somebody has lost the job in the household or somebody has been furloughed, which is interesting. If you add those together, you're around 40-something percent, and somebody else has had a pay cut. So that's pretty hard hitting, I'd say.

Absolutely. And I'm sure it's creating all kinds of challenges and interesting concerns in people's lives. Hopefully, later on, we can give them some good tip.

Yes. I hope so. Conversations -- dinner table conversations are kind of tough. So...

Absolutely.

Yes. Go ahead, Bev.

Yes. So according to the Pew Research Center, and I believe we're on Slide 7.

Yes.

For those of you who are following along.

Yes. I don't know why that changed. Go ahead.

So according to the Pew Research Center, 43% of those surveyed said that they or someone in their household has lost a job or taken a pay cut due to the outbreak. And that number is up from 33% in the latter half of March. 23% of Americans rate national economic conditions as excellent or good. Now that's down dramatically from 57% at the beginning of the year. So while there are some good news, there's still some uncertainty about how all this is going to play out in the economy.

Yes. It's interesting. That 43% number actually is pretty close to what everybody reported in our survey just a moment ago. And it's -- I know that everybody, at least the e-mails that I'm getting, people are wondering how long their form of unemployment is going to last. And if it's going to be permanent, especially in the sort of restaurant and retail worlds, where it's been particularly shocking. We have another poll question. Do you want to read that one?

Yes. Let me go. It says nearly 9% of all mortgage holders have gone into forbearance. And many Americans have started paying their bills late. So have you gone into mortgage forbearance? Have you had to create some sort of accommodation on your credit card? Or are you starting to have to pay your bills late? Please vote and take more than one option, if it applies.

All right. So this is an easier question, fewer options. So let's see what people said. Well, whoever voted, wow, that's a big number. So...

Absolutely. Listen, these options are really difficult decisions. So by taking advantage of a forbearance, some families have actually found some relief. It's allowed them to continue to make other important bill payments or quite frankly, even to feed their families even while their household income has been reduced. It was quite helpful actually for the government to provide this option, even though it's only available for homeowners with federally backed mortgages.

Yes. It's the overall number of people who have taken a mortgage forbearance right now, not a credit card forbearance, but a mortgage forbearance is around 9%, it's actually just slightly under. And the government-backed loans, Ginnie Mae, those, I think, about 11% of homeowners are in forbearance on those.

Yes. And just so that people understand, these are government-backed FHA, VA and USDA loans. And quite frankly, I get these confused all the time, and I'm in the industry. So if you need to better understand what kind of loan you have, go to cfpb.gov/housing, and we'll talk a little more later about the type of information this website offers.

Right. So let's talk about where we are today because where we are today is happily not where we were, in some cases, 4 weeks ago. So while 41 million people lost their jobs since March 13, when the government declared an emergency -- continued claims, which is the number of people continuing to file unemployment claims is around 21.5 million according to the Federal Reserve. Now for comparison purposes, at the height of The Great Recession in 2009, that number was 6.6 million. So 21.5 million versus 6.5 million, pretty significant difference.

Very significant and very devastating for so many families. And quite frankly, it's worse for families of color. 17.6% of Hispanics are unemployed and 16.8% of blacks. But at least some people went back to work last month, and that's a good start.

Right. First quarter GDP was just revised downward in the second revision. They typically do 3 revisions. So I don't know where it will be in a couple of weeks, but it's negative 5% right now. But economists actually believe this number will be better in the second quarter. And it's interesting because usually, we don't get an official declaration of a recession until we've seen 2 quarters of negative growth. But I think it's been pretty clear that we're in one now. And so that's just been officially named last week, I think.

That's right. And even with all of this consumer debt, it's still at an all-time high, it's interesting to note that over the last month, the amount of money that people are actually spending on their credit cards has dropped significantly. Equifax data shows that spending is down around 30% for spenders overall, but for high income spenders, it's down around 40%.

Yes, which is...

So people just aren't spending money.

Yes, it's a real drop.

Absolutely. And by way of comparison, the total consumer debt back in 2008, right at the start of The Great Recession was $12.68 trillion. And I remember thinking that number was really high. That number came down as people kind of worked their way through the recession, and then the number came right back up to $14.3 trillion. So we're at a new high.

Which is crazy. But some good news, right? Times are tough. Most people, though, are finding way to get through it.

