OT: Request for help!

[ctkaiser]

I have agreed to help my step-son try to repair his credit, which is pretty bad. I am led to believe that a common-sense approach is not always effective and that there are some sharks in them waters. If anyone has first-hand knowledge and would be willing to share it, I would appreciate a pm.

Hey JS, Biff, Nan or whoever; I forgot (obviously!) the OT, and also hung an l in the thread title. Would you very sweetly fix it for me? Thanks. z

You might want to have him look at Clark Howard.com. A good site with common sense information and also a forum with good advice being given on consumer and financial issues. He also has a daily radio show on consumer issues.

 

[DaddyChoc]

Yes, CK is great; I use it all the time to monitor my own financial situation. A great free resource.

Mint.com is awesome as well

 

[DaddyChoc]

I agree 100% with DaddyC - All of the grumbling about interest rates, payment penalties and bad credit reports belongs squarely on the shoulders of the card holder/debtor. Spend only what you can afford, pay on time and most important - use credit wisely and there will be no problem. I would add - get a part time job. Get two part time jobs if that's what it takes

It's like the woman I saw on a talk show once. She was whining about drowning in credit card debt and she blamed the credit card companies because "they just keep sending me cards."

.

thanks for the support

 

[Husky25]

Credit cards are very similar in their marketing and fine print to the predatory mortgage business - and yes the borrower or credit card owner is responsible for their irresponsible actions, but ... it really is not far off the business model of loan sharks or drug dealers or gambling dens.

That's a cop out. When used properly, credit cards are a 30 day interest free loan. That's all there is too it. There are not "buts." If you can't afford or aren't responsible enough to have a credit card, don't activate one. Get a debit card instead.

About 10 years or so ago, I went to happy hour with a bunch of co-workers and one guy was complaining about his credit card debt. At the same time, he pulled one out to pay for a round of drinks. One of my other co-workers picked the debtor's card off the bar and asked the bartender for a pair of scissors. He proceeded to cut the card in 6 pieces, paid for the drinks himself, and told CC debt guy that step #1 of paying of his debt was to stop adding to it.

 

[DaddyChoc]

That's a cop out. When used properly, credit cards are a 30 day interest free loan. That's all there is too it. There are not "buts." If you can't afford or aren't responsible enough to have a credit card, don't activate one. Get a debit card instead.

About 10 years or so ago, I went to happy hour with a bunch of co-workers and one guy was complaining about his credit card debt. At the same time, he pulled one out to pay for a round of drinks. One of my other co-workers picked the debtor's card off the bar and asked the bartender for a pair of scissors. He proceeded to cut the card in 6 pieces, paid for the drinks himself, and told CC debt guy that step #1 of paying of his debt was to stop adding to it.

well said, damn all of the excuses

 

[UcMiami]

Husky25 - I live my life that way, and have never had debt, but then, I never had a lot of other hardships that many people have. I went to college and graduated with zero debt, never was unemployed if I wanted a job, never earned minimum wage or anywhere near it, and never had a financial emergency that I couldn't handle. I never had a drug or gambling addiction, and have never been married or had children. So financial life for me has been extremely easy. And I came from a family that educated me about money and saving and never over extending myself and about working hard to 'earning' my pleasure and leisure. I had great role models, and a very good education, and very good employment options. But that is not the norm.

And I also understood from day 1 of owning a credit card, that the 'minimum payment' was a teaser designed to keep people in perpetual debt, and have never carried a single dollar over on any credit card from one month to the next. Unlike many people I never had to choose between paying the balance vs. paying the rent, or putting food on the table, or seeing a doctor, or ...

And the credit card companies hate me and similar customers - their ideal customer and the one they market to aggressively is the customer who barely makes the monthly minimum payment and is maxed out, and as long as they keep paying they will up the credit limit. Every week I get new offers to transfer my non-existent balances to some new card with a teaser rate, and my current cards send me checks that I can write on my card for life's little emergencies. They don't want responsible customers, they want irresponsible ones and they specifically make it very easy for them to continue in their irresponsibility.

We are bombarded with offers for quick fixes, and easy credit, and expensive and meaningless educational opportunities to get ahead, and no interest for ____ months, and payday loans, and state sponsored lotteries, all designed to increase our individual debt. For desperate people and those with little discipline it is not an easy world to navigate.

