How To Improve Your Credit Score After Bankrutcy-Part 5

Applying for New Credit to Improve Your Credit Score

a. If you have an auto or home loan that you have reaffirmed you won’t need to apply for a credit card to reestablish your credit. Just paying these bills on time is all you need to worry about.

b. If you are still paying on a car or home loan but didn’t reaffirm the debt the creditor may not be reporting to the credit bureaus so your credit won’t bounce back the way it should. Sometimes you can get these creditors to begin reporting again but you will have to contact their bankruptcy department and ask them to start reporting. They will probably need you to sign a waiver since reporting a discharge debt would be a discharge violation. Because of this some creditors will still refuse to report current house or car payments to the bureaus even if you offer to give them a waiver. But it won’t hurt to try. 

c. If you have no open credit accounts that are reporting to the bureaus after you get your discharge, you may want to apply for an auto loan or credit card so you can start building your credit again. If you do, follow these rules:

i. First you need to do a family budget to see if you can afford a credit card.

(1) write down your family net income (after taxes and deductions)

(2) make a list of all your expenses each month including the cash you spend. Be realistic. Then add it up and subtract it from your income.

(3) If you have a surplus, then you can apply for a credit card or auto loan as long as the minimum payments are less than the surplus amount.

(4) If you have more expenses than income, don’t get any new credit or auto loan. You can’t afford it.

ii. Only get a new credit card or auto loan if you can easily make the minimum payments each month. If you miss payments your credit score will go down instead of up.

iii. Put the card on automatic pay from your checking account for the minimum payment due each month.

iv. When the paper credit card bill comes in, pay as much more as you can by check.

v. Don’t ever max out your credit card.

vi. Borrow less than one half of your credit limit, if possible.

vii. Try to pay the full balance when the bill comes at least once or twice a year.

viii. Only use the credit card for emergencies or to cover short term shortfalls.

ix. Don’t ever apply for a new credit card so you can use it to make payments on another credit card. 

x. Avoid adding family members as authorized users of a credit card as that makes it much more difficult to manage properly.

          For more information you can visit our website, see us on Facebook or follow me on Twitter.

    

How to Improve Your Credit Score After Bankruptcy-Part 4

Post-Bankruptcy Debt

Debts incurred after you file your case are not discharged. 

1. Debts incurred after your bankruptcy filing are not usually discharged so pay them timely.
2. Don't Ignore small debts. Even small unpaid balances that are in collection or charged off can drastically hurt your credit. Don’t ignore them or think they will go away. 
3. Pay off small balances in full that have accrued since your filing
4. Negotiate with creditors on debts too large to pay off. Try to get them to take 25%-50%. If they won’t agree to that, try to get an agreed payout of a flat amount per month like $50-$100. 
5. If you reach a negotiated settlement make sure it is put in writing and it is agreed that the creditor will delete the reporting once the agreed settlement is paid, or reported as “Paid As Agreed” or “Negotiated Settlement” with a balance of -0-.
6. Student loans and taxes often are not discharged and must be addressed. Consolidate student loans or get them deferred. Once you do that make sure the creditors involved remove and adverse reporting. If they won't, then dispute it.
7. Work out an installment agreement with IRS if you can’t pay the full amount immediately. That can usually be done with a telephone call or a meeting at your local IRS office. Don't let them file a federal tax lien. That will do great damage to your credit. If one is filed, get it released once the agreement is in effect.
8. If the amount of taxes is so high you could never pay it, try an offer in compromise. You’ll probably need a lawyer of accountant to help you with this, but if you qualify you could save a lot of money and avoid having a federal tax lien messing up your credit.
9. Child support won’t be discharged so keep it current and work out a payout on past due sums if they weren’t dealt with in your bankruptcy. Past due child support really looks bad on a credit report, so get it paid off as soon as possible.

                  For more information you can visit our website, see us on Facebook or follow me on Twitter.

The Credit Card Trap

From the day you are born you are indoctrinated on how important credit is to everyone. You're told over and over again that good credit is the secret to financial success and happiness in life. You're barraged with advertisements for all the expensive luxury items you can buy right now on credit and nearly everyone takes the bait.

