Experiences Using a Non-Profit Debt Management Program

Calling a debt management program (DMP) was a low-point in my life. Newly divorced with more than $15,000 in credit card debt, I didn't trust anyone - not my ex-husband, not my credit card companies (who had come after me ruthlessly despite my very decent credit history), not my divorce attorney, not myself. I certainly didn't trust that the automated phone system at a debt management program called Consumer Credit Counseling Services (CCCS) would help me get out of this terrible financial situation.

But I had to try something! My creditors' calls wouldn't stop. The operators, I could tell, were getting ever more professional sounding, higher and higher up in collections at the banks I was dealing with. I had to find a way to restore order to my life - even if it was going to be a new order that I wasn't happy about having to live with.

Consumer Credit Counseling set up an appointment for me with one of their representatives, and I arrived at their satellite office near my home to find a friendly, polite, young man named Gerald waiting to discuss my findings with me. He was sympathetic. He listened as I described my situation. He said to me, "You can do this. You can get out of debt." He added something comforting like, "It happens to the best of us."

He explained to me the terms of "joining" CCCS: I had to divulge all my debts to them as well as tell them about my income and monthly expenses. Based on that information, they would negotiate with my creditors for lower interest rates and lower monthly payments. They would encourage my creditors to stop harassing me. Usually, Gerald said, it worked. I would stop getting harassing phone calls from creditors. This was the good part.

There were more terms, however. I would have to pay CCCS an initial fee, which I think was around $50. After that, I would have to pay them $24 a month for as long as I was on the program. They would need my checking account number because they would automatically withdraw my monthly payment (in my case it was $360 per month), then they would distribute it out to my creditors. Late payments or insufficient funds could mean getting dropped from the program.

And, perhaps most significantly, as long as I was on CCCS's program, I could not have a credit card or apply for a line of credit. Car loans were an exception.

I was hesitant to sign on. After all, I told myself, I didn't have a credit card problem - that problem had belonged to my ex-husband. My problem wasn't overspending, it was trusting the wrong man. The thing was, though, I was the primary card holder on our accounts, and I was therefore held legally responsible for the debt. I was the one who faced harassing phone calls daily. I was the one who, frankly, cared. I didn't want to go forward in life with a terrible credit record and debt up to my eyeballs. So, umm... I did have a credit card problem no matter what the source. And, I wanted my creditors' calls to finally, finally, stop.

I signed on.




With the help of the debt management program, Bank of America agreed to reduce an interest payment on a very high balance from 23% to 8%. HSBC reduced the interest on a card I had with them from 12% to 0%. And, Cox Communications, a cable/ phone company with whom I had an outstanding balance of $550, agreed to accept a monthly payment of just $20 as long as it came through the Debt Management Program. I had tried negotiating with all these creditors myself with no luck - the DMP did so easily and the harassing phone calls stopped.

I made my monthly payments. I never missed one, even though it was really hard sometimes. I lived without the convenience of a credit card for more than two years. While I was on the program, I also strove to make extra payments to my largest credit card balance (Bank of America), using the debt management program to keep me in good standing and generally on track, but exceeding their expectations by paying down the big debt.

(Gerald, by the way, told me I shouldn't have paid the extra money to the credit card balance, but used it to start a savings/ emergency fund - was this good advice or did he just want me to keep paying CCCS $20 a month? I'm not sure. I will say that every single person who I ever spoke to at CCCS, by phone or in person, treated me with kindness, compassion, and respect. I never heard a derogatory word or had the horrible experience of calling during business hours and being unable to reach a real person. Overall, I'm thankful to the company for their support.)

Finally, I was able to pay off almost all of the debt and a family member lent me the last few thousand so that I could go off the debt management program. I wanted to rejoin the world of credit - and reestablish myself as a good credit holder. I expected credit card offers to come pouring in to me. They haven't. I'm not sure if it's because I was on a debt management program or if it is because in the current economy banks simply aren't extending credit to new/ risky customers. I did finally procure a credit card, but it has a limit of just $500 and an annual fee of $39. (So... six months off the program and I'm $39 back in credit card debt, already... without even making a purchase.)

If you are considering a debt management program (DMP), here are some points to consider:

• It should be a not-for-profit organization and the monthly fee should not be above $40.


• You should be able to make extra payments to your credit card accounts at your convenience without going through the DMP.


• You should be able to go off the program at any time you choose, with no penalty from the DMP itself. (Your credit card companies may punish you - for example, when I went off the DMP, my one card with a remaining balance went from a 0% interest rate - negotiated by the DMP - to an interest rate above 30%.)


• You should be treated respectfully every time you call to speak to a representative at the DMP.


• They can only help you as much as you are willing to commit to helping yourself.

The Federal Trade Commission has also posted information for consumers about using Debt Management Programs effectively and about how to know if the program is legitimate. Link to that information here.

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Montel Williams Will Still Loan You Money: How To Inherit An Elderly Relative's Credit Card Debt

The first thing I noticed the day I moved in with my grandmother was Montel Williams sitting on top of her unopened mail.

She's been in and out of the hospital over the past few months. After 84 years, her body just isn't holding together anymore. Worse, her memory and cognition are becoming unreliable. She was in terrible shape when my parents first hospitalized her, in denial about how poorly she was taking care of herself and the three-bedroom house my father built for her. Dirty dishes in the cabinets, a layer of dust over all the furniture, floors stained with what could only be dried vomit or worse... but she insisted that she could still take care of herself.

When she was first admitted to the hospital, my mother started handling her bills. Many of them were months overdue or, more worrying, paid more than once in the same period. One of the overdue bills was a credit card statement from Capital One, a card that my grandmother denied having, a card that was still being used while she was in the hospital. When my mother said she was going to report the card stolen, my grandmother admitted the card was hers. She'd given it to a neighbor who said they needed money. One of her “friends,” like Montel Williams.

Leafing through pages and pages of my grandmother's credit history, we were horrified to find that the $500 Capital One card was the least of her credit card secrets. At one time, she owed Bank of America a little over $20,000, but that account had been in collections for almost two years, purchased by a company called Asset Acceptance, that had bumped her debt all the way to $28,000 and put a lien on her home, the one my father built for her just a few years ago.

The envelope with Montel Williams on it was from a company called MoneyMutual. Montel promised, “Get up to $500 deposited into your account by tomorrow!” The information in the envelope was confidential, exclusively for the “member,” and assured my 84-year-old grandmother, who believes the city inspects her garbage for recycling and will fine her if they find any, “Your Emergency Cash Card has been activated and is ready for you to use. Keep it in your wallet or near your computer so that your personal Reservation Number is always handy.” Much like the neighbor running up her Capital One card, Montel Williams was her “friend,” always ready to lend her money if she needed it. On the back of the MoneyMutual letter, the fine print reads, “www.MyMoneyMutualNow.com is not a lender, an agent, a broker, or a representative of a lender, and does not make cash advances or lending decisions. MyMoneyMutualNow.com will provide your information to lender(s) that offer short term loan products.” In other words, MoneyMutual would happily give my grandmother's name and finances to whoever was swimming in the low end of the shark pool. Thanks, Montel.

My grandmother lives on food stamps and social security checks, but companies like Aspire Visa, Bank of America, HSBC, Chase, Upfront Rewards and even Barclays Bank of Delaware have been extending her enormous credit lines over the past five years. She had limits as high as $15,000 dollars on some of these cards, which she would use and then roll onto another card as soon as she had trouble making the payments. Some time during 2009, she stopped being able to keep track of which cards were canceled and which were due, and stopped paying all of them. The companies wrote off the debts, and various collection companies scooped them, including Asset Acceptance, a collection agency notorious for its tactics. The lien on the house is likely their doing, but my grandmother can't tell us anything about how it happened.

According to a recent article on the New York Times website, heavy credit card debt among the elderly is exploding in recent years, with seniors “regularly swiping cards to pay for things like gas and groceries.” The balances pile up, leaving it difficult for them to cope by themselves. The same article cites a study by Demos, a public policy research organization: “The growing reliance on plastic has driven the average credit card debt for people over 65 to $10,235.” My grandmother owes three times that amount.