This whole thread originated about a nice kid who obviously lost his was - probably a great guy, but one who is going to need help and an concerted effort from friends and family to extricate himself and learn how to manage his finances responsibly. Luckily for him, it sounds like he has those crutches to lean on, but many just stumble from one disaster to another.

 

[j66kicker]

And I also understood from day 1 of owning a credit card, that the 'minimum payment' was a teaser designed to keep people in perpetual debt, and have never carried a single dollar over on any credit card from one month to the next. Unlike many people I never had to choose between paying the balance vs. paying the rent, or putting food on the table, or seeing a doctor, or ...

And the credit card companies hate me and similar customers - their ideal customer and the one they market to aggressively is the customer who barely makes the monthly minimum payment and is maxed out, and as long as they keep paying they will up the credit limit.

They still like you. I charge a lot of stuff, get the airline miles or whatever, but never pay them a dime in interest. But, if you've ever had a consumer business with a merchant account, you know they charge the merchants through the nose for accepting their cards too This averages between 2% and 3% of all purchases, in addition to the usurious interest they collect from many consumers. So, even if you never pay any interest and just use their money for 30 days, they're getting 2-3% per MONTH (24-36% APR) from the merchant.

Then, to add insult to injury, most also charge (or try to charge) YOU an annual fee for the privilege of being part of their money harvesting machine.

 

[Zorro]

Credit cards, used wisely, can be a tremendous resource. Some years back I faced a sudden need for a considerable sum of cash (well, actually, about 80k.) That was when I discovered the wonders of the promotional balance transfer. I was able to raise the cash just about overnight by using the promotional offers on a number of cards that I already had. Then, I also acquired a number of new cards, each of which offered interest-free, or almost, promotional advances, which I used to pay off the old balances as they came due, while also paying down the totals. I probably averaged paying about 2% or less per annum on the advances over about a six year period, at a time when interest rates were much higher than that. Of course, it required paying strict attention to due dates and small print, and a good amount of self-discipline, but it worked. In the end, the balances were all paid and having had such a large amount of credit without missing a payment established us as rock solid credit risks.

Credit cards are very dangerous for the unwary and uninformed, but so are a lot of other potentially valuable things.

 

[KnightBridgeAZ]

While I can't claim we didn't have some stupid times shortly after we married, my wife and I have never had huge debts, and about 10 years ago decided to not pay interest. I charge a lot each month, get (mostly) hotel points at Holiday Inn for what I charge (enabling extra travel), and pay the bill monthly.

That said, like UCMiami said above, I have never - even when I had debt - had to make a choice of what bill to pay. I'm not wealthy and, since I retired extremely early, I may have to be more financially conservative at some point in the future, but bottom line my needs are relatively modest and I am able to satisfy them at this time.

Interestingly, I refused to finance my new car last year (which was only because the previous one needed major engine repair after 10 years) because I refused to have the debt. My financial adviser felt that it would have been more advantageous to pay the low interest rate and earn a higher rate on my savings. Of course, since the market has been so sour, it may not have been such a bad thing after all.

 

[DaddyChoc]

Interestingly, I refused to finance my new car last year (which was only because the previous one needed major engine repair after 10 years) because I refused to have the debt. My financial adviser felt that it would have been more advantageous to pay the low interest rate and earn a higher rate on my savings. Of course, since the market has been so sour, it may not have been such a bad thing after all.

so did you finance it or not?

 

[KnightBridgeAZ]

so did you finance it or not?

No. I have debt-a-phobia. I suspect I should have, however.

 

[DaddyChoc]

No. I have debt-a-phobia. I suspect I should have, however.

dang I wish I could buy outright... but sometimes its cool to hold on to some of that cash "just in case"

 

[j66kicker]

dang I wish I could buy outright... but sometimes its cool to hold on to some of that cash "just in case"

If you can't, or don't want to, 'buy outright' for large stuff like cars or tuition, an equity line of credit on your home is a good option. Much lower rate than consumer credit, and the interest is deductible on up to $100,000 of principle beyond the 1st mortgage.

 

[DaddyChoc]

If you can't, or don't want to, 'buy outright' for large stuff like cars or tuition, an equity line of credit on your home is a good option. Much lower rate than consumer credit, and the interest is deductible on up to $100,000 of principle beyond the 1st mortgage.

how is that done?

