Credit & Identity Theft Blog
-
November 5, 2009
I learned about SmartyPig at the Finovate conference, and wanted to try the online savings account for myself. I currently have an ING savings account and think I do a pretty good job socking some funds away each month for a rainy day, but you can always save more, right?
Based on the demonstration at the conference, SmartyPig seemed like a fun way to save cash for specific goals. Here's how it works, and why it's different from other online saving tools.
The sign-up process
When you sign-up with SmartyPig, you are also really signing up for a new savings account through their banking partner, West Bank. This West Bank savings account is currently yielding a 2.01% interest rate (better than the 1.30% ING is currently offering)!
Once you have a SmartyPig account, you'll need to link it to an existing checking account. SmartyPig requires that you transfer a minimum of $25 from your checking account to your new savings account right away, so you have at least a small balance to start.
You can modify your security and account settings, including choosing an avatar for yourself. SmartyPig has plenty of piggy personalities to select from, or you can upload your own.
Setting goals
At SmartyPig, you list out your savings goals and it tells you how much you need to put aside each month to reach those goals. Sure, anyone who passed a high school math class can calculate the same thing, but can they give you the cute piggy graphics and visual motivation you need to actually follow through? And more importantly, will they autodraft that necessary amount from your checking account each month?
I decided my first goal on SmartyPig would be to save up for a Vegas trip I'm taking next June (safely assuming my winnings from the blackjack table won't cover the costs of the weekend). I figure to really go in style I'll need two grand. Smarty Pig reminded me that a $2000 trip means saving $245 each month. Yikes! Somehow, $245 drafted from my checking account for the next eight months seems like a heck of a lot more than just putting $2000 on my credit card and worrying about it later. This might be Smarty Pig's biggest strength: it forced me to re-evaluate how much something is really worth to me. If I'm not willing to part with the funds each month ahead of time, maybe I should reconsider my purchasing decisions.
I decided to lower my Vegas goal to $1000, and chose the day of the month I want the $125 autodrafted from my checking account each month. I'll also start looking for ways to cut my trip's costs (cheaper airfare and luck at the slots will certainly help).
Going public
Perhaps the most unique thing about SmartyPig is that it can interact with your Facebook and Twitter account, if you want it to. The SmartyPig Share tool alerts your friends and family to your savings progress and even solicits funds from them. You can create a widget to place on 28 various social networks of your choosing. This widget can either ask for friends and family to donate money to your savings goals or (if you think that's kind of tacky) simply show them your progress. Sharing your goals with others is a great way to help you stay motivated enough to reach them.
The payout
Once you've reached your goals, SmartyPig has a few options for sending your savings back to you. You can opt for a MasterCard with your savings on it, choose a gift card from a list of retailers (this option will add 6% to your amount), or simply transfer your savings back into your checking account.
Site security
Don't let the cuteness and simplicity of the website's design fool you: it has thorough, no-nonsense security in place to keep your account secure. SmartyPig will ask for a strong password, answers to five security questions, and other personal information like your Social Security number when you sign up. In truth, the security seems almost like overkill. Each time I visit the site it wants me to answer security questions, and my sessions time out faster than other online accounts I have with ING, BofA, and Chase. I actually locked myself out of my SmartyPig account by entering the wrong password too many times. Luckily, the customer service was efficient and friendly, and I was back in my account in no time.
Other features
I haven't explored everything yet in SmartyPig, but I did notice the ability to connect your SmartyPig account with other online personal finance managers like Mint and Wesabe. You can also purchase SmartyPig gift cards for friends to get them started on the savings site, too.
Overall, SmartyPig is perfect for those looking for some fun motivation to save towards goals. It is especially great for people who enjoy social networking, but can also just be used as a basic savings account that autodrafts monthly from your checking account. Plus, you can edit or cancel your savings goals at any time, so it really is as flexible as you want it to be. A worthwhile site to check out for long-time penny pinchers and savings newbies alike!