A few years ago, when my grandmother was just starting her life in Florida, she mentioned a few of the credit card offers she'd accepted as though it wasn't a big deal. “I asked my lawyer, and he said that no one has to pay those bills after I die. So why not?” My parents were skeptical, but neither of them believed a credit card company would extend much credit to an old woman on social security. I tried to tell them that these same credit card companies extended credit to freshman college students living off SallieMae loans.

My grandmother's lawyer was only half right. In a column posted on www.creditcards.com, a woman named Roberta wrote in asking about a similar situation with her elderly mother's credit card debt. Roberta's mother and my grandmother are both what Harry S. Margolis, Boston Attorney and president of ElderLawAnswers (http://www.elderlawanswers.com/), call, “'Judgment proof,' meaning the credit card companies may be able to sue her, but they can't collect anything if there's nothing to collect.” Credit card debt is unsecured debt, which is why collection agencies will try so hard to convince you to pay them. Unsecured debt won't live on after my grandmother's death, but somewhere between running up almost $30,000 in credit debt and now, that unsecured debt became firmly anchored by her house through a lawsuit or a home equity line of credit she doesn't remember agreeing to through a lien. When the house passes completely to my father, the lien and her $30,000 worth of debt will go with it.

Every morning, I remind my grandmother to take her pills, and every morning, she asks a short while later whether she took them or not. Despite a failing memory, she gets mail almost daily from her “friend,” Montel Williams, who wants her to borrow more money. Her calendar on the refrigerator still shows the due date for the last cash advance a local check cashing store forwarded her against her social security check. My grandmother used to keep a detailed record of every phone call and transaction in a notebook. I've read through the entries during the period where she stopped paying her credit-card statements, trying to find a clue to how the debt became so huge, why it became tethered to the house. All I found were a few confusing scribbles about lost credit cards and this note, dated March 19 of 2010, “Letter from Bank of America Attorney – left message, no way I can pay them, do what they want.” Her handwriting grows erratic after that point, and the notes stop altogether in early 2011. One of the last entries was that she sold some of her custom jewelry for $100.

My grandmother's phone never stops ringing, but it's not collection calls. Those must have stopped when Asset Acceptance placed a lien on her house. The calls are from dozens of my grandmother's “friends,” all the people she used to do favors for. “I've done a lot of good for a lot of people,” she said to me the other day. I believe her. $30,000 worth of favors, including credit cards to friends and paying other people's bills and lending borrowed money to people who neither me nor my parents have ever met. My mother wants me to be polite when these friends come to visit because we don't know the whole story. We'll never know the whole story. So I smile and shake the hands of these strangers, like the woman who borrowed the credit card, but whenever Montel Williams pays a visit, I tear him in half and toss him in the trash.

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FICO Credit Score Back Up to 760: Big Yawn...

Some good news and some bad news this month. First, the bad news.

The mother of my child moved out into her own condo, so, even though I am enjoying the extra space, stress relief and the freedom, I have agreed to pay $300 per month in child support.

$300 per month is too high, in my opinion, considering the circumstances. First of all, the mother of my child has a full time job with excellent benefits. She doesn't have to make car payments on her car (as I do), because she owns it, thanks to me. When her car broke down a couple of years ago, I gave her my very reliable and well-maintained car, and I bought another used car for me. Her insurance payments are very cheap as well -- less than $500 per year.

Now, don't get me wrong: I'm not trying to make a big deal out of my car donation, because it's really not that big a deal to me. I'm just laying down the facts here, and I think it's important to note the source of her assets.

Another reason why I feel that $300 per month is too much: our child -- I'll refer to her as TK from now on -- is in preschool, and I am paying for her tuition, which is $135 per week, or $540 per month.

Furthermore, it's not like TK is with her mother all the time. I pick up TK from school, and she spends all day with me every Friday (her preschool is 4 days per week), and she stays with me every other weekend.

Now, considering all these factors, I thought that $200 per month plus TK's tuition payments was fair. We debated the issue for about half an hour -- without any shouting, which was a welcome surprise -- and, in the end, I acquiesced and agreed to $300 per month. The way I see it, the bottom line is that we are in a critical transition period right now, and I really don't want to do anything to exacerbate the tensions that inevitably manifest themselves when a home is newly broken; my daughter can be surprisingly mature at times, but she's also very sensitive. My baby girl means a lot to me, so as long the money I'm providing is being used for food, clothes, weekend outings and trips to the hairdresser, I'm OK with it (I don't think I'm being a miser, but if you think I'm just being a cheap bastid', then feel free to post your comments below. I'm open to all rational arguments!)

So I'll be paying TK's mother by check tomorrow, and from February on I'll be making payments via a prepaid debit card, so that I can track all spending online. I'm not just being paranoid. When TK's mom was living with me, she would order stuff from QVC and the Home Shopping Network sometimes. Did I have problem with the spending? No, not at all. What did bother me, however, was the way she would spend money on items, then totally trash them or even throw them away a few weeks later. That kind of nonsense just boils my blood. That kind of spending is, in my opinion, a sign of a serious psychological problem -- possibly depression -- but that's a subject for a another blog.

I was hoping to fatten my savings account this year, as I'm getting too old to have such a puny balance in my savings account. But I guess I'll just have to work harder, and chase the dollar with even more zeal in order to maintain myself and my obligations.

One way I'm saving money is by using space heaters instead of the electric heating system that's installed in my place. My apartment's built-in heating system is a real hog at 8 kilowatts. When I got my first electric bill back a few years ago, it was a staggering $600 (December used to be a cold month in the Northeast U.S.) so I was highly motivated to find another heating solution (I was also motivated by my breathing problems, which are almost always exacerbated by built-in heating systems, no matter how well they are cleaned.) I turn my space heaters on when I need them, or when the nights are really cold, and this works very well for me. My heating bill now averages about $157 during the winter months, much less during the warm months, which is pretty darn good considering that I work from home (my computers actually produce enough heat to keep my home office toasty most of the time; of course, my office gets a bit too sticky during August, and I sometimes have to (grudgingly) power up my portable air conditioner.) I usually turn all my space heaters on full blast when my daughter is staying with me, as she has a habit of stripping down and running around the house with just her panties on.

I have to laugh at myself sometimes when I'm home alone. I'm so keen about saving money that my office is often the only warm room in the house during the cold months. This makes for some very eye-opening trips to the bathroom: who needs coffee when you've got freezing cold floors and toilet seats.

It's funny: when I was in high school, I never imagined that I would grow up to become the kind of person who thinks about money every day, but that's who I am now. I don't think an hour goes by without me thinking about ways that I can boost my income by another $10,000 per month, or ways that I can reduce my daily living expenses. Oh well.


OK, and now for the good news.

One of my businesses did surprisingly well during the holidays, so for February and March (it takes a while for my earnings to filter through to my bank account), I'll have some extra cash to play with.

As noted above, I don't think I'll be able to play catch-up with my savings situation, because my pending windfall has already been earmarked. I'm going to

• Maintain a decent quality of life.
  
  
• Take care of my familial responsibilities.
  
  
• Pay down my personal and business debt.
  
  
• Send my father $1,000 (he recently had surgery and needs some cash. I can empathize: I had a tonsillectomy back in April of last year.)
  
  
• Maybe, just maybe, take a small, working vacation (my last real vacation was in 1999.)
  
  

Putting money into savings now doesn't make sense to me. My savings account is at a great bank, but the yield is not very competitive, as is the case with most brick-and-mortar banks. Putting money into saving while paying an average of 8% on my debts isn't the smart way to go, in my opinion. Overall, I would still be "leaking money" via interest payments if I opted to go with such a plan.

But I am very tired of my personal credit card debt. I'm bored with it. I'm sick of it!

My FICO® credit score, provided by TransUnion, jumped back up from 753 to 760 last month, and it stayed at 760 this month (boring!) My credit score hasn't experienced a serious jump since September, 2006. I'm itching for the kind of fix that only a 10+ point jump to my FICO score can provide.

Yep, my credit score is good enough that I could easily qualify for yet another 12-15 month 0% balance transfer offer, which would allow me to avoid paying interest on my personal credit card debt for another year or so. But, the bottom line: transferring my debt via a 0% APR deal is just moving my debt around, and I'm tired of it. The banks and credit card companies have made some good money off my debt, but it's time to turn off the music and kick everybody out: the party is over. I now have the power to eliminate all of my personal credit card debt and some of my business credit card debt, and that's exactly what I'm going to do.

