GOING UNDER: America’s Debt Dilemma

November 1, 2010


1.  Identify your problem.

2.  Build a support network. Have friends, or relatives help talk you out of unnecessary purchases and share your successes in resisting temptation.

3.  Assess current debts and income and build a workable budget for paying off debts. (Do not continue to increase debts.)

4.  Approach your creditors to negotiate payment plans you can fit into the budget you’ve built.

5.  Use your support network to help you change your buying behavior.

6.  Set up realistic financial goals and a timetable for meeting them.

7.  Keep track of your progress; share your successes. Do what you can to stop backsliding, but don’t dwell on it.

8.  Pay off all outstanding credit card debts.

9.  Set up new guidelines for responsible credit use.

10.  Begin saving money for your financial goals.

11.  Reward yourself for accomplishments (not by spending money).

12.  Check your financial status regularly and adjust any backsliding. Set new financial goals as you accomplish the old ones. And, most important — now that you know the way, help someone else who might be tangled in debt.

Source: Debtors Anonymous

 Answers to the Credit Dilemma

What students can do:

1.  Educate yourselves by reading and checking the Internet on what card companies are up to. (See accompanying Web-site information).

2.  Don’t give up just because you’re in debt. Most students can salvage their situation by addressing it early. Don’t be afraid or embarrassed. Ask for help early. Problems with long-term blemishes on credit reports occur when students feel they can’t win and give up.

3.  Get only one card, for emergency use only. Not many horror stories of debt occur when students have one major card. The danger comes when other companies continue to mail pre-approved offers — and students take the bait. Do not get cards from furniture or department stores. Nightmares about credit seem always to include those secondary cards.

What parents can do:

1.  Teach children early. MasterCard is not shy about putting a card bearing its likeness into a Barbie doll’s hand, so parents should work equally as hard to combat those approaches.

2.  Be ”nosy” about your child’s finances even if he or she is 20 or older. That may be when they need snooping most.

3.  Be a role model. Children will follow Mommy and Daddy’s lead. Will yours see you do the right things?

What companies can do:

1.  Give people accurate information about interest rates. Eliminate the fine print on the back of monthly statements. Bring that information out front, in clear language and charts. Looming legislation may help.

2.  Put the owner’s picture on every card, as Citibank does now. If the industry truly wants to lower card thefts, this would be a major step forward. The idea is simple: If the shopper doesn’t match the picture on the card, clerks should not sell them anything.

3.  Stop targeting teen-agers.


What universities can do:

1.  Make personal finance mandatory to graduate. Students should be required to get at least a ”C” for credit. National statistics, surveys and personal testimonies show that students need lessons in personal finance.

2.  Ban solicitors from campus, or at least limit their visits. Make them put away the candy, toys and T-shirts — free gifts designed to attract student interest.

3.  Credit is a privilege. Require people under 21 to take a test on money matters before qualifying for a card. In most states, no teen can get a driver’s license without passing a test. It should be that way with credit cards.


How you handle your credit and finances is as individual a choice as picking a toothbrush. But here are some general tips to help you stay out of debt, or avoid getting there.

•If you have many cards, cut up all but one. Experts say one is enough. Two is OK for theft of the other card or an emergency.

•Ignore the Joneses; keep up with yourself. Much of credit card hype involves status. Chasing fads can tempt even the most disciplined consumer to spend.

•Pay your entire balance every month. If you can’t, pay as much as possible. Some months, double or triple a payment, but make reaching zero balance a priority.

•Don’t be intimidated by card firms. NCCU sociology professor Ike Robinson likens them to bullies.  ”It’s about power,” he said. ”These are very, very powerful companies with vast resources preying on vulnerable, unstable young people. And most of these youngsters are coming from homes that are not usually affluent.”

•Be like David: Grab your slingshot and fire away at Goliath. Complain if you get hit with improper penalties, late fees or over-the-limit fees. Scrutinize your statement for phony or wrong charges. At least once, photocopy the fine print so you can enlarge it and see what it is saying.

•Network with friends and family to find ways to deal with card companies. Just as you discuss getting the best deal on a car, talk about how you can combine brain power to get the best credit deals possible.

•If you are a parent, teach your child about responsible money management, regardless of age.

Get familiar with your credit report

One of the most important tools you have to rebuild financially is your credit report.

It is the one item that will tell you what creditors are saying about how you handle money, loans, car payments — and credit cards. It also will show how often you apply for credit.

In an age when employers increasingly are asking to see credit reports, you need to arm yourself with information. Become familiar with every item on your report and get them from all three major agencies: Experian (TRW), Equifax and TransUnion.

The first step is to contact the agencies. Call to find out what information you need to send them. TRW will send a free report if you request it. Call 1-800-392-1122. Equifax charges $8. Call 1-800-685-1111. TransUnion charges $8. Call 1-800-916-8800.

Be sure to order a report from all three agencies — to compare and to have the most complete information about your credit history. One agency sometimes will have information that conflicts with figures from another agency.

Here are some common questions you may have when the reports arrive.

