The Truth of Credit

The Health Insurance Portability and Accountabilities Act or (HIPAA) was created to protect the consumer’s personal medical information.  HIPPA says that a healthcare provider or plan may disclose only the following bits of information on you to the credit bureaus.

• Name and address.
• Date of birth.
• Social Security Numbers.
• Payment History.
• Account Number.
• Name and address of person claiming the debt.

Recent changes to Fair and Accurate Credit Transaction Act (FACTA) has changed the way delinquent medical bills appear in credit reports. Obviously, if the creditor was shown as “Riverside Cancer Center” logic would tell you that the consumer has cancer.  That clearly is a violation of HIPAA and any healthcare providers that their names would disclose medical conditions are and should always be masked.

This is important mainly because lenders could use that information to deny you credit or a prospective employer could use this information against you. For more information on your rights under FACTA here is the link. http://www.privacyrights.org/fs/fs6a-facta.htm#7

“F.R.E.E.  that spells free” we have all heard the commercial (If not here is the link).  Truth is most credit reporting sites maybe free but is not free of responsibility on your part.  Many “FREE” sites are loaded with trial periods and credit monitoring service.  Who wants all that stuff? All you want freaking credit score.

What you need to understand is even if you purchase a credit report from all 3 credit bureaus (Transunion, Experian and Equifax) that does not necessarily mean that will be the same report a lender will pull on you.  Here are 2 great sites for someone curious and wants to get a general idea where they’re at on the credit score ladder:

• Credit Karma – This site is awesome!  Best of all it is truly free and can be updated often. Definitely, a great place to start and get a general idea.  The downside is you will have to deal with numerous credit card ads and offers but with some patience it’s definitely worth it. Also the score you receive may not be 100% correct.
• Annualcreditreport.com -   This site is sponsored by all 3 credit bureaus and probably your best bet to see exactly what a lender may pull. You can pull a credit report from 1 of the 3 credit reporting agencies for free. However, this can only be done once every 12 months.  After that you will begin to pay if you decide to pull more often.

Any marketer will tell you the greatest word in marketing is “FREE”.  Your best indicator should be if they ask you for your credit card. In that case your better make sure you read the fine print or you may end up with a nice surprise on your next bank statement. Not all credit reporting sites are created equal. However, these 2 sites are a great place to start.

I know I know, it’s hard to even think about what you are going to do this weekend much less think about retirement. However, the future you will thank the present you if you would start think a few years down the road. Individual Retirement Arrangements (IRAs) were created to with some great tax advantages to provide a person some great incentives to save. There are 4 types of IRAs Traditional, Roth, SEP, SIMPLE. All have their own unique benefits but today I just want to discuss the two most popular Traditional and Roth:

Benefits of Traditional IRA:

• Possible Tax Deduction if eligible
• Tax Deferred Growth
• Still contribute even if funding 401k(any employer sponsered program)

Benefits on Roth IRA:

• Contributions can always be pulled when you need the money.
• Possible Tax Free Growth
• Can contribute past the age on 70 1/2.

The TRUTH is if you don’t have a retirement program through your job you need to invest in at least one of these programs. Yes, paying bills, debts etc… are all very important however, you need to start having a “big picture” focus. If you think the government is going to be there to help you in your old age think again.

There are worse things than being in deep debt, but not many.  The problem is that you are constantly paying for past mistakes and those mistakes have a resounding compound effect. Having bad credit can effect many aspects of your life from potential jobs, to how much you pay in car insurance. However, there is a light at the end of tunnel. You can and will get another chance.

Life Lines:

• Statue of Limitations - If you are way behind on bills, in every state there is a certain amount of time in which a creditor can bring suit against you. However, each state is different but on average the statue of limitations is 5 years. Check your state here.

• Consumer Credit Counseling – Whether you are facing an immediate crisis or just want to learn how to improve your financial health, CCCS can help.