That's right. And some of these we talked about in our first webinar for anybody who may have attended that. But just a quick reminder, there's a lot of good support out there for people who need it. The stimulus checks, as people recall, about $1,200 hit people's checking accounts. And we believe stimulated a little bit of economic activity in the marketplace. Unemployment stimulus in excess of kind of base unemployment of about $600 a week and more money for people with children. The mortgage and student loan forbearances, which we've already talked about, being completely helpful for people who need a little bit of extra room. And then the community support, which certainly, we've all been hearing about and seeing. And a good topic is the food bank and the one that's been highlighted often in the news is the San Antonio one. People are literally lining up overnight to make sure that they're there early enough to get food before it runs out.

Yes. The food bank situation is absolutely crazy right now. Another study just found that 17% of Americans are experiencing food insecurity, which frankly, is a nice way of saying they're going hungry. That's an insanely huge number. We're also seeing people, though, while they're patch working the support, there are some liquidity challenges. And I suspect that there are some people even on the call who are experiencing that, and it happens -- when you need cash, but you can't get your hands on it in the way you become accustomed like charging on your credit cards, or getting a home equity line of credit, those are the ones known as HELOCs. Lenders have cut back on both the numbers of HELOCs that are approving and the amount that they're lending in order to mitigate their own risk. And so that's problematic for some people.

Yes. What no one really knows is how quickly we're going to bounce back from all of this. And part of it depends on how people are feeling. So to that point, we've got another poll question. We want to know how you're feeling about the economic fallout. And if you think it's going to affect you going forward, you can see the options here from being extremely concerned to extremely unconcerned. And please just pick one answer this time.

So this question is one that Equifax has posed to thousands of Americans through the weekly -- the biweekly consumer credit confidence survey. And it's been really interesting to see how the answers have been staying fairly steady over the past 3 surveys or 6 weeks. And yet in this last survey, the one that came out last -- at the end of last week, we got the results from it, and we'll be sharing some of that with you in just a minute, things started to really change. And I'll be really interested to see what everyone's going to pick here in a couple of the other poll questions. Should we see what they have to say?

Yes. Let's take a look.

So this is...

Quite a lot of concern.

Yes.

Sorry, go ahead.

No. I mean it's interesting about how well it's mimicking what our own survey found. Do you want to share some of that, Bev?

Sure. That's right. So our recent survey found that 60% of respondents believe that the virus will negatively affect their finances over the next 6 months. Now that is down significantly from 4 weeks ago where the number was closer to 70% and 68%. So consumer sentiment is certainly moving in the right direction.

And it's interesting that the people who are on this are -- must be more concerned. It's 77-plus for this group. So there's definitely lingering concerns. We'll have to see what our own survey shows next time.

Absolutely.

Let's turn to some of the -- yes, right. Let's turn to some of the newer rules and updates that the government has been making to the CARES Act over the past 4 or 5 weeks since our last webinar.

Absolutely. Well, here is a good update. So Fannie Mae and Freddie Mac have issued temporary guidance stipulating that borrowers will be eligible to refinance or buy a new home, if they are in the forbearance agreement, but also are current on the mortgage. And the regulators just reissued guidance that reminds lenders they may not charge extra interest and fee.

So you have to make 3 payments on time in a row, and then you can refinance or you can buy a new home. And this is a big shift from the way that these were done the last time or in prior recessions, where you had to make 12 payments on time before you had the flexibility to do this. And as a reminder, the CARES Act prohibits your mortgage lender from assessing you late fees if you're in forbearance. So you'll want to watch for that as well. Some more good news is that you won't be required to repay all of your missing payments at once. So you might be eligible for a repayment plan, which allows you to repay past due amounts over a period of time. The second option is a payment deferral, which puts your missed mortgage payments together puts them into a payment due at the sale of the property or the refinancing of the property or at the end of the loan. And then finally, a third option, if you have a sustained reduction in income and are unable to afford your regular monthly mortgage payments, you may be eligible for a loan modification, which changes the terms of your loans to enable a more affordable payment. So what's supposed to happen is that your mortgage servicer is supposed to reach out about 30 days before your forbearance plan is scheduled to end to determine which assistance program is best for you at that time.

People had a lot of questions about what was going to happen at the end of these terms. So it's very good for people to get some clarity about this. One thing for folks to remember, though, the CARES Act only covers government-backed mortgages.

Right. And again, the numbers are starting to look better. So not as -- the height of this, which was last week's numbers, there were about a little over 9 million -- excuse me, 9% of all loans were in forbearance. That's dropped down to 8.9% according to the Mortgage Bankers Association, and that includes about a 1.5 million borrowers with private lenders. So while the CARES Act only covers government-backed mortgages and not private lenders, some private mortgage lenders are actually helping out their people, which is really good, I think.