-
November 3, 2009
We've gotten a few questions from readers asking about credit unions and how they compare to traditional banks. I personally don't have any accounts with a credit union, probably because I've been so marketed to by major banks that I never thought to approach one. I've heard some credit union customers say the interest rates they get from their credit unions are lower than other places, and some say they are comparable or even higher. Nonetheless, it seems like credit unions deserve a closer look. I asked Paul Brucker from Alliant Credit Union to share his expertise on the subject. Here's what Paul had to say:
"A bank is a for-profit business owned by shareholder investors. A measure of a bank’s success is how much profit it makes from its customers and distributes to its shareholders. To maximize profits, banks pay lower rates on deposits, charge higher rates on loans, and assess more and higher fees. Credit unions operate on a totally different principle.
For one thing, when you join a credit union, you’re not a customer – you’re a member and an owner. Credit unions are not-for-profit organizations owned and operated for the benefit of their members. In a credit union, all income after expenses and capital reserves is distributed to its members. In fact, a credit union’s mission is to maximize the returns to its members through high savings dividends, low loan rates and low fees.
In short, while banks take money from their customers, credit unions, like Alliant, make money for their members."
Sounds good to me. What do you think? Do you prefer a credit union over a bank?
About Alliant Credit Union: Alliant was founded in 1935, shortly after Franklin D. Roosevelt signed the Federal Credit Union Act into law. It serves more than 250,000 members and manages over $6.7 bilion in assets, making it the seventh largest credit union in the nation based on asset size. To learn more about Alliant, their rates, or to apply for membership, visit www.alliantcreditunion.org.
-
October 30, 2009
Oh the horrors! Credit card balances that make you want to run screaming, debt collectors that call late into the night when you're home alone, identity thieves that are able to suck the very soul right out of you...It's Halloween folks, and at SpendOnLife, that means sharing some classic (and financially horrifying) ghost stories.
The Lady of the Lake...who couldn't stop shoppingIt's true, she exists. You may see her walking that desolate stretch of road along the lake late at night, weighed down with shopping bags so heavy they could sink her to the bottom of the water. She's on foot because her car was repossessed (she spent all her money on clothes instead of car payments). But did she have a choice? No! Not when Nordstrom was having THE sale of the year, and deals abounded in every corner of the store. She may be walking in a torn chiffon wedding dress now, but just wait until she changes into the Therapy outfits she bought! Of course, she has nowhere to change into them...her house was foreclosed on long ago. And so she walks from the mall to the lake each night, purchases as heavy as iron-forged chains hanging from her ghostly arms.
The Tell-Tale Debt
He thought ignoring the bills would make them go away. The past due notices piled up, and yet he did not pay. No, instead he cleverly peeled back the floorboards and placed the bills inside, where no one could ever find them. The debt collectors came to the door. He thought he could tell a convincing enough tale to make them disappear. But the planks of the floor kept creaking, something tapping at them from below. He could stand it no more! Like a desperate man, he began ripping at the wooden boards, until he revealed the past-due debts that weighed so heavy on his heart and would not simply disappear. They continue to haunt his credit report to this day.
The Possessed Identity
Something beyond comprehension is happening to Regan. She's not feeling quite like herself lately. She's receiving notices of past-due payments on loans and credit cards of which she has no recollection of applying. A Bowflex listed on
her credit card statement? She has no need for one of those, especially considering the newfound flexibility in her neck and levitation abilities. It's as though demons have invaded her identity and are using her good credit for their own devices. How can she exorcise these evil spirits once they've gotten a hold of her Social Security number, date of birth, and mother's maiden name?! If you listen close enough, you can still hear her cries: "Be gone, identity thieves! I command you!"For more Halloween money stories (treats only, no tricks, we promise!) check out PT Money's comprehensive list. Have a Happy Hallow's Eve from all of us at SpendOnLife!!
-
October 28, 2009
George from Seinfeld would likely disagree, but I'm with BillShrink.com: Shrinkage is good! Who wouldn’t like finding new ways to spend less and save more in their financial endeavors?
I gave their product a test drive this past week. After entering in some personal information, I was able to identify a few ways to save with the click of a button. BillShrink has software to help you save money in four categories: wireless service, credit cards, gas purchases, and CDs and savings.
Wireless / Cellphone
I haven’t had a landline in over three years which means I live and die by my cell. I currently spend $180 a month on three lines and was thrilled to see what I could do to save a few bucks. BillShrink took into consideration every issue I would encounter in switching plans, down to factoring in early termination fees with my current provider. Impressive! All I did was supply my account information for my providers website and they did the rest. I also got a detailed analysis of my usage and found out that 36% of my phone calls the previous month were to my best friend…yipes!
