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Debt Help

The Debt & Personal Finance Blog and Magazine

Monday, November 17, 2008

How Money Really Works

So you think you understand how money works? OK, maybe you're a finance or economics professor and you know exactly how money works in the USA. If not, then I highly recommend the following long but extremely enlightening video series I found on YouTube.com. I've added each segment of the five part Money As Debt series in order below for easy viewing. The series was created by Canadian artist Paul Grignon. Comments welcome. Enjoy!

Money As Debt: Part 1 of 5





Money As Debt: Part 2 of 5





Money As Debt: Part 3 of 5






Money As Debt: Part 4 of 5





Money As Debt: Part 5 of 5


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Wednesday, November 12, 2008

Even When You Have Outstanding Debts, You Still Have Rights

debt collectorsThese days, it’s commonplace to swap telemarketer horror stories with friends and family; it’s as American as apple pie. However, wild bill collector stories are also becoming increasingly popular. With the average American carrying an average of $2500 in unsecured debt plus mortgages, many of us know the dread of receiving unpleasant calls from creditors, although we’re less willing to tell the tales.

An old friend of mine named Wes is one of the great storytellers - he has spent the last 5 or 6 years climbing out of debt. So, he has collected some war stories along the way. One creditor told him that he wasn’t a real man if he didn’t pay his bills, and another asked him whether or not he truly cared about his family. One debt collector actually called my friend 2-3 times a day, every single day, including Sundays, for months. These relentless predators had no idea what his situation was, nor did they care; they were simply looking for the right button to press to get them what they wanted. However, as bad as these instances were, they weren’t the worst of the worst. There was one case that topped them all.

One creditor showed up at Wes’ doorstep.

Unannounced, with no attempts to contact him by phone, an employee from a payday loan establishment knocked on the door, looking to collect. Ironically enough, Wes didn’t owe a lot of money, and he had only missed one payment. Apparently that was enough to send someone out on a bounty hunting expedition. As soon as Wes opened the door, the woman began talking a mile a minute about his commitment, how he hadn't been in to pay, and how she had come to pick up the money. The woman didn't even identify herself - she just started talking. Wes had to interrupt her just to find out who she was. Needless to say, my friend was highly offended, and told the collector that she had to leave his property and not come back. I couldn't believe that a guy who was doing everything he could to settle his debts in a timely manner (even when it meant occasionally robbing Peter to pay Paul) would have to be subjected to such treatment, as if he were evading repayment.

This kind of harassment should be illegal!

The good news is that it is. However, when consumers don’t know that they have rights, they surrender them. The following video explains how to respond when a debt collector has gone too far:



The Fair Debt Collection Practices Act is designed to protect consumers against harassment, false claims, and fraud. You have the right to demand that creditors stop calling your home, to dispute the debt, and to receive, in writing, all the details concerning the debt owed. You also have the right to be treated respectfully and not harassed by debt collectors. Furthermore, if your consumer rights are violated by a creditor, you even have the right to sue them! The FTC says,

“You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney' s fees also can be recovered.”
Ironically enough, if you won your claim, you’d probably have to turn right back around and hand it over to the guys you just sued.

Ouch…

But at the end of the day, your dignity and privacy are worth fighting for, even if you only break even.

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Wednesday, August 27, 2008

After 9/11 Creditors Told Me, "There's Nothing We Can Do"

My husband worked on the 81st floor of Tower One in the World Trade Center for a company called Network Plus. On September 11th his entire office managed to climb down all 81 flights of stairs and escape just minutes before the buildings started to collapse. His boss guided the entire team of salespeople down and encouraged my husband to continue when he felt tired. At one point my husband’s boss even left the team in order to help carry a woman in a wheelchair down the stairs to safety. Miraculously, she survived as did everyone in my husband’s company. As the highest office to have every member survive, Oprah Winfrey even had them appear on her show.


The ordeal was stressful enough for us to deal with, and after a few weeks passed the company he worked for went out of business. They tried to survive by relocating but the entire city was in such turmoil that the company simply couldn’t make it work. I realized that my husband was the bread winner and I had no idea how we were going to pay for our bills. We had managed to accrue quite a lot of credit card debt and now had only my small teacher’s salary to pay for it all. As the bills continued to pile up I started to make phone calls to the credit card companies with the hopes of working out a payment plan. What ended up happening instead was my filing for Chapter 7 bankruptcy.


Before September 11th I had a credit score of about 650 and had over $10,000 in credit card debt. My payments were always on time and I rarely had any problems. Most of my debt was due to department store credit cards such as Macy’s, Ikea, Express and Spiegel. I also had an electric bill that I couldn’t pay and a cell phone bill which piled up. The interest rates were sky high, over twenty percent for each card and I knew if I didn’t work something out I was going to sink fast. Paired with the late fees I knew it would happen quickly if I didn’t do something fast. The largest amount I owed was to American Express and since they require payment within thirty days they were the first company I called.


To say that American Express is cold-hearted would be a nice way of describing them. I explained to the representatives over numerous phone calls that I wasn’t looking to get out of paying the $2,000 I owed them but that I needed more time than the thirty days. They could care less. They didn’t even sound sympathetic when I spoke to them nor did they seem to care about my situation. As if programmed like a robot, each representative I spoke with said the same thing to me, “there’s nothing we can do”. They would take nothing less than the full amount owed and as long as I didn’t pay it the late fees would continue. The late fees started to add up into the hundreds as November rolled around.


The other department stores sometimes sounded sympathetic when I told them about my situation but could do little to nothing to help me. The representative I spoke to at Spiegel was distraught to hear about my situation and immediately put her manager on the phone. He explained that there was little he could for me except to lower my interest rate from a 22% to a 12%. He waived one late fee for me but gave me no extension.


I found that no one really wanted to do me any favors at all. I explained to each one that I simply needed a two month period during which no late fees or other charges would be given to me. Even when I explained that I would be forced to file for bankruptcy they still gave me the same line – “there’s nothing we can do”.


The only company that helped me out was the bank that issued my student loans. Citibank immediately issued me forbearance for my student loans and gave me no problems whatsoever. They were nice and understanding and were actually the only company that did anything to help me during the difficult time.


My credit score began to plummet as did my credit history. After I filed for bankruptcy in December my score dropped to the low 500’s and stayed there for years. I couldn’t rent an apartment and I had a hard time getting utilities without paying a deposit. The funny thing was that my husband found a new job within months and our income was back where it was before, but none of that mattered when companies looked at my credit report.