Q. How can I get a mistake off my record?

A. According to Equifax, you will have to document the details of the problem in writing.

Some reporting agencies will include a form to use for disputes over information you believe is wrong. The reporting agency then will check with the companies that say they gave you credit. Information that cannot be verified will be removed from your file.

Take up disputes with the company that is the source of the information in question.

Q. What if I still disagree with an item after it has been verified?

A. Send a brief statement for your credit file that will be disclosed each time your file is checked.

Q. What in my credit file could keep me from being approved for credit?

A. The answer varies. It could be directly related to items in your file. Your credit could appear to be perfect, but you could be denied because of not living at your current address long enough. Also, having too many inquiries could make stores think you constantly are applying for credit. If you have questions about why you were not approved for credit, contact the store that turned you down and ask why.

Q. How long will bad credit information stay on my report?

A. Most comes off after seven years. If you filed bankruptcy, it might stay on there for 10 years.

Q. Who can look at my credit report?

A. The law says credit bureaus can disclose any information about you to any person with a ”permissible purpose” for seeing the information.

That could include landlords, car dealerships or employers — anyone who wants to see your financial habits. Your report will show who has been requesting information about you and when they requested it.

Sources: Equifax Credit Information Services; ”Get a Financial Life,” by Beth Kobliner


Listed below are Web sites and telephone numbers that should help anyone seeking more information on credit companies’ relationship with college students:

1.www.JumpStart.org — JumpStart is dedicated to increasing financial literacy among teen-agers and children. It is excellent for parents and children. (202) 466-8613.

2.www.ftc.gov — The Federal Trade Commission has a site loaded with information in easy-to-understand English. The publications page should be helpful. (404) 347-4836.

3.www.abiworld.org — The American Bankruptcy Institute site is a must for anyone thinking about filing bankruptcy. This a nonprofit organization that won’t push for or against filing. But it will provide a plethora of information for you to make an informed choice. (703) 739-0800.

4.www.debtorsanonymous.org — This is the site of one the first national help organizations for over spenders and debtors. (212) 642-8220.

5.www.fraud.com — This is the national fraud information center. It has vast resources on how to protect your cards and account numbers. (800) 876-7060.

6.www.powersource.com/cccs/ — This is a national site for the Consumer Credit Counseling Service. The service also has a local office that provides counselors who can help people analyze their debt and how to get it under control. The CCCS also can be contacted by calling 800.251.2227,* Books: ”Get a Financial Life,” by Beth Kobliner; ”Expressing America,” by George Ritzer.

Download this Debt Seminar: Click Here


The “New” Rules of Rapid Refinancing

May 23, 2009

By Brian Short, CMC, CRMS, GMA

Many of us who have “survived” in the mortgage business are very busy these days with folks who desire to refinance their homes.  With rates in the range from low 5% to high 4%  for a 30 year fixed for many borrowers, this is an ideal time to consider refinancing to lock in an historically low long-term interest rate on your house.  Maze

However, the rules have changed for many borrowers.  The days of no documentation, high loan-to-value, cash-out, debt consolidation mortgages have come to an end. 

Does that mean it is impossible to accomplish any of these goals in a relatively painless refinance process – absolutely not!  Just take heed of the new “Rules for Rapid Refinancing”:

1.  Get your documentation organized and copied for your mortgage professional.   Employed workers and self-employed business owners will all need to prove their income and their assets to qualify for a new low interest loan.  I remind my customers that they should keep the following documents for the following length of time – just to be safe.

     a. Pay Stubs – Keep these all year until you receive your W-2 and have completed your tax return for the year.

     b. Bank Statements – Keep these 5 years.  The IRS can audit you for the past 5 years.  It your responsibility to prove your case if you would be audited.

     c. Tax Returns and W-2’s – Keep these until you die.  Let your kids throw these away for you and be amazed at how little (or how much!) you made when they were kids.  You never know when you will be asked to document income, deductions, businesses, rental houses, etc.  File a copy away in a cabinet (and scan a copy to your hard-drive in case you need to e-mail a copy for your kid’s college financial aid application, etc.) each year.

2.  You will not be able to pull cash out of your house for more than 85% of appraised value.  If you owe more than 85% of your current appraised value then you will not be able to get any cash to consolidate debt, pay off other obligations or even make improvements to your house.  Trying to get cash out of your rental house will be nearly impossible unless you owe very little on the rental house.  Getting cash out of Real Estate is not something Fannie Mae and Freddie Mac (or FHA or VA) are too interested in doing in this economy.

Does this mean that you can’t refinance your house?  Absolutely not!  You can still lock in a lower rate, shorter term (go from a 30 yr to a 15 yr), longer term (go from a 15 yr to a 30 yr), switch from an adjustable rate to a fixed rate, or combine your 1st and 2nd mortgages into one mortgage payment with a lower payment or a payment which includes principle reduction.

3.  Use this time to focus on getting out of debt and limiting your purchases of “things” to those items you can pay for with cash.  Running up credit card debt and buying vehicles (cars, boats, motorcycles, RV’s, etc), furniture, appliances or TV’s with credit is generally not the way to get or keep your finances under control. 