I did notice that the amount shown for my monthly bill was incorrect, and my only option was to manually enter my usage information myself (aka, reverse the gloriousness of having them aggregate that for me). I was still able to get a rough guess on how much money I could save by switching my plan by doing some simple math on my trusty calculator, though.
Credit Cards
I’m a firm believer of staying away from credit at all costs, but have been lured into using rewards cards for my bills and paying off the balance every month. It’s a nice way to collect on some great cash bonuses. After entering information regarding my current card and spending habits, BillShrink offered me a list of cards that would offer much better returns. I was not able to compare my current card and the cards BillShrink suggested side-by-side, but I could easily compare the cards they suggested and quickly found one I could use to earn an additional $700 a year. Applying for the card was as easy as clicking a button and entering a little more information. Mint.com, an online money management program, has a similar section on their site, but the card offers on BillShrink were much better.
Gas Stations
When I was in high school I could fill the tank of my Mazda Protégé with $10 and still have enough change to buy a soda. Things have changed a bit since that time and I had no problems letting BillShrink show me the way to budget-friendly fuel. After they factored my typical daily route, asked some important questions (like how far I’d drive for a deal), and determined my mpg by asking what type of car I drive, BillShrink found multiple stations where I could save a pretty penny. To be exact, I could save nine cents more than I paid the week before without driving very far out of the way.
Savings / CDs
Savings and I have a love / hate relationship: I love saving but my money hates to be saved. So I was very interested to see if there were any accounts that could drum up additional interest earnings than the ones I currently use. I was delighted to see that BillShrink offered options based on sole CD use, sole savings-account use, or both of those combined. That’s worth a gold star in my book! I toyed around with the various options and found a combination where I could earn an additional 7% over my current interest earnings.
BillShrink: My Two Cents
BillShrink is free and easy to use. They do 99.99% of the work for you unlike most sites that require you to come up with your own estimates. It’s not something I would use daily, but definitely a site I’ll check up on from time to time. If you’ve got a spare 10 minutes, you should test it out as well to see how much you can save.
Plus, they have this great infographic on their site that highlights consumer rights under the new CARD Act, and tells which banks are already in compliance. Bookmarking the site solely for this info is worthwhile, and will help you make sure your creditors are playing by the new rules.
-
October 27, 2009
FICO schmico. Credit scores have long proven an obstacle for students trying to get private loans. But now, there's a new score in town specifically designed for students.The Human Capital Score from People Capital doesn't assess students based on their credit history (which is often non-existent), but rather on factors like their school, major, and GPA. Your Human Capital Score can hook you up with good loans from quality lenders to cover expenses that government funding and part-time jobs just aren't covering.
I first heard about People Capital at Finovate, and wanted to get more information about this new student lending service. So I followed up with Alan Samuels, Chief Product Officer at People Capital, to get some specific questions answered. If you're a high school, college, or graduate student (or a parent of a student), I think you'll find what Alan has to say about this new lending option very interesting.
SpendOnLife: So Alan, People Capital helps students who often have little or no credit history by pairing them up with lenders. How do you do this? What’s required of students to sign up with you?
PeopleCapital: When you apply for a private student loan, lenders want to assess the risk they would take by making the loan to you, so they can know what amount they should lend and at what interest rates. The most common form of determining risk is the FICO score. FICO scores are based upon your credit history (how much money you've borrowed and repaid, whether you've made timely payments and for how long). Based on this, most students will fare poorly, as they do not have a long (or even medium) positive history of payments.People Capital is revolutionizing student lending with a new credit risk methodology. Our Human Capital Score calculates future income potential by including variables such as GPA, standardized test scores, college, and major.
The idea behind the Human Capital Score (HCS) is that there is a way to assess the relative riskiness of students by looking in part at a different set of standardized and verifiable attributes than the traditional credit score. These attributes help predict students' future income, and hence their ability to pay back loans. The HCS uses these to create a score (click on the thumbnail at right to see a sample).
SPL: If I’m a business major at Harvard, I assume my Human Capital Score would be sky-high. But what if I’m a History major from a small school that's not ivy league? Are there loans out there for me?