You get a house you can't afford, a luxury car you don't need, and run up a half-dozen credit cards to the hilt. Before you know it you're a slave to the system. You’ve stepped into the credit trap. Most of your hard-earned money is going to banks and mortgage companies in interest payments. You pay and pay and pay, yet the balance you owe never goes down. For many the joy is soon gone—happiness is replaced with constant worry and depression.

Yes, from the day we are born, each and every one of us have been carefully manipulated into becoming slaves. That’s right, carefully programmed robots who go to work everyday and then religiously send seventy to eighty percent of our wealth to our masters, the big corporate giants of Wall Street and the government bureaucrats in Washington.

Think about it. From the day you are born you're told that good credit is your ticket to the American dream. You can have all the luxuries and modern conveniences of life on credit. Why wait, they say, when you can have it right now.

Millions of Americans, including myself, have been victimized by this credit conspiracy. The lure of easy money is so tantalizing that few can resist it. I started my own law practice with a two-thousand dollar cash advance on my American Express card. I tried to get conventional financing but had no collateral, so I was summarily turned down. Over the years I continued to finance my small business with high-interest credit card debt that the average entrepreneur would have no prayer of ever paying off.

A lot of small business are started and financed with credit cards each year this same way. A few will be successful and pay off this high-cost debt, but most will eventually perish because of it. Eventually the burden of the minimum monthly payments will get so heavy that the business will collapse.

Credit cards are very handy and useful for travel and to make it easy to keep track of business expenses. But they shouldn’t be used for financing your business or covering your negative cash flow at home. If you are using credit cards for this purpose you need to stop immediately and take a close look at the business. Find out what is wrong and correct it, but don’t keep digging a hole that will eventually swallow you and your small business.

So, now you’ve been warned, but will you do anything about it? Probably not. Credit cards are addictive just like cigarettes and booze. They provide immediate pleasure and allow you to fulfill your dreams. In your mind you’ve got everything under control. You tell yourself that you can stop using your credit cards whenever you want. So, why don’t you?

What makes credit cards so dangerous is that, unlike booze, there is no immediate hangover to make you regret you your actions. The consequences of your indiscretions with your credit card are deferred for months or years. For awhile you can manage to make the minimum payments without too much struggle, but eventually all the minimum payments add up and you find yourself overwhelmed.

The use of credit cards defies logic. Why would anyone pay 29% interest, late fees, over the limit penalties, and an annual membership fee, when the bank won’t pay you 2% if you buy a CD. It’s ludicrous. But when I point it out to clients they just shrug. It’s like their minds don’t compute when it comes to credit cards. Armed with a pocket full of plastic gods they become mindless zombies who have no idea what they are doing.

I could understand it if they were desperate. Many of my bankruptcy clients over the years have turned to pawn loans, payday loans, title loans, or other legalized loan shark operations. Without giving it a second thought sign a note that provides or sometimes over 900% interest. What’s ridiculous is that the Truth-In-Lending disclosure is right there staring them in the face and they still sign on the dotted line. When you absolutely have to have money people will do whatever it takes no matter what the consequences are to get it.

But people with credit cards half the time don’t need what they are buying. They are not desperate people who are buying food, clothing or gasoline to get to work. They are buying gifts they can’t afford to give, luxury items they could do without or booze and cigarettes that will eventually kill them. Nor are these people stupid. They are just as often college graduates as high school dropouts. The common threat among them is materialism and a lack of common sense. They like fancy cars, good food, designer clothing, the latest in technology and large well furnished homes. If they can’t have all these things they are unhappy.

So, what is the answer to the credit card addict? Fortunately, it’s an addiction that can be easily ended. All you have to do is quit paying the credit cards. When you do this they soon will lose their magic and you will never buy something you don’t need ever again. Even better your credit score will crater so you won’t be able to get new credit cards to replace the ones you have lost.

Of course, the downside of this solution is having to deal with all the angry collection agents who will start hounding you for payments on the now dead cards. They will threaten you will all kinds of horrible things like lawsuits, liens, garnishments, attachments, and even criminal prosecution. Of course, they can’t legally do any of this, but they will do their best to make you believe it will happen very soon if you don’t send them money. It may become so bad you will have to file bankruptcy just to get some peace, but bankruptcy is the worst thing for the credit addict.