Here's what my current debt situation looks like:

Paying off my personal credit card debt should give my FICO credit score a huge boost, and should get me to my goal of an 800+ credit score sooner than I had originally planned (If bringing a personal credit card balance of $5,800 down to zero doesn't boost my FICO score above 800, then I will certainly lose faith in the system.)

At first, I was thinking of paying off my car loan. It would feel great to own my vehicle and get my title back into my fireproof safe where it belongs. It would also be great to get rid of the almost $390 per month I pay on my car loan; that's money that could ease the stress of my nascent $300-per-month child support payments. But the APR associated with my car loan is 6.25%, which is pretty good considering that the national Prime Rate is 8.25% right now. I'm paying higher than 6.25% on some of my other debts, so paying off my car loan is out, for now.

I then considered paying off my student loan debt. When I consolidated my student loan several years ago, I got an APR of 8.25%. Lots of people are consolidated at half the APR I'm paying these days, which makes me feel like I'm getting ripped off. But my student loan payments aren't stressful, and my credit card debt is more of a priority for me.

So, by March of this year, I will have completely wiped out my personal credit card debt, wiped out the debt on Business Credit Card #1, and made some major progress (i.e. cut the balance in half) with the debt on Business Credit Card #2. Business is kinda' slow right now, but if my new marketing push is successful, I plan on making some large payments toward my student loan and my car loan, so as to eliminate at least some of the interest I'll pay on those loans.

That's it for now. Remember: comments are always welcome.

Here's an updated image of my charted credit score:

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FICO® Credit Score Holds Steady At 804

There are plenty of things I could complain about in my life. My credit score isn't one of them. My FICO® credit score has held steady at 804/805 since May of this year:



I was hanging out in a CNBC forum the other day and came across an interesting thread. The user has a FICO credit score of 788, but is still worried about a comment in his credit report that reads, "amount owed on revolving accounts is too high." I know this comment well. I posted about this back in the summer of 2006 when my credit score hit 719. Yeah, it looks bad, but, in my opinion, that's just the FICO system's way of telling you that if you want to have a score of 800+, pay your revolving accounts down to zero. It's nothing to panic about. This note disappeared from my report when I paid all my personal credit card balances down to zero.

The fact that I still had a balance on one of my business credit cards at the time did not matter, since healthy business credit card debt is reported to business credit rating systems like Dun & Bradstreet's Paydex or Experian's Intelliscore service.

Now, if I ever get into trouble with one of my business credit cards and default (God forbid), the issuing bank(s) will almost certainly report the negative item(s) to all consumer credit monitoring agencies (TransUnion, Equifax and Experian.) They have the right to do this since I signed a personal guarantee when I opened my business credit card accounts, which is standard practice.

Even with my current score of 804, I'm seeing the following notes in my report as reasons why my score isn't higher than 804:

• "The time since your most recent account opening is very recent
• The length of time your revolving/charge accounts have been established is too short"

The top one I can understand since I only recently stopped chasing 0% credit card offers. But I find the second note quite funny since I have accounts so old that I'd even forgotten they existed.


Avoiding Interest Charges on My Main Business Credit Card

There is a certain balance on my business credit card that I have been targeting. This target balance allows me to have enough cash to save to for retirement (Roth IRA, of course!), pay my bills and child support, and have a little left over for savings (I wouldn't have a balance at all if the credit crisis never happened, but that's life.) Now, with this particular target balance, finance charges are applied every month. However, I've managed to avoid having to pay any interest by using the rewards points I earn each month to "purchase" a statement credit of $50.

My target balance is $4,000. Since this business card has an APR of 9.99%, the daily periodic rate for purchases is:

• 9.99/365 = 0.02737%
• 0.02737% is the same as 0.0002737

So with my preferred target balance, I am charged $4,000 x 0.0002737 = $1.0948 interest per day. This makes the interest I owe each month in the $34 range, which gives me some breathing room since I can't predict the exact amount that I'll purchase on this card every month. As long as the finance charges are $50 or less, I'm good.

How do I manage to stay close to my target balance? Easy! I login to my account at least every other day and check my balance. When my balance is looking too high, I schedule and online payment. Quick and easy. Whenever I make a major purchase, i.e. over $500, I make an online payment immediately, so that I don't mess up my average daily balance.

So, if you've been paying attention, your next question is likely, "so how much do you have to spend each month to get a $50 statement credit?" Easy. A $50 statement credit requires 5,000 rewards points. I get 1 rebate point for each dollar I spend on the card. So I have to spend $5,000 per month. In other words, it's a 1% cash back rewards program.

During the good times, when I'm able to pay my balance to zero every month, my points accumulate and roll over, which gives me plenty to play with during the bad times (I had about 28,500 points stored up when the credit crunch took a serious turn for the worse a couple of months ago. Converted all those points to statement credits.) However, my points do expire if I don't use them within two years, which is quite reasonable in my opinion.

So, with this technique, it would seem as though I could have a 0% business credit card forever, just as long as I keep spending and avoid having an average daily balance above the $4,000 threshold (this card has no annual fee.) But the reality is a "fixed" rate of 9.99% can disappear without much notice. That's because credit card issuing banks invariably reserve the right to modify the terms of each credit card account whenever they wish, as long as they give you warning of an impending rate increase and the option to opt out of it. Citi and American Express have plans to raise APR's for millions of their credit card customers.

This technique requires that I do a lot of spending on this card each month, which has worked out fine since I've been buying a lot of advertising lately. Even as business improves and I'm able to pay down my balance a bit, I have another statement credit tier to work with: I can get a statement credit of $20 in exchange for 2,500 rewards points. As you can see, this tier isn't as equitable as the top tier I described above, but I can still work with it. Maintaining an average daily balance of $2,500 would produce an interest charge of about $21.21, so I'd need to keep my average daily balance at around $2,200 (interest would be $18.67) and spend at least $2,500 per month.

Of course, I'd much rather end this game and return to the good old days of paying my balance in full each and every month. Yes, I'm taking full advantage of my card's rewards program -- and I enjoyed 0% on new purchases and a transferred balance for a year -- which is great. But by having a revolving balance, I'm playing right into the hands of my bank. Bottom line: this scheme could easily blow up in my face if my business has a really bad month.

Some credit cards offer up to 5% cashback on everyday purchases like gas, travel, home improvement, dining out, etc. The Discover More card is the perfect example. For some reason, I wasn't able to get a Discover More card, despite having a good credit score when I applied. When I submitted my application for this card, my FICO score was in the upper 700 range, yet my application was rejected. I checked my credit reports after that rejection, and found nothing wrong. Go figure. If you can get this card, do it. If you already have one, cool. The rewards are peerless in generosity, it comes with 0% intro APR on purchases and balance transfers and the "goto" APR isn't that bad (as low as 10.99%, variable) when compared to competing consumer cards in the American market.

But I'm not complaining. I like my flagship business card. It's a business purpose card, which enables me to have credit card debt and a high personal credit score simultaneously. Plus, the process that my issuing bank has setup for claiming statement credits is efficient and stress free. I just login to my account and within a few clicks of my mouse I've traded my points for a statement credit. Lovely. My other business cards either have APR's that are too high for my taste and credit standing (so I keep them for building credit and emergencies only) or, as is the case with my newest business card, the credit limit is way too low.

Discover has some relatively new business credit cards on the market now, and the rewards are quite generous, though not as generous as the Discover More consumer credit card I noted above. I'd love to apply for this card, but I'm gun shy as a result of my previous rejection.

So, why I am not recommending my favorite business credit card here? Good question. The answer is simple: it's not available anymore. A victim of the current credit crisis. In fact, I just visited the issuing bank's website to see what other business credit cards they have on offer, and found none. The market for business credit card receivables dried up last month (a receivable is any debt owed to a company/corporation that is not paid in full yet.)

Before the onset of autumn this year, my bank could take my $4,000 business credit card balance, bundle it with other credit card receivables and sell the debt to Wall Street. But investors don't want to buy that kind of debt right now because credit card defaults are rising, even with accounts held by prime borrowers.

