Source: Credit Cards From Beyond the Grave - Just Because You Need to Laugh

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The credit score was originally designed as an easy way for lenders to identify which potential customers would be low risk and high profit acquisitions. Using a credit score to screen new customers allows lenders to approve or reject your application in seconds, rather than hours or days with manual screening.

The uncomfortable side of credit score implementation is when your credit score is used in other unintended ways. It is understandable that the use of the score has crept into other markets. The creators and sellers of your credit score actively encourage other industries to buy your score to make decisions. But do all those decisions make sense?

The way you use credit may be really smart and wise for you but hurt your score and cause ripple on effects. Even creditor actions can cause the same negative consequences for you in the cost of insurance, employment and access to health care.

Credit bureaus have encouraged the use of the credit report and credit score for employment screening but there is no evidence to show any correlation between a credit score and the value of an employee.

And today with credit card companies running for financial cover, their self-serving actions can lower your credit score even though you have not done anything wrong. When a creditor either lowers your credit limit to just above your balance or closes your account to limit their risk, it can have a negative impact on your credit.

If you’ve had an unpleasant run-in with problem debt in the past but have now recovered and not started borrowing again, your credit score will continue to suffer. Even if you live on a cash basis and avoid credit, your score will be worse.

Ironically the credit score can only be improved through the current use of credit, even if you don’t want to use credit. New and good credit use must appear on your credit report in order for you to be scored on it.

Those people that only buy what they can afford and avoid credit actually have the worst credit scores. No credit is worse than bad credit when it comes to scoring you.

Those that lived through a traumatic event like bankruptcy will have an ongoing and continued negative score since their credit histories essentially end with a string of bad credit and now as they live financially responsible, their lack of new credit does not help to bring their score out of the gutter.

So why is the credit score so important? Well you credit report creeps into your daily life in unexpected ways. Credit reports and credit scores are used as a screening tool and a way to judge you for employment, insurance, and more disturbingly, access to medical care.

More hospitals are performing a “wallet biopsy” on patients to determine if the patient can afford the medical care to be delivered. This does not appear to impact people brought into emergency rooms, broken and bleeding, but those that need additional services, like a CAT scan and specialized treatment.

Hospitals that are now using sophisticated software credit scoring and financial screening tools are finding ways to flag people that were traditionally unable to pay for medical services since they were charity cases, as potential or likely to pay from retirement plans or other lines of credit.

Today, a sudden and unexpected medical event can leave you broke and unable to pay. A single appointment can leave you with thousands and thousands of dollars of medical debt in a matter of hours and by using new financial screening tools, some hospitals are cruising your credit report and spotting available cash advance opportunities on credit cards and encouraging patients to take extremely high interest rate cash advances on those cards to pay for medical services that are often billed at an arbitrary and inflated cost, especially to those without insurance.

The story has two sides to it. On one side is the limit to medical care that physicians have identified as necessary for the health of the patient and on the other side are the for-profit and not-for-profit hospitals that are unwilling or unable to provide medical care for those that don’t meet their scoring or screening models.

Ultimately the issue comes down to a question if access to health care should be universal to all United States citizens or are we comfortable letting some people die prematurely or suffer because of their credit score.

Photo: TaranRampersad & See-ming Lee

Source: Disjointed Use of Your Credit Score Can Leave You Unemployed or Dead

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Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty. If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help.

“Dear Steve,

Okay, I am currently a grad student in a foreign country which is cool and wonderful and educational and definitely worth the money. However, it’s costing me money. I currently have a $77,000 price tag in student loans and would like to reduce this amount. Because I am overseas it is very difficult to get a job and work through the university pays according to the local economy which is much less than required.

Are there options for me to begin paying off some of this debt (at minimum the interest that is accruing) while enrolled? What steps can I take to set myself up to be successful when the deferment ends?

Lauren”

Dear Lauren,

I’ve been a critic of student loans for some time. My primary issue with them is that they are pushed on students and people believe that they are ‘good’ debt. Yet, they are the largest debt that a college student will have, they can’t be discharged in bankruptcy, if you don’t graduate you still owe them, and if you default, you can pay as much as a 40% penalty.

