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Open House

How to Get Your Spending and Budget Under Control; Colleges Selling Personal Student Information, Costing Students Money; Why Your Doctor May Not Have Your Best Interests At Heart; Slam-Dunk Car Deals; Revamping Your House While Still Going Easy on Your Budget

Aired August 30, 2008 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


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GERRI WILLIS, CNN HOST: Finance expert and the author of "How Come that Idiot's Rich and I'm Not?"

Great to see you, Robert.

ROBERT SHEMIN, AUTHOR: Good to see you, Gerri.

WILLIS: All right, well, let's start with the basics. Because if you really want to get a mortgage out there, buy a house, it sounds great, the prices are down, but it's really, really hard because lenders are so stingy these days. What's the first step?

SHEMIN: You know, No. 1, back to the basics, get your spending under control. What's coming in, what's going out? What can you afford?

WILLIS: And you talk about getting your spending under control, you might as well have a budget. But you say that 20 to 30 percent of every budget is fantasyland, it's extra stuff, stuff you don't need. That sounds like a lot of dough.

SHEMIN: It's fluff. You know, you can look at any budget, a household or business, and there's usually 20 percent to 30 percent without changing your lifestyle can be cut out.

WILLIS: You know, and another thing I think to think about what is that credit score, because it matters in this marketplace. The requirements for credit scores now for loans are so much higher than they used to be, up to 700 now just as a base line, used to be able to get away with all kinds of things. What do you do to move that score ahead and when looking at those lists of items on your credit report what are you focusing on?

SHEMIN: Well, the first thing is get a copy of it. You can get one for free off the Internet, and look at it. You know, most people have never done that. There are 50 percent of all credit reports have some type of error. So, just by looking and saying, hey, this isn't me, that's not me, write a letter your score might change. No. 2 is, there's a lot of inter things that are counter intuitive, they don't make sense. Like for instance, don't close accounts. The longer the account is open the higher your credit score. WILLIS: Because that means that you have more experience in the marketplace. Lenders look at that favorably and if you close down credit cards, that means you'll have less credit and lenders don't like to see you have a lot of debt compared to your credit.

SHEMIN: That's right. Here's another strength, don't get your credit checked too much, you know, looking at cars or houses, because every time you get it checked it can knock it down about four points. Here's another strange one, Gerri, I thought you would pay off your bills every month, that means you have good credit, your score goes up, not true. You want to leave about a five or 10 percent balance every month and not pay it off, that will raise your credit score. Doesn't make any sense, but that's how they do it.

WILLIS: Wacky world, isn't it? Credit cards. Yeah. I mean the rules are byzantine and fortunately we have people like you to describe them, here.

Of course, quickly now, if you had one piece of advice, something very specific for folks today, what would you tell them about this housing market.

SHEMIN: Well, it's a great time to buy. Negotiate, negotiate. Negotiate and there's tons of motivated sellers out there. It's getting affordable and go out there, shop, take your time, but like we're talking about, make sure you know what you can afford before you go out and look. Get preapproved, your credit score, know what you can afford comfortably, monthly payments. Not what everybody did a few years ago where you're making $5,000 and your mortgage is $4,000. No. Thirty to 40 percent tops of your income, find out what you can afford, get preapproved, there are loans out there, then shop for a great deal.

WILLIS: Get preapproved, get a loan, and there's a house out there for a good price. You heard it from Robert Shemin.

All right, student credit card debt is on the rise. One reason for this, college and universities are making millions of dollars by selling students sensitive information to credit card companies. And now state investigators are looking to see if any laws have been broken.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice-over): Andrew Kunka is a student at Rutgers Law School in Newark. His credit card debt tops $5,000, books, tuition, other expenses. He's now maxed out his credit card. And the credit card offers still keep coming.

ANDREW KUNKA, STUDENT: I think it's very easy. In fact, I think it's too easy, because I think what happens is so many students they take these credit cards and they expect only to be using them, you know, for minimal things that they have to get, but what happens is tuition payments come up, living expenses come up. SYLVESTER: Credit card companies market aggressively to students trying to reel in new customers, offering freebies, lunches, t-shirts and other goodies.

