Debt

Credit cards are so easy to get and abuse. After all, how many credit card offers do you have junking up your mailbox on any given day? They’re so tempting, promising 0% interest on balance transfers until next year or a low introductory APR. They’re attractive, they’re seductive and they’re dangerous if you let them take over your life.

What, you say. Take over my life? Don’t be silly.

But use them the wrong way and you can get behind on your bills, which is compounded by a sudden increase in interest rates (because you did read the fine print that says the company is within its rights to spike your rates if you’re a day late with payment, right?), leading into a spiraling vicious cycle that includes calls from creditors day and night, at home and at your job, as well as the inability to get more credit. See how it’s taken over?

One of the best ways to avoid all of this is to use the credit cards to your advantage, which so many people don’t know how to do. Credit cards don’t have to be all bad, but not knowing how to use them correctly can lead to all kinds of catastrophes, including a credit rating so low that you won’t be able to get credit for anything.

Keep it at Zero

How do make credit cards work for you? By using them for small purchases that you can pay off completely when the bill comes. I know this isn’t always possible; if you’ve already racked up huge credit card debt, this is going to seem impossible. However, if you’re just starting out and you want to avoid trouble down the line, remember to keep your credit card balance at zero.

But this won’t build up my credit rating, you say. How will I build up credit to buy things, like a car and a house?

You can, but do it wisely. Charge something small and pay the balance off when it comes. Completely. If you think you need something next month, charge it and again, pay your entire balance. What this does is establish your credit rating: you pay on time and you pay in full, which looks good on your credit report, leading to a higher score. Sure, you can maintain a balance and continue to make payments on time, which is favorable, but your main financial purpose should be to avoid credit card debt as much as possible. Carrying balances over seems harmless enough if the balance is low, but what happens when an emergency occurs and your balance is suddenly hundreds of dollars higher?

Avoid High Interest Offers

Store credit cards are notorious for having higher interest rates than standard cards, no matter how good your credit is. Therefore, before you take on one of these too-good-to-be-true store offers, read the fine print and read it well. Better yet, just avoid them altogether. If you absolutely have to have something from a department store, charge it on your bank-issued credit card. And then, pay off the balance when the bill comes.

It’s much harder to pay off your balance in full when high interest rates jack up your payments. If your credit history is already spotty and you have a high-interest card, it’s going to seem difficult to get out of this trap. However, the best thing you can do is make more than your minimum payments on time each month while, at the same time, not charging anything. After establishing an on-time pattern, call your credit card company and ask if they’ll lower your interest rate. If you have to resort to telling them you’re thinking of switching to another company’s card due to your current interest rates being so high that you’re having trouble making payments, then do it. You don’t have to play nice with credit card companies. Do you think they’re sitting in their offices worrying about your interest rates? Then don’t worry about their feelings. They’re big companies; they can handle it.           

All right, you’re here because you want to get rid of your credit card debt once and for all. The stress of high debt and possibly late payments has finally gotten to you and you want out. Of course, the amount of time it takes for you to get rid of your debt depends on how big your debt is as well as how much income you have coming in, but everyone is capable of paying off their credit cards if they’re willing to do the work.

There’s a right way and there’s a righter way. Doing it the righter way is smarter. So how do you do it?

Steps to Get Rid of Credit Card Debt

• First, you have to be willing to stare your debt in the face. Surprisingly, so many people are afraid to do this. It’s just pieces of paper, people, not snarling Rottweilers! You need to get all of your current credit card statements together and sit down with them. Arrange them from highest interest rate card to lowest.
• Next, add up what your total minimum payments are for all of your cards together. Don’t worry, you won’t be making these minimum payments—you’ll be making more than the minimum if you can afford to. Paying above and beyond the minimum will erase this debt more quickly. Just paying the minimum keeps your debt-escaping momentum practically inert.
• Determine what amount of money you can realistically afford (over the minimum) to pay on your cards each month. This can seem like a scary number, but remember, it’s just digits. This isn’t a time for fudging or being dishonest, either. If you’re unwilling to write down the right number, you’ll only drag out your financial mess even further. For example, let’s say the figure you can pay every month toward credit card freedom is $500.00. You have three cards and the total minimum payments for each come to $300.00. Now tally your minimum payment plus an additional $10.00 on each card; your total payments are now $330.00. Subtract that from $500.00 and you have $170.00 left over. Add that $170.00 to your payment on your highest interest card and pay that amount every month until that card is paid off.
• Don’t quit. However, once that high-interest card is paid off and you’ve closed the account, don’t subtract the amount you were paying from your total $500.00 monthly allotment. Continue to pay out $500.00, but now use the “extra” money from that previous payment toward the next highest interest card. Rinse and repeat until all of your credit cards are paid off.
• And in case it’s not obvious, do not continue to charge things.