That’s right because as long as your credit is bad you will have no choice but to go straight. But once you file bankruptcy your credit will rebound quicker than you’d ever thought possible and then you’ll be right back where you started with a pocket full of plastic gods.

So, rather than going through all of that, the better move for the credit addict is to simply cut up all the credit cards and pay them off as quickly as possible. This will be painful and require a lot of sacrifice, but it will be well worth it as it will free you from the financial shackles that have bound you from the moment you stepped into the credit trap.

Lucky for me, attorneys often find themselves in a position to make the big score. For me it was a personal injury case that netted enough to pay off my credit card debt and the loan on my home, but it was only after struggling for twenty years that I finally escaped the credit trap and became debt free. For most entrepreneurs bankruptcy or death will be their only way out.

The above article is from my new book, Go Broke, Die Rich, Turning Around the Troubled Small Business. For an entertaining perspective on credit cards read my novel Plastic Gods. Visit my website at http://williammanchee.com./

Getting the Mail Can Be A Risky Business

Today I went out and got the mail and discovered I'd recieved a check made out to me for $6,000.00. All I had to do was deposit it and it was mine to spend. This happens all the time and I'm sure it has happened to all of you. Of course, I shredded it as the attached financial disclosure indicated the interest rate was 98%! But can you imagine if someone got that check in the mail who was desperate for money to pay bills or wanted something that they ordinarily couldn't afford. The temptation to cash that check would be staggering.

Along with the $6,000 check there were three credit card solicitations offering guaranteed acceptance with credit limits of $2,500 to $5,000. Of course the lowest interest offered was 29%. In the first quarter of 2010, according to the marketing intelligence firm, Mintel Compermedia, total credit card direct mail solicitation volume was 1.2 billion pieces! This is an unconscionable abuse by the credit card industry motivated by greed and a reckless disregard for their customers' well being. At a time when interest rates are ridiculously low and banks can get all the cheap money they want, they shouldn't be trying to fleece the American consumer. Unforturnately, credit card lending is so lucrative they can't help themselves.    

So, I tell my clients they shouldn't feel guilty about filing bankruptcy as they have been lured into this credit trap by greedy lenders who care nothing about how predatory lending hurts the people who get caught up in it. When they lure people into buying things they can't afford they reap big profits but are unsympathetic when their customers lose their job or get sick and can't pay the bills.

These finance companies, payday lenders, banks, and credit card issuers will turn on you the moment you get behind on a payment. They'll call and harass you, send you threatening letters, and destroy your credit without giving it a second thought. I see this everyday and it sickens me. I got so angry one day I wrote a poem about it one night.  It's called Plastic and you can read in my novel, Plastic Gods, A Rich Coleman Novel, Volume 2.

So, when you go out to the mailbox marshall all your strength and will power, and do what I do, immediately shred any credit card applications or preauthorized checks that you find. Also, look in your credit card bills and shred any unsolicited checks that they slip into the bill so they won't be a temptation in the future. You have to be vigilant to avoid the credit trap, but you can do it!

Can Bad Credit Be A Good Thing?

Excerpt from Go Broke, Die Rich 

From the day you are born you are indoctrinated on how important credit is to everyone. You're told over and over again that good credit is the secret to financial success and happiness in life. You're barraged with advertisements for all the expensive luxury items you can buy right now on credit and nearly everyone takes the bait.

You get a house you can't afford, a luxury car you don't need, and run up a half-dozen credit cards to the hilt. Before you know it you're a slave to the system. You’ve stepped into the credit trap. Most of your hard-earned money is going to banks and mortgage companies in interest payments. You pay and pay and pay, yet the balance you owe never goes down. For many the joy is soon gone—happiness is replaced with constant worry and depression.

Yes, from the day we are born, each and every one of us have been carefully manipulated into becoming slaves. That’s right, carefully programmed robots who go to work everyday and then religiously send seventy to eighty percent of our wealth to our masters, the big corporate giants of Wall Street and the government bureaucrats in Washington.