Total borrowing for school has more than doubled to $85 billion in the 2007-2008 school year from $41 billion 10 years earlier, adjusted for inflation, according to the College Board, the research and testing concern. The percentage of private loans, which generally carry less-generous terms, has ballooned to 23% from 7%. Meanwhile, subsidized federal aid has remained relatively flat at about $42.8 billion per year.

The fear is that default rates on student loans will increase, as seen in the mortgage and credit-card worlds. SLM Corp., or Sallie Mae, the largest private student lender, reported a delinquency rate of 9.4% in September, up from 8.5% a year earlier. “It’s clearly because of economic conditions,” says spokesman Tom Joyce. “The credit crunch has washed onto the student-loan beach.”

That prompted state and federal governments to pass legislation allowing them to seize income-tax refunds, withhold professional licenses and enlist collection agencies to gather payments. Meanwhile, the U.S. Department of Education withheld eligibility from federal financial-aid programs from institutions that didn’t keep their default rates low. - WSJ

Student loans can hold your career and dream job hostage and I’m afraid you are learning about the realities of that first-hand.

The lender will say that that it is your choice to place yourself in a position where you can’t afford to pay and that is not their problem, it’s yours.

Going to college is one of those things that is beaten into many of us from a very young age. We are programmed that we must go to college to succeed, but is that really a valid belief to have?

The cost of a college education does nothing but go up, up, up. And more and more of those expenses are being financed with student loan debt. This isn’t necessarily a good thing.

Student loan debt ends up being rationalized as being good debt. It is a debt worth undertaking to get the payoff of having a college degree. Parents want their children to succeed and students are eager to attend college to get that diploma that will either allow them to follow their dreams or get a better paycheck. Least we forget the college student aid offices that enthusiastically want students to take on loans to attend. We can’t forget that colleges make money by having students pay tuition and fees. For profit or not-for-profit, all colleges at their core are a business that yearns for income.

Nearly 66% students today are graduating from a four year school with $19,202 in debt and if they went to a private four year school, 87.3% of students graduate with $28,138 of student loan debt.

Interestingly, many cry out about the evils of credit card debt and college students and want to ban on campus credit card marketing but the amount of student credit card debt is about $2,200. And surprisingly the number of students with credit card debt is declining.

Debt is debt. Debt does not care what form it is in. A debt for $28,138 and $2,200 must still be serviced the same way; labor must be converted to common currency to repay the obligation owed.

Student loan debt is the bigger obligation and more financial threatening than you would imagine. You see, unlike most other types of debts a student loan is a loan for life. A federal student loan has no statue of limitations and you may be chased for the rest of your life to repay. It can’t be discharged in bankruptcy. You can have any tax refund due you intercepted and used to repay the loan and massive collection fees and penalties of 25%-40% of the loan balance can be added to the loan balance if you default, raising the amount you owe by a very large amount.

If you have been paying attention to all the facts that parents and teachers have been telling you, you’ve heard how college graduates earn an average of $82,000 while those with less than a high school diploma earn around $21,000. Those numbers certainly help to persuade many to go for the college degree.

But let’s challenge those assumptions for a moment. If we look at the 87.3% of private college student graduating, their student loan debt might be $28,138 as they leave school but with 20 year financing and monthly minimum payments of $214 that debt blossoms into $51,548. That’s significant.

By this point in the article you’ve got to be saying that all these numbers are nice and all but how can going to college not be a smart economic move. Well here is the often skipped statistic that you never hear. Of those that enroll in college, only about 37% actually complete their four year degree.

That means there are a large number of people that have gleefully taken on student loan debt as a good debt, are obligated to repay it, but receive none of the benefit for it. For those people, college becomes a massive financial noose around their neck.

There is no doubt that attaining a college degree is a good thing but in order to receive the financial rewards, you must obtain your degree. And what about those that do make it all the way to graduation, are they better off?

More and more I am talking to recent college grads that are not able to pursue jobs in their desired fields because they have to find any type of employment to service the student loan debt. They have obtained the degree but can’t use it. Before you know it the ability to just follow your dreams is gone, replaced with rent, car payments, student loan debt and increasing credit card debt.

I am a firm believer in education. There is tremendous value in education. But students need to not be feed a mantra of student loan debt is good and gladly embrace student loan debt unless they understand the consequences. The largest of those are: 1) You must finish your degree to get the full benefit of your investment, 2) If your dream field is in a field with low starting salaries, you simply may not be able to afford servicing your student loan debt and following your dreams at the same time.