Want to know when global credit markets will improve? Stay tuned to the TED spread (the TED spread is the difference between the yield on the 3-month Treasury Bill and the 3-month LIBOR yield; it's a reliable indicator of banks' willingness to lend.) Once it falls below 1.00 percentage point, banks will start (probably with baby steps at first) lending like they did before this decade's housing boom.

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New Credit Card Rules

Consumers are now familiar with the Credit Card Accountability Responsibility and Disclosure Act of 2009 or CARD and how it protects borrowers against unfair interest rate hikes and other exorbitant credit card fees. However, most consumers are not aware that the Federal Reserve enacted new rules for credit card companies on February 22, 2010 to ensure that consumer rights outlined in the CARD Act of 2009 are truly protected. As the regulatory agency of America’s banks, the Federal Reserve has to police the banks to make sure that they don’t try to exploit potential loopholes in legislation and thereby exploit consumers.

The February 2010 regulations enacted by the Federal Reserve provide the following protections to credit card consumers:

Credit card companies must tell you how long it will take to pay off your balance. Now your monthly credit card bill must include a breakdown of how long it will take to pay off your balance if you only make the minimum payments as well as what you would need to pay each month in order to pay off your balance in three years.

No interest rate increases for the first year. Credit card companies can no longer increase your rate for the first 12 months after you open an account, EXCEPT IF:

• Your card has a variable interest rate tied to an index.
• There is an introductory rate, but it must be in place for at least 6 months.
• You are over 60 days late in paying your bill.
• You violate a payment arrangement agreement.

You MUST be notified when they plan to increase your rate or other fees. Your credit card company is now required to give you 45 days written notice before they can

• Increase your interest rate;
• Change fees that apply to your account
• Make any significant changes to the credit contract terms.

If you do not agree to the new terms you now have 45 days to cancel your card before the changes are put into effect. However, if you do choose to cancel your card your credit card company may close your account and increase your monthly payment, with certain limitations.

Your credit card company DOES NOT have to give you 45-day written notice if:

• You have a variable interest rate tied to an index and the index goes up.
• Your introductory rate expires.
• You violate a payment arrangement agreement and you experience a rate increase as a consequence.

Increased interest rates can only be applied to new charges. If after 12 months your interest rate is increased it cannot be applied to a balance accrued before the rate increase itself.

Restrictions on over-the-limit transactions. You must now opt-in to allow transactions above your credit limit to be processed; otherwise the charges must be denied. If you do not opt-in and your credit card company allows your card to be charged above your credit limit, you cannot be charged an over-the-limit fee. Also, if you do go over your limit you can only be charged one over-the-limit fee per billing cycle, and you can opt-out at any time.

Payments must be directed to highest interest balances first. If you make more than the minimum payment, the difference must be applied to the balance with the highest interest rate, with one exception:

When you owe a balance on a deferred interest plan, the credit card company may give you the option to apply payment in excess of the minimum balance to the deferred interest balance before other balances. Otherwise, for two billing cycles prior to the end of the deferred interest period, your entire payment must be applied to the deferred interest-rate balance first.

No double-cycle billing. Interest charges can only be applied on balances in the current billing cycle.

Standard payment dates and times. Your credit card bill must be mailed or delivered at least 21 days before your payment is due. Furthermore,

• Your due date must be the same date each month
• Payments must be accepted until 5 p.m. on the due date.
• If your payment due date falls on a weekend or holiday you will have until the following business day to pay.

New caps on high-fee cards. If a card comes with fees such as an annual fee or application fee, those fees cannot total more than 25% of the credit limit. The 25% cap does not, however, apply to penalty fees.

Protections for underage consumers. Applicants under the age of 21 must prove that they have the income to pay their balances or they must have a cosigner in order to open a credit card account. Also, if an underage cardholder wishes to increase their credit limit and they have a cosigner, the cosigner must agree in writing to the limit increase.

The Fed also announced in October 2010 that it would amend Regulation Z, the regulations implementing the statutes of the Truth In Lending Act, in order to stop certain predatory practices enacted by credit card companies in attempts to maneuver around the CARD Act rules and earlier Federal Reserve regulations. The amendments will clarify matters of compliance for card issuers on the following:

Promotional programs that waive interest charges for a specified period of time. Reduced interest rate promotions are subject to the same protections as promotions that employ a reduced interest rate for a specified period. Credit card companies have recently used a ‘bait and switch’ approach to certain reduced rate offers, not disclosing that the promotion rules would allow them to revoke the benefit at any time.

Fees charged before a credit card account is opened. Application fees and other fees that are paid before a credit card account is opened are covered by the same limitations as fees charged during the 12 months after the account is opened to further avoid predatory lending practices.

Proof of ability to pay must be proven for the cardholder as an individual, not household income. Predatory lenders often issue cards to individuals who do not truly have the ability to maintain their accounts based on household income or other income credits, locking these consumers into a debt trap.

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My Mom Can Be Such A Comedian...

A few days ago I was having a conversation with my mother, and, as usual, she asked how I'm doing financially. I told my mother what I tell everyone who asks: I have no complaints. Of course, I understand why my mom asks all the time. She's known me my whole life, and for a relatively large percentage of my time on this planet, I've had plenty to complain about, including massive credit card debt, a student loan-related judgment against me, and various creditors calling me incessantly trying to collect. I'm not rich, but I am pleased with my financial circumstances, especially when I consider my irresponsible past. I've learned a lot over the years, and one key thing I've noticed is that you can live quite well and be happy while earning a lot less than the Donald Trumps of the world, but only if you have no debt, or your debt is at a very manageable level. In other words: you'll be surprised how little money you can live on when you're not servicing mountains of debt. Yep.

So this conversation with my mother took an interesting turn this time around, as she asked me if I was aware of my brother's problems with credit card debt. I told her that I wasn't, and she proceeded to enlighten me about my older (by 3 years) brother's credit card debt, which is currently at a whopping $45,000, and rising. When she told me, I did not believe her. I thought she was pulling my leg. You see, when I was growing up, my brother always seemed to have his act together when it came to matters of money. He always had savings, when I had none. He always had a job during the summer breaks, whereas my summer work history was...well...spotty. I asked her why he had so much credit card debt, and she told me that he just wasn't doing well. I still didn't believe her.

The reason for my incredulity was simple: my brother and his family are all healthy (so no big medical bills), he has a steady job working with computers and -- OK, this is the big one -- he doesn't pay rent and he doesn't have a mortgage. Yes, being the oldest boy has it's privileges, and one key benefit that he, his wife and his daughter have been enjoying for about a decade now is living in my mother's house for free (and no: my mom doesn't live with them.) Don't get the wrong idea here: I am not, and never have been, bitter about my brother's free accommodations. I think it's great. The way I see it, if you can take advantage of a good thing, then do it. Besides, I really wouldn't want to live in the same house where I grew up (my sister feels the same way.)

The only housing-related bills my brother (I'll refer to him as Phil from now on) has to pay for are the utilities and property taxes. I know that old, stone and stucco house can be expensive to heat, but I'm still not feeling any sympathy. I also know that when things aren't going well between a man and a women (his marriage isn't the happiest), money tends to drain away, for all kinds of reasons. Still, $45,000?

So, my mother eventually laid this Godzilla of a question on me. She asked, "Why don't you and your sister put some money together and help your brother out?"

I didn't answer my mom. I sat silent for about 10 seconds, and she understood what that meant: sorry, but no. She quickly changed the conversation at that point.

Once again, I am sorry, but I'm almost ready for my midlife crisis, and I've only just started building a serious savings account. Why should I help Phil? I took some serious risks, used up all my 401K savings and worked hard to get where I am today. Phil should work hard too, get a second job if he has to. I had the same problems with credit cards not too long ago, and I did the right thing and paid them off. It took a while, and it was quite painful at times, but I did it, because it had to be done. Bottom line: I know that Phil has the inner fortitude to get disciplined and get serious about fixing his finances, so I'm not going to be a crutch for him. If we were talking about a medical emergency, I would happily open my wallet. But credit card debt? I don't think so.

It's just like the current situation with all the bad mortgage debt dragging down the American and global economies. Helping those speculators and investors out would create a moral hazard. People should be willing to bear the pain and take their lumps. Besides, if we get a recession, it will help to purge the ill-considered speculating, bad debts and bad investments that have created bubbles in markets all across the globe. Market players will eventually rise from the ashes stronger, wiser and more mature.