Think about it. From the day you are born you're told that good credit is your ticket to the American dream. You can have all the luxuries and modern conveniences of life on credit. Why wait, they say, when you can have it right now.

Millions of Americans, including myself, have been victimized by this credit conspiracy. The lure of easy money is so tantalizing that few can resist it. I started my own law practice with a two-thousand dollar cash advance on my American Express card. I tried to get conventional financing but had no collateral, so I was summarily turned down. Over the years I continued to finance my small business with high-interest credit card debt that the average entrepreneur would have no prayer of ever paying off.

A lot of small business are started and financed with credit cards each year this same way. A few will be successful and pay off this high-cost debt, but most will eventually perish because of it. Eventually the burden of the minimum monthly payments will get so heavy that the business will collapse.

Credit cards are very handy and useful for travel and to make it easy to keep track of business expenses. But they shouldn’t be used for financing your business or covering your negative cash flow at home. If you are using credit cards for this purpose you need to stop immediately and take a close look at the business. Find out what is wrong and correct it, but don’t keep digging a hole that will eventually swallow you and your small business.

So, now you’ve been warned, but will you do anything about it? Probably not. Credit cards are addictive just like cigarettes and booze. They provide immediate pleasure and allow you to fulfill your dreams. In your mind you’ve got everything under control. You tell yourself that you can stop using your credit cards whenever you want. So, why don’t you?

What makes credit cards so dangerous is that, unlike booze, there is no immediate hangover to make you regret you your actions. The consequences of your indiscretions with your credit card are deferred for months or years. For awhile you can manage to make the minimum payments without too much struggle, but eventually all the minimum payments add up and you find yourself overwhelmed.

The use of credit cards defies logic. Why would anyone pay 29% interest, late fees, over the limit penalties, and an annual membership fee, when the bank won’t pay you 2% if you buy a CD. It’s ludicrous. But when I point it out to clients they just shrug. It’s like their minds don’t compute when it comes to credit cards. Armed with a pocket full of plastic gods they become mindless zombies who have no idea what they are doing.

I could understand it if they were desperate. Many of my bankruptcy clients over the years have turned to pawn loans, payday loans, title loans, or other legalized loan shark operations. Without giving it a second thought sign a note that provides or sometimes over 900% interest. What’s ridiculous is that the Truth-In-Lending disclosure is right there staring them in the face and they still sign on the dotted line. When you absolutely have to have money people will do whatever it takes no matter what the consequences are to get it.

But people with credit cards half the time don’t need what they are buying. They are not desperate people who are buying food, clothing or gasoline to get to work. They are buying gifts they can’t afford to give, luxury items they could do without or booze and cigarettes that will eventually kill them. Nor are these people stupid. They are just as often college graduates as high school dropouts. The common threat among them is materialism and a lack of common sense. They like fancy cars, good food, designer clothing, the latest in technology and large well furnished homes. If they can’t have all these things they are unhappy.

So, what is the answer to the credit card addict? Fortunately, it’s an addiction that can be easily ended. All you have to do is quit paying the credit cards. When you do this they soon will lose their magic and you will never buy something you don’t need ever again. Even better your credit score will crater so you won’t be able to get new credit cards to replace the ones you have lost.

Of course, the downside of this solution is having to deal with all the angry collection agents who will start hounding you for payments on the now dead cards. They will threaten you will all kinds of horrible things like lawsuits, liens, garnishments, attachments, and even criminal prosecution. Of course, they can’t legally do any of this, but they will do their best to make you believe it will happen very soon if you don’t send them money. It may become so bad you will have to file bankruptcy just to get some peace, but bankruptcy is the worst thing for the credit addict.

That’s right because as long as your credit is bad you will have no choice but to go straight. But once you file bankruptcy your credit will rebound quicker than you’d ever thought possible and then you’ll be right back where you started with a pocket full of plastic gods.

So, rather than going through all of that, the better move for the credit addict is to simply cut up all the credit cards and pay them off as quickly as possible. This will be painful and require a lot of sacrifice, but it will be well worth it as it will free you from the financial shackles that have bound you from the moment you stepped into the credit trap.