In the meantime, it’s in your best interest to call your credit card companies and ask for lower interest rates. I know this sometimes seems like a hassle, but all they can do is say “no.” If you’ve been making your payments on time, however, there’s a good chance they’ll say “yes,” especially if you mention that you’re thinking of switching over to another company’s card. Isn’t spending a few minutes on the phone (okay, half an hour…okay, an hour…call at off-peak times!) worth the amount of savings you can accrue? This is interest you don’t have to pay, which is almost like tossing dollar bills into a fireplace. Wouldn’t you rather make a call and endure just a little elevator music instead of tossing your money away?

You may have seen ads on TV featuring companies that claim they can “repair” your credit. They tell you that you won’t even have to pay all that you owe to creditors because they’ll negotiate your debt down to a smaller percentage.

First of all, only you can “fix” your credit. If you have a poor rating, it won’t be easy to get it back up to a decent rating and it will take time. There’s no quick fixes when it comes to credit repair. If you’ve been thinking of taking advantage of one of these offers of debt settlement, here’s 3 reasons to run from debt settlement companies and rethink your options:

1. Your credit rating will plummet. Many of these debt negotiators will advise you to no longer take creditors’ phone calls. They’ll tell you not to make any payments. Meanwhile, your phone is probably ringing off the hook with creditors on the other end of the line, some of whom will undoubtedly threaten legal action. While the debt settlement company is waiting for you to get so behind in your bills before they make a move, your credit rating is dropping like a lead weight. And who wants to deal with all those harassing phone calls?

2. Many of them are scams. This isn’t to say all of the debt settlement industry is a scam, but it’s sure full of scam artists. From personal experience, I can tell you that one such company offered to sign me up without asking how I was going to make monthly payments. They simply said, this is what you’ll pay per month, but they didn’t know if I was employed, unemployed, what I made, etc. And they didn’t care. All they wanted was their exorbitant fee upfront before they’d lift a single finger to do anything about helping me with my debt. Besides, although a lot of consumers aren’t aware of this, they can negotiate with credit card companies themselves, without having to pay a middleman. But you can’t go into the negotiation pool with no life jacket; this requires a lot of research (because credit card companies often don’t want to cooperate with you on this) and sometimes an attorney.   

3. It doesn’t allow YOU to take full responsibility. I know this may be an unpopular view, but if you only have to pay back 50% of what you “owe,” how do you claim responsibility for all of your debt? I know that interest fees are a huge part of credit card balances and only having to pay back some of your enormous debt certainly looks attractive, so much of this will depend on how much you actually have to pay back. Someone who’s $25,000 in debt may have a different view that someone who’s $100,000 in the hole. But in the end, it’s all debt that you wracked up and part of being financially mature and responsible is being able to say “Hey, this is my debt, this is money I spent and now I’m going to be in charge of it and pay it back.”

If you still decide to go the debt settlement route, I can’t stress enough how important it is to do your homework and thoroughly check the company out. Or, you can go down a path that I know works and that’s dealing with a debt management company. No, your debt won’t get slashed by 50%, but your interest rates will be lowered by a significant margin, you’ll receive financial education and counseling as part of the program and you won’t have to avoid your creditors. Again though, check out a debt management company’s reputation before you sign up and then get on the way to being debt-free.   

Online education is the big thing right now. But is it really worth the cost? Are the degrees worth as much as a traditional, bricks and mortar 4 year education? Honestly I don’t know. I do know that if you’re looking for a specific online degree program
then you should probably make sure that it’s accredited, and that your employer or future employer views degrees from places like the University of Phoenix in a good light.

If you’re looking for a specific degree, college rankings like the Best Psychology Colleges and Top Engineering Schools will also be helpful.

As the Internet becomes a more and more central part of our life, there are a number of ways you can lower your bill and retain the same great service. Here are three quick and easy options:

1. Get a bundle - companies like Comcast, AT&T and others offer significantly discounted rates for buying multiple services from them.
2. Call and ask for a discount - you’d be surprised what companies will offer - see if you can get transferred to a retention specialist who can give you the best deals.
3. Try alternate services - check out alternate methods of broadband, like Satellite Internet, Wireless Internet and even cellular broadband.

To really experience fiscal liberty, you have to know how to play the credit score game. Here, I’ll talk a little about how credit scores came to be, how to get your score, and how to improve it so you save as much money as possible in the future.

A super-quick history of credit scoring

A long time ago—before online banking, ATM machines, and even widespread credit card use—banks made lending decisions the old-fashioned way. A person wanting a loan would gather necessary paperwork, put on their most professional-looking suit, and walk into the neighborhood bank for an in-person interview to plead their case. The banker would make a lending decision based on the applicant’s income, assets, and character.

Then, around 1960, a company called Fair Isaac came up with a math formula. This formula generates a three-digit number that rates our creditworthiness. These FICO credit scores are calculated based on the information contained in our credit reports. A high score means you make regular, timely payments on your past bills, and a low score means you borrow money but don’t pay it back.

FICO scores have largely replaced the subjective and time-consuming loan process of yesteryear. Many lenders now make instant, automated lending decisions—including the interest rate they offer—based on an applicant’s credit score.