One of the most disturbing trends I have watched over the past years are those students that work hard to obtain advanced degrees in specialized fields such as law and medicine but what they discover along the way is that the field really isn’t for them.

Instead they wind up owing $150,000 and more for education only to just not want to or be able to graduate in the field they originally started in and obtain the income necessary to repay those very high levels of student loan debt.

Let’s not forget, student loans and financing college can be a tragedy for many. We can’t blind ourselves to that reality and maybe student loans need to carry warning labels. Caution: If you don’t finish your degree this loan could be detrimental to your financial health.

You do have some options for repaying the student loans. Please see a previous article, “I Have Three Degrees But I’m Broke And Miserable” for details.

Big hug.

Steve

Source: Lauren is in a Fabulous Foreign Country and Can’t Afford Her Student Loans

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Source: Tough Credit Terms - Just Because You Need to Laugh

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Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty. If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help.

“Dear Steve,

I have a 2006 Mitsubishi Endeavor that i just purchased in June of 2008, I want a truck so I have the box to carry bikes, sleds, and home material like lumber, etc. It suits my work life much better than a SUV.

I owe lots of money as I traded in a truck for a Mitsubishi Eclipse last year then traded the Eclipse for the SUV. How can I get out of this and be able to get a truck that suits all my needs? Can you help me out here?

Can I get out of this situation and get a truck that suits all my needs or is this something that I have buried myself with?

Kurt”

Dear Kurt,

In auto finance days of old the way you got out from under a car loan where you owed more than the vehicle was worth was to roll the debt forward. The dealer would lend you enough money to pay off the old loan and buy the new car. While this got you out of your old car loan it just buried you further in debt.

I think the recent purchase of your 2006 Mitsubishi Endeavor has buried you deep without a real chance of financing your way out this time. It is very hard for car dealers to arrange new financing and as upside down as you probably are, it would be near impossible. Honestly, I seriously doubt you would find a reputable lender to bail you out of this mess.

The only way to get from under that loan would be to sell your SUV and then reach into your pocket for the difference between the sales price and the loan amount and pay that difference off. That’s the only way you’ll get a clean title to transfer.

Big hug.

Steve

Source: Kurt is Upside Down In His Mitsubishi Endeavor Car Loan And Wants Out

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My name’s Annette and I just got told that in two weeks, my job will go from 40 hours a week to 10. On top of that, I’m losing all my benefits. Which means I have no health insurance to cover my lupus.

My husband and I entered a debt management program several months ago that seems to be helping us out some. We live in a poverty stricken area of Southern Indiana. The average income per family here is only 25k a year. There is no work here. We’ve considered trying to sell our house and move, but right now, there’s 9 houses in our neighborhood that have either been abandoned or are up for sale. We are stuck where we are and desperately need help.

There will be no gifts, no brightly wrapped packages in our home this year. We’re giving ourselves the gift of paying our electric bill on time, and keeping our internet service one more month so I can keep job hunting.

The economy stinks, I’m glad gas prices are down, for what little good that does. If you can’t get a job to make the money, then you can’t put the gas in the vehicle.

Source: “I’m Right There With Everyone Else”

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Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty. If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help.

“Dear Steve,

Can I ask for your advice since I’m so overwhelmed with debt. I have 4 credit cards with approximately $48,000 in balance. I’m only paying the minimum amount due per month because that’s all I can afford considering the other expenses I need to pay (mortgage, car loan bills, etc).

Most of the debt here were house related since we were expecting to have our house refinanced after several months and payoff some if not all our credit card debts. But we are underwater so refinancing is not possible. The I stumbled upon your website. I’m the only one working since my wife takes care of our baby.

What can I do? Please help.

Bob”

Dear Bob,

You are drowning in debt and the only fundamental ways to change the balance of debt problems is to lower obligations, increase income, or a combination of both. Or think about it this way, lower the water level or increase your height above the water line.

The technical way to get out of debt is easy, spend less than you earn. But when your income is completely spoken for and obligated, even before you bring it home, that’s a problem.

The liability of debt is that in order to repay it you must work and earn in the future to meet that obligation. Currently all of your future labor has been pledged to meet those past obligations. The only way around that would be for you to get a raise, to get a second job, for your wife to go back to work and earn more than the cost of daycare for your baby, or to look at reducing or eliminating your debts.