Lucky for me, attorneys often find themselves in a position to make the big score. For me it was a personal injury case that netted enough to pay off my credit card debt and the loan on my home, but it was only after struggling for twenty years that I finally escaped the credit trap and became debt free. For most entrepreneurs bankruptcy or death will be their only way out.

The above article is from my book, Go Broke, Die Rich, Turning Around the Troubled Small Business. For an entertaining perspective on credit cards read my novel Plastic Gods. And be sure and visit my website or follow me on Facebook.

The Speech I Never Gave

A young man came up to me at a book signing yesterday and asked me if I was the one who had written Plastic Gods. I acknowledged to him that I was and he told what a great book it was and how much he'd enjoyed it. My signing had been a little slow, so it lifted my spirits to find out my book had meant a lot to this young man. As I stood waiting for the next person to stroll by, I thought about my own high school days decades earlier. Being second in my class at Buena High School I was asked to address my fellow graduates. At the time I was lacking in experience and the wisdom experience brings. I didn't really know what to say, so it turned out mediocre at best. I sighed, wishing I'd of known then what I knew now. Then I started to formulate in my mind what I would have said to my fellow classmates had that been the case.

Fellow seniors, I stand before you today to warn you of a great peril that you will face the moment you step out into the world on your own. It's a danger that will threaten your health, your happiness, your marriage and even your very freedom. The reason this risk is so dangerous is that it is perfectly legal. There are no laws to protect you, no warnings from family and friends, and you won't know that you are a victim until its too late.What I'm warning you about today is the credit trap—the lure to buy now and pay later, to live above your means, to accumulate possessions of every sort that you don't need. It's an unfortunate fact of life that our economy is driven by credit and you will be expected to do your patriotic duty and help drive the economy forward. This pressure will be manifested by a deluge of credit card applications, offers of financing for new fancy cars, a barrage of advertising trying to lure you into buying expensive home, clothes, cosmetics, travel packages, you name it.

You won't feel any pain the first few years after you fall into the credit trap. You'll be enjoying everything you've purchased on credit. Minimum payments on credit cards are low and you can draw on your credit cards or credit line if you come up short. It won't be long though until you'll find yourself in serious trouble. Lets say you have $50,000 of family income. If you did a budget you'd discover that you were probably spending $70,000. That means you're going in debt at the rate of $20,000 per year plus interest.

Interest at first may be reasonable, but the first time you miss a payment it will be jacked up to 28% and every time you go over your limit or make a payment late you'll be charged outrageous fees in above this high interest rate. Soon, in addition to your car and house payment you'll have credit card debt exceeding your car and house payments combined. You'll live with this as long as you can, borrowing from Peter to pay Paul, but eventually it will be too much and the only way out will be bankruptcy.

It's an established fact that financial stress is the leading cause of divorce. After a few years when creditors start to call, your credit goes in the dumpster, and it gets difficult to even pay basic bills, you'll start blaming your spouse, arguments will ensue, and love will turn to bare tolerance. It's very common for bankruptcy to be followed by divorce. Some law firms ofter a combination package, bankruptcy and divorce all for one low fee.

So, you've been warned. Don't fall into the credit trap. If you do, at best you'll lose your financial freedom and at worst you'll end up alone in the bankruptcy courts. Don't live above your means. The only credit you'll ever need is for a house, a car and perhaps your children's education. Pay cash for everything else.

Now here's my final piece of advice. If you follow it you'll never experience the tragedy I've just described. When you get your first job and go out on your own, prepare a budget and follow it no matter what. Change it whenever your income changes, and put in a budget item for savings. Ten percent is the amount you should save each month. Do this without fail and you'll preserve your financial freedom, greatly improve the chances of having a successful marriage and go a long way in insuring your future happiness and well being.

That's the message I wish I'd of given my fellow students back in 1969 or I wish someone would have given me. I fell into the credit trap just like millions of other American's have done over the years and suffered greatly on account of it. It's only been in the past few years that I've managed to escape and become debt free. I wrote Plastic Gods as a way to communicate this message in a manner that would be entertaining but still effective. The young man I met tonight wasn't the first person who's thanked me for Plastic Gods, but it felt good to know someone had benefited from my work.

 

Buy Plastic Gods at Amazon.com.