Today my credit is back up to a 620 but is still marked with the bankruptcy. If the credit card companies had taken the time to work with me they would’ve had their money and I would’ve kept a clean credit report.

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Tuesday, August 26, 2008

Can You Get a Good Job With Bad Debt?

People generally go to college to get the tools they need to get a great job. A degree gives you the credentials you need for professional employment. However, the job hunt doesn’t start after graduation. One of the benefits of the college experience is the opportunity to attain internships and student positions that are designed to lead to permanent placement. They’re the diamonds in the rough that lead to the very job security people attend college to obtain. My best friend landed such a job, and despite how much her employers liked her and how qualified she was for the position, she was still very uneasy about her future.

It turns out that you need more than a great resume and an education to get a good job these days.

My friend applied for a student position with the U.S. Army as a civilian working on base. She would be hired as a technical writer, which was right up her alley. As an English major and a freelance résumé writer, my friend could create instruction manuals for equipment usage or artillery assembly in her sleep. Technical writing takes a skilled pen and an analytical mind, and she has both. So, from the moment my friend saw the listing, she got excited because she knew she had a real shot. The salary was nice and they offered tuition reimbursement. She knew that this was her job. Since she is a skilled résumé writer, she has never applied for a job and not received an interview (her résumés are that good), and she knew her résumé would also serve as a preliminary writing sample. She could kill two birds with one stone!

And that’s exactly what she did.

She got a callback and an interview. In fact, there were two interviews. In both of the panel interviews that she had to undergo, she absolutely shined. She’s just one of those people who knows how and when to turn on the charm, you know? I never did as well as she does in the standard, run of the mill, one-on-one interviews most people get from potential employers; yet in two separate panel interviews, she was able to handle the pressure and even impress them. If that scrutiny weren’t enough, there was the extreme background check; she had to fill out a form that was between 40 and 50 pages long, recounting almost every significant aspect of her life. It was so detailed that she had to give the names, addresses, and contact information of every person whom she had lived with for seven days or longer over the last ten years! How can you ask a college student who has had various roommates to give you that kind of information? It was a nightmare just gathering all of the information that they required. They looked into every job she ever had and anyone who she ever called a friend. It caused me to be a bit paranoid, being her best friend since childhood. I felt like I was under the microscope, too. Yet, despite it all, she passed the very extensive background check. She told me about how much her interviewers liked her. It was an exciting time for her.

That is, until she found out that they would also be checking her credit.

We both panicked - at the time she had a little over $10,000 in unsecured debt besides her student loans. It was also bad debt - as a full time college student she wasn’t making enough to may her bills, so those accounts were in collections. If the credit check was a part of the hiring process, my friend knew she was toast. We tried to remain optimistic about it, thinking that maybe they would let it slide or somehow the results would slip through the cracks. For a moment, there was a small ray of hope; she received an acceptance letter saying that she had been hired and received clearance to begin working. Then, the dreaded reminder at the end of the letter - she would start after her pending credit check was completed.

Of course, the credit check caused a problem.

My friend was called in and her would-be manager explained that her bad credit history posed a unique security risk that would prevent her from being employed by the Armed Forces. Because she would have access to extremely sensitive information, her financial woes could very well serve as a bargaining chip for terrorists seeking information. In a nutshell, they could not afford to have people who may be desperate for money walking around an army base with access to classified information and areas. They did, however, tell her that if she paid the debt off she could reapply. Without the job, she couldn’t afford to pay off the debt. So, a great opportunity was lost because of previous financial irresponsibility. Soon after this experience, my friend, an older student at the time, filed for bankruptcy.

Ironically enough, she was later hired by the IRS!

Go figure…

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Monday, August 25, 2008

The $4000 "Free" Trip to Paris

My oldest child has retinitis pigmentosa, a degenerative eye disease that slowly erodes her vision. She is now legally blind, but eventually, she will lose all of her sight. Her world will go dark forever, and there’s not a thing I can do about it. Some day, medical science will hopefully find a cure, but until then, we deal with the situation as best as we can.

My daughter has had a fascination with Paris ever since I read the Madeline books to her when she was very, very small. When she got older, she told me quite often that someday she was going to go to Paris. I smiled, but I just kept my thoughts to myself. One day, she came to me and point blank asked me to take her to Paris so she could see the Eiffel Tower before she went blind.

My heart just broke because as a single American mother of 4 children going through a horrific and costly divorce, Paris was just not on my “can do” list. There simply was no way I could even dream of affording such a trip. I tried to do the best I could for her—I got her French lessons and books on Paris. I bought her an Eiffel Tower 3-D puzzle and helped her put it together. I hoped that she might accept this instead of the real deal but all of these things made it actually worse.

I was homeschooling my children at that time and they were attending a local homeschool co-op where I taught. My daughter was taking French lessons there and happened to mention to her teacher that she wanted to go to Paris before she went blind. The teacher had actually lived in Paris and still had contacts there. She didn’t say anything to my daughter or me, but she began to work on that Paris trip.

The group began to do fundraisers and spread the word that they were raising money for a community service project. The project: granting a wish to a handicapped child which would allow her to see Paris before she lost her sight. Our community rallied behind this project and the group collected enough money to send both my child and I to Paris for 2 weeks along with the French teacher as our guide. Another mom in the group agreed to keep my other children for free.

When the French teacher told my daughter and I that we were going to Paris after class one day, my child cried tears of joy. She was SO happy and I simply couldn’t believe it; maybe the world wasn’t such an awful place after all. The teacher bought tickets for the airline as we assumed (wrongly) that my ex would be excited for his child to go to Paris, especially since it was free, and would help in any way he could.

I went to my ex and told him about the trip and asked him to sign the paper for the passport. He refused. I went again and again and went with friends and he still refused. I had my lawyer write his lawyer a letter and they never responded. The Paris trip was approaching.

I know it sounds stupid. I mean, why wouldn’t the man just SIGN the paper and be done with it? To understand that, you’d need to understand a little bit more about the relationship the ex and I had. My ex was a very abusive, controlling man. He also had been diagnosed schizophrenia, borderline personality disorder, and oppositional defiant disorder.

Another thing that happened shortly after I left and filed for divorce was that my daughter had admitted to a counselor that he’d been abusing her during her court ordered visitation. Because of this, he’d lost his visitation privileges for a time. They’d been recently re-instated, but he was furious. He was angry that I’d left him and filed for divorce; he was angry about the abuse charges; and he was mad that we were moving on with our lives without him. We were going to pay for what we’d done to him, and this was the perfect opportunity for him to demand payment.

