Saturday, April 3, 2010

Credit and Debt advice

It's not easy getting along in the economy that we are living in. But I will spare you my personal politics in this area. The reality is, it's not as easy as it used to be to get by.

I was reading an article about "becoming debt-free" and it had a website in it called Debt Advice. I looked through the website and thought it was very informative on it's credit, housing, bankruptcy, saving money, and debt reduction advice. Instead of calling one of those "debt consolidation firms" that have erupted like hordes of locust, try seeking the help of the nonprofit credit counselors at this site.

Additionally, in the article it talked about paying off your highest interest credit cards, even if they don't carry the highest balance. (This is what I did - so I was glad to see someone agreed with my plan! LOL)

It also says that some credit card companies will reduce your interest rate for 6 to 12 months if you promise to freeze your account during that time, as in no new charges. (I didn't do this but had I known about it, I probably would have given it a shot).

The article also said that you should think about signing up for a balance transfer to a new credit card that will give you a "no or low" interest rate for a specified period of time. I've done that before and it was nice, but now that they charge a large transaction fee, which makes it less appealing to me. Plus there is the fine print you need to really read. Many of them say if that if you are late, at all, with your payment, you'll likely get socked with a huge interest rate up to 30% as your penalty. And though it says "low or no interest for a year", well, that's not exactly true because the paperwork can take up to two months of your "for a year". I'm not a big fan of this method of lowering your bills.

Another thing it talks about is your credit score. Credit scores are very important if might ever want to own a home, a car, or anything with a big price tag that you don't have the cash for. It can also be a factor for gaining certain employment. This article, talks about the "credit utilization ratio" which means how much total credit you have compared to what you're actually using. Now according to the article, it says that you should never cancel a credit card. If you have $20,000.00 of credit on 3 cards and carry a total balance of $5,000.00 owing, you're credit utilization is 25%... which is good. If you were to cancel one card that has a $10,000.00 line of credit, then your utilization score jumps up to 50%... which is bad.

Now, in my personal experience, I have always enjoyed an excellent credit score and until recently never was turned down for any credit app. Well, I was turned down twice and the stated reason was because I had a lot of credit cards with huge lines of unused credit on them.... which means I MIGHT use those lines of credit. Most of those cards I hadn't actually used for several years, having paid them off, I just hadn't officially closed them out.... and what I MIGHT do counted against me! I'm not even sure that's legal!

You can be sure that I have cancelled all those unused cards since then, regardless of the above advice. Also, if you cancel a card.... they don't always really cancel it, I found out.... so if something that you have automatically charged every year on your card, and you forgot to tell that agency/company... the charge still goes through.... which it should not! This happened with two cards from two different companies and, fortunately, I had saved the "cancellation" numbers written down with date, time, and the name of the person I had talked to. After a scathing tongue lashing from me, for them allowing a charge on my card I had cancelled, AFTER I had cancelled it, they apologized, removed the charge and truly cancelled the cards.

So, there you have it.... advice from some "experts" ( Jean Chatzky - author and financial editor; David Bach - money expert and author; and Carmen Wong Ulrich - author and personal finance expert) and my personal experience/thoughts on their advice.

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