PC: Your HCS is not solely based upon college and major. Other factors, such as achievements on standardized tests, GPA, as well as publically available information affect the results.
While the student borrowers on People Capital will run the gamut of Human Capital Scores, it is not the case that only the highest HCS scores will receive loans. The interest rate for any particular loan will be set by an auction methodology that processes different bids from different potential lenders. Depending on an individual lender’s risk-return profile, some will seek low risk/low return (i.e. High HCS) students, while others will seek higher risk/higher return (i.e. lower HCS) students. Our platform matches lenders with the students that fit their lending objectives.
SPL: How do the rates offered on People Capital compare to those offered by the federal government? Can I use the money for other expenses like rent, food, and books?
PC: The interest rate for any particular loan will be set by an auction methodology that processes different bids from different potential lenders. Some of our lenders are philanthropic or other benevolent organizations. As such, some loans will be lower than those offered by the federal government and some above.
People Capital strongly recommends that students apply for federal loans and all other sources of financial aid — including grants, scholarships, and Work-Study — before applying for private student loans. But even with funding from all those sources of capital, students will most likely require additional funding to meet the costs of attending college.
The loans originated on the People Capital platform can be used for generally acceptable educational expenses, such as tuition and fees, room and board, books, school supplies, and transportation.
SPL: Can graduate students sign up with People Capital as well?
PC: Yes.
SPL: Will I see my credit score if I sign up with People Capital?
PC: Yes. People Capital will provide a traditional credit score (i.e. your Vantage Score from Experian) as well as the People Capital Human Capital Score.
SPL: Unlike many federal loans, People Capital requires that student borrowers begin paying back the loan while they’re still in school. Why is this a good thing and how will it help students in the long run?
PC: It is an important part of the loan payment process that the student gets into the discipline of making regularly scheduled payments, however small. Lenders find it very attractive to see the positive actions of the borrower from an early stage. One of the biggest failures of traditional student loans is the period when the student is first expected to make a payment – when it may have been three or more years since they last had contact with the loan company. In addition, these monthly repayment streams allow People Capital to continuously enhance and improve the Human Capital Score credit analytic, and are reported to the credit bureaus, thereby enabling the student to build a traditional credit profile.
SPL: You’ve just launched an income projector that tells students what they are likely to earn if they graduate from a certain school with a certain degree. How does this work?
PC: Currently, we are providing free access to the Human Capital Score. In addition, we have just launched the Human Capital Score College Planning Tool for students (and college planning consultants) who want to use the Human Capital Score to compare multiple projected income scenarios based on colleges they are considering attending.
The Human Capital Score College Planning Tool is a web-based college scenario planner that is targeted for students who are planning to go to college and need help measuring the economic value of various schools they are considering. Namely, the tool can help students decide whether it is worth the money spent to go to one school as compared to another, based on the income potential from the academic choices they make.
The planning tool works when a user inputs key data about themselves (GPA, SAT scores, planned college major) and the various schools they are considering. The tool then calculates the data and presents a graph and chart documenting results of several scenarios (up to five maximum) of the user’s potential income 10 years after graduation, allowing the user to compare the results between colleges she is considering. This tool can also be used by college planning consultants and high school guidance counselors with a professional version available for their consulting needs.
If you are interested in learning more about People Capital and how they will help you to find quality loans to cover the cost of school, visit them at their website at People2Capital.com.
-
October 26, 2009
In your twenties? If you’re like most twentysomethings, you’re probably working hard to finish your education, get your career started on the right foot, and launch your life in the “real world.” Whatever stage of the game you’re in, don’t forget about credit!Although you may not be thinking about credit — that little file that can help or hinder your ability to borrow money — the sooner you start to build and maintain good credit, the more easily you can take important steps like financing a new car or buying your first home.
Why Credit Matters
Let’s face it: cash is king. When you pay for things you want and need with cash, you don’t go into debt. With cash, you never buy anything you can’t afford. If you already spend money this way: congratulations! You’re smarter with your money than most Americans.
But fast forward five, ten, or fifteen years from now. Will you want to buy a home? Do you think you’ll have saved enough cash to buy a property that costs hundreds of thousands of dollars? Today, most people simply can’t pay cash for their first home. Even if you never want to borrow money for any other reason, you’ll probably want to borrow for a home.