And so will my brother Phil, just as soon as he tames all that ugly debt.

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No Balance Transfer Fee Credit Cards

I'd really like to see 0% intro APR, no fee balance transfer credit card return to the U.S. Credit card offers have been improving, but, these days, banks are very keen on charging a fee for all kinds of services, including credit card balance transfers.

I know from experience that the best way to raise your credit score above 800 is to spend plenty of money with credit cards, then pay all that money back. That's what I did during the last decade, as I built my business. As of last month, my TransUnion credit score is still above 800; 804 to be exact.

I very rarely use my personal credit cards these days. I use my business cards for business spending, and for personal stuff I use my personal debit card.

I was thinking of transferring some of my business-credit-card debt to another business credit card that includes an attractive, no fee balance transfer, 0% intro APR deal, but I can't find any. And I can't transfer my business debt to a personal card, since, technically, that would be breaking the rules.

Before the financial crisis of 2008, there were plenty of no fee balance transfer deals out there, with both business and personal cards. Bank of America, Citi, Discover -- they all had at least one no transfer fee 0% card.

So I guess I'll just have to wait and do my best to pay down my business cards, so that I don't get overwhelmed with finance charges.

Used My Citi Personal Card, Just In Case

Last weekend, I decided to use my Citi personal credit card, just to use it.

My Citi card has a credit limit above $30,000. The APR isn't good, but I keep the card as a backup in case of a financial emergency, and to keep my credit score high. Closing a credit-card account that has a zero balance and a high credit limit would almost certainly cause my credit score to drop. As you probably already know, having lots of credit available to you, and not using it, looks very good to credit scoring algorithms.

So I used my Citi card to keep the account active. I don't want Citi to close it due to inactivity.

Spent a little more than $69 on some gas, then paid it off right away via an online payment.

I don't drive anymore (sold my car) but I was riding shotgun in my friend's car on a trip to New York. Trip was mostly benefiting my todo list, so I paid for the gas.

I was very surprised to find that at Sunoco stations, you can't use a credit or debit card more than once in a day. This is true even if you use a credit card to pay for fuel in one state, then try to use it again in another. VERY annoying.

So I found myself with limited cash and a debit card that I can't use to pay for gas. Seemed like the perfect opportunity to dust off my Citi card and send a clear signal to the good folks at Citi that I want to keep this card alive!

Why do I insist on using Sunoco? I like the quality of the fuel, and I also very much like the fact that the company gets not a drop of crude oil from the Middle East. Does all Persian Gulf oil money fund radical Islam? Of course not! But if even $0.01 goes to support terrorism, I'm spending my money elsewhere.

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A New Record High for My FICO Credit Score: 721

I'm pretty excited about sharing the latest news from my debtscape: my FICO® credit score has hit a record high 721. I was actually expecting a bigger jump this month, because I made two $1,000 payments on two separate credit card accounts. 2 payments in the $1,000 range should have caused my score to jump higher than 2 points, according to the handy FICO Score Simulator that's available to me when I access my Providian account online. But I'm thinking that perhaps only one of the two payments is being reflected in my new 721 score, because there's always a lag with these types of updates.

You know, the only reason I keep my Providian (which, by the way, is now Washington Mutual) account open is to have access to my FICO score for free. The credit line on my Providian account is $9,500, which is decent, but I don't use the card, because the annual percentage rate is close to 20%--actually, it may be higher, but I have no idea because it's been a very long time since I used the card for purchases (as you've probably already figured out, I got my Providian card way back when my credit score was pretty bad.) I really have too many credit card accounts open right now, which can look bad in the eyes of certain creditors, so if it wasn't for the free FICO access, my Providian card would have been consigned to the cruel and efficient teeth of my shredder many months ago.

At this point in my life, it feels good to be able to say, "I'm comfortable with my current debt burden," and mean it.

I'm trying to see if I can make a ~$700 payment to one of my Citibank® credit cards, which would bring the account balance on this particular card down to zero. If I can manage to spare the cash, it would be a great thing, because then I would be left with only one consumer credit card with a balance. I have two business credit cards, each with a very manageable account balance, but I'm OK with carrying business debt at this point: the business-related credit card debt is helping to build a credit history for my company, and I need to be able to cycle in and out of debt for certain business expenses (I'm enjoying a year-long, interest-free period on 1 of my business credit cards, so my business-related debt really isn't pinching me that much at this point.)

For those of you who like visuals, I've posted an updated screen shot image of my charted FICO credit score below:

That's it for now. Stay tuned, and thanks much for reading.

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My Highest FICO Score Ever: 719!

I recently checked my FICO credit score: 719, the highest FICO score I've ever had! I've got plenty of debt: credit cards, student loans, car loan--which tempers my excitement about my credit score. But if you're going to play the debt game, might as well play the game right!

I'm still renting, so every bump to my credit score should translate to a lower interest rate when I'm ready to own, if I decide to buy a $1,000,000+ home.

When will I be ready to own? Not any time soon, that's for sure. I understand all the benefits of owning a home, but I really can't stomach the idea of paying a bank $x,xxx,xxx for the principal, and another $x,xxx,xxx in interest charges for a mortgage. Just doesn't seem fair to me. So, if I do well with my businesses, I am hoping to have enough to just buy a decent-sized condominium for about $150,000 in the same neighborhood where I am living now (thankfully, I've seen a few in my price range recently.)

As if on queue, I'm starting to receive some highly attractive credit card offers from the major providers. Heretofore, the credit card offers I've been receiving have been good, but not spectacular. Now that my FICO credit score is 719, the offers are much better.

Just yesterday, I received an offer for a Chase®  branded Visa® Signature credit card. With this offer, I have the option of transferring my other credit card balances, and pay no interest on the transferred balance until October, 2007! Now that's hot (apologies to Paris Hilton, for stealing your catch phrase.) Furthermore, the go-to rate for this card--the annual percentage rate (APR) I would pay once the interest-free period terminates--is a sexy fixed rate of 8.99%! To give you some perspective on how great an 8.99% APR is, we'll probably have a national Prime Rate of 8.5% after August 8^TH of this year. A credit card with an APR that's a mere 0.49 percentage point above Prime is...well...hot!

Of course, if you were smart enough to get a credit card with a fixed APR when the Prime Rate was 4% back in the summer of 2003, and your credit score was high, then you're probably one of the lucky few who now owns a credit card with an APR that's below the current Prime Rate. My credit score wasn't good enough to qualify for an ultra-consumer-friendly credit card offer back then, but, in early 2004, I was able to buy the car I've always wanted, and I was able to secure a 6% APR on that loan. Good stuff.

Well, folks: the game continues. My new goal is to have a FICO credit score that's above the 800 mark by the time the nation is ready to vote for a new President. Wish me luck (I'll need it!)

My Charted FICO Credit Score

For your viewing pleasure, I've posted below a screen capture of my charted FICO credit score:

When I lookup the reasons why my score is 719, I'm seeing the same two items:

• The amount owed on your revolving/charge accounts is too high.
• The proportion of balances to credit limits on your revolving/charge accounts is too high.

The second item is kinda' annoying, because I'm not even close to being maxed out with any of my credit card accounts. No big deal, really, but it's annoying to see it there.

That's it for now, boys and girls. I'll post more about my adventures with debt ASAP. Thanks for reading.

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My Student Loan Debt Horror Story

I have a very personal story to share with all you people out there with student loan debt. I am sharing this story in the hope that as many people as possible can learn from my mistakes. This is a true story that happened to me back in 1999.

I had been out of school for quite a while. I was working at a big law firm in New York City making a decent living, paying my bills and some of my debt. I had (foolishly) incurred a lot of credit card debt in my youth and I was really paying for it. I also had about $11,000 in student loan debt from a Federal Subsidized Stafford Loan I had taken out when I was in school. I wasn't paying my student loan debt. In fact, I completely ignored my student loan debt, throwing all the threatening letters I received into the trash! My thinking was, "what could they do to me? If I ignore the debt the government will step in a pay it off. Besides, those monthly payments are way too high!" There was a moderate amount of guilt associated with my actions, but it's hard to feel sorry for the richest government that has ever existed on the earth.

