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Dealing with Debt
Transcript of Dealing with Debt
If you cannot pay for it don't buy it and get yourself in a financial position where you can buy anything you want.
Understand it is hard
Credit cards' marketing campaigns work..........we feel these companies are our friends....
People NEED plastic
1) Credit cards are the way to build up that ever coveted FICO score. There is no other way to do it - not with debit cards and not with cash. You need a credit card to become financially independent, plain and simple.
Three simple rules
1) Pay them on time
2) Pay them in full
Keep an eye on rewards
Some credit card companies keep you a loyal swiper via their reward programs: airline miles, points for hotels, cruises, pre-paid cards. Reward programs sound great and can be great; HOWEVER, they should not factor into your spending decisions. The goal of having a credit card is to show the credit bureaus that you are responsible with money.....not to show that you learn the art of swiping.
Dealing with Debt:
No Free Passes
It is a whole lot easier to stay out of trouble than it is to work yourself out of trouble
2) Use credit cards for small purchases that you
you can pay in
when the bill comes
(if you cannot pay for it in cash, don't pay for it with credit cards)
3) If you can't pay in full pay more than the minimum
35% of your FICO score is based on your credit history.
30% of your FICO score is based on the amounts you owe.
15% of your FICO score is based on the length of your credit history
1) GET your CREDIT REPORT. Check for errors at least annually
2) Automate your bill payment so you are never late
3)Don't despair if you missed a payment just get current as quickly as you can.
4) Keep your balance well below your limit.
5) If you have a high balance at end of the period, pay your bill BEFORE period ends
6) Don't open more new accounts, increase your available credit.
TIP: Consider getting a credit score monitoring program.
When debt is out of control
The National Foundation for Credit Counseling is a nonprofit organization that can refer a debtor to a reputable credit counselor. These professionals assist the debtor to develop a Debt Management Plan to be debt free in three to five years. Cost $50-80/month. Under this Plan, your credit is frozen to stop debtor from spending. The credit counselor's main role is to negotiate with credit card agencies to lower interest rates and develop a payment plan.
Debt Settlement Companies- help you but they are our to make money off your debt.....sending you deeper into debt.
It is a legal proceeding which is facilitated in court. Some or all of the assets of the debtor are distributed among the creditors since the debtor is unable to pay his/her debts
Most, but not all, debts are forgiven. Some of those debts are credit card bills and or medical bills. Excluded are student loans, child support, or debts incurred as a result of fraud, DUI, or any debt resulting from a willful or malicious act.
Most of the debtor's assets are sold to pay off creditors. Any assets such as a car or a house are liquidated to pay the creditors.
(also known as wage-earner plan)
The debtor proposes to a bankruptcy court a plan for extinguishing his/her debts from future earnings over a period of time. In this type of bankruptcy, the debtor keeps most of his/her property.
Payments are made to a trustee over a period of time (usually 5 years). The trustee is in charge of distributing payments to the creditors. Filing CH13 is not a guarantee that creditors will accept the proposal bringing complications and delays to the trial. It may not be successful.
Court costs / attorney's fees / trustee's fees
FICO score: immediate drop of up to 260 points. Damage is serious, harmful and long lasting
3) If under 21, CARD act requires a cosigner. Remember Thanksgiving Dinners.
2. Gas for your car
3. Transportation fare
4. Dry Cleaning
2. Dinner with all of your friends
3. Nights at the bar
4. Designer clothes
Good start for under or over 21
Requires a security deposit of a few hundred dollars which is the maximum you can spend
Downside: typically higher fees, and make sure that your usage of the card is reported to at least two of the three credit bureaus
2. Department Stores
3. Traditional Cards
4. CU Cards