Trouble is, you’ll have a difficult time getting a mortgage if you’ve never borrowed money before.
And that’s why it’s so important to build credit early in life…even if you don’t think you need it yet.
How Credit Works
In a nutshell, your credit report is nothing more than a record of all your debts and how you repay them. From that seemingly basic information, credit bureaus (the companies that collect, store, and distribute your credit report) make calculations (like credit scores) that tell lenders how risky it would be to lend you money.
You get points for borrowing money responsibly and paying it back on time. Take out a credit card and a loan or two and pay each loan on time (every time) for a year or two to build good credit. If, however, you miss a payment or two or take on more credit that you can afford to pay back, your credit score won’t look so hot.
Where Do You Start?
Often, the hardest part to building credit is taking out that first loan or credit card. That’s because banks don’t want to lend money to somebody that doesn’t have a credit file yet.
If you’re a student, credit card companies offer student credit cards that may approve you even if you don’t have any credit history. Trick is, you must be a full-time undergrad. Also, the pending CARD Act will also restrict people under 21 from getting a credit card without a co-signer or proof that you’re financially independent.
If you’re not a student, you can always apply for a loan or a credit card with a co-signer (like a parent) who has good credit. Your co-signer will be responsible for any debt you incur if you don’t pay. Ask your bank if they will issue you a loan or a credit card with a cosigner and then release the cosigner from liability after you make a year or two of on-time payments.
If these options don’t work, ask your bank about getting a secured credit card. With a secured card, you’ll have to deposit money into a savings account (the security deposit) and will get a credit card with a credit line equal to your security deposit. You make purchases with the card just like a regular credit card and pay your bill every month. Unlike a debit card or prepaid card, however, the bank will report your timely payments to the credit bureaus (which builds your credit). After a year or two of on-time payments, most banks will upgrade your secured credit card into a regular unsecured card.
Credit Building Myths
Once you’ve gotten your credit report started with your first account, you’ll be able to apply for a couple more credit lines to help you build credit good enough to qualify you for a mortgage when you’re ready. As you build credit, avoid these two common credit myths:
- You have to carry a balance (and pay interest) to build credit. Not true! If you make a few purchases (even just a tank of gas a month) on your credit card and pay the balance in full, on-time, you’ll still build good credit.
- You need a ton of credit accounts to have good credit. It’s true that having a "mix" of credit accounts is a good thing. For example, at least one revolving credit line like a credit card and at least one fixed-installment loan like a student loan or car loan. That does not mean you need twenty credit accounts to have good credit. After a certain point, extra credit accounts will actually hurt your credit rather than help.
Building good credit is an important step in building your own life and financial independence. As you go, just remember to be patient and that paying your bills on time is the single most important thing you can do to ensure you’ll always have a good credit profile that can help you reach your financial goals!
This guest post comes from David Weliver. David is publisher of Money Under 30, the personal finance blog for the young and ambitious, featuring advice for twentysomethings on getting out of debt, mastering money, and getting on with life. You can learn more about David and his blog or follow David on Twitter @MoneyUnder30. -
October 23, 2009
It's Friday again, and that means it's time for the weekly SpendOnLife grab bag! Here we share some of the week's more interesting tidbits from the world of credit, personal finance, and identity theft. Enjoy!
Step right up…79.9% APR limited-time offer!First Premier Bank recently sent a comically horrendous credit card offer to a San Diego resident: a card boasting a 79.9% APR, plus a $75 annual fee. What I want to know is how bad was this person’s credit to qualify for an offer this insulting?? Thanks to Dual Income No Kids for sharing.
Credit scores sliced and diced by e-mail address
Congrats to everyone@bellsouth.com! You beat out Yahoo, Hotmail, and even Comcast e-mail users in the best credit score contest. I’m not sure of the point of this latest Credit Karma study (it seems as arbitrary as ranking credit scores according to consumers' hair color or favorite food), but it’s interesting nonetheless.
New bill to ban employers from checking your credit
Personal Finance by the Book offers the details of Congressman Steve Cohen’s new bill that will prohibit potential employers from poking around in our credit pasts. This could be especially helpful considering the current unemployment rate, and all those struggling to find work in part because of tattered credit histories (which could be caused from having lost their jobs in the first place). Stupid vicious cycles.