Yes, that's good. The easiest way for people to know if their mortgages qualify for any of these programs, again, is to go to cfpb.gov/housing.

And while we're on that website, which is actually a good -- really good website, let's talk about the help that's available for renters because they're also in trouble.

Yes, and this is really important because 35% to 40% of adults in the U.S. are renters. And so renters who are living in properties financed by Fannie Mae or Freddie Mac are covered by something called a Temporary Eviction Moratorium. And you can use that same lookup tool for Fannie and Freddie to find out who has financed your property. Renters are still expected to pay their rent during the eviction moratorium period, if they can. And those who are experiencing financial hardships and some may be, they should reach out to their landlords and discuss options and considerations for some relief. You can also access the disaster response networks. And these networks offer support for things like how to approach housing counselors, financial coaches and budgeting and ongoing check-ins. The best thing to do is to contact a property manager of your rental property and see if you are eligible. We put some Fannie Mae and Freddie Mac hotlines up on the slide, and you can also find them at cfpb.gov.

Right. So there's also been some welcome updates to the Paycheck Protection Program, the PPP program for the last few weeks. And this has been for sort of small- and medium-sized businesses. I know that there have been some publicly traded companies who have also taken advantage. But these loans were designed to be fully forgiven if at least 75% of the funds are used for payroll costs with the rest being spent on your rent, your mortgage, your utilities, the other costs of running a business. But you don't have to get it all spent within the 2 months of the funds being granted, which is the old -- the original way, I should say, it's not really old. But the original way the rule was written, which is great. Because now you have a lot more time to actually spend those funds. And as a reminder, this loan has a maturity of 2 years and an interest rate of 1%.

Yes. And this is another place where clarification has been really helpful for people trying to figure out. Well, what happens if I spend the money and how do I pay it back? Or how is the forgiveness going to work? So the PPP loan forgiveness rules and paperwork were published, so people can find those. Loan forgiveness is based on the employer maintaining or quickly rehiring the employees that they had before the pandemic and maintaining at salary level. The forgiveness amount will be reduced if the full-time headcount declined or if the salaries and the wages decreases. But there is a new exemption for borrowers who, if in good faith, and in writing offer, to rehire their employees and some of them decline. So good sort of new information for people to take advantage of. And with that, let's go to our next poll question. And this is one that we've also been asking in our consumer credit confidence survey. And by the way, you can read all of these high points of our survey on our website, equifax.com and then our COVID and Credit Financial Resource Center. So we've got a lot of good data as we've been surveying consumers and getting great insight. But here's the question. How are you feeling about your household financial situation during the pandemic? So this is much more kind of emotionally driven. And certainly pick any one or ones of these that you like.

Right. And you might need to scroll down on your screen so that you can see all of them. So the last one you should see is upset. There's frustrated, stressed and upset at the end, and then there's the submit button. So the list is really long. But again, you can pick as many of these as you want so that you can get a sense of how people are doing. And actually, Bev, this has been one of the most interesting results from our consumer credit confidence survey over the past 6 weeks. Because in last week's survey, respondents indicated that they're feeling much more cautious, but overall more optimistic and positive about the pandemic and the economic consequences than they have been in the past 6 or 8 weeks. So they're feeling even more accomplished. And I'm thinking maybe people have been learning new skills. I know that one of my kids got himself a guitar and has been teaching himself how to play guitar. And the other one is learning how to cook, which has actually been really awesome for us.

So you're going to eat well and get serenaded every evening. That sounds pretty cool.

I'm living the dream.

Absolutely. I also saw some interesting tidbits in the survey results. 18% of all responders say they feel more productive now, up from 12% at the start of April. Now I say that's because we're all living 8 or 9 hours a day on Zoom video calls. And then about 25% of people are feeling anxious, that's down from 34%, which is a huge improvement. And the levels of frustration, stress and general sadness have also fallen meaningfully over the past 6 weeks or so. And finally, we've got a full breakout of these results at our COVID plus Credit Financial Resource Center. It's clear that people are feeling better. And I'll just say this really quickly, at least before go to the results. I just recently moved to Atlanta, and it's one of the areas that's opening. And just being able to be out and about a little bit, I was a little bit tentative about it at first, but it's nice to be out and maybe sit socially distanced at a restaurant outside. So that's helping the mood as well.

Yes. Well, good weather always helps everything. I also understand that from everybody who's taking this poll that we're seeing that you can actually only pick one thing. So I'm sorry about that. That's not how the poll was supposed to work. But anyway, let's see what the results are. So interesting, we've got almost an equal number of optimistic and anxious.