My lawyer advised me to sue him in court and ask the judge to order him to sign the paper. The only catch—it would cost me $3000. I signed the papers and charged the 3k to my credit card. I remember how angry and embarrassed I felt. I simply couldn’t believe that one nasty man was spoiling this wonderful thing for everyone. Strangers had, out of the kindness of their heart, given of their time and money to make this possible for our child and he was going to spoil that. Another thing, how can you deny your child her wish to see Paris before she went blind, if the trip is FREE? How? He was a cruel, heartless person indeed.

The day of the court hearing arrived and we argued our points in front of the judge. The ex’s lawyer argued that our daughter should not be allowed to go to Paris for a whole bunch of stupid reasons and asked the court to deny my request. My lawyer argued that our daughter should be allowed to go to Paris for a whole bunch of reasons and asked the court to grant me my request. Many of those who had contributed to the wish fund were present observing the court session. They too were shocked that things had gotten to this point.

After a brief recess, the judge agreed to grant me my request. He ordered my ex to sign the passport and allow our daughter to go to France and then the judge left the courtroom. This is when the ex, his sister, and his lawyer made a break for the exit. They had no intentions of obeying the judge’s order.

I lost them in the crowds as the different courts let out. I can not even describe the amount of anger I felt at that point. Well, maybe I could describe it, but my description would be peppered with a lot of not so nice words. I saw that across the hall, the ex had taken the elevator with his lawyer and I ran for the stairway followed by a bunch of the people who had supported me. We ran down the stairs and found…nothing. He and his lawyer were gone. I ran out of the courthouse and there they were, talking in one of the gardens in front of the courthouse. I ran up to them both and they were shocked.

“The judge told you to sign this. Do it now.” His lawyer started to argue that he couldn’t and make a whole bunch of excuses when the rest of the group of my supporters caught up with me. The ex and his lawyer were surrounded by a group of us…all very, very angry.

“Sign it. Or I’ll call the judge and report you to the Bar Association.” His lawyer, seeing we meant business, told him to sign.

The crowds started cheering and the ex and his lawyer left. We walked to the parking garage, and the ex’s sister came out of nowhere and tried to hit me and get the passport paper away from me. My friends helped me to fight her off and we continued walking.

I know, it’s incredible, but it really happened this way.

I expedited the passport application, which cost me several hundred extra dollars, but I did get the passport back in time for the trip. The judge had also ordered that my ex be allowed to contact his child for regular phone calls of 1 hour 3 times per week. It was my job to pay for these expenses too. This cost me several hundred dollars as well.

If my experiences were a commercial, it would read this way:

“Free” trip to Paris for 2: $4000
Knowing that your child has seen the Eiffel Tower before she went blind: PRICELESS

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Tuesday, August 19, 2008

The End of an Affair

Most people love money. So many people today choose to buy expensive material things and validate themselves by these purchases. Money helps people feel important, to take control, to make a statement about who they are. Money becomes a best friend, a family member, and a lover. Obtaining money is all some people can think about and all that they believe in. It doesn’t matter how they get it or who they hurt in the process, as long as in the end they get the money they need to feed their addiction.

Some people don't have the means to gain the money they desire but this doesn't stop them from having irresponsible flings with it. Even though these people may be late on their bills, they will go out and buy something they can't afford just to make themselves feel better. And it will usually work. During the heat of the moment people who make an impulsive purchase will feel like they are at the peak of their happiness. And when the feeling disappears they'll likely feel guilty, ashamed and regretful. Not much different than a one night stand.

Like all love affairs, my own love affair with money was short, sweet and tumultuous. It was both satisfying and completely unsatisfying at the same time. And similar to many love affairs, mine began at work. My job as a sales representative on Wall Street in New York City started up a love for money that would only go away after it ran its course. It became a love-hate relationship in which I began to spiral out of control.

Making a ton of money as a person who wasn’t even good at her job seemed like everything I ever wanted. I was renting an apartment in a top building and I was able to buy anything I wanted. I shopped in boutiques, purchased the newest cell phones the day they hit the market and treated people to dinners and drinks. What I didn’t realize at the time was that I was building my life around money and money was the thing that was in control.

After I lost my job the love affair became quite rocky. I no longer had the sparkle of admiration I once felt towards money since it was now seeing less and less of me. I moved out of my elevator building apartment into someone’s rental in their house. I went from having a washer, dryer, dishwasher, microwave and air conditioner to having none of these. The quiet of the building I had lived in was replaced by screaming landlords who constantly argued with each other. Instead of shopping at boutiques I started shopping at Old Navy and other discount clothing stores. Eating out and partying all the time was replaced with staying home and cooking dinner.

Some people in my situation would have never given in to the evil tricks that money played on them. These types of people would have picked themselves up, got a new high paying job and started up their love affair again. They would believe that they were back in control, but of course this would just be another trick money would play on them. The second time around would likely be more passionate than the first, and it would become a lifelong addiction that created life for those who chose it. People that would never dream of a real life affair find themselves embroiled in controversy and secret desires.

But love affairs rarely end up so happy in the end. If they do, it takes a lot of pain and struggle to get to the end goal and a lot of people get hurt in the process. I chose to end my love affair with money by replacing it with something real, a true love that was not based on sneaky escapades and under-the-cover operations. As you look back on the choices you’ve made thus far in your life, ask yourself, are you in the midst of an affair?

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Tuesday, August 12, 2008

The Expensive Road Trip To Hell and Back

Life isn’t fair. Perhaps you have learned this tidbit already. Family court really isn’t fair. You may not have learned this already.

When I divorced my ex, I didn’t realize that the share of justice pie you get largely is determined based upon how much money you can shell out to hire a lawyer. My ex’s family re-mortgaged their expensive suburban Philadelphia house in order to hire him a lawyer. My family smiled and said, “Good luck with that!”

I hired the best lawyer I could almost afford and wracked up debt on my credit cards paying for his services. That was a bad decision, but the only one I had really. My ex was abusive and I really feared for the safety of my children. So my choices were: fight for my children or go into debt. I chose the first option.

Years went by and I happened to go into a coffee shop one day while the kids were visiting their dad. I met the most wonderful man who was a soldier visiting the area for some training. He lived over 800 miles away near the beach in Virginia. We ended up exchanging information after we’d finished our coffee and went our separate ways. I really didn’t expect anything to come of it at all, but life rarely turns out like we expect.

Fast forward a year or so and we are preparing to get married. We went to court to work out visitation because my ex frankly asked the court to NOT allow me to move out of state with the kids. I assumed that the judge would give us a standard “long distance” visitation arrangement. You know, the non-custodial parent gets the summer and long school breaks. It didn’t work that way.