Different credit scores

Today, FICO is not the only credit score available. Many different scoring models have been developed by Fair Isaac, as well as by the major credit bureaus and even individual lenders. This is why you don’t just have a single, authoritative credit score, but rather multiple scores. These scores can also change from month to month based on your most recent credit history. So a credit score is just an estimate of your creditworthiness at any given point in time.

Finding out your credit score

Again, there is no universal credit score that all lenders use to evaluate you. But that doesn’t mean you can’t get a good idea of where you stand. AnnualCreditReport.com, the government-sponsored website that furnishes free credit reports, will offer you a credit score (though you’ll have to pay for it). Or, you can visit the websites of the three major credit bureaus—TransUnion, Equifax, and Experian—to purchase scores. Services like FreeCreditReport.com do offer free credit reports and scores, but typically only for a trial period, after which time you will be charged.

Improving your credit score

Most credit scores fall on a scale of 300-850. In today’s economic climate, the definition of a “great” credit score has shifted steadily up the scale. These days, you’ll need at least a 720 or higher to qualify for the best loans with the lowest interest rates.

So how do you improve your score? Paying at least the minimums on all of your debts every month is the first step. Timely payments count for around 35% of your credit score, so do everything you can to meet those monthly obligations.

Paying down your existing debt is the second most important thing you can do to improve your score. Are your credit cards almost maxed out? Your card balances shouldn’t be anywhere near your card limits. In fact, some say your balances should be less than 10% of your card limits. This means if your Visa has a limit of $10,000, you shouldn’t have more than a $1,000 balance on it.

The third way to improve your credit is to simply be patient. Time plays an important role in boosting your score: Long and strong credit histories merit better scores than short or weak credit histories. The phrase “time heals all wounds” is true when it comes to your credit. For instance, past delinquencies have less and less of an impact on your score as time goes on.

If you pay your monthly bills on time and lower your existing debt, your credit score will improve over time. With a great credit score, you’ll qualify for new loans and lines of credit at the best interest rate a bank can offer. This means serious savings for you each month.

I know that sometimes, just getting your goods together once you’ve checked out can seem like enough to do, but I want to give everyone out there one quick tip you can do to make sure you’re not losing money unnecessarily: check those receipts.

I’ve been overcharged by as much as $25.00 and if I wasn’t diligent about looking my receipts over before I left the store, I could be out quite a bit of money. And so could you. Computerized checkouts aren’t perfect. Humans make mistakes and so do machines. I’ve been charged twice for one item or not given the “buy one/get one free” offer. 

It only takes a few moments of your time. What time you take looking over your receipt can easily be money saved.

I know the price of gas has forced many of us to make changes and while there’s some grumbling involved at the inflated price of oil, I’m going to look at the bright side and show you 3 (beneficial) things high gas prices can do for you:

1. Make you take trips closer to home. For many families, summertime is the season to gas up the SUV or minivan and take it on the road. People will drive hundreds of miles to Disney World and try to pack a month-long of fun into a week. Sure, it’s fun, but it’s usually pretty exhausting, too. But what about all those attractions that are closer to you that you never checked out because the kids wanted to see Mickey Mouse? Every year, my family drove past several attractions because we were headed straight for Disney. Sure, there aren’t the same rides or characters and some of them are even more — gasp — educational than FUNFUNFUN, but I think a trip that involves some quiet time where the kids can fish, cook out in the open and actually talk to their parents can be just as memorable as one that involves thousands of flashing lights.

2. Make you healthy. I see a lot more people bicycling everywhere these days. It doesn’t matter if high gas costs are what motivated it, the fact is cycling is a great way to get where you’re going as well as get yourself into better shape. While everyone who cycles won’t change their entire lifestyle, many people who begin to take care of themselves with exercise also take this healthy approach to their eating habits. They lose weight, they feel better. If you walk to take public transportation, you’re putting one less car or truck out there on the road, which is a good thing for the environment and for you.      

3. Makes you money-aware. How many of us, back in the good ole days when gas was under $3/gallon, just filled up our tanks without much thought? Gas was necessary to get us where we needed to go and the price, though quite a bit higher than it was when I first started driving back in 1987, didn’t seem too outrageous. Fast-forward to an era when $5/gallon isn’t far-fetched anymore and many people have had to make changes. Change isn’t always bad in a situation like this. When people have to decide whether they’re going to get gas or get food, it forces you to sit back and look at the price of things. It makes you think. Many of us may not have given much thought to how we spent money on seemingly “necessary” items like gas, but today, we probably do. I’ve had to re-do my budget due to high gas prices; I’ve had to adjust my schedule to get my kids to their activities, but you know what? It’s made me more conscious of how I spend my time and money. And that’s a good thing. 

As a Floridian, I’m about as embarrassed by this as I was the 2000 election results, but anyway…

The Sunshine State accounts for “nearly a quarter of all mortgage fraud incidents” according to the Mortgage Asset Research Institute.

Misrepresentation of income, job history, debt and assets are all factors contributing to the most common fraud cases. It’s a pretty big deal because “mortgage fraud has represented about $1 billion in losses over the last decade.” Since Florida and California are two states with a high number of speculators, it’s no wonder they figure number one and number two on this list.