• Debtors Anonymous - Debtors Anonymous is a fellowship of men and women who share their experience, strength and hope with each other that they may solve their common problem and help others to recover from compulsive debting.
  

• Bankruptcy – Don’t get caught up in the bankruptcy, avoid defeatism self talk. Bankruptcy was created for a reason and if all fails, you need to do it. In fact, it might accelerate your ability to recover.

So is your life over because you have a very low credit score? No, absolutely not. However, it’s time to take control and stop the victim mentality. You didn’t get a 400 credit score overnight and you surely will not have an 800 by next week. With the right plan and self discipline you can regain the direction of your financial health.

Let’s face it, for most people in New York City a car is a necessity. Unless you are Amish or under the age of 16, you probably either have a car or need one badly. The problem is coming up with $10,000 to $50,000 for a new car is not easy to get for most of us. In fact, the majority need to borrow from parents or personal savings just to get a down payment. Then on top of that, you will need to finance the debt with a bank for the remaining. Nothing new there, right? Well, being in debt sucks, anyone will tell you that.  So what are some way I can accelerate my repayment?

With the quickness:

• Pay more each month: Duh, seems obvious, but some loans make you pay penalties for paying debt sooner. You’ll find that a majority of the finance companies make most of their money in the first 36 months of a car loan. The sooner you can start paying these loans down, you’ll be thanking your self 5-6 years later.

• Make Bi-weekly payments: This may go hand and hand with the suggestion given before, but you’ll find that if you are able to split your payments, you may be able to pay more each time which has a snowball effect.

• Getting another job: Look, I’m a big believer that you work to live, not live to work. So I have a tough time with this one. However, if getting out of debt is a major priority for you this step can only help. I implore you to really think about this because there are major benefits and consequences to this.

Now, before you comment, I know this sounds overly simplified but really it is. There are no tricks. There are options like refinancing, which can and could save you money but you really need to do the math. Not all deals are created equal. Also, a car loan, unless it is outrageous, should be one of the last debts you pay down. If you have credit cards or loans that are accruing interest at 20% plus you need to focus your efforts there first.

Is your car paid off? If so, how long did it take?

Let’s get the disclaimer out of the way: I AM NOT AN ATTORNEY. More importantly, I don’t know the laws in your state or your personal situation. All I have is years of experience and a fairly good idea how creditors (generally credit card companies) work. So I want to write this post for the person who is worried they are going to be sued but has not run this scenario by their lawyer.

It should not be a surprise that YES a creditor does have the ability to sue you for not paying them.  Unless you borrowed money from family or a close friend, more than likely there will be a clause or some stipulation that the creditor has recourse for non-payment.

The big misconception is that if you are making some form of payment that they will not sue you. This is far from the case. Any payments not paid pursuant to an agreement with the creditor are simply voluntary payments on a debt. That does not stop the creditor from suing you (and ultimately garnishing your wages, etc.).

Here is the tricky part, more than likely you are dealing with a collection agency at this point. They will say they are a “firm” or “law center” but most are just collection agencies; do not be fooled. Getting them to send you payment arrangements in writing is going to be difficult, if not impossible. The only exception, normally, would be a settlement offer in which you can and should always get in writing. What you do have as evidence is your bank statements and most reputable collection agencies record their calls.

Just as a heads, up if you are dealing with the likes of Capital One or Bank of America, they tend to be much more aggressive then other creditors. However, more than likely if you have a payment arrangement and can give copious notes on who you spoke to and who their boss is, etc… you should not have a problem.

Feeding your family is why most people go to work every morning. To give you an exact percentage for your budget would be misleading because I know nothing of your station in life nor how much money you make, etc… we will only speak in generalities here. So lets talk about what actually goes into a food budget.

Rick’s Food Budget:

• Groceries
• Toiletries (Kleenex, napkins, etc..)
• Lunches at work cafeteria

What’s Not in Food Budget?

• Dining Out
• Delivery (Pizza, Chinese food, etc.)