ED MIERZWINSKI, U.S. PUBLIC INT. RESEARCH GRP: There's a difference between college students and other adults. College students often don't have a job, often don't have any items on their credit report to give them a credit score, yet they're given credit cards anyway.

SYLVESTER: And the colleges are cashing in as student credit card debt is piling up. The New York attorney general's office is investigating how universities and alumni associations profit by selling students' sensitive information to the credit card companies.

BENJAMIN LAWSKY, SPECIAL ASSISTANT TO U.S. ATTY GEN: The universities get paid millions and millions of dollars by the credit card companies to basically give exclusive access to that company to the students. And they -- what the universities will often do is they'll actually sell the students' personal information to the credit card companies in exchange for these millions of dollars.

SYLVESTER: University of Iowa officials confirmed it receives $200,000 every year from the Bank of America for a credit card that's marketed to alumni and undergrad students. No suggestion of illegality, but the Alumni Association stopped sharing its student roster with marketers last November after negative publicity. But the credit card company can still get personal student information through the university's public records.

(on camera): A spokesperson from the University of Iowa responded saying, quote, "we are trying to reduce our dependency on credit card revenue" and notes that students can opt out to have their personal information not shared with outside marketers. We should mention, a lot of these credit card offers appear to be deals. In the case of the University of Iowa credit card, the introductory rate is 4.9 percent, later the rate jumps to more than 18 percent and with late payments the rate jumps to 29.99 percent.

Lisa Sylvester, CNN, Washington.

(END VIDEOTAPE)

WILLIS: Unbelievable.

Well coming up on OPEN HOUSE, why your doctor may not always have your best interest at heart. And the annual end of the year model incentive war is heating up. Choose carefully and you can find some great deals on really good cars.

(COMMERCIAL BREAK)

WILLIS: When your doctor chooses a drug for you, is it really because it's best for you or because your doctor is under the influence of a pharmaceutical company? Joining me now, CNN medical correspondent Elizabeth Cohen. ELIZABETH COHEN, CNN MEDICAL CORRESPONDENT: Gerri, let me tell you a story about a woman named Linda Lewis. Linda needed back surgery. She went to a doctor and the doctor recommended this artificial disk and she got the disk and it was a disaster. She was in terrible pain, she had to have a second surgery. Later she found out that her doctor had financial ties to the company that made the disk. She said if she had known she never would have done the surgery.

We tried to get the surgeon, his office said he wasn't available for comment. What things brings up is a huge debate in medicine right now. Are doctors being swayed to their financial ties to drug and device companies? Just this month in the "New England Journal of Medicine" an author writes most doctors do have these ties -- Gerri.

WILLIS: It's an unbelievable story. I cannot imagine how angry she was when she found this out. But of course, everybody should be thinking about this now, I guess. What should you be looking for?

COHEN: Right, there are certain signs you want to look for to see if your doctors has connections to pharmaceutical or device companies. First of all, if their office is littered with pens and mugs and pamphlets, that's a sign. If you see drug reps walking in and out -- and the drug reps are the nicely dressed ones with the brief cases, you know, that's the sign.

Also, you can ask your doctor questions. I mean, don't be afraid to say, you know, there's ten blood pressure drugs out there and you're recommending this one, why is it that? And you want to make sure they give a scientific answer. Also, know when not to worry. If your doctor is giving you a prescription for let's say an antibiotic you're going to take for 10 days, drug represents don't really push those because they don't make a lot of money off of them.

So, in some situations you don't need to worry very much. And if want to get more tips, we have more things to think about, Web sites to go to, go to CNN.com/empoweredpatient.

WILLIS: Oh I love that. But I've got one more question for you, though, Elizabeth. I'm just thinking there have to be some rules against this. What does the American Medical Association say?

COHEN: You know what, amazingly there aren't many rules like that disk that I mentioned in the beginning. There are some physicians who are making $8 million a year from this company that makes this artificial disk. Pretty much there are no rules.