 

[UcMiami]

If you can't, or don't want to, 'buy outright' for large stuff like cars or tuition, an equity line of credit on your home is a good option. Much lower rate than consumer credit, and the interest is deductible on up to $100,000 of principle beyond the 1st mortgage.

Good advice though with cars and a good credit score it is a toss up between an equity line and the manufacturer's often very good interest rate offers. I said above that I never had debt which is a over-statement because I bought one car on credit because the manufacturer was offering zero interest over 3 years, and another when the interest rate was 1% - just seemed like too good an option to pass on.

DaddyChoc - if you have good credit and own your house with positive equity built up, then you can go to your local bank and enquire about a equity line of credit - it is in effect a second mortgage, secured by the equity in the house. Typically it is at around the same interest rate as the current floating mortgage rate, and can be set up like a bank account in that you can write one or more checks against it, and only pay interest on the balance that you owe each month.
People who buy a second house, often take an equity line on their first rather than a mortgage on the second - better tax treatment, and much easier paperwork. And it is a great way to pay for major renovations, or other significant one time purchases.
Once it is set up, you may be able to leave it in place even if you have not used it or have paid off the original borrowed amount as long as you continue to own the house, with no fees unless you again borrow against it. It is in effect a personal version of a business having a line of credit - cash available to be borrowed when needed. The rate of interest will fluctuate with the 'market' but it is always there. And the rate will always be better than standard credit cards, though not necessarily better than special teaser rates.

 

[BroadwayVa]

first thing is to admit there's a problem, get spending in order, line up monthly bill, set up a budget, call collectors and work out a payback plan... and wait!

A common sense plan. Credit can be screwed up in one day but it takes years to fix. My suggestion is to contact all creditors, work out arrangements with each, pay off owed money and as DaddyChoc say WAIT. During the waiting period, you take command of the Step's finances (with his money)--my guess is if you don't this will be an on going issue.

 

[BroadwayVa]

how is that done?

Paying cash, in my experience, does little towards developing credit. Creditors like to know how you pay over time--if you will meet your commitments. Live up to agreements. Then there is --you've got to have the cash to buy a car, a house, etc--not many kids have that kind of money.{

 

[DaddyChoc]

Paying cash, in my experience, does little towards developing credit. Creditors like to know how you pay over time--if you will meet your commitments. Live up to agreements. Then there is --you've got to have the cash to buy a car, a house, etc--not many kids have that kind of money.{

Line of Equity... from mortgage, how is that done?

 

[Husky25]

Line of Equity... from mortgage, how is that done?

You have to have a fair amount of your note paid off.

 

[SubbaBub]

I have agreed to help my step-son try to repair his credit, which is pretty bad. I am led to believe that a common-sense approach is not always effective and that there are some sharks in them waters. If anyone has first-hand knowledge and would be willing to share it, I would appreciate a pm.

Hey JS, Biff, Nan or whoever; I forgot (obviously!) the OT, and also hung an l in the thread title. Would you very sweetly fix it for me? Thanks. z

The personal finance board on Reddit has some very useful advice.

r/personalfinance.

What you are looking for is likely in the FAQ's.

Beware, as a time sink, Reddit make this place look like salt mine.

 

[BroadwayVa]

Line of Equity... from mortgage, how is that done?

I have agreed to help my step-son try to repair his credit, which is pretty bad. I am led to believe that a common-sense approach is not always effective and that there are some sharks in them waters. If anyone has first-hand knowledge and would be willing to share it, I would appreciate (this is the THREAD START--) No mention of needing a mortgage with this--that seems like a giant leap just to be critical of things NOT said Have a glorious and peaceful day.

 

[BroadwayVa]

Husky25 - I live my life that way, and have never had debt, but then, I never had a lot of other hardships that many people have. I went to college and graduated with zero debt, never was unemployed if I wanted a job, never earned minimum wage or anywhere near it, and never had a financial emergency that I couldn't handle. I never had a drug or gambling addiction, and have never been married or had children. So financial life for me has been extremely easy. And I came from a family that educated me about money and saving and never over extending myself and about working hard to 'earning' my pleasure and leisure. I had great role models, and a very good education, and very good employment options. But that is not the norm.