The reason I keep these separate is because I feel that the latter is more of an entertainment expense and can be adjusted depending on how things are going. To give you some figures, last month my food budget was 14% of my total budget. However, that’s with only 2 adults and no children.

Again, your budget maybe drastically different than mine. The best best way to start is to get some kind of personal financial software. There is mint.com which I highly recommend (and is free) also Bank of America customers have the ability to track their spending habits through their personal online banking, so check with your bank too. Start with three months to get a good read on what you are spending and then start to make adjustments.

Remember, the most important thing is that you’re managing your money in such a way that you’re able to invest and save significant amounts of money to meet financial goals and prepare for your future.

Retirement products can be extremely confusing. Add to the mix a few job changes, and following your 401(k) money can seem like a dentist visit (annoying but very necessary). The fact is that you are really only hurting yourself by not keeping this money all in one account; preferably your current employer’s 401(k) plan. Trust me, the custodians of your previous accounts are still collecting their fees and that is eating away at the gains you maybe be receiving. So here is the best way to get these accounts together:

Just to rehash, you are only hurting yourself by not keeping up to date with these accounts. To make an analogy, if you were a general and your money was your soldiers, wouldn’t you exploit the weakness in the tax code by concentrating your forces where it will benefit you the most? It only makes sense right?

It’s the Tuesday after Labor Day weekend and I know what you are thinking, the absolute last thing you want to do is get up and go to work. Who can blame you, when all you did all weekend was play with your kids, played a round of golf or even read that book you have been itching to get to? However, this morning, it’s back to making sure you have your security pass and what can I do to make myself look busy today. The fact is, having a job you hate “SUCKS”. There is no sugar coating it and no better word that even Shakespeare could use to describe it.

Unfortunately, the fact is that what you are doing for a living is your fault. Sure you can bridge the gap with a variety of different occupations but once you get past the first year you need to really think long and hard about the road you are traveling. There are the rare exceptions, like the military, where you are legally obligated to stay for an extended period of time but I’m troubled to think of any others off-hand. The point is, after a year you should have a good barometer as to if I like this job or it’s just not going to work.

The TRUTH is if your job is so bad, you would have been gone months ago. Something is keeping you there; be it the people, the money or how quick it takes you to get home. You should always think about the positive and be grateful that you even have a job. But it’s important to remember, that as long as you hate going to work you will never be great at it, so what’s the point?

Don’t take it from me, consider the late DJ AM’s words of wisdom:

“My mom always said you want to be happy in life, find something you love to do so much, you’d do it for free, then find somebody to pay you for it.”

“I don’t know what they want from me, It’s like the more money we come across, the more problems we see.” – Notorious B.I.G

Certainly, at some point you have heard the phrase, “more money, more problems”. First and foremost, I’m not a millionaire nor do I pretend to be. However, I have to laugh when people have said this to me in the past. Really, how hard can it be to have money in the bank and know your future is reasonably secure? The problem is that while you are accumulating this great wealth certain things will naturally attach themselves to you.

Simply put, everyone and everything is looking for increase in their life. There is nothing wrong with that but not everyone and everything is positive. For example, having money probably can get you a table on Friday night at the best steakhouse in town. However, it can also open the door to better and more addictive drugs, not to mention leaches. On top of that, you are now going to attract considerably more jealousy and envy from the people you know.

The TRUTH is I would much rather deal with begrudging co-workers or country club members than worrying about feeding my family tomorrow. How about you? Maybe being poor you have less problems but they are much more severe than the rich person’s are. So next time someone tells you wealth isn’t all it’s cracked up to be, consider the source.

• The best way I have found to combat this negativity is to ask yourself every night before you go to bed, “Have I done everything I could to reach my wealth goal today?”

Try to think of your thoughts as compound interest. For every positive thought you have today, you may not see the benefit immediately but over the course of several months you will see your situation turn itself around exponentially. That I can promise you!