Incredibly, the courts ordered me to meet my ex half way each month in DE to exchange the children with him. Some months, with holidays and breaks, it is even two times a month. The visits are from Friday to Sunday (normal visits, not the holiday breaks) and take approximately 16 hours to complete. With gas, tolls and food costs, we are spending an incredible $500 a month if we have to do 1 visit. This month, we will make two trips—spending an astounding $1000 to obey a court order. His regular monthly visitation occurs a week after his court ordered Labor Day holiday visit and so, in the space of 6 weeks, I will spend $1500 on visitation. Of course, the total amount of money the trip costs depends upon the wildly fluctuating price of gasoline. The ironic thing—he has been court ordered to pay me $930 a month for our 4 children. I spend more paying to take them to visit him than I actually get in child support.


For him, this is really no big deal. His family feels sorry for him and pays all of his expenses, including a rental car to make the trip and reimburses his gas money. I do not have a financial fairy Godmother.

In order to ask the court to re-consider, I would have to save up a retainer fee of $5000. I have asked my ex to re-consider, but he refuses. I have caused him great pain by remarrying and getting on with my life, and he wishes to make it most difficult for me.

I try to not let it get me down…and think of all the things I could do with that money. Right now, I am trying to get the kids ready to go back to school, and that $1500 could surely buy a lot of clothes, backpacks and school supplies. It could also buy a lot of food. But I have no choice. If I can't make those trips, I risk being sued for contempt of court. Conceivably, if I was found guilty, my children could be taken from me and given to my abusive ex.

This month, to make the budget work, we’re eating a lot of Macaroni and Cheese and other pasta meals. I’ve found that if we eat soup once a week, that really helps the budget too. I’ve bought a bunch of back to school clothes at the local thrift stores and I shop on half price Wednesday in order to stretch that already pinched budget even further. I have even learned how to cut hair in order to minimize our expenses even further. As gas prices continued to rise this summer, we cancelled our vacation plans and other fun events we’d planned in order to be able to afford to pay for the trips I was court ordered to make.

Some days, the stupidity of it all really gets to me. My youngest child is 9 years old and I simply can't imagine having to do this for 9 more years, but what choice do I have? With how tight the budget is, there is no money left over to be able to save to go back to court to ask the judge to re-consider the current arrangement.

I don’t for a minute regret marrying my current husband and moving. My children are doing very well and loving life near the beach. Yes, moving was one of the best decisions I ever made. But if I had to do it all over again….I think I’d ask my husband to move too…and we’d go across the country, where no one would tell me I had to go through this insanity every single month. Sure, it would mean purchasing plane tickets several times a year so the ex could get his visitation, but think of the money I’d save!

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Thursday, August 07, 2008

The Student Loan Dilemma

The Student Loan DilemmaWhen I decided to go to college I knew that no matter where I went I was going to take out student loans. My parents didn’t have much money to pay for college and I had little to no savings for the occasion. Instead of thinking about money and how much the bill would add up, however, the school advisor was limited to helping me choose a school. After all, I was going to have a college degree in four years so what’s the difference how much my student loans added up to? While there are some kids that have a strong and dedicated desire to be something great like a doctor, lawyer, or dentist, most kids planning for college simply go to get a degree in whatever interests them by their junior year. If you plan on going to graduate school at a hard-to-get-into college then the undergraduate school may matter. If you are going to graduate with your bachelor’s and get a job, I’ve learned the institution really means nothing.

I chose to go away to school in upstate New York where most of my friends were going. I had no clue what I wanted to do but knew that I qualified to have just about everything paid for by my student loan. The majority of the loan was through a private bank while just a minute amount was funded through the government. An even smaller amount was given as a grant that I wouldn’t have to pay back. At 18 years old, I didn’t think twice. I packed up my belongings and headed off to what would become the best four years of my life.

After I graduated college, my loans totaled over $20,000. I slowly paid off the government loan which was around $3,000 and deferred payments on my private loan. Although the rate was pretty good at 4.41% I found it impossible to pay the $390.00 monthly payment with my newly acquired job. I applied for consolidations and was denied multiple times. Since the rate was good everyone I spoke to acted as though the $17,000 should be easy to get rid of. But I didn’t go to school to be a lawyer or doctor, I graduated with a degree in Psychology that I settled on after 3 years of trying to figure out what it was I wanted to do. In fact it seemed as though my college degree was more of a high school diploma and all the places I applied to could care less what I studied, only that I had the degree. Completing 4 years of college showed dedication and an aptitude for learning and that was all anyone seemed to worry about. My job was in sales and I had no idea how I was going to pay back the money I owed.

That was 8 years ago. Today my loan now totals over $19,000. The interest keeps building up and the payment remains at $390 a month, a nearly impossible amount for a person that makes $30,000 a year to afford. Now that I own a home I’m going to try the consolidation process again to see if that will help. After all, isn’t better for me to pay something rather than nothing? It would seem from the $2,000 in interest they’ve made that the answer to that is no.

While going away to college was a great experience, was it really worth the price of a new car? I could have easily got the same degree at a local community college for less than half the price and to be honest most employers could care less where the degree came from.

My answer to this dilemma is a big fat resounding yes.

While many kids may seem like they are just going to college for the sake of it, who are we to make that choice for them? I am happy I was given the chance to decide for myself and will do the same for my children someday. Limiting a child to a local community college when they have aspirations is like telling someone who wants to be a police office they can only be a security guard. Yes, many of them will fail and end up protecting the local mall anyway, but isn’t it worth it to give them a chance?

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Thursday, July 31, 2008

The Pros and Cons of Settling a Past Due Debt

Before the economy fell into the dark pit of despair that it seems to be in today, I was barely making ends meet. We had far too many bills than we had money coming in. At one time I sat down and ran the numbers and we were over $150,000 in debt on an income of $50,000 a year (I was not working at the time). Coupled with the fact that I was in very poor health and making over a year and a half's worth of doctor trips and hospital visits, and we were afraid to answer our phone from the bill collectors calling day and night. I had four hospital stays in that period of time from kidney stone and getting my gall bladder out, and then was plagued with fibromyalgia and interstitial cystitis. Between the mounting medical bills and having more bills than income, we were sinking further and further behind. Finally it got to the point when they (the bill collectors) were offering to settle our past due debt for 50% of the balance. Some of these were medical bills, others were credit cards used to get by when we just didn't have any money left. There were even times when I was getting a cash advance on one just to pay the minimum payments on the rest. Truly a dark time in our financial life.