And I also understood from day 1 of owning a credit card, that the 'minimum payment' was a teaser designed to keep people in perpetual debt, and have never carried a single dollar over on any credit card from one month to the next. Unlike many people I never had to choose between paying the balance vs. paying the rent, or putting food on the table, or seeing a doctor, or ...

And the credit card companies hate me and similar customers - their ideal customer and the one they market to aggressively is the customer who barely makes the monthly minimum payment and is maxed out, and as long as they keep paying they will up the credit limit. Every week I get new offers to transfer my non-existent balances to some new card with a teaser rate, and my current cards send me checks that I can write on my card for life's little emergencies. They don't want responsible customers, they want irresponsible ones and they specifically make it very easy for them to continue in their irresponsibility.

We are bombarded with offers for quick fixes, and easy credit, and expensive and meaningless educational opportunities to get ahead, and no interest for ____ months, and payday loans, and state sponsored lotteries, all designed to increase our individual debt. For desperate people and those with little discipline it is not an easy world to naviga

This whole thread originated about a nice kid who obviously lost his was - probably a great guy, but one who is going to need help and an concerted effort from friends and family to extricate himself and learn how to manage his finances responsibly. Luckily for him, it sounds like he has those crutches to lean on, but many just stumble from one disaster to another.

I too lived debt free paid debts first my ole Irish mother taught me that. Never had a credit card until I couldn't rent a car without one.
I did however have months of unemployment, and moved to a lot of jobs and had way too many kids. But never owed more than I could pay. Rode on bad tires and ran out of gas often. The point is: Having issues with jobs or income is not always an excuse. The real issue is spending more than you make--living within your means--BUDGET is a dirty word but it works.
I agree quick fixes are the current thinking but they are usually offered by crooks.
Fortunately, I was raised in a world of less--less money, less food, less housing, less autos, but more respect and honesty.
Today I am among the 47 percent Romney spoke of and the 1 percent Bernie speaks of--all with saving, spending properly, and having an intelligent wife. Like Kibitzer--I believe in giving back. Philanthropy isn't just for the very rich, it's about help your fellow man/woman. The Wife and I give back--first to Veteran helping groups (some are less honest) Vet organization, helping the Deployed, and to my local organizations who really help. Our Salvation Army help the homeless--some of whom are former military. Visit Walter Reed/Bethesda combo and Vet hospitals and feel what positive thinking is about.

 

[j66kicker]

Line of Equity... from mortgage, how is that done?

Go to your own mortgage holder, your bank, and/or to others from your junk mail. Usually you need to have more than 20% equity in your home, meaning you've paid down (or your home's value has appreciated) to where you owe less than 80% of the current value of your home.

Normally you can get an equity line of credit up to how much more than 20% equity you have. Example: Your home is worth $200K and you owe $100K on your mortgage. So you have $100K equity, which is $60K more than 20% of the value. So most banks/mortgage companies with finance you an LOC up to $60K. Their collateral is 2nd claim on your home, hence "2nd mortgage." Since they don't have first claim, their rate will be a little higher than current first mortgage rates, but much lower than consumer credit or conventional car loans (not subsidized by the carmaker). And you don't have to borrow it at all unless you need it, can usually pay it back however fast/slow you want.

Typically the whole contract is for 5 years (or another similar term). At the end of that you owe the whole thing back. But, if conditions are roughly the same (your credit, home value, etc), then you can usually re-do and start another 5 years..

 

[cockhrnleghrn]

I have agreed to help my step-son try to repair his credit, which is pretty bad. I am led to believe that a common-sense approach is not always effective and that there are some sharks in them waters. If anyone has first-hand knowledge and would be willing to share it, I would appreciate a pm.

Hey JS, Biff, Nan or whoever; I forgot (obviously!) the OT, and also hung an l in the thread title. Would you very sweetly fix it for me? Thanks. z

I work in banking as a Sr. VP of Lending. Please make sure he stays away from those "credit repair" places. The first thing he should do is get a free copy of his credit report from the 3 main credit reporting agencies to ensure everything reported is correct. If anything is incorrect he can dispute it with each credit reporting agency and they will investigate. He should then work on paying off the smallest items first. If he contacts each creditor they may be willing to accept a settlement. Make sure any agreements are received in writing. I wish him luck. Two years after the date of last activity on a negative item, his scores will begin to improve. In the meantime he should join a credit union, put a few hundred dollars in savings and get a share secured loan. Feel free to PM if you have any questions.