So I was moving along with my life, happy to be slowly improving my credit rating by paying of my old credit card debt. I got a raise at work and started investing a large chunk of my paycheck into my employer's 401K plan. Yeah, things were OK and getting better. It was at this point in my life that I opened a business checking account because I had big plans of quitting my job and starting my own business. I started making small deposits to this account every week or so and soon I had over $1000 in that business account. And that's when it happened.

One day, I was performing a routine balance check on my business bank account and found that my bank account was completely empty! Shock? Horror? No, it was more than that. I nearly fainted! I immediately got on the phone with the bank to get an explanation. They informed me that my money was legally withdrawn from my account by a law firm representing the government in student loan default matters. I got the phone number for that law firm and called. They told me that they had obtained a "judgment" against me in court 3 or 4 years prior, and that they had every legal right to seize any and all money in my bank accounts. Wow. That's some serious power, eh?

So, all those threatening letters I was throwing away: I really shouldn't have done that! If I had responded to those letters, I would have been able to avoid the nightmare that I have just described. If I had contributed a little less to my 401K and made payments on my student loan, I would have avoided having my bank account emptied. And to add insult to injury, because my business bank account was empty, the bank assessed some very large and nasty fees due to lack of funds.

Hey! Learn from my mistakes! Consolidate your student loan debt and do it now while interest rates are still low. If I had consolidated my student loans years ago, I would have been able to secure a fantastic interest rate, which would have made my monthly payments far more manageable and I would have been much more inclined to keep up with my student loan payments.

The market for money for the average consumer is the best it's been for many years. Take advantage and get a great consolidation interest rate for all your student loans. The economy will be strong again soon, and that means higher interest rates. If you don't consolidate your student loan debt now you'll probably regret it. I am not saying to go for the first student loan consolidation offer that comes your way. You should shop around for the best consolidation deal, just as you would shop around for the best mortgage or credit card deal. Nowadays, there are a plethora of organizations out there that specialize in buying student loan debt (it's obviously a very profitable thing to do these days.) All that competition is great for you, the consumer, so let the consolidation companies fight for your business. Don't settle for anything but the very best deal.

Thanks for reading. Comments are always welcome.

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Citi® Raises My Interest Rate from 8.24% to 14.99%

As a consumer with an 800+ FICO® credit score, I find it very vexing when a credit card bank raises my interest rate to that more suited to a subprime borrower, or someone with a limited or nonexistent credit profile. This has happened with a number of my consumer credit card accounts since the credit crisis peaked last year. In each case, I've opted out of the rate increase, which resulted in each account being closed by the bank.

Though I have the option to opt out of the latest assault on my credit -- an APR increase on my Citi® Dividend Platinum Select card -- I'm not going to. That's because this card has a relatively high credit limit, so closing this account would cause my FICO credit score to drop considerably. Keeping it open will not be a problem, as I haven't carried a balance on this card in years.

Change of Terms Notice

Since I will be accepting the change of terms. My APR will increase from 8.24% variable (Prime + 4.99%) to 14.99% variable (Prime + 8.99%, with a minimum of 14.99%) at the beginning of next month. In other words, in reality, my APR will rise to Prime + 11.74%! Simply outrageous for someone with my credit history. So why didn't Citi just note the change as Prime + 11.74% in the literature they sent me? Very good question. Perhaps it's because they know how uGlY it looks?

I'm betting that two years from now, when the Fed will be raising short-term rates to tame runaway inflation, the rate on this card will be close to 20%, if not higher. Just have a look at where the U.S. Prime Rate was at its most recent high: 8.25% from mid-2006 through September 2007.

8.25% + 11.74% = 19.99%.

Even more telling, let's plug in the median U.S. Prime Rate:

8.75% + 11.74% = 20.49%.

Yikes! Ouch! Just looking a those numbers makes me cringe.

Ok, so here is the reason I was given for the rate increase:

"...In this economic environment in order to continue to provide consumers with access to credit, we have had to adjust our pricing..."

Actually, the way I see it, the rate increase has more to do with the really bad mistakes Citigroup made during the recent housing/credit boom than it does with this recession we're in. Of course, the banks that messed up want consumers and taxpayers to pay for their mistakes, while top executives continue to take home massive bonuses. Seems to be the new American way of doing business on Wall Street.

Citi's excuse is not so bad, however, when compared to the one Advanta gave me when they closed my business credit card account. That bank actually tried to paint me as a credit risk despite my high credit score, perfect payment record and my habit of paying at least three times the minimum amount due each month. Advanta has a lot of small business owners very angry, and I think that lawsuits and settlements are only just beginning for that company.

Ok, here's another quote from the change of terms notice:

"...If you opt out of these changes, you may use your account under the current terms until the end of your current membership year or the expiration date on your card, whichever is later..."

This is actually a much better policy than I've seen with other credit card banks. With other banks, when I opted out of rate increases, the bank either closed my account right away, or closed it within 30 days of my opting out. So, I will give some kudos to Citi for giving customers time to pay down their debt before jacking up their APR.

As soon as I am done posting this blog entry, I will take my Citi® Dividend Platinum Select card out of my wallet, blindfold it, march it down to my crosscut shredder, give it its last cigarette and destroy it. I'll keep a record of the card's details, of course, just in case.

I'm actually grateful that banks like Citi exist. Why? Because my income varies so wildly that my credit union won't give me a credit card, despite my stellar credit rating. So, yeah, I like to complain when they're up to no good, but these banks actually play a vital role in providing credit to folks with undulating income, like me.

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Why I Tend To Overspend

I am currently in credit card rehab – my loving husband, who admitted me, is also the chief of staff. We are in the process of getting out of debt for good, so there has been absolutely no credit card usage allowed, period. It’s been like this for quite some time now, and I have to say, I didn’t think that I would make it this long. Paying off debt while ceasing from creating new debt seems like an obvious solution, but putting such theory into practice is harder than it seems. When we abruptly stopped charging purchases, I began to show withdrawal symptoms, which is why I am here, cleaning up my act.

Although I went down kicking and screaming, I always understood that my husband was right for putting a halt to all credit card spending until we were ready to be responsible users. We did what many newlyweds do – we got a joint card almost as soon as we got married and bought things that we thought we needed for our new life together. The problem was that we didn’t have the money to get those things outright; thus, the use of credit. This kind of spending put us in a vice that really began to squeeze when unexpected situations arose, pinching our finances so hard that accounts became delinquent.

How did that happen?

I believe that, at least for me, the problem began when the foundation was laid for my conceptual understanding of credit. Besides the fact that my teacher was an eighteen year old girlfriend, there were negative influences and temptations on every side. College campuses are now lairs for predatory lenders with magic plastic cards, giving you a free t-shirt or tote bag for books in exchange for your credit application. Hip, trendy boutiques make it all too easy for young people to obtain store credit. So, my belief system concerning the purpose for and availability of consumer credit was corrupted from the very start.

I bought into the idea that credit was a pipeline as opposed to a lifeline. From what I had gathered from my friends and the credit card companies, consumer credit was there so that I could purchase things I couldn’t afford and simply pay for them later. As long as I made small monthly payments, I could buy whatever I wanted, up to my credit limit. Credit was a money pipeline, creating cash flow in the present based upon resources from the future. I could keep the pipeline going, so long as I put a little cash into it on a regular basis.

While that sounds good, it’s a shame that it’s completely untrue!

Consumer credit was originally developed as a lifeline, primarily for the well-to-do and business owners in order to purchase necessary equipment or other assets that would either appreciate in value or help them turn a profit. That’s a far cry from getting some new clothes (that I really can’t afford) this week, even though I don’t get paid until two weeks from now.

Well, after living a while with this “pipeline mentality”, I soon came face to face with the realities involved with racking up debts that I couldn’t pay, and then being denied the help I really did need in the future because of past indiscretions. Then, I turned around and started fresh again when I got married. Apparently, I hadn’t learned my lesson in college.

I sure did learn it during my stay in credit card rehab, though. It’s actually been a couple of years now. I honestly believe that I have been rehabilitated. But, just to be sure, we don’t plan on getting another credit card until we know exactly what we will use it for and that we will pay the balance off every month that we use it.

The pipeline is officially closed.