The Pro's
The phone stopped ringing with twelve different collection agencies calling about the same bill. That was the biggest relief. Then there was the matter of just knowing that the debt was settled, done, and over with. It was a positive step in the right direction to trying to rid ourselves of debt and credit. It was far easier to come up with the diminished lump sum payment they wanted to settle than it was the entire amount of the debt. Every dollar that we "saved" in the lesser amount was able to go toward another debt that was still in the (now shrinking) pile of bills. Attempts at payment arrangements never seemed to be enough for the creditors that we had. They (before the settlement offer) were unwilling to accept a payment plan that would have worked for us, and kept piling on late charges and over the limit fees on the credit cards.

The Con's
About two months after settling the debt, it was showing up on our credit reports. I didn't think about it at the time, considering it a good thing that we at least paid most of the debt and stopped the collections, but it was working against us still credit wise. They were actually viewing the settled debt worse than if we weren't paying on the debt. What we did was do a "charge off" where the agencies forgive the large portion of the debt and stop trying to collect. These charge offs appear on our credit statement just as if we hadn't paid a thing and the companies decided to just stop attempting to collect. A very bad sign for anyone looking at our credit report. Now I realize that with our new mindset of Cash Only in paying for things the credit report should really not matter much, but it does.

In summary, if you are in over your head it’s a very personal decision. It definitely isn't a magic wand quick fix and all your credit and debt troubles go away. The best advice would be to talk to a financial consultant about where you are and where you would like to be in the future and the best method to get to that happy place. For us, had I had it to do over again knowing about the black marks on the credit report and everything, I'm certain I still would have done it. Today I have a savings, no credit debt, no harassing phone calls all the time from collection agencies, and the ability to know that we can save for the things we want instead of paying for it on credit. It was a good decision for me.

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Friday, July 04, 2008

Dude Where's My Car?...Seriously

I woke up in a hurry knowing that I only had about 45 minutes to get ready. That's 45 minutes for my daughter and me to bath, dress, do our hair, eat, grab everything we needed and get out the door - not a second to waste or spare. We made it, but going towards the parking lot it took me a few seconds to realize that something was missing. I kept walking though because I was certain my eyes were playing tricks on me. Yet, when I reached our parking spot our truck definitely was not in it, nor was it anywhere else in the parking lot. Way to start the day.

My initial shock quickly turned to frustration once I realized what had happened. Our financing company (the powers hereby known as HSBC) had sent someone out to repo our truck, when just days before they were on the phone reassuring my husband that we would be in the clear as long as they got some kind of payment. I think back now and realize that when they were asking him to 'update' his information, they were actually confirming our address and then waited until the day he deployed to come out. So there I sat, husband having just left, a million things to do that day, no transportation, and certainly nowhere near the almost $3,000 I knew we owed on the note. Plus, I kept wondering how I was going to tell my husband that his prized Harley Davidson edition F150, that he had worked so hard for and loved more than me, was gone.

I had half a mind to let them keep it because we could never really afford the thing to begin with. I couldn't let it go though because they said there would be no repo if we could send a payment and make arrangements for the rest, which we did. I spend the rest of that first day making phone calls to see who had taken the truck, why, where it was and how much they would accept to at least get it back. It didn't really surprise me that I got the runaround and for some odd reason no one knew anything except that we owed them money. Day two was spent doing the same thing, this time with a little more success. The representative I was working with told me he could keep the truck from going up for auction, but the kicker was that I had to give him $2,000 and he could only guarantee the offer for two weeks. I thought that was outrageous since 1) they shouldn't have taken it to begin with after what they said and 2) if we could afford to give them that much then the note wouldn't be past due. Needless to say, day three was spent calling around and begging my family for money and luckily I was able to scrounge up what I needed. Day four, I called up the company and arranged for payment in hopes of having them release the vehicle back to me. Once this was done, they gave me the information for the impound lot and this is where the real fun began.

If you noticed, everything I just described took place over the course of about four days. The next day I went to the company that took the vehicle, paperwork in hand, thinking I was on the way to pick it up. Turns out that it wasn't there, and according to paperwork the company had on file it was transported to the auction lot in North Carolina two days after it arrived at their facility (we lived in Virginia at the time, about 4 hours away from where it was taken to). I don't think the word upset is enough to describe what I felt like at the time. After a verbal battle with the employees there, I was able to get about half of the contents of what was in the vehicle, information for the auction company, signed some papers and high-tailed it right back home to give a piece of my mind to Mr. HSBC representative. This guy assured me that the truck would be safe and kept from auctioning for two weeks, not knowing that while I was talking to him the first time, the vehicle was already on its way to another state. He proceeded to tell me that he had made me no promises and that my payment was good enough to keep the truck from actually being auctioned but not from being transported to the auction site. How much sense did that make, really? After some more time on the phone, he agreed to send over the necessary paperwork and it was up to me to and make sure all was well from there. By this time, it was the end of the business day so I had to wait yet another day.

First thing the following day, I called the auction company and went though the whole rigmarole to get the truck officially released and ready for pickup. To make a long story even longer, I was told that I had no authorization from the finance company to do anything and only the owner could come down and claim the vehicle (it was in my husband's name). So I had to contact the HSBC rep, once again, who had the nerve to tell me that he had NO IDEA that I had intentions to pick up the vehicle myself, which is why I didn't have any kind of authorization. I asked him how he figured I wasn't going to pick the vehicle up if I was the spouse of the owner, had paid him every dime we had, went through all that hassle and had previously informed him that the owner was away on a deployment. I shamefully admit that we argued about this for about 15 minutes before he transferred me to a supervisor at which point I just got off the phone. In the end, and after they received every piece of paperwork imaginable, had exhausted all their excuses and wasted enough time, I was able to get a friend of mine to take a road trip with me to go pick up the prize.

Here we are about a year later still struggling to keep up with these payments and wondering when they will strike again if we're even a day late. There's no convincing my husband to consider trading the truck for something more manageable because it's his and he's determined to get it paid off to show these people that he can. He financed it for about $28,000 and is paying $650/month with an interest rate well over 14.5%. No one will refinance with us for lower rates and payments, and no matter how much we pay it seems like the balance owed is always $2,000+. It's insane and there's no light at the end of this tunnel.