I thought BofA was supposed to be the good guy
Bank of America was standing tall above other banks who are changing terms and charging fees left and right in this critical period before the CARD Act takes effect. But now, BofA has just announced that there will be new annual fees for some cardholders come 2010. These fees will range from $29 to $99, and could be charged to those who pay back their balances in full each and every month.
Save like it’s a bill
When debt is high, and bills like the mortgage and car loan are screaming for your attention each month, it’s hard to think about putting money aside into savings. But Find Secured Cards offers an easy step-by-step calculation to figure out exactly how much you should be paying your future (hopefully retired and relaxing-on-the-beach) self.
Actor in debt alert!
I hate to follow the Hollywood drama (can we please banish the words "Jon" and "Kate" from the media forever, please?) but sometimes it’s comforting to know that even movie stars have trouble with their finances. American Express has filed a civil suit for $20,000 against Jeremy London, who you may recognize from Mallrats or 7th Heaven. (Interesting Jeremy London tidbit: he didn’t star in 1993’s Dazed and Confused, but his twin brother Jason did. Who knew?)
Smooth talker woos his way to bank account information
Miguel Bell of Philadelphia supposedly used his "considerable charms" to talk bank tellers into handing over private account information, which Bell then used to cut fraudulent checks. He and his partners in crime (at least twenty of them) stole over $1 million from customers’ checking accounts at eight different banks.
27-year old nurse steals seniors’ credit information
Erica Fowler, a nurse in Norfolk, Virginia, added her name to the credit card accounts of nine of her elderly patients and went on a $14,000 spending spree.
Texting + phishing = smishing
Now, beware fishy e-mails, phone calls, and texts. Called smishing ("sms" or "short message service" combined with phishing
), identity thieves are now sending fraudulent texts to get at your personal information.
Carnivals are not just for clowns
Our friends over at One Family's Blog have gathered some great posts in the latest edition of their ongoing roundup. It's better than a spin on the ferris wheel and full of great information to help you stay on top of your finances.
-
October 20, 2009
This guest post was written by Jesse Michelsen. Jesse is an IT consultant with a passion for personal finance. After racking up consumer debt while courting his wife-to-be, he realized the need to eliminate debt and create savings for his family. Jesse, his wife, and their two darling daughters have made great strides in reducing their debt and he documents their journey to financial freedom on his blog, PFFirewall.
When Spend on Life asked me if I wanted to write about getting and staying out of debt as a young married couple, I thought that was an awesome idea. Interestingly enough, I haven't even told this story on my own blog, or anywhere else for that matter.
Before I get into my journey let me tell you a story about something I witnessed recently. I listen to a small Classical Music radio station. The station is run by a local college and has been for 30+ years, yet they have no commercials. I had never really thought of how they stayed on the air but I found out that they run a week-long pledge drive. They have different people, community voices, professors and local starlets come on the station and ask listeners to contribute. I would listen to the station on my commute, fifteen minutes to and from work. Everyday they would announce a few names of people who had contributed. Everyday there were two or three more, and the radio host would always say, "Every little bit helps." At the end of the week they announced the total amount that they had collected. It was a whopping $45,000! I was baffled. I couldn't fathom how they collected that amount of money just by asking for it. I now believe even stronger that every little bit really does help.
With debt, every little bit helps too.My wife and I got married young. She was 18 and I was 19. It's safe to say we were already in debt when we got married. In the year that we dated, my savings was quickly devoured by fancy dinners and expensive gifts. On top of blowing the few thousand dollars I had saved since the tenth grade, I started spending on credit cards. I liked to spoil my girl!
I had also purchased a brand new Toyota Corolla the year before we got married. I drove that baby off the lot with three miles on her. By the time we actually got married, we had approximately $30,000 in consumer debt.
We are down to around $10,000 now, only a few years and two children later.
I'm not going to get all cliché here and say, "Just spend less than you earn!" Everyone has heard that, and if you are in serious debt, that advice isn't going to help you. What I will tell you is how we paid off $20,000 in debt in a fairly short amount of time without going to extremes.
Firstly, before 2009, I didn't know what a debt snowball was or that there were personal finance tips online. I had never even thought to look for tips on the internet, so if you are reading this you are already on the right track.