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An Unexpected Dip for My Credit Score: FICO Score Now at 753

Two weeks ago, I logged into my Citibank consumer credit card account -- the only consumer credit card account I have with a balance right now -- to find that the good folks at Citi had recently given me a credit line increase, and a substantial one at that. My credit limit was around $13,000; now it's close to $22,000. 22K is the highest credit limit I've ever been granted. Not even my strongest business credit card has a credit limit that high.

Of course, I was very pleased about the credit increase, because it means that the balance on this particular card is now a smaller fraction of the account's credit limit, and that looks good to my current and potential creditors.

Funny thing is, my FICO® credit score (provided by Transunion), which had been hovering at 760 for the past two months, has dropped to 753. Now, I realize that the best way to get my FICO score to rise is to pay down my consumer credit card debt: the bigger the payment, the bigger the bump to my score. But since the balance on my Citi consumer credit card is now close to a third of my total credit line, my thinking was this would cause at least a small increase for my score.


Unexpected Decline for My Credit Score: Must Be Identity Theft!

Since I was expecting a small rise for my FICO score this month, as soon as I noticed the lower score, my immediate reaction was to order a free credit report from each of the 3 credit bureaus. I had to rule out the possibility that someone had gained my sensitive info and used it to open one or more accounts in my name. Under federal law, you are entitled to one free copy of your credit report (also known as a "credit file disclosure") every year from the 3 majors -- Transunion, Experian and Equifax. I had never exercised my right to a free report, so it seemed like the perfect time to take advantage of the new law.

I stopped by the www.Annualcreditreport.com website to order my free reports (Congress mandated that the 3 bureaus create the Annualcreditreport.com website. It's the site you need to use to get your free annual credit report from the 3 majors, or you can call 877-322-8228. If you contact any of the credit bureaus directly, you'll probably be asked to pay a fee.) After bypassing all the extra stuff the credit bureaus tried to sell me, I was able to get a free copy of my report from each agency quite quickly. I reviewed all the data carefully, and found nothing out of order.

Was I being paranoid for assuming that someone had stolen my identity? I don't think so! And here's why: Last month, I performed a virus scan on all my computers and the virus scanner found a keylogger installed on my primary workstation. A keylogger! I was floored by the discovery. With all the precautions I take -- virus scanner, firewall, etc. -- someone was still able to get a keylogger program installed on my computer. Unbelievable. I am not going to do the idiots who create these programs any favors by posting the name of the trojan here, but I will share this: the trojan almost succeeded at collecting many of my usernames and passwords -- and the corresponding website URL's! Had the trojan succeeded, it would have sent my many credentials to the criminals who probably know exactly how to exploit them for maximum gain, or maximum damage.

So remember to run a virus scan regularly, and remember to keep your virus definition files up to date!

A Downgraded Credit Score: It Feels Like I Failed A College Midterm.

So, why did my FICO score regress? I haven't opened any new accounts, or performed any balance transfers lately. For all my personal spending, it's been all cash (or debit card) for some time now. My understanding was that as your accounts age and you pay down your balances, you score goes up. Maybe the scoring algorithm was recently modified in some way. Maybe it was a simple correction. Whatever the reason, the decline in my score has certainly rubbed me wrong, and I plan on making a $900+ payment to my Citibank consumer credit card next week, which I'm hoping will boost my FICO score above 770. Wish me luck!


Always Negotiate -- Even Your Rent!

I do have some good news to report. I recently renewed the lease for my apartment and was able to get a favorable deal. The folks who manage my apartment complex wanted to raise my rent by $250 per month. I realize that a rent increase is quite normal for a place like mine, but $250 was simply not reasonable. I met with the property manager and negotiated (I brought my baby girl along to the negotiating table; gotta' use all the tools God gave me!) In the end, the property manager agreed to raise my rent by $20, which I calculated to be considerably lower than the rate on inflation, so I was OK with it. It's like Frederick Douglass said, "Power cedes nothing without a demand."

Here's an updated image of my charted credit score:

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FICO® Credit Score Hits 791

A nice jump for my FICO® credit score this month: up 31 to 791. How did I do it? I made a payment of $2,000 (exactly) on my Citi® credit card some weeks ago. This is cool: I'm just 9 points away from my goal of being in 800+ territory by 2008.

Just as soon as I'm done writing this blog entry, I'm going login to my Citi account and make another large payment -- $3,916.74 to be exact -- a payment that will eliminate my personal credit card debt completely! That's a significant milestone for me since I've had personal credit card debt for as long as I can remember.

A $2,000 payment caused my FICO score to leap from 760 to 791. So what will a $3,916.74 payment do for my FICO score? My guess is that my score will jump to at least 805. If you care to make a guess, please feel free to do so in the comments section below.

Will I be able to refrain from using credit for my personal needs? Yes, I'm quite confident that I will. I have some major purchases to make:

• A new car stereo. It's not a self-indulgent upgrade! My radio went dead a month ago and I haven't been able to fix it. I may be able to spend less than $100 by simply replacing the head unit, but if I have to spend more, I will. I love to drive, and I can't stand driving without a good mix of NPR news and my favorite driving tunes.
  
  
• A washer and dryer. An investment really, since I'm just making the owner of my local laundry center rich by washing my clothes there. Plus, I'll save time by washing my things at home.
  
  
• Some car repairs. I've been hearing a strange and worrisome noise in my car's front end. It's been bothering me for many weeks, and it's time I got it fixed. Suspension work is often expensive, but I'm hoping the repairs won't cost more than $1,000.

But I've been saving up for the above list of expenses, so my personal credit cards won't see any action any time soon. Yup: my personal credit cards are going to experience some serious neglect from now on.

As for the status of my two business credit cards: I'll be paying the balance on my Citi business credit card down to zero later tonight, and I'm also going to make a large payment on my Bank of America business card, a payment large enough to reduce the balance by at least half.

I'm excited about all this debt reduction going on in my life, especially because it means that I'll be shelling out less money each month.

That's it for now.

I usually close with an updated chart of my FICO credit score. Don't worry: the tradition continues. I recently created a new spreadsheet with my FICO data, and from that spreadsheet I created a new chart which I hope is clearer and easier to read. So here it is: my FICO credit score from June, 2005 to the present:

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Debt Reduction -- Why It Is So Important To Do Now

Our Grand Debt and Cost of Living Reduction Adventure was inspired by a variety of factors. While some were personal, such as having more time to enjoy our children, others were strictly financial. My financial reasons were based on looking at the big economic picture. I've been watching global economics for about 4 years now. (Yes, I realize that I have strange hobbies.) And, the big picture tells me that getting out of debt and getting spending under control is very important right now.

By now, most are familiar with the mortgage and lending meltdown and its closely associated foreclosure crisis. Foreclosures are occurring at rates that haven't been seen since the Great Depression. Many of the foreclosures have to do with loose lending practices, and practices that some define as predatory, which resulted in people getting mortgages who wouldn't have been approved under more standard lending practices, due to the risk of default. Another aspect of the foreclosure crisis has had to do with teaser rates and adjustable rate mortgages. As the rates increased and the monthly mortgage obligation climbed, people struggled to make their payments.

Easy loans fueled a housing bubble, with prices going up, up, up. Many home prices reached incredible levels, and homeowners borrowed against these inflated values, pushing themselves further into debt. While lenders were engaging in riskier loans, they were also selling those debts to investors in various forms of mortgage or debt backed financial instruments.

As more people default on their loans, those investors are losing their money, and getting scared of that particular investment market. The wave of foreclosures has slapped house prices back into the realm of reality, reducing the value of homes throughout the nation. In fact, the affect of our mortgage and lending crisis has touched housing and credit markets throughout the world, not only through international investment, but also by setting off small housing bubbles elsewhere.

Homeowners, holding mortgages based on inflated values, are all too frequently finding themselves with a mortgage that is greater than the current value of the property. Lenders are writing down billions in debt and struggling, some unsuccessfully, to stay afloat. With more ARMs due to reset in coming months, the situation is likely to get worse before it gets better, and the big banks and other lenders are scrambling to find a way to shore up the foundation of the industry, before the next wave crashes, shaking that foundation loose and threatening the current banking system to its core.

There are two potential waves in view. Credit card debt is at an all time high. Unfortunately, delinquencies are starting to creep up to heights that haven't been seen in quite a while. Credit card companies are starting to experience significant losses. And now, according to recent news, it seems as though the auto loan industry is entering into a similar phase. The situations with credit card and auto loan debt have an interesting factor in common with the mortgage situation -- those debts were also packaged as investments and sold to investors throughout the world.