4. Pay cash.  Use cash.  Save some cash.  Keep some financial margin in your life buy having some cash in the bank to carry for 3-6 months in case your job, your health, your spouse – fail to meet your expectations.  Having a good payment history on your current obligations will get you in the door if you need or want to refinance your house.

5. Anticipate the future – as much as possible.  One of my Dad’s famous sayings is: “No one will loan money to a poor man!”  Once you lose your job, get sick or hurt or get behind on your payments, you’re stuck.  Especially in this current market – the squeaky clean borrowers are getting good loans.  Don’t wait to lock in on historically low fixed interest rates if you don’t have one and could qualify.  Waiting might put you into one of those categories of people who can’t qualify for one.

Is this a great market for quick and painless refinancing – absolutely!  However, there are some new rules.  Some of you are saying, “these are not NEW rules!”   “These are the rules we all used to live by.”  I agree that these rules may be new to this current generation of borrowers but are really time-tested rules for ensuring financial success – even when much seems to be crashing in on those all around us.  Whether these rules are new or old stand-bys they are in place for now.  Knowing them and playing by them will make you a winner – even in this economy!  Now, let’s play!

Preparing for Home Ownership: A ‘Do-List’ for a Soon-To-Graduate College Student

November 20, 2008

By Brian Short, CMC, CRMS, GMA

cap20graduationIf you can count the number of days, weeks or months until you graduate and “enter the real world” of having your own place, buying your own food and doing your own laundry, then let me give you a few tips for how to set yourself up for financial success – especially when it comes to buying a owning your own home.

1. Don’t buy a house during your first year out of school or during your first year of marriage.  Hold it – I’m a mortgage professional!  Shouldn’t everyone BUY a house – as soon as possible???  Not always!  Working through the adjustments of a new job, a new city, new schedule or a new spouse will be time and emotionally consuming enough without the added pressure of shopping for, qualifying for, buying and moving into a new house.  Rent for your first year before you begin thinking of buying.  You may have second thoughts about your location or employment situation in one year which will help you decide when and where you might want to buy a house.

2.  When interviewing for a job give high priority to a job which can help you pay-off CB055356any school debt you may have in the shortest period of time.  Think about knocking down you student loans and saving for a reliable car during those first couple of years after graduating.  If you are not married, you will not want to bring your student loans with you into a new marriage.  So make this a priority to pay off all your debts by living very simply and write out a payment plan to pay massive amounts toward your debts.  Take on roommates, drive an older car, eat out less, buy less expensive clothes – do all you can to PAY OFF DEBT!

3. Live on a budget.  Write it out.  Put it on paper and stick to it.  My wife uses www.mvelopes.com for our personal budgeting needs. It is an on-line “envelope system” which will let the user start each month with allotted amounts for each category in your budget and then be required to move money from one “envelope” to another if you overspend in an area before the month comes to an end.  A user can “sync” your bank accounts to your “envelopes” and so you can move money out as checks clear or debit card transactions ar posted.

easel4. Keep balanced. Now is the time to develop life-long spending, lifestyle, health and relationship habits.  You don’t have homework, term papers, exams and assignments hanging over you now – so you no longer have any (or fewer!) excuses!  If you have been putting off going to the gym, starting a diet, learning to cook (or dance, or play a musical instrument, or paint), going back to church, looking up your old friends from high school, or whatever you have wanted (or needed) to do while you were in school, but never had the time or money to do – do it now! 

However, do what will bring about balance in your life.  If you have been without physical exercise for the past several years – do that.  If you have drifted away from your faith and your deeping spiritual life – work on that.  What will bring balance and what will give you new things to learn and make your life a joy to live?  If you are happy – truly happy – others around you will be happy, as well.

5. Live with margin in your life.  Each time you get paid, pay down debt and put some money away.  If you are earning $4,000 each month, try to live on 1/2 of that amount until you have your debts paid off and you have built some financial cushion in your life.  Dave Ramsey calls these “Baby Steps”.  (www.daveramsey) You should have an Emergency Fund ($1,000) and 3-6 months of your expenses in savings before you begin your long-term and retirement savings funds.

Also, build in some margin in your health, your relationships and your intellectual development.  Eat good foods (Not too much – your body is slowing down as you move into your 20’s and 30’s.) take vitamins and supplements to help you rebuild the past 20-25 years of abuse.  Surround yourself with people who are “givers” who help you accomplish your life goals. 

I concluded years ago that there were two kinds of people in the world: “Givers” and “Takers”.  “Givers” cheering-business-people-thumbknow how to contribute to the the “building-up” process in others lives.  “Takers” are constantly trying to get all they can from others – sympathy, pity, attention, money, worth, time, etc.  Stay away from those.  They will suck the life out of your life if they are given the chance.  Be with those who, like you, desire to be “givers” because they are confident, secure, valuable, focused, sensitive and respectful of others’ time and possessions.  Intentionally put yourself around others you want to become like.

These are great days of very few pressures and responsibilities – even though you may not feel like this at times.  Enjoy your 20’s and see the world!  You will have many years to be very committed to a house payment and job and family responsibilities.  However, your 20’s can be great years of learning about yourself and developing good life-long habits which will bring about decades of joy and fulfillment if you spend these years wisely.