However the AMA did have this statement. The American Medical Association says "The first priority of physicians is the health and well being of our patients" but they add patients should feel comfortable discussing with physicians the basis for their treatment decisions.

WILLIS: Elizabeth Cohen, thank you for that fascinating report.

General Motors says it's offering employee discounts to everybody. That's a big price drop on nearly all its 2008 models and some 2009 models. But, is it really a good idea today and what are some slam-dunk deals on other cars from other automakers. CNNmoney.com Peter Valdes-Dapena is here.

Peter, great to see you.

PETER VALDES-DAPENA, SR. WRITER, CNNMONEY.COM: Good to be here.

WILLIS: All right, let's talk about this discount. Because, I don't really know if it makes a big difference. How much money would I save?

VALDES-DAPENA: It's actually -- it could be quite a lot of money. If you're a GM employee and went in to buy a car, you could get that car for a little less than what the dealer themselves actually paid for it by 10 percent less than wholesale. So, that can be a lot of money...

WILLIS: That's a lot of dough. That seems worthwhile. Would you do it, you're an auto expert?

VALDES-DAPENA: Well, it depends on the car. You never want to buy a car because there's a deal on it, but GM does have some products that are pretty strong and they offering this deal on all their 2008s and interestingly, on the 2009 models -- they're offering it on ones that are already some of their better sellers.

WILLIS: And on that score, the 2009 Cadillac which you like.

VALDES-DAPENA: Oh, yeah.

WILLIS: Last year's Motor Trend Car of the Year, that's a good deal isn't it?

VALDES-DAPENA: That's an awesome deal. That's great deal, about $5,000 off. And this is a car seriously, I spent a lot of time driving this car, it's an incredible competitor against cars like the BMW III series, Mercedes Benz C Class, I actually like it better than the C Class, a little more room, it's got terrific ride and handling and the interior is actually really nice.

WILLIS: Interesting. OK, it's about $33,600, that's the starting price. Other cars from other automakers you like, the Chevy Malibu is one of your picks -- why?

VALDES-DAPENA: That's another one of GM's really good new products that was car of the year voted on by a panel of journalists from different publications voted that one and it really is -- starts in the 20s. You know?

WILLIS: I know, $19,900 to start. That's amazing.

VALDES-DAPENA: A really nice interior. GM paid a lot of attention to interiors. It has the ride quality of a far more expensive car. I'm test driving a version now that gets 33 miles-a- gallon on the highway, that's a four cylinder engine and six speed transmission, drives really nicely. Again that's a car I would buy any time, but right now is a particularly a good time to get it.

WILLIS: Mazda CX9, now this is and SUV, not great mileage, here -- right?

VALDES-DAPENA: Not great mileage, but not too bad, I mean, considering. It's a very aerodynamic SUV. It handles really, really well. A lot of cars have compared it to like driving a BMW. It handles and drives much better than you'd expect from a vehicle like that. It looks a lot more stylish than your typical truck-based vehicle. You can still fit seven people in it, three rows of seats. And they're offering, you know, not a cash discount, Eastern companies don't tend to do discounts, but give you zero percent financing for up to 36 months, so that can save.

WILLIS: On $29,000 that's not nothing.

VALDES-DAPENA: That's not nothing.

WILLIS: Well, Peter, thank you for your help, today. We appreciate your expertise.

Still ahead, how to design a Hollywood home without the Beverly Hills budget. And the presidential candidates talk family friendly policies. We are the show that saves you money.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: They're everywhere!

UNIDENTIFIED FEMALE: Just ask Britney Spears, it seems like the papaparazzi never sleep. No privacy at home for celebrities or at least not until you move into the Carlisle on the Wilshire corridor.

UNIDENTIFIED FEMALE: Between 78 residences in the building plus we have 20 housekeeping units, which is a really unique feature of the building. So, the entire second floor of our building is comprised of 20 studio units. You can house staff persons, security, guest quarters and office. Those are a unique feature of the building.

UNIDENTIFIED FEMALE: Erin says you're looking at a paparazzi proof condo, slated to be finished next summer.