But, wait, there's more. The value of the dollar is falling, and fast. The euro is just one currency that has experienced record heights in value when measured against the shrinking worth of the dollar. The increase in fuel prices is affecting the price of everything. Food and other goods have to be transported throughout the nation, fuel is essential to the running of the factory farms we rely on to feed us. Much of the country is feeling the pinch of increased home heating costs. Inflation further eats away at the purchasing power of the dollar, and no matter how hard the government tries to hide it -- and they do that by manipulating the numbers in order to avoid cost of living increases for such things as Social Security -- at this point, even they have been forced to admit that the rate of inflation is climbing.

Those factors, in combination with the other fiscal problems they bring with them -- such as a slowing job market -- lead me to firmly believe that debt reduction now is essential to financial security and health. Carrying unnecessary debt in the face of all of the fiscal problems before us is just dangerous. Therefore, for us, reducing debt now and setting up a way of life that decreases our cost of living dramatically, such as being self-sufficient in our energy by using solar and wind, is of paramount importance, as that will help to ensure that we are able to better ride out the difficult economic conditions seem to be just over the horizon and fast approaching.

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My FICO Credit Score Gets An 18 Point Boost: Now @ 745

Looks like all the cash I used to get my debt into a zone that I'm comfortable with is paying off. My FICO® credit score has just been bumped up by 18 points and is now @ 745. Am I pleased? Yes, quite pleased. 745 is basically an A- rating. From my research, I've determined that any score over 720 will get you the best possible interest rate on most loan products.

What does a FICO score of 745 mean to me? It means that when I am ready to buy a house or condo, the mortgage companies are less likely to ask for employment or income verification. This is very key for me because I'm self-employed. I'm actually hoping that I won't need to rely on a loan when I'm ready to buy; with a little luck and a lot of hard work, I may be able to pull it off. But if I don't have enough tucked away by the time I'm ready to take the plunge, I may have no other choice but to get a mortgage.

From this point forward, any increase in my FICO score probably won't make much difference in the interest rate I get on loans, etc. But I'm still shooting for an 800+ score by the time Bush & Co. leave office, just so I won't have to worry about those temporary dips that can cause problem if your score isn't high enough. In other words, if my FICO score was 800, and it dipped to 785 temporarily as a result of a new credit account being opened, then the temporary dip would be nothing to sweat about. On the other hand, a temporary dip from 725 to 710 may cause some interest rate-related issues.

About a month ago, I had a brief conversation with a mortgage broker at a car dealership. He told me that 720 is the threshold with most lenders, and any score above 720 is just good for breathing room. So, in theory, someone with a score of 731 should get the same rate on a mortgage loan as someone with a score of 799 -- all other things being equal, of course.

You know what's kinda' embarrassing? I know a guy who is in his early 20's and has a FICO credit score at or around 800. In my early 20's I was a very poor, spendthrift college student with lots of debt-related problems. But I don't feel too bad about my past. I really didn't understand money back then, but I do now, and even though it can take up to 7 years to fix major mistakes, those mistakes aren't a death sentence. With knowledge and perseverance, I believe that anyone can go from having a credit rating of F-, to A+.

Some advice for those who are working on repairing or building credit.

There was a time not too long ago when people in-the-know would advise credit consumers to cancel old credit card accounts once the balance on each account was paid in full. The reasoning was sound, as it was thought that banks considered you an increased credit risk if you had a lot of credit available to you. After all, a long, drunken weekend in Las Vegas, for example, is all it would take to raze a solid financial house to the ground.

These days, the advice from credit experts is to keep those old accounts open, because the FICO scoring system favors older credit accounts, especially those with a zero balance.

Also, if you really want the banks and credit reporting agencies to notice your excellent debt repayment track record, use your credit card(s) to make a few minor purchases each month, then pay the balance in full when the statement arrives. If you can't pay the balance in full, then pay at least 3 times to minimum amount due. Timely payments on your student or car loan will help your credit score by demonstrating that you are willing and able to pay your bills on time, but regular and responsible credit card activity is, in my opinion, the best thing for improving a credit score over time. Bottom line: the banks pay close attention to how well you handle retail purchases. Once you've achieved your desired credit score, you can pay all your cards in full to avoid interest charges, but remember to keep the account(s) open once you've done so.

And if you want to get 3 or 4 credit cards, do it, just don't get them all at once! Having more than once card can be advantageous, because having a modest balance on 3 credit cards is better -- from a FICO point of view -- than having 1 credit card that is nearly maxed out. Just be sure to space out the applications. In my opinion, the time between credit card applications should be at least 7-9 months. Remember: a great way to save on interest charges is to take advantage of the best available 0% APR balance transfer offers out there.

That's all for now. Below I've posted an updated image of my charted FICO credit score:

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After 9/11 Creditors Told Me, "There's Nothing We Can Do"

My husband worked on the 81^st floor of Tower One in the World Trade Center for a company called Network Plus. On September 11^th his entire office managed to climb down all 81 flights of stairs and escape just minutes before the buildings started to collapse. His boss guided the entire team of salespeople down and encouraged my husband to continue when he felt tired. At one point my husband’s boss even left the team in order to help carry a woman in a wheelchair down the stairs to safety. Miraculously, she survived as did everyone in my husband’s company. As the highest office to have every member survive, Oprah Winfrey even had them appear on her show.

The ordeal was stressful enough for us to deal with, and after a few weeks passed the company he worked for went out of business. They tried to survive by relocating but the entire city was in such turmoil that the company simply couldn’t make it work. I realized that my husband was the bread winner and I had no idea how we were going to pay for our bills. We had managed to accrue quite a lot of credit card debt and now had only my small teacher’s salary to pay for it all. As the bills continued to pile up I started to make phone calls to the credit card companies with the hopes of working out a payment plan. What ended up happening instead was my filing for Chapter 7 bankruptcy.

Before September 11^th I had a credit score of about 650 and had over $10,000 in credit card debt. My payments were always on time and I rarely had any problems. Most of my debt was due to department store credit cards such as Macy’s, Ikea, Express and Spiegel. I also had an electric bill that I couldn’t pay and a cell phone bill which piled up. The interest rates were sky high, over twenty percent for each card and I knew if I didn’t work something out I was going to sink fast. Paired with the late fees I knew it would happen quickly if I didn’t do something fast. The largest amount I owed was to American Express and since they require payment within thirty days they were the first company I called.

To say that American Express is cold-hearted would be a nice way of describing them. I explained to the representatives over numerous phone calls that I wasn’t looking to get out of paying the $2,000 I owed them but that I needed more time than the thirty days. They could care less. They didn’t even sound sympathetic when I spoke to them nor did they seem to care about my situation. As if programmed like a robot, each representative I spoke with said the same thing to me, “there’s nothing we can do”. They would take nothing less than the full amount owed and as long as I didn’t pay it the late fees would continue. The late fees started to add up into the hundreds as November rolled around.

The other department stores sometimes sounded sympathetic when I told them about my situation but could do little to nothing to help me. The representative I spoke to at Spiegel was distraught to hear about my situation and immediately put her manager on the phone. He explained that there was little he could for me except to lower my interest rate from a 22% to a 12%. He waived one late fee for me but gave me no extension.

I found that no one really wanted to do me any favors at all. I explained to each one that I simply needed a two month period during which no late fees or other charges would be given to me. Even when I explained that I would be forced to file for bankruptcy they still gave me the same line – “there’s nothing we can do”.

The only company that helped me out was the bank that issued my student loans. Citibank immediately issued me forbearance for my student loans and gave me no problems whatsoever. They were nice and understanding and were actually the only company that did anything to help me during the difficult time.

My credit score began to plummet as did my credit history. After I filed for bankruptcy in December my score dropped to the low 500’s and stayed there for years. I couldn’t rent an apartment and I had a hard time getting utilities without paying a deposit. The funny thing was that my husband found a new job within months and our income was back where it was before, but none of that mattered when companies looked at my credit report.

Today my credit is back up to a 620 but is still marked with the bankruptcy. If the credit card companies had taken the time to work with me they would’ve had their money and I would’ve kept a clean credit report.

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