Yes. That means that while certainly, there is some -- there are green shoots of optimism out there, there's still some people working their way through this. And I think this data shows that. Even the stress, it's still high, a little high at 15%.

Yes. It is. Well, let's talk a little bit more about opening the economy because it's just -- it's where we are in, right?

It is. I mean I say the country is opening up and there are moments when I want to say, "Oh, maybe we're getting back to normal and then I realized, it's really the new normal right, Ilyce?"

We're craving that sense of normalcy, but I have no idea what normal is going to look like. I mean it depends. I have no idea what it's going to look like. I think it's almost going to be different for everybody. The real question, though, is how much of real-life is everybody ready to return to?

Well, it's a trillion-dollar question. And certainly, the question that will tell us how the economy is going to go over the next few months. We know we're going to see more states open up. We'll see if people are ready, in fact, to eat in restaurants and go shopping for things other than their basic needs or travel. And speaking of travel, Las Vegas opened up last week. Now that's a place I don't think would do it, but they've put sneeze guards up on all the table, sneeze guards. They're only allowing 30% capacity. And I'm not sure they're having those huge conferences that they are typically known for.

Yes. It's interesting. I've heard to generate interest for last week's opening that a casino gave away 1,000 one-way tickets, airline tickets from 24 cities on Allegiant, Frontier, Southwest, Spirit and Sun Country airlines. And they were snapped up in just a few minutes. And by the time I heard about it, they were all gone.

It's one-way ticket. I wonder how anybody is going to get home.

Well, I don't think anybody wants to go home, right?

Maybe not. Yes. It's a good test, quite frankly, to see if people are really ready to travel. And any conferences for you this year in Vegas?

Well, last year, I went to 5. Count them, 5 conferences in Las Vegas, which is awesome until you get past the first one, and you think, oh, gosh, 4 more. But it was crazy. But actually, all of my conferences up until this point have been canceled in Vegas so far, and I've still got 1 or 2 on the books for October, September and October, but I actually think the organizers are waiting to see what's going to happen once it opens up and how it works with companies that are welcoming back workers to the office, but maybe aren't quite so comfortable with their people going to air travel or 10,000 person conferences. Maybe most of my companies that I work with aren't even welcoming vendors and consultants into their offices.

Yes, we're experiencing some of the same rules at Equifax.

Yes. So transportation work is kind of an interesting issue, right? I mean some people fly for work. I fly a lot. Some people drive. Some people take mass transit, and everybody is starting to deal with the consequences of those choices because opening the economy and returning to work also means figuring out how exactly you're going to get there. And so the automobile industry, like so many others, has been really hard hit during this pandemic. And Bev, I thought maybe you could talk about what's going on there and how consumers have been affected and may be further affected later this year?

Absolutely. And transportation is one of the biggest issues, I think everyone is trying to deal with. How do we get around, in general, whether it's air travel, cars, Ubers and Lyft, I used to take 5 or 6 of those a week or even public transportation. One of the areas that we have a lot of data on is the automotive industry, and we look at loans and leases and how people are managing those and paying those. So let me start at the 30,000-foot view. And according to some new survey from the American Public Transportation Association, 53% of Americans say they are less likely to use public transportation right now. And 35% of them, they -- then they buy a car this year because, quite frankly, about 70% of them feel less at risk riding in their own car versus being on public transportation. So consumers are very cautious about this and are not sure yet about their preferred mode of transportation.

Well, I think that survey is really interesting, and it tracks with a conversation I recently had with the Chief Economist for Cox Automotive. He told me that over the past 2 months, when cars come off their leases, which is to think, the car dealers didn't want to take back these vehicles and consumers didn't actually want to bring them into the dealerships. And a lot of times, those dealerships were closed. I mean everything just shut down. So in many cases, the leases were simply automatically extended for another 3 months or so, pushing what is normally the busiest time of the year for car leasing activity in fall, but that's supposed to be when car sales are happening. This year, car sales may be lower than expected and part of that is because supply is diminishing, right? Factories have been closed. So it's -- and I mean new car sales, right? It's going to be -- and this is what the Chief Economist was saying, it's going to be super interesting to see as the year goes on, how these sales are made up or even if they are. And I asked Jonathan, Jonathan Smoke is the Chief Economist of Cox Automotive. And I asked him if it's possible that with the way this has all worked out, is it possible that the biggest months for car leasing might have been permanently [Technical Difficulty] fall. And he said it's kind of too soon to tell, but he thinks it might have been.

Yes. And so if anybody out there is trying to make a decision about whether to make a big purchase like buying a car, it might be helpful to have a little bit of perspective here. So I found myself a long and very wandering around a car dealership, where I was getting my car serviced. And I learned that the most popular cars are actually in very short supply, primarily because of the supply chain set of issues that have occurred since COVID-19. So if you don't mind buying a car that's on the lot today, the dealers are very incented to move them. And then because of these extended leases that Ilyce just talked about, the cars coming off their lease in the fall might be really good used car deal. So -- and you can see the numbers here, which means the dealers and manufacturers are really, really excited for someone to walk in, wanting to buy. New car sales are down 35% and used car sales are down almost 18%. Next, we're seeing just abundance of supply of 0% financing deals. It appears that those deals peaked in April, but they're still out there. And it's really clear that the dealers and manufacturers are motivated to get these cars off their lot. The data that we see is also showing that if you want some of these deals, though, particularly the 0% deal, you've got to have higher credit scores. In this kind of time of uncertainty, the lenders are certainly being a bit more risk-averse. They're looking for higher credit scores on average. And here, you can see 60-plus percent of loans and leases are going with consumers with credit scores over 700. At the end of the day, if you currently have a car on a lease payment or an auto payment and are having some trouble, you should immediately call your lender and/or your dealer and talk to them about some sort of a loan modification or some sort of an adjustment. That's the best choice in order to move forward.

Yes, that's great advice, but I'm sure there are a lot of people who up until very recently had solid jobs, I mean, even people who are listening to us right now would never have thought to ask for an accommodation on their auto loan or even knew that, that was a possibility. Just the way that I think people forgot from the last recession that you could call your credit card lender -- credit card company and say, ask for an accommodation. But the pandemic has just hit everybody so hard, and it's so important to reach out and get some help. And now is when lenders may be more inclined to provide it, which I think is also important. So let's get to the questions. There are a lot of questions. You can type your questions just at the bottom of the screen, and we're going to, I think, start right now. Bev, let me read the first question to you. I've been looking for a job since I got laid off in March. I have good skills, but I was in the restaurant industry. And now I think I need to shift gears and try maybe something new, different industry. Do you have any advice for me as I begin to think about my career in a different way?

Well, sure, and it's a great question. And I'm so glad you asked it. And like millions of Americans who are getting laid off, there are many, many people who are starting to get hired or rehired. So I would say stay positive. And then when I think about my own career and the advice I've given to mentees and others in the past, there are a couple of things I tell them to do. One is to understand your skill set in the most broad sense and think about how you can apply that skill set to other opportunities. If you're doing a certain kind of job that gives you the ability to talk to people or make a sale, well, there are plenty of industries that do that, so think a little bit about how you can reapply your skills to something new. The second thing I usually tell people is to think about what you're passionate about. If you're passionate about it, you'll really want to go do it. You'll want to go sell yourself so you can -- and sell your skills so that you can, again, find that new opportunity, but find something you're going to love to do. And then the last piece is to think about what you might want to learn or how you might want to expand your horizon and look for those opportunities. There are a couple of resources that I rely on pretty heavily. LinkedIn does a terrific job of providing free resources that help you build your personal brand and tweak your resume. As a matter of fact, my Alumni Association is actually doing a webinar with LinkedIn in a week or so on this very topic. And then there are a number of websites that help you build digital resumes, help you walk through the process of applying online for jobs that offer free resources that help you think about this reskilling or applying their skills in new ways. And one of those is livecareer.com, which offers a really robust unemployment section fields -- filled with lots of links and resources that can help you figure this all out.

Yes. That resource is a really good one. Indeed.com has some good things as well. All of these companies that help you build online resumes also are now providing, because of COVID, extra resources to help people kind of reskill and think about it in a new way. That's great advice, Bev. Here's another question we're getting. A couple of people, I'm kind of mixing these together. My credit card was closed and my credit score dropped by a few points. Why does this happen? And will my credit score go back up?