UNIDENTIFIED FEMALE: So, if somebody wanted to avoid paparazzi or just sort of bypass the lobby and go to their unit they could access the elevators from the private subterranean gated parking and into their private parking and go to their private residents.

UNIDENTIFIED FEMALE: The building is shaped like a crescent, supposedly it makes it impossible to peek inside. Israeli trained VIP security guards will patrol the building. These condos range from 2,700 to 5,000 square feet.

(END VIDEOTAPE) WILLIS: So, you may not have $15 million, heck you may not have $1 million to fork over for one of those fancy houses in L.A. But hey, you can make your home A-list with a few DIY tricks. Robert Verdi is a designer to the stars whose clients include, holy cow, Eva Longoria and Tony Parker, Hugh Jackman and Cathy Griffin.

Welcome and good to see you.

ROBERT VERDI, CELEBRITY STYLIST: Thank you, good to see you too, Gerri.

WILLIS: All right, so we've got some like inexpensive little ways to make big differences.

VERDI: Big differences.

WILLIS: And you know, I don't know anybody who owns a home who hasn't picked up a caulking gun. But, you have a way for the same effect.

VERDI: Get rid of the caulk gun. This is much easier. Tear, squeeze and toss.

WILLIS: I can do this. I'm so excited.

VERDI: Single use -- well, that's not -- that close.

WILLIS: OK, but maybe it would be better to do like that.

VERDI: I'm not letting you caulk my tub.

WILLIS: I'm barred from your tub?

VERDI: You're barred from my tub.

WILLIS: All right, well, that's that. Very interesting product.

VERDI: Yeah, it's really easy to caulk. And it's good to -- you know, foundation is key. So, when you're fixing up your home, whether you're resell -- particularly for resell, make sure all your foundation is in place. Fix cracks in the walls, make sure your moldings are nice and tight. A lot of times when homeowners come in they pay attention to big things, but not the details.

WILLIS: And the details matter.

VERDI: Details make the biggest difference.

WILLIS: All right, speaking of details, the level of light matters. You have a dimmer switch, here. Are these easy to put in? My husband always does this, and I want to do it, so...

VERDI: Very easy to put in. I would put them in every room. Again, if you're trying to sell your home, this is a really nice way to create a really beautiful even glow throughout the whole home when you're showing it. WILLIS: OK, and is it expensive?

VERDI: It's not, 15 bucks you can get a dimmer switch.

WILLIS: OK, and the dimmer switch, isn't working on these lights, but OK. OK, fabrics. Now, I love these. These are fabulous. But, isn't this stuff really pricey? I mean, you can spend so much money on fabrics.

VERDI: Yes, you're 110 percent right. Fabrics are very expensive. But here, the idea is that you can buy a little bit of fabric and change something with a ready-made curtain panel, add some trim that's really going to customize it and make it unique and beautiful, really give a personal touch to the home. I always recommend, with clients, decorating in neutrals. Keep everything really neutral...

WILLIS: These are not neutral.

VERDI: No. And pop accessories and details with color. So, don't do the whole drapery in this, because this is very aggressive, but do a detail in it. Do a toss pillow in it, do a table runner in it. You know, create a trim again on a drapery with that.

WILLIS: Here and there sprinkled, but not the entire room.

VERDI: Yeah. Don't ice it. Sprinkle it.

WILLIS: OK. We got floor tiles right in front of the table, here. And they are adorable.

VERDI: Adorable, from the Floor Company. So, those are fantastic, because what they allow you to customize. No room is really the same size as any other room, but there are these generic, you know, pre-manufactured sizes: 6x6, 5x7, 4x6.

WILLIS: And these are indestructible, these things.

VERDI: These are indestructible and you can customize. These one happen to be artful. The patterns are from Andre Gerard, but they have neutral color ones, they have a whole bevy of different textures. They're fascinating as a company, so you can, again, customize the style and the size.

WILLIS: I'm thinking kids' rooms. Because, you just wouldn't have to think about it.

VERDI: Ever. And you know, the ability to really make the carpet fit perfectly in the room and get color you want, the pattern you want is really unique.