The two most mainstream approaches available to you would be to look into a debt management program and see if your credit card payments could be lowered in a debt managment program (click here), or bankruptcy (click here).

Bankruptcy would allow you to get out from underneath your underwater house and discharge your credit card debt to allow you to start over. But before you do anything, I would encourage you to speak to a local bankruptcy attorney and ask for a free bankruptcy review and to speak to a debt management program provider.

Only once you are armed with the facts of how those solutions will assist you can you make the best decision about which option is best for you.

My gut tells me that once you evaluate both a debt management plan and bankruptcy, that bankrupty will make more sense.

Big hug.

Steve

Photo: Chris Carpenter

Source: Bob Is Underwater And Drowning, In Debt

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It is not the thought of a car marker going bankrupt that is keeping people away from showrooms. Hey Detroit, maybe it is:

• The fear of job loss.
• Economic doom and gloom.
• Low gas mileage cars for sale.
• Can’t get financing to buy them.
• Lack of innovation.
• Realization that the cars that come from Detroit are full of cheap plastic.
• Years of not being treated like a valuable customer when a problem with the car occurs.

And Detroit, before you get all high and mighty with yourself, look around, other car maker sales are down as well.

Just yesterday I was sitting with my cousin who was born and bread in Detroit, who always buys Detroit made cars and even he was saying he had no sympathy for Detroit car companies.

“I’ve always bought Detroit cars but not anymore, the current car I’ve got I’ve had to go after them under lemon laws to try to get my check engine light fixed. Instead of fixing it they’ve given me such grief and run around I can’t believe it. And a friend of mine had an engine go on his Toyota shortly after the warranty ran out and the Toyota dealer replaced it, no problem.”

I’m not sure how giving the carmakers a bailout is going to even address those issues and Detroit, that’s the problem.

If you want to make sure that people will still flock to you if you go bankrupt, which you probably should to restructure your legacy obligations, then simply create a third-party trust fund to pay into for warranty service liabilities. That would go a very long way to ease purchase worries that you think people might have.

And would your bankruptcy potentially impact the retirees that count on you for full medical care, it probably would but the underlying issue here is that it is a promise that should never have been made to employees, at all. Promising employees any sort of lifelong benefit is irresponsible unless you already have the money set aside to meet that obligation. If not, then those promises were nothing more than empty promises.

When I bought a new car last year, I looked at domestic cars and foreign cars, which are also made in America, and I bought a Honda. You know what, Honda could go bankrupt today and I just have ten times more confidence that they would make provisions to treat their customers with grace and consideration. I’m not sure that you guys in Detroit deserve that kind of respect and loyalty from the people that have purchased your cars and trucks over the past decade.

Big Three Bankruptcy

You know Detroit, you can continue to spend tens of millions in lobbying Washington and trying to paint a picture about how bailout money will hurt your workers but let’s be real here. Your financial dilemma did not just happen, it has been brewing for years.

If anyone has let down your workers and retirees, it is only you. Failed and arrogant management has continued practices and ways of doing business that have lead to legacy obligations and commitments that simply can not be afforded in this economic winter. That is not the fault of the tax payer.

I think taxpayers would be more willing and supportive of your case if you actually had a plan about how to money would be used to restructure your businesses and lead us forward with quality products into a new age. But what am I to think when I hear you say that in this economic climate that you are going to have to cut way back on research and development. What!

It is exactly research and development that needs to be ramped up to lead us where we want to go in safe, fuel efficient cars and trucks.

Hey Detroit, Lead, Follow, or Get Out of the Way. Sound familiar?

Photo by Derek Farr

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I encourage you to use the form below to learn more about how a credit counseling, debt management or debt settlement program may be able to assist you.

There is no cost and you are not obligating yourself to anything by completing the information request form below.

By completing the form you will be able to get an personal estimate about what your payment would be in one of these solutions.

Armed with this information you to be in a much better position to determine if a debt repayment or debt settlement option will work for you.

When you enter and submit your information you will be contacted by an third-party specialist service provider who will personally review your situation and lay out a plan of action to help you to get out of debt using one of these solutions.

Steve

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If you can’t afford your life, please ask me for help and advice rather than following the path these people did recently.

Source: Mug Shots of People Arrested For Forgery, Writing Bad Checks, And Credit Card Theft

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