This is a question we see a lot and hear a lot, and it is baffling to people. And so let me see if I can shed some light and provide some helpful information. Credit scores change depending on a lot of different factor. But when an account is closed like when you pay off an auto loan or when you close a credit card account, the makeup of your credit history may shift temporarily, and it could, in fact, impact your score. So if you close a credit card account and you could lower the overall credit that you have versus the amount that you're using, and that's called your debt-to-credit utilization ratio. This could impact your score. And you can calculate this ratio by adding all of your available credit and adding all of the debt you owe on those accounts and you divide the total debt you owe -- so the amount that you actually need to pay by all that's available to you. And creditors and lenders usually like to see a lower ratio on how much debt you have versus how much available credit you have. So that's one thing. You might have shifted that utilization ratio. The second thing is the card account that got closed, you may have had that for a long time. And that length of time impacts your credit history. And so that could be another factor that changes that score. And then lastly, if you've paid off a card, but you haven't used it in a while, it may be declared inactive, it actually get closed by a lender. So those are some of the reasons that could impact your score.

Yes. That makes total sense. All right. So here's a question that I think will maybe break everyone's heart. I know that my -- kind of broke mine. So here's the question. So my spouse and I have lost our jobs, both of us, and we're secretly glad that the summer plans for the kids have all been canceled because we couldn't afford to make payments for them anyway. My kids are old enough to talk with them about our money problems, but I'm not really sure what to say. Do you have any advice for me?

Yes. This is really heartbreaking. And it's so -- it's hardening to see that families, including children are kind of navigating through this uncertain time. And you know I'm not a child psychologist, but I've always believed that being honest is the best policy. And then you have to talk to kids in a way that is appropriate to their age. And I'll just share that I remember as a young kid, we didn't come from great means. And so there were times when my parents had to sit down with us and tell us that there are certain things we couldn't have right away or certain reasons they were making trade-off decisions. And many times that was because of our financial situation. And maybe we didn't understand everything, but we understood that they loved us and that they were protecting us and caring for us. And then we also knew that things would get better at some point. So I believe that honesty is the best policy. I believe that you shape the conversation for the appropriateness of your child's age. And I think they care most of all that you love them.

Well, we've always been honest with our kids about our financial lives. But to your point, we haven't ever told them specifics. They weren't old enough to appreciate or understand. And I think a lot of parents, when it comes to money discussions, don't really know how to have those conversations. In a way, they never had those conversations with their own parents when they were kids and now that their parents are older, they still don't know how to have those conversations, even if they need to take control of their parents' finances. And what I would suggest -- because this is such a heartbreaking thing and because we all want to be able to give our children and our younger generation everything that they want and everything that we would want them to have -- is to be honest about where you are. And so if your children are younger, I would suggest you talk to them about how mom and dad aren't working at the moment like so many parents, and certain treats might have to wait until you're back at work, but you get more time with us, kids -- bonus. When your kids are older, you can talk to them in more detail about unemployment, insurance and what percentage of income you're bringing in so that they begin to understand why life may have changed some in the household, why you and your spouse or partner may be more stressed. And if you're worried about losing your job and about what that might mean to your finances, especially if it might impact something like next fall's college tuition then for those older children, you being even more specific and asking for their help is probably on the table. And so maybe they've lost their own summer internship opportunities, or your new graduate has had a job offer rescinded like my children's friends have, and they'll be able to identify. And I suspect that you'll probably find your children are supportive and helpful, and they'll rise to the occasion as well.

It sounds like a good answer, Ilyce, and a great way to manage your children and help them -- make this relevant to them and understand -- help them understand what it means to them. That's really great advice.

Yes. All right. So we have one more -- well, not one more, we've got a whole list of them. I have a question about closed accounts. I was recently laid off, and when I went to use a couple of my credit cards, I found that one had been closed and another one lowered my limit. Can you explain a little further about how lowered credit limits can lower my credit score?

Sure. So we are definitely seeing that lenders are making decisions to manage their risk as well, manage their exposure and they are lowering credit limits, in some cases, closing accounts. Hopefully, these don't come as surprises to you, but you get communicated to by your lenders. These typically apply to revolving accounts which allow you to, of course, repeatedly borrow against money at a defined limit and pay it back over time with interest. And some examples of where this happens is credit cards and home equity lines, personal lines of credit. Again, we talked about the utilization ratio earlier. When those limits come down or when accounts get closed, it can sometimes impact your utilization rate. And if it does and it makes your rate go up, that may, in fact, impacts your credit score. And that may be the issue that this person is seeing. So one way to think about an example here is if you have 2 credit cards, they both have a combined limit of $10,000 and you owe $2,000 on one and $1,000 on the other, your total debt outstanding of $3,000, your total credit available is $10,000. So your rate is 30%. But if the lender reduces your credit limit by $3,000 and now your total debt -- total credit limit of $7,000, your utilization rate actually goes up to 42%. And so if that happens, that may, in fact, impact your score. The best thing to do in a situation like this is call your lender and understand what decisions they've made and why and see if you can, in fact, get your limit reinstated.