WILLIS: These are fantastic and really pretty. And, wow, you know, they really make your house stand out when you pick the right thing.

VERDI: If you do the right things you can pull a lot of these fabulous things in and take away all of the drab. So, pop with color, again. Toss pillows about. So, starting at about $125 from Mattie Winerib (ph) and also she has coordinating and complimenting rugs that start at about $175. But these are great. These little area rugs are great to layer on top of a neutral ground.

So, if you did floor in all an oatmeal color you can get great vibrant rugs and lay them on top. They work really well next to beds and small hallways. Really a great idea to make the house much more exciting. And then you can really have your sort of celebrity vibe because these are all things that celebrities do.

WILLIS: I feel so special like a little star. OK, thank you so much for your help, today. Great stuff.

Join the best political team on television, all this week for coverage of the Republican National Convention, live from the Twin Cites. When we come back, the candidates on family friendly policies.

(COMMERCIAL BREAK)

WILLIS: Presidential candidates John McCain and Barack Obama both doing their best to court the Female vote. Earlier I sat down with Terry Neese, a distinguished fellow at the National Center for Policy Analysis. She says if they want to win that vote, they need to adopt some friendly family policies.

(BEGIN VIDEOTAPE)

WILLIS: Why is this so important, Terry?

TERRY NEESE, NATL. CTR. FOR POLICY ANALYSIS: Well you know, first of all, women make up 54 percent of the electorate and so...

WILLIS: That's a winning margin, right there.

NEESE: The women's vote is critical. But, it's critical, we believe at the NCPA, that women have the opportunity to have flexibility -- flexible benefits. flexible workplaces. So flexibility, portability and security is key for women.

WILLIS: And let's walk through each of those. Flexible employee benefits. Why is that important? Why frankly do you think that you can get these candidates to accept these ideas?

NEESE: Well, both of the candidates are really looking at all of these issues. They're not endorsing all of them, but they need to be. So they need to listen up. Flexible benefits primarily will allow employees to choose between taxable wages or nontax benefits.

WILLIS: Meaning?

NEESE: Meaning, if you're on a part-time job, which many people are today, that they have the opportunity to choose between lowering their wages perhaps and actually taking a benefits package, which is critical for many people who work part time. WILLIS: Well that's interesting. What about portability? You know, I know about a lot of women, a lot of girlfriends in the workforce, you know, want to be able to move those benefits. Tell us about that.

NEESE: You know, in today's society, people change jobs a lot.

WILLIS: All the time.

NEESE: In the '60s and '50s when labor laws, tax laws and employee benefit laws were written, people worked one job for a lifetime. That's not the way it is today. So, it is critical that people can take their health insurance with them and one of the ways to do that is to allow employers to pay premiums for individually owned insurance policies with untaxed dollars.

WILLIS: OK, wage and hour flexibility. Why do you think it's important and, again, do you think you're going to get any traction on this?

NEESE: You know, traditional 40-hour workweek is no longer. We have our Blackberries, we're working all the time. Hourly workers have no flexibility, whatsoever. And in fact, the Employment Policy Foundation found that 71 percent of all workers would choose compensatory time in lieu of overtime wages. Today federal government employees have access to choose compensatory time over -- in lieu of overtime wages. The private sector does not.

WILLIS: What's up with that? Well, and again, you're saying flex ability, the ability to choose. I guess, the pushback may be you are forced to make a choice you don't like, here. What is the downside? And are you concerned that at the end of the day we might invite practices that we really don't want.

NEESE: Well, you know, there's always abuses. But, let's let the free market work. Let's allow the employer and the employee to sit down and decide about the flexibility and give them the flexibility and portability that they need in their working lives.

WILLIS: Well, Terry Neese, that's fascinating conversation, interesting ideas. We appreciate you helping us out today. Thank you.

NEESE: Good to be with you.

(END VIDEOTAPE)

WILLIS: You can hear more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi, Saturdays at 1:00 p.m. Eastern and Sundays at 3:00, right here on CNN.

As always, we thank you for spending part of your day with us. Don't go anywhere, your top stories are next in the CNN NEWSROOM. have a great weekend.