Here’s “what we should have learned in school” about credit. Without this information, you’ve probably wasted thousands of dollars, or worse. Now you’re about to learn exactly how your creditors have been taking advantage of you this whole time, and how to flip the tables to win the credit game. This unique info is unlike anything else out there in it’s completeness, effectiveness and simplicity. Please enjoy the benefits forevermore…
If you can’t write a check, you don’t have the resources like a 401k or equity in a home to pay off your debt, what can you do? Most people out there are just making minimum monthly payments, exactly what the banks want them to do.
The average client I deal with these days has around $40,000 in credit card debt. This is a lot of debt, on top of which they’re paying 20% to 30% interest. This large payment is really hurting their debt-to-income ratio.
Most of these folks are over half-way utilized. Many people are already maxed out, hurting their credit again on the third leg, (debt to credit limit ratio) and they’re struggling to achieve the holy grail of credit by making their minimum payments on time. Unfortunately, that’s a trap! There are a lot of false beliefs that keep people in this cycle for a long time. You’re basically trapped if you don’t get off of that treadmill. You will be on it forever, making those minimum payments.
What most don’t realize is even if they have perfect payment histories and a “great” credit score, if they’re over utilizing their available credit or have a high debt to income ratio, they won’t be able to get affordable financing for the things they really want (cars, homes, etc). Those minimum payments aren’t getting them any closer to these goals.
Minimum payments on $40,000 of debt with 20% interest are going to take you 60 to 70 years to pay off. That’s a long time, too close to forever. Even if you owed $20,000 with an 18% interest rate, you’re still looking at 30 years or more to get out of debt. Making minimum payments is only good for you in the very extreme short term to maintain cash flow.
The appeal to buying on credit is overwhelming. You can have a lot of leverage because you can buy a whole bunch of stuff with a small monthly payment. This allure is what has trapped most people in America and is causing the current debt epidemic.
Really, there’s an epidemic out there! There’s over $2.3 trillion of consumer debt. The credit card companies are raking it in with little to no regulation on how they conduct their business (ie: interest rate hikes, penalties, fees, etc). This is not a small problem, and this is the trap you’re falling into when making minimum payments. There’s got to be a better way; unless you just want to be a slave to debt for the rest of your life.
Was this valuable to you? Feedback? Question(s)?
Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com
Let’s start with your situation…
The fact that you have high credit scores and have not fallen behind means you have something to lose (your perfect payment history) if you choose debt settlement.
But, let’s first get clear about exactly how your credit will be affected, because along with the negative impact to your payment history, the other two important areas of your credit, your debt-to-income ratio and utilization, are both greatly improved through debt settlement. (more…)
What’s the difference between “credit rating” (credit score) and “credit worthiness?”
How do these two different aspects of your credit affect you? How much money is your debt costing you right now?
Many people are overly concerned with their credit score. Many don’t really know how credit works. Even fewer really understand “credit worthiness.”
To most it’s a mystery…
Now that you know “How Credit Works,” let’s go to up to 30,000 feet for just a moment and look down at this situation to get a clear perspective…
We have to realize what’s actually going on here, because most people think making payments on time is all there is to having “good credit,” so they make their payments on time month after month, year after year, paying insane amounts of interest along the way…
Most mistakenly think their credit score is the most important thing.
Why is this happening?
It’s happening because the credit bureaus and the credit card companies are in cahoots. Working together they make billions and billions of dollars a year through this system of credit, designed to prey upon human nature. The industry capitalizes on financial hardship, something you may have experienced yourself firsthand.
What am I talking about here?
I’m talking about the credit card industry having the deepest pockets and the tallest buildings in the land. They do lots of advertising and sell their ideals well to the public through mass propaganda. This is what’s caused people to mistakenly think making your payments on time is the holy grail of credit.
Payment history and credit score are important, but they are not everything, or even the ultimate thing…
Remember “the big idea” is to earn interest, not pay interest. The credit card companies know this. They’ve built their business around this idea, but here’s the catch: “they” depend ON YOU to pay them interest!
The reason your payment history has been made to seem like it’s the most important aspect of your credit is because the credit card companies want you to simply make your minimum payments every month, paying the highest interest rate possible, for the rest of your life!
This little secret was exposed in 2004 by the award winning investigative journalism of the PBS Frontline/NY Times Special Report “Secret History of the Credit Card.” I encourage you to watch this special some time if you haven’t already. You can watch it all for free online through the link above.
It turns out credit card companies actually label you as a “deadbeat” if you pay your cards off every month. The credit card industries want you to pay the minimum monthly payment every month, so that’s what they promote because it’s how they make their money. That’s okay; you just need to understand the difference between propaganda and reality.
Credit isn’t made up of just your payment history. There are the other two factors, each almost equally as important. Either can ruin your credit worthiness, even if you have a “perfect payment history”.
Here’s an example:
You may have a credit score greater than 700. If you walk into a mortgage broker they’re going to be happy to see you, rubbing their hands together and smiling, because they can get you any loan you want! Or so it might appear at first…
However, if they pull your credit report and see you are enrolled in credit counseling (which the credit card companies, the credit bureaus, and the whole credit industry promote), your credit worthiness (your actual ability to get a loan) will be crippled. You are not likely to get a loan at all these days, and if by chance you do, you will pay higher fees and interest despite your high credit score because your credit worthiness is poor.