Cars and car loans are much more attainable these days, even with some bumps and bruises on your credit. A person could be denied for a $500 personal loan, but then turn around and get a $10-15K car loan (I can vouch for this from personal experience). This can be a positive advantage for those who really are in need but don't have the best credit record; yet it could also be a trap that causes people to dig themselves further into the hole with debt and no help or hope of getting out. The lessons to be learned here are always pay your bills on time, of course, but also never bite off more than you can chew. This way you stand less of a chance of running into a situation where you can't pay on something. When it comes to leasing and financing, always be aware of what you are getting yourself into by knowing and fully understanding the terms, rates, payments and any other important details and fine print.

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Thursday, June 19, 2008

Doubling Down On Debt: How I Became a Gambling Addict


One tidbit of information about me that most of my friends don't know is that I used to be a gambler. You may not think that's such a big deal, but my reasons were different than most. Many people visit casinos and play the slots and other games for recreation; still others enjoy the thrills and high drama that ensue with games of chance. Neither was the case for me. As young as nineteen years old, when I went to the casino, I was serious and focused because I was going there to make money. I gambled to make money because I was drowning in debt.

The legal age for gambling in Canada is nineteen years old, so many young Michiganders cross the Ambassador Bridge looking to have a grown up good time. That's why soon after my nineteenth birthday I began to study the game of Blackjack. The slot machines weren't much fun to me because they seemed to leave everything to chance, with most players losing their money in the end. That wasn't much fun at all. I had heard that Blackjack was the only casino card game in which the house could truly be vulnerable, so, in my free time away from my studies, I learned as much as I could about Blackjack. The more I learned, the more obsessed I became with getting good because it seemed that this form of gambling might really empower me to pay off my debts. By my sophomore year in college I was beginning to rack up lots in student loans, and I had a couple of credit cards that were close to being maxed out because I was not as fiscally responsible as I am today. Throw a new car with a note in the mix and you end up with one very frustrated young lady. I was mostly paying my own way through school, so I quickly learned about the stress that comes from high debts with low income.

I needed a quick way out.

So, I turned to gambling. Not being a real risk taker, I vowed to only gamble moderately, and to only play a game like Blackjack that could yield a reasonable return for my educated effort. In the beginning, my plan worked. My visits to the casino brought me some much needed prosperity. However, as time went on and my debts began to accumulate, my gambling trips became more frustrating and I became more desperate. I found myself addicted to playing Blackjack and addicted to winning. I would even play the slots that I disliked so much, just hoping for a break. I would take bill money to the casino to flip it so that I could pay more bills, and end up losing the little bit that I had. My youthful ingenuity had turned into a full blown gambling addiction, and it was doing more harm than good.

I needed a quick way out.

I thank God that at the height of my demise, my mom was in the picture with a watchful eye. She saw what I was doing, and she began to counsel me. She even helped me get my head back above water. Because I hated losing so much, her lifeline of encouragement and comfort was easy to grab a hold to. I was falling into deep depression, so her understandng and care nursed my poor spirits back to health. I really needed someone older to tell me it would be alright and offer me a helping hand. There are millions of struggling gamblers who are not so fortunate, however. Many gambling addicts do not have a shoulder to cry on, and many of them are so hooked on the thrill they get from high stakes that they aren't able to pull away the way that I did. I'm glad that I was able to get out of gambling before it truly became a lifestyle. I feel the same way about debt. Maybe if gambling and debt were part of my lifestyle today, I might still be trying to juggle them both. I suspect that many gambling addicts are performing such juggling acts right now.

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Tuesday, April 29, 2008

What A Little Effort Can Do For Debt Reduction

There are many, many things I love about my life here in the beautiful mesas of the Chihuahuan Desert. Among those are the contrasts, the juxtapositioning of old and new ways of living.

While I make use of the remarkable technologies of today as I write this now, I spent some time this morning as the indigenous women of this region did for thousands of years -- making tortillas. And, while I was working, I was thinking about a couple things related to cooking at home -- far less expensive and far more healthy overall.

I could buy tortillas. They run about a dollar a
dozen. In the photos (always clickable for a larger view), I am mixing up a batch of about 40 for less than a dollar... and, if I do say so myself, my home-made, fresh tortillas are far better than those mass produced in the factory and bagged up. Everyone here has said so, too.

In the big pot next to my wanna-be comal -- I have no proper comal for tortilla making, so I make do with a well-seasoned iron skillet -- are about 5 pounds of pinto beans. I'm feeding 9
people with hearty appetites. I'll be smashing and
frying a good portion of those beans with some
spices for tacos tonight, which is why I made
tortillas this morning. The rest of the beans will be used tomorrow by my sister to make her awesome chili.

The dried beans are pretty inexpensive, about 2 dollars for 4 pounds. Canned beans are easily double and often triple the price. It seems kind of silly to pay that when cooking dry beans is so easy. If I wanted to, I could buy canned refried beans for my tacos, though that would also be much more expensive, and I'd still have to add spices to make them palatable. Furthermore, they'd be less nutritious from the can, and probably have MSG and be high in sodium.

My point, over all, is that many people spend a lot of money on prepared foods, convenience foods, and drive-through foods, when by investing a little effort they could save a considerable amount on their food bill by cooking at home. Furthermore, most of those quick foods are price heavy and nutrition light. The benefits of eating fresh, whole foods are innumerable, but if we stick to the financial aspect for a moment, improved health leads to less money spent on costly health care.

There are many things in day-to-day life that are similar. For those looking to reduce debt and decrease spending (leaving more money for saving or more time for something other than working to pay the bills), learning to do basic repair tasks around the home and on the auto really isn't all that difficult. Being less dependent on others to meet your needs is a very good thing, particularly in today's economic climate.

I've been following the recent news about food shortages, skyrocketing prices, and the rationing of some food items throughout the world with a blend of fascination and horror. This is exactly the scenario that inspired me to remove my family from the city. I, geek that I am, have strange hobbies. Global economics is one of those hobbies and I've been watching trends for a few years now. To me, as well as to many financial experts, it looks like times are sure to be fiscally challenging in the near future and for a significant period of time thereafter. The financial markets are going to have to go through their spasms of correction and we're all going to have to go along for the ride.

During the Great Depression, while those in rural areas did experience severe poverty, they did have a significant advantage over those living in urban areas -- the ability to grow and hunt for their food. During World War II, the Victory Garden was an important supplement to households throughout the nation, including urban neighborhoods, as common, daily-use foods were rationed by the government. Looking at our situation today, it seems that learning to develop a bit of food self-sufficiency -- whether by cooking more, creating urban patio or fire escape gardens in containers, or larger suburban or rural gardens --is not just good economics in terms of a debt reduction plan or strategy for reducing overall expenses, but also simply good old-fashioned common sense.

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Monday, April 28, 2008

Out Of The Blue...