What I did have was common sense. I knew that if I paid towards the debt, it would begin to shrink. If I paid more towards the debt, it would shrink faster.
The most important thing we did was to get into a routine of paying towards our debts. We kept paying the same amount or more towards them each month, even if our minimum payments went down. Soon we were paying hundreds more a month than our minimums. If we had extra money, we would put it in our savings account. If we felt comfortable with our money situation, we would take a chunk of our savings and put it towards the debt.
This routine went on for about two years. When January 2009 rolled around and I discovered the personal finance scene, I started thinking more about money and different ways we could improve our finances.
We took a good hard look at our finances, really for the first time. I wrote down all of our outgoing bills, associated interest rates, and everything we had coming in. Then I prioritized the debts to focus on first.
I took a look at the things I didn't value as much as the amount I was paying for them. This included our internet and phone service. I felt these were too expensive, so I did some research and found less expensive solutions. I contacted our Internet Service Provider and begged for a lower rate. It was that easy. We got a rate cut of $20 a month for a year, well worth the fifteen minutes it took me to contact them. We are light cell phone users and were severely overpaying on terms of usage versus price. We switched to prepaid phone service saving us over $1000 a year.
All this and any other found money went towards credit card debt. By March of 2009, our credit card debt was gone. We could see the light at the end of the tunnel.
One thing I will tell you that we didn't do is stop having a life. We go out to eat, socialize with others, and take our kids to fun things. We enjoy ourselves and spend on things we care about, things we value.
I know that it's hard to start anything. I am one of the biggest procrastinators you will ever meet. I of all people know how hard it is to get started on something that you dread or that you simply feel is too much of a burden to deal with, but that is the key. Start dealing with it now. It won't be as bad as you think.
I leave you with this final bit of advice. You don't have to completely put your life on hold to get out of debt. What you do have to do is create a habit and stick with it. I spent some time researching and organizing and cutting back here and there but never resorted to extremes. It may seem like a long journey, but every little bit helps.
-
October 19, 2009
FICO has said that how a person repays their medical debt will predict, at least in part, how they will handle their finances.FICO and other credit scoring formulas will drop your score if you have medical bills that have gone to a debt collection agency. It doesn’t matter if the medical debt was due to a trip to the emergency room after your son broke his arm, or a round of chemotherapy treatments. These medical collection accounts can ruin your credit by remaining on your credit report for up to seven years, even if you pay them back in full.
Luckily, there are people out there who feel that we shouldn’t be denied access to quality loans, a new mortgage, or decent credit simply because medical emergencies temporarily blew our finances off course. Enter Rodney Anderson, a major Dallas-based mortgage lender who doesn’t think medical debt should hurt your credit score in the same way that other types of unpaid debt do. Unlike a FICO score, Anderson believes that medical debt should be an exception to the rule in assessing your financial responsibility, because it blindsides almost all of its victims.
Anderson is a driving force and huge supporter of a government bill that aims to remove medical collection accounts from credit reports once paid in full. If passed, the Medical Debt Relief Act will result in an instant improvement to the credit scores of millions of Americans.
Where did the Medical Debt Relief Act come from?
About a year ago, an elderly couple came into Anderson’s office in search of a reasonable mortgage. He was disturbed that they didn’t qualify for the best rates available due to a small medical collection on their credit report accumulated after a three-week stay in the hospital. Anderson became curious as to how many others were affected by this issue and set out to learn exactly what percentage of his clients were paying higher interest rates solely because of credit-damaging medical debt. The numbers were so astounding that he realized someone needed to take action on this issue.
A win-win-win
Currently, a medical collection account will likely remain on the debtor’s credit report for seven years, even if the debt is paid. This damages the debtor’s credit score, which in turn makes it hard to qualify for credit cards, mortgages, and other loans. By eliminating a medical collection account from a credit report once it’s paid, consumers can move on with their lives with cleaner credit history (that’s Win #1). In addition, medical providers are likely to collect more payments, assuming more people will pay up once they know the account will drop from their credit history (Win #2). Plus, the government will get tax money from people purchasing more due to their newly increased credit score (Win #3).
Anderson estimates a boost in the economy of $50 to100 billion in the first year alone after the bill passes.
The battle for H.R. 3421
Anderson is serious about making this legislation a reality. Mary Jo Kilroy, Representative from Ohio, took notice of the severity of the issue and quickly supported the bill. From there, it gained 44 co-sponsors after Kilroy introduced the bill in the house on July 30th. It has even yielded bipartisan support with the addition of Congressman Don Manzullo in late summer.
Other supporters include John Conyers of Michigan (the Chairman of the House Judiciary), Nydia Velazquez of New York (the Chairman of the Small Business Committee), and Steve Cohen of Tennessee (the Chairman of the Subcommittee on Commercial and Administrative Law). Mark Rukavina from the Access Project and Pam Banks of the Policy Counsel for Consumers Union are also major supporters of H.R. 3421.
The hearing for the Medical Debt Relief Act is set for November. Rodney Anderson will testify in front of the sub-committee for Financial Services and Credit Reporting.
If you’re interested in learning more about the bill or showing your support, visit OpenCongress or write to your Congress person. Rodney Anderson is also collecting petition signatures on his website.
-
October 16, 2009
Last year, almost 10 million people suffered some form of identity theft. As painful as that number is, even more cringe-worthy is the large number of those cases that involved a family member who has stolen another family member’s personal information.We’ve heard stories of people chasing down complete strangers that have stolen their identity and the joy they’ve felt from making sure these people faced penalties for doing their evil deeds. The situation can become completely different if the perpetrator is a parent of the victim. I’ve witnessed that very situation happen with a good friend from college.
Sara's case of family identity theft
I met Sara my junior year of college and we instantly became great friends. She was an outspoken, fun-loving, life-of-the-party type with a magnetism that drew people to her like bees to honey. We lived the lives of typical broke college students on tight budgets but always managed to save enough money for beer and ramen noodles. Her parents divorced while she was small. Even though she was raised by her mom, she and her dad were still close despite their ups and downs.
One day after class, she asked me for advice on a sticky situation she’d found herself in. Her dad had asked her to co-sign a loan for two ATV’s he planned to purchase for her younger half-brothers. He also asked her not to tell her mom. The shadiness of his request led us to believe it was probably a bad idea. Yet after a few weeks of being pressured, she caved in, sent her dad her sensitive information, and co-signed the loan.
How her dad ruined her credit
Time quickly passed and before we knew it, we were seniors with the fear...uhhhh, I mean excitement...of graduation fast approaching. After a weekend trip home, Sara called and urged me to come checkout the early graduation present she had gotten from her dad, a brand new SUV! He knew her financial situation, and that her current vehicle was about to die. This gift was meant to ease her stress during her final year in school, so he claimed.
She was completely elated until a few months later when she learned that not only had her dad used her information to co-sign the loan he purchased the vehicle with, he also stopped making payments and the car was in danger of being repossessed. At this point, she could have filed a complaint with authorities and taken legal action against him. Instead, her emotions took over and she accepted his apologies and his word to start paying on the note. But it soon became clear that he wasn't going to pay up, and my friend had to find the money each month to avoid losing the car. She let the loan for the ATV’s, which her dad also stopped making payments on, go to collections.
Destroyed credit and a destroyed relationship
Over the next few years her dad continued to obtain thousands of dollars of credit in loans and credit cards with her information. Her plan of action was to let the collections pile up until her credit was so ruined it would be worthless to him. The plan worked — he hasn’t been able to open any accounts in her name this past year.
The downside to this plan, of course, is that Sara can’t open accounts in her name either. Despite being in her mid 20’s and making a high five figures a year, she must rely on her mother to make all the major purchases she needs. Sadly, the emotional ramifications she would face from turning her dad in are worse than her destroyed credit. Her alternative has been to limit his means to contact her by moving and changing her phone number. Their relationship consists of being friends on Myspace, and they haven’t spoken in years.
It's easy to assume that if placed in her shoes I'd play by different rules and be willing to fork over anyone who came between me and my credit. The dark reality, though, is that I'd probably let my parent off the hook too.
What would you do? Is having stellar credit more important than relationships with your loved ones? Would you turn in a relative for opening lines of credit in your name without your permission?
My Account | Contact Us | Write For Us | About Us | Affiliate Program | Sitemap | Answers
Email Options | Privacy Policy | Terms & Conditions
Copyright © 2002-2009 SpendOnLife.com. All Rights Reserved.