Credit counseling, non-profit counseling, debt consolidation, and debt management programs are all different names for the same thing. These programs are heavily promoted by the credit industry. The credit bureaus themselves, along with most credit counselors will tell you credit counseling does not affect your credit score and that’s true. “They” have made it this way, and so, if you’re in credit counseling, it’s no longer going to negatively affect your credit “score.” You may be able to keep that 700 credit score. But it’s only a “half-truth,” or in other words, in light of your credit worthiness, it’s a lie.
It’s a “half-truth” (lie) that credit counseling doesn’t affect your credit score.
(Hint: credit worthiness)
When your mortgage broker pulls your credit report, each account included in a credit counseling program is listed as “THIS ACCOUNT IS INCLUDED IN CONSUMER CREDIT COUNSELING SERVICES” (or similar). The industry term for what this looks like to a lender is a “walking bankruptcy.”
It’s like having a BIG RED “X” on top of your three-legged stool!
Here’s why credit counseling hurts (even cripples) your credit worthiness:
Statistics came out a few years back showing the average failure rate for credit counseling is around 70%. Roughly seventy percent of the people that enroll fail to finish the program and will not get out of debt. It’s no secret most of those people who fail end up filing bankruptcy. This makes you a much bigger risk to the lender. Therefore, lenders see you as mush less credit worthy than your credit score would make you appear.
As you can see, it isn’t just about your credit score; your “credit worthiness” ultimately affects your ability to get a loan.
Someone with the 700 credit score enrolled in credit counseling may not get as good of a loan as someone else who filed bankruptcy two years ago and now has rebuilt a good payment history with zero debt and cash flow freed up to commit towards monthly payments on new debt.
The person who filed bankruptcy may have a lower credit score but may be much more credit-worthy than the person with the good credit score who’s enrolled in credit counseling and strapped for cash every month trying to keep up with payments. Statistics say the person in credit counseling will fail. How would you feel about lending money to such a person?
A/B Example:
Problems in either of the second or third legs (too high of a debt-to-income ratio or balances over 50% of your limit, maxed out or over the limit) can also hurt or cripple your credit worthiness, despite having a perfect payment history or a good credit score.
A = Perfect payment history, maxed out utilization, high/maxed out debt-to-income ratio
B = Bad payment history, but NO DEBT = low debt-to-income ratio and low / no utilization
Go ask any mortgage broker…
2009 WAKE UP CALL: “These days”… very few people are left with “perfect credit.” With the collapse of sub-prime lending, it’s very difficult to get financing today if you have “less-than-perfect” credit. So if your credit is not stellar, then you may not be able to get financing at all, and it’s time to look at solving the underlying problem of debt now, while your credit takes a back seat.
What’s more important to you, your short term credit rating or long term credit worthiness?
Where is your credit score right now? ___________
How is your credit worthiness? GOOD? BAD? CRIPPLED?
Keep in mind the difference between credit rating (credit score) and credit worthiness as you evaluate your options to be debt free.
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com
What is debt settlement?
Debt settlement is the process of negotiating with your creditors to settle your debt for less than what you owe. One thing you need to realize is that this program works best for people that are soon approaching or already in a financial hardship of some kind. You don’t have to wait until Hell or high water comes, if you see it coming you can be proactive and debt settlement may be a very good solution for you even if you haven’t taken a tumble yet.
If you are going towards that tumble, or you’ve already fallen behind, you’re on that treadmill, especially if you’re paying high interest on a lot of debt, this may be a very attractive option for you.
Debt settlement is definitely the most popular option out there…
BUT THERE’S A LOT ABOUT DEBT SETTLEMENT YOU MUST KNOW, BEFORE YOU EVER EVEN THINK OF ENROLLING INTO A DEBT SETTLEMENT PROGRAM!
Put yourself in the shoes of creditors, what can you do?
Lawsuits…
Collectors and creditors alike would love for you believe they want and will sue you, get a judgment, garnish wages, etc. They bank on this general fear, but you may be shocked to learn the truth about how unattractive lawsuits actually are to creditors.
Let me be clear, a creditor can, and may, file a lawsuit against you if you default on your debt (fall behind on payments). They could sue you if you’re a day late. This is obviously unreasonable, but what’s not so obvious is how unreasonable lawsuits are in general, even if you are severly late. Your creditors DO NOT want you to know this, as they would rather you live in fear thinking they could flip a switch and get a garnsihment or have you put in jail – neither of which is true.
Here’s why it’s not attractive to a creditor to sue you:
Collectors…
Traditional choices for creditors with customers in a hardship: sue or sell to collector…
So when a debt settlement negotiator comes along and offers 40, 50, 60%, it’s a smoking deal.
Debt settlement is actually the best way for your creditors to get the most money from someone in a financial hardship!
This is why debt settlement is such a popular option, because not only do we save you a ton of money, but it’s also a great deal for the creditor. You see, they account for a certain amount of people every year to be in a hardship and unable to pay.