We've had the equipment for weeks. What we didn't have was an installer. The company couldn't seem to locate one willing to come to our remote high desert location. Naturally, they made no mention of that potential difficulty when they took the order.

So, we held the equipment through installation cancellation after installation cancellation. We just had our appointment for April 30th recently canceled, as the closest installer had to drive 800 miles and had yet to schedule other installs in the area.

And, then, out of the blue, this past Saturday, installers arrived with no notice. After, of course, I'd contacted another satellite company because this one couldn't seem to get the job done. Naturally, their website is just as good as their customer service and I cannot get into my account and will have to go somewhere to call them, as there is no way to e-mail their support system. That doesn't surprise me, ha ha ha.

All that, though, seems fairly small in comparison to this great leap forward for us here in the desert. I can now work from home again. The past few weeks of me having to go out to work have been very stressful for the children. I've always been at home with them. With everybody -- my sister and my brother -- having daily access to the Internet, everybody can get back to work and we can start moving forward with a variety of essential projects, like solar panels to run the modem so we don't have to use the gas powered generator as much.

With all that is in the news today -- food shortages and rapidly increasing prices, oil prices skyrocketing, the dollar continuing its fall, an epidemic of struggling mortgagees, a tidal wave of foreclosures, and the potentials that lie underneath the staggering burden of consumer debt -- our efforts towards sustainability and self-sufficiency seem quite timely and more important than ever.

The path for some of our nation's banking and lending institutions seems inevitably to lead to failure. Already sustaining significant losses from the sub-prime mortgage and lending debacle, many of these institutions are now having to deal with consumer debt gone bad. Economically stressed consumers have been missing payments as they struggle to make their salaries extend to cover the most basic of needs as the costs of those needs move steadily upwards.

That oft repeated Chinese curse -- not the one referring to flooding the market with cheap consumer goods, but the one that says may you live in interesting times -- appears to be an apt description of our current situation. Very interesting times, indeed. To me, everything going on today indicates an imperative need for preparation -- reduce debt, increase savings, and stock the shelves.

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Tuesday, February 05, 2008

Frugal Living Makes Headlines?

Apparently, living within one's means is so uncommon these days that the New York Times reports a 'cultural shift' moving Americans toward not living like debt is a lifestyle, but like the burdensome financial responsibility that it is. Because of the economic slow down stemming from increasing foreclosures and unemployment, fresh credit is harder to attain, so people are cutting back. That's what the New York Times is reporting.

Is being marginally responsible news now?

What happened to the values that we learned growing up? What happened to saving for a rainy day, not taking more than you needed, exercising restraint? I understand that sometimes people find themselves in a tough spot and often have no choice but to use credit to live, but most of us don't fall into that category. Most of us have financed lifestyles that our paychecks can't justify. Most of us have at some point or another lived as happy contributors to the debt carrying culture we call Western living.

Well, now the chickens have come home to roost. It's time for us to pay up and live like people did before consumer credit became mainstream.

It sounds good to me.

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Sunday, January 13, 2008

Reduce Your Medical Debt

Hospital bills are expensive. A single emergency room visit with x-rays can cost $1000 or more. If you need an MRI or a CT scan, it will easily add another $2000. A hospital stay without surgery for only a few days will run $5000 and up. Unfortunately, debt due to medical expenses is difficult to avoid. When you need medical treatment, you need it. It is not usually an expense you can save up for and just put off treatment until you can pay the bill with cash at the time of service. But you can look for ways to reduce your bills and in turn, your debt.

I have spent the past 4 years fighting an $18,000 hospital bill for my husband's dental surgery. He has Medicare and full coverage on my Blue Cross Blue Shield policy as well as dental insurance. In effect, he should not have to pay more than the BCBS policy copay for any office visit or hospital stay.

He has a rare condition that requires that ordinary dental work such as fillings be performed under general anesthesia with special medications. Prior to scheduling the surgery, I met with the finance office to make sure that they had notified all of the insurance companies correctly and included an exception notice as insurance does not generally pay for dental surgery. I was assured it was all done correctly and the pre-authorizations had been obtained.

As you can guess, nothing was billed correctly. They billed my insurance first, even though it was supposed to pay after Medicare was done paying their share. They forgot to send the exception notice to Medicare. As a result, Medicare said it would not pay and under the terms of Medicare, I did not have to pay either, since the billing error was the hospital's fault. My BCBS and the dental insurance company eventually picked up a lot of the tab, but the Medicare snafu left a $6000 tab in my name.

I have spent countless hours and many certified letters trying to explain to the hospital why I do not owe them any money. It was well worth it, as I finally got them to reduce the bill to under $200. I finally just paid that in order to be done with it. But, I had to take the time to read the Medicare and BCBS policies and fight for the reduction. Imagine how many people would not have realized that the money was not owed and would have just paid it based on the hospital's word that they owed it?

So here is the advice I can pass on after my ordeal - if you have medical bills, always make sure they are accurate. You would be surprised at how often you are charged improperly. My husband was billed for multiple ice packs – which you or I would have used after dental surgery to keep our faces from looking like watermelons. However, due to his medical condition, he is forbidden to use ice. I was able to have those charges removed from his bill. Always request a detailed copy of your bill and make sure that you actually received every service, medication and supply listed.

For those of you with health insurance, read the fine print in your policy carefully. Always request a detailed copy of your bill and make sure that you actually received every service, medication and supply listed. Then double check to make sure that your insurance company paid for everything it was supposed to pay for. Do not agree to pay for something that your insurance should have covered.

If you do not have health insurance, ask to set up a payment plan. Many hospitals will reduce the costs for someone without health insurance who is going to have to pay in case, so check with the billing office to see if your hospital offers this reduced cash rate.

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Sunday, December 02, 2007

My Mom Can Be Such A Comedian...

A few days ago I was having a conversation with my mother, and, as usual, she asked how I'm doing financially. I told my mother what I tell everyone who asks: I have no complaints. Of course, I understand why my mom asks all the time. She's known me my whole life, and for a relatively large percentage of my time on this planet, I've had plenty to complain about, including massive credit card debt, a student loan-related judgment against me, and various creditors calling me incessantly trying to collect. I'm not rich, but I am pleased with my financial circumstances, especially when I consider my irresponsible past. I've learned a lot over the years, and one key thing I've noticed is that you can live quite well and be happy while earning a lot less than the Donald Trumps of the world, but only if you have no debt, or your debt is at a very manageable level. In other words: you'll be surprised how little money you can live on when you're not servicing mountains of debt. Yep.

So this conversation with my mother took an interesting turn this time around, as she asked me if I was aware of my brother's problems with credit card debt. I told her that I wasn't, and she proceeded to enlighten me about my older (by 3 years) brother's credit card debt, which is currently at a whopping $45,000, and rising. When she told me, I did not believe her. I thought she was pulling my leg. You see, when I was growing up, my brother always seemed to have his act together when it came to matters of money. He always had savings, when I had none. He always had a job during the summer breaks, whereas my summer work history was...well...spotty. I asked her why he had so much credit card debt, and she told me that he just wasn't doing well. I still didn't believe her.

The reason for my incredulity was simple: my brother and his family are all healthy (so no big medical bills), he has a steady job working with computers and -- OK, this is the big one -- he doesn't pay rent and he doesn't have a mortgage. Yes, being the oldest boy has it's privileges, and one key benefit that he, his wife and his daughter have been enjoying for about a decade now is living in my mother's house for free (and no: my mom doesn't live with them.) Don't get the wrong idea here: I am not, and never have been, bitter about my brother's free accommodations. I think it's great. The way I see it, if you can take advantage of a good thing, then do it. Besides, I really wouldn't want to live in the same house where I grew up (my sister feels the same way.)

The only housing-related bills my brother (I'll refer to him as Phil from now on) has to pay for are the utilities and property taxes. I know that old, stone and stucco house can be expensive to heat, but I'm still not feeling any sympathy. I also know that when things aren't going well between a man and a women (his marriage isn't the happiest), money tends to drain away, for all kinds of reasons. Still, $45,000?

So, my mother eventually laid this Godzilla of a question on me. She asked, "Why don't you and your sister put some money together and help your brother out?"

I didn't answer my mom. I sat silent for about 10 seconds, and she understood what that meant: sorry, but no. She quickly changed the conversation at that point.

Once again, I am sorry, but I'm almost ready for my midlife crisis, and I've only just started building a serious savings account. Why should I help Phil? I took some serious risks, used up all my 401K savings and worked hard to get where I am today. Phil should work hard too, get a second job if he has to. I had the same problems with credit cards not too long ago, and I did the right thing and paid them off. It took a while, and it was quite painful at times, but I did it, because it had to be done. Bottom line: I know that Phil has the inner fortitude to get disciplined and get serious about fixing his finances, so I'm not going to be a crutch for him. If we were talking about a medical emergency, I would happily open my wallet. But credit card debt? I don't think so.

It's just like the current situation with all the bad mortgage debt dragging down the American and global economies. Helping those speculators and investors out would create a moral hazard. People should be willing to bear the pain and take their lumps. Besides, if we get a recession, it will help to purge the ill-considered speculating, bad debts and bad investments that have created bubbles in markets all across the globe. Market players will eventually rise from the ashes stronger, wiser and more mature.

And so will my brother Phil, just as soon as he tames all that ugly debt.

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Saturday, August 26, 2006

My FICO Credit Score Gets An 18 Point Boost: Now @ 745

Looks like all the cash I used to get my debt into a zone that I'm comfortable with is paying off. My FICO® credit score has just been bumped up by 18 points and is now @ 745. Am I pleased? Yes, quite pleased. 745 is basically an A- rating. From my research, I've determined that any score over 720 will get you the best possible interest rate on most loan products.

What does a FICO score of 745 mean to me? It means that when I am ready to buy a house or condo, the mortgage companies are less likely to ask for employment or income verification. This is very key for me because I'm self-employed. I'm actually hoping that I won't need to rely on a loan when I'm ready to buy; with a little luck and a lot of hard work, I may be able to pull it off. But if I don't have enough tucked away by the time I'm ready to take the plunge, I may have no other choice but to get a mortgage.

From this point forward, any increase in my FICO score probably won't make much difference in the interest rate I get on loans, etc. But I'm still shooting for an 800+ score by the time Bush & Co. leave office, just so I won't have to worry about those temporary dips that can cause problem if your score isn't high enough. In other words, if my FICO score was 800, and it dipped to 785 temporarily as a result of a new credit account being opened, then the temporary dip would be nothing to sweat about. On the other hand, a temporary dip from 725 to 710 may cause some interest rate-related issues.

About a month ago, I had a brief conversation with a mortgage broker at a car dealership. He told me that 720 is the threshold with most lenders, and any score above 720 is just good for breathing room. So, in theory, someone with a score of 731 should get the same rate on a mortgage loan as someone with a score of 799 -- all other things being equal, of course.

You know what's kinda' embarrassing? I know a guy who is in his early 20's and has a FICO credit score at or around 800. In my early 20's I was a very poor, spendthrift college student with lots of debt-related problems. But I don't feel too bad about my past. I really didn't understand money back then, but I do now, and even though it can take up to 7 years to fix major mistakes, those mistakes aren't a death sentence. With knowledge and perseverance, I believe that anyone can go from having a credit rating of F-, to A+.

Some advice for those who are working on repairing or building credit.

There was a time not too long ago when people in-the-know would advise credit consumers to cancel old credit card accounts once the balance on each account was paid in full. The reasoning was sound, as it was thought that banks considered you an increased credit risk if you had a lot of credit available to you. After all, a long, drunken weekend in Las Vegas, for example, is all it would take to raze a solid financial house to the ground.

These days, the advice from credit experts is to keep those old accounts open, because the FICO scoring system favors older credit accounts, especially those with a zero balance.

Also, if you really want the banks and credit reporting agencies to notice your excellent debt repayment track record, use your credit card(s) to make a few minor purchases each month, then pay the balance in full when the statement arrives. If you can't pay the balance in full, then pay at least 3 times to minimum amount due. Timely payments on your student or car loan will help your credit score by demonstrating that you are willing and able to pay your bills on time, but regular and responsible credit card activity is, in my opinion, the best thing for improving a credit score over time. Bottom line: the banks pay close attention to how well you handle retail purchases. Once you've achieved your desired credit score, you can pay all your cards in full to avoid interest charges, but remember to keep the account(s) open once you've done so.

And if you want to get 3 or 4 credit cards, do it, just don't get them all at once! Having more than once card can be advantageous, because having a modest balance on 3 credit cards is better -- from a FICO point of view -- than having 1 credit card that is nearly maxed out. Just be sure to space out the applications. In my opinion, the time between credit card applications should be at least 7-9 months. Remember: a great way to save on interest charges is to take advantage of the best available 0% APR balance transfer offers out there.

That's all for now. Below I've posted an updated image of my charted FICO credit score:


Updated Chart of my FICO Credit Score - August 26, 2006: 745

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