That's great. That's -- I know that's like probably a long complicated, everybody is doing math in their head there. So I'm sorry about that, that we can't just draw it on a board for you, but it's a good answer. So another question, this one, Bev, where do you see interest rates headed in the near term and 2021? Would you recommend buying given the current marketplace and economy? And I don't know if they mean buying a car or buying a house, but do you want to take a shot at that one?

Well, sure. We're not in the position to predict interest rates, and I certainly don't want to do that. If I could, I may not be working at Equifax.

I've just pulled that out of your door.

Exactly. That would be so nice. But what I would say is the interest rates have been low for quite some time. We've seen that over the last several years, which has driven some of that consumer debt higher as we talked about earlier in our discussion. It's also driving an incredible mortgage market right now, which certainly is fueling the mortgage refi business and even some new mortgages. So without predicting where rates are going to go, I certainly would say we've seen a trend. And in uncertain times, usually rates tend to hold steady. So my suggestion would be that if you're looking at opportunities, you might run a few scenarios, but certainly, rates have been long for quite a while.

Yes. And I'll just say from a housing perspective, which is sort of the area I focus on most in my syndicated column. From a housing perspective, interest rates are at rock bottom like they can't really get lower than this. And what we're seeing now is plenty of people buy homes with 10-year loans. We haven't seen that really happen in really 12 years or it's a little bit less than about 9 years since after The Recession, things sort of hit rock bottom. And so if you can go and buy a house with a 15-year mortgage or even a 10-year loan, go ahead and do that. That's pretty terrific. And even if you're buying a rental property, you're seeing extremely low -- historic low interest rates. So like Bev, I can't tell you -- I'm not going to read the tea leaves for you. I don't know that I could. But I will tell you that what we've seen over the past even 20 years is that the Federal Reserve has kept interest rates low in order to improve the economy. And so the only time they tried to raise it was once the economy looked like it was getting better in like 2014, 2015 and 2016, and now they're back down again. So if you want to know where things are going, watch the general economy because as it looks like it's getting better, that's when you'll see interest rates, I think, start to go up. So let's -- should we do another question, Bev?

Sure, let's.

Okay. Here's one that came in. Does credit get hit negatively every time there's an inquiry by multiple lenders within a 30- to 45-day period?

So there are a couple of answers to this, and Ilyce feel free to provide a perspective as well. But first, the question is what kind of inquiry? And there are inquiries that we call hard inquiries that you're asking for a new loan and the lender is coming in to take a look and assess your creditworthiness. That's a hard inquiry, and that is a hard pull on the bureau. If you do that multiple times in a period that -- you're usually going to see an impact on that. Then there are soft inquiries. Those are the ones where lenders are updating portfolio information or they're doing a review of you for some reason or other, but it's not a request for an extension of credit. And that soft pull usually does not impact your inquiry. On the mortgage side, multiple pulls in a short period of time can sometimes show up as one pull versus each one individually. So that's going to not necessarily negatively impact your bureau. So it really depends on what the use case is and what asset class you're talking about. And Ilyce, any other thing you'd like to add there?

No. It feels like, yes, you just want to look around. And when you're looking for a home, I mean, there are some special rules, as you said, right, so that it would be treated as one. And I think home ownership is one of those periods of time where they know you're going to shop around to a multiple lenders. In my book, I recommend that you talk to at least 5 different kinds of lenders. So focusing your attention in a short period of time should make it all treated as one hard pull and not multiple. And that should be better for you. But one of the things -- the questions that we got, and I think we can kind of move just right into this, Bev, is so why are the credit scores different when they're pulled by me as an individual and by lenders like a mortgage lender. So I'm sure people have had that experience when they go and they pull their free credit score, which they may get from their bank or they may get it from you or whatever. And then they go to a lender, and it's like, wait, that's not the same number. So why are they different?

Yes. There are a couple of different reasons. One, there are different score types. And sometimes when you're pulling your score in a free score environment, that might be a particular score offered by one of the bureaus or even a FICO score. And then your lender may have a different score, may have a different model. And so that's another opportunity for that score to be different. Hopefully, they're not too terribly different, but you'll definitely see some differences based upon their models, which score and things like that.

All right. Well, hopefully, that answers that question. Let's see, I'm going down. There's a whole bunch of questions that are kind of similar, but some are giving me too much information. So I want to make sure that we're not getting in too personal. Here's one that we can talk about. I'm close to $150,000 in student loan debt. I just don't see a way to improve my credit due to this amount of debt, what can I do? I just -- I think one of the interesting points here, Bev, is that there's a difference between debt, having a lot of debt and having bad credit. They're not generally -- it doesn't have to be the same thing, right?

No, that's exactly right. And I think, Ilyce, the question is they've got the debt, and they're just not sure how to reduce it.

Yes, I think the -- she seems -- she's worried about having poor credit because she has a lot of debt, but I don't think that those 2 things are mutually exclusive or together that just because you have debt doesn't mean you have bad credit.

Right. No, that's exactly right. So if you have debt and you're paying that debt as you're obligated to do so. If you've got income level that's commiserate with the debt or you are certainly working your way up to do that. Student loans are a class of debt that people tend to know that you're going to earn your way into that sort of debt structure over a period of time. As long as you're making your payments as you're obligated to do so, that doesn't necessarily mean you're going to have bad credit. And when you think you may, in fact, be headed towards some trouble, you need to get ahead of that discussion early. And you need to get on the phone with your lenders. In this case, there are forbearance programs that are available to student debt holders if you're having challenges due to the pandemic. So there are many ways, particularly in the student loan space that you can work yourself into modifications or forbearance or opportunities to relieve that pressure, if you think you're in trouble or about to be in trouble. But just because you have a high debt level doesn't necessarily mean you are a bad credit risk or that you have bad credit. I would suggest one thing to do is keep track of your credit score and to keep track of your reports. And a good easy way to do that is to go to myEquifax and sign up for myEquifax Account and get core credit, which is the opportunity to get your free credit report and free scores on a monthly basis. And that way, you can just see how you're trending and how your score is trending and you can proactively manage what your debt picture and your financial picture looks like. Ilyce, I don't know if you'd add anything else to that question.

I would just say that I know that having that much in school debt has got to feel like a huge weight around your neck. And I know, though, that -- and it seems hard right now in the middle of this pandemic recession to -- that you're ever going to figure out a way out of it. But I promise you that with all that, I don't care what kind of debt it is, making slow but steady progress is really the best way that you're going to get ahead. You'll pay it down little by little and really focus on prioritizing your bills so that, that debt gets paid off as quickly as it can. But I feel for you. And it does feel like it's a pretty dark, big hole. But I'm here to tell you that it can absolutely get better. Bev, we just have a couple of minutes left. We had one quick question that I thought maybe you might want to answer. So just in general, and this is somebody -- this is kind of a mash up of 2 questions that we got. How can I protect my credit during the COVID crisis and the COVID pandemic?

Well, there are many ways. The first thing to do is just stay knowledgeable. And I'll go back to making sure you can see your scores and your reports on a regular basis, and we certainly have ways for you to do that. The second is the 3 bureaus, Equifax, TransUnion and Experian also offers weekly credit reports at annualcreditreport.com. So that's another way that you can get access to your information. The third thing is if you want to make sure -- if you're worried about any fraud or things like that, there are report freezes that you can do. So you can log on to equifax.com and freeze your accounts so that no one can apply on your behalf until you unfreeze your accounts, so you can do that. So there are many ways that you can protect your credit and make sure that you get through this crisis unscathed. I think the other thing you want to do is just manage your financial situation in case something uncertain happens like the loss of a job or furlough or a pay cut. And that's by making sure that you're managing your spending, you're only spending what you need to. You're making critical choices about making all of your payments, making them on time and being diligent in your obligations around your debt, and saving the money that you have and making sure that you've got a nice set of coffers that are your rainy day fund in case something unfortunately goes wrong. So those are the key tips I would have. Ilyce, anything else that you would offer?

No, I think that really covers it. We're seeing savings rates skyrocket to levels we've never seen before in this country. I think everybody is getting the message that you've got to have some cash put aside somewhere just in case the sky opens up on you one day, and it's that proverbial rainy day. I can't believe it, but our hour is up. We've got like 56 seconds left here. And I just want to say, Bev, it's always such a great honor to be able to spend a little time with you and share some of this great information. And just want to remind everybody that Equifax has its COVID and Credit Financial Resource Center up at equifax.com, and there's just a ton of information there. We're putting a podcast, that's coming up new. And we've got some other kinds of cool new things happening. So be sure to check it out at equifax.com. And Bev, thank you.

Thank you, Ilyce. It's always a pleasure talking to you. And for everybody out there who hung out with us for an hour, thank you so much for your time. And hopefully, we said a little bit of something that brightens your day and gave you some new tips and tools. Thank you.

Enjoy your evening.