How Debt Settlement Works
When you enroll into a program for debt settlement you sign a limited Power of Attorney. That limited Power of Attorney is sent out to each of your creditors. It basically says to them that you’re in a financial hardship, you will no longer be making any regular monthly payments, and instead you’ll be saving up your money to settle the debt in the future. It’s also a notice for your creditor to no longer contact you, but to contact your negotiator who is representing you. It informs them they will be contacted in the future when you have enough money saved up to offer a settlement.
From that point forward, you no longer make any regular monthly payments to your creditors. You’re going to make one payment each month for the same amount, the same time each month, to a special purpose account that is set up for you. Each month your payment is transferred from your regular account into your special purpose account. Your payment amount is usually substantially less than your current minimum monthly payments that you’re making on your cards.
This account will build up month after month. Once you’ve saved enough money in that account to offer a settlement to one of your creditors, your debt settlement negotiators will contact them and negotiate a one-time lump sum payment to settle the account to a zero balance. This typically can be negotiated to about half of what you owe.
Once a settlement is made, your debt for that account is wiped out forever.
Month after month goes by and your funds build up again, and they’ll settle the next account, and so forth, until usually within about 24 months you’re completely debt free by settling all of your accounts.
That’s the main process of how debt settlement works. There are fees for the program. Usually with the fees included, you are going to pay about two thirds of what you owe and you’ll save about a third of what your current balances are right now – whatever your total debt is.
Keep in mind that the fees would be included in that two thirds that you actually pay. It’s also included in the monthly payments that you get as a quote so those fees are known about up front and taken out over a period of about 18 months.
Fees and everything included, you are still saving a ton of money. Not just the third or so of your current balance, but also all the future interest and fees that you will no longer have to pay.
When you go through this program, interest and fees are effectively eliminated. The creditors will still say “you owe interest” or “you owe fees” once you stop making those payments, and the balance may increase, but negotiations with them are based on your current balance when you enroll.
When you’re given a quote, that’s a quote for the total cost, meaning basically all the additional interest and fees come out in the wash. Whereas by example, if you were just going to make minimum payments; if you’re paying 20% to 30% in interest, you’re going to pay two to three times what you owe in interest alone by the time you get that paid off.
That’s a tremendous savings! Now you’re getting out of debt quickly in 24 months and you can take that savings each month and invest it to start earning interest; where your money is working for you.
The difference it can make say 30 to 40 years down the road:
If person ‘A’ were making minimum payments and it took them 30 or 40 years to pay off their debt; person ‘B’ went through debt settlement and after two years began investing money and earning interest, then by the time person ‘A’ is out of debt, person ‘B’ is a millionaire. That’s the difference. It’s not that complicated over all, it’s just a matter of learning about it and doing it, taking action.
Cost & Savings of Debt Settlement
There are fees for these programs. Usually with the fees included you are going to pay about two thirds of what you owe and you’ll save about a third of what your current balances are right now, whatever your total debt is. Most importantly; eliminating your debt quickly will allow you to take control of your cash flow, stop paying interest and have cash every month to save, invest and get your money working for you.
After you graduate and your debt is completely wiped out for a fraction of what you owe, not only will you have saved over $10,000 from your current balance (if you’re in the average client bracket), but you will be saving tens of thousands of dollars that you would otherwise pay in interest to keep your credit score where it is in the short term. You also will have ALL the money you’re currently paying in minimum payments BACK in your pocket.
Now I know you may like shopping. Hey, I’m a guy who likes to shop too. Let me tell you… taking CASH out of an interest earning account working FOR me 24/7 to go buy shoes, clothes, dinners, vacations, and nights out on the town feels so much better than it ever did charging up a credit card, constantly working against me.
Overall, what we’re looking at here is the difference between being a slave to debt with money working against you vs. being debt free with money working for you.
The difference is huge.
Was this valuable to you? Feedback? Question(s)?
Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com
Traditionally, if you’re not able to make minimum payments, you’re in a hardship, or you just find yourself in too much debt, what you do is file bankruptcy.
You file bankruptcy and you pay zero. The creditors get nothing and it’s the ultimate move, the ultimate trump card that you’ve got as a citizen. Unfortunately, about a year-and-a-half ago Congress passed new laws, which made it extremely difficult to file for what’s called Chapter 7 bankruptcy.
Let’s talk about the difference real quick.
There are two types of bankruptcy for personal bankruptcy filing. I’m not a bankruptcy attorney, I’m not an attorney at all, so this is purely educational information. This is not any kind of legal advice. (If you want to talk to a bankruptcy attorney, I do have a close network of bankruptcy attorneys nationwide. I would be more than happy to refer you to somebody in your state/area. Just contact me, and I’ll get you in touch with them. They can answer any specific questions.)
As a basic overview, Chapter 7 bankruptcy is called liquidation, where they wipe out the debt completely. Chapter 7 is the type of bankruptcy these new laws affected and they have made it much more difficult to qualify. Chapter 13 bankruptcies, on the other hand, are called a repayment plan. This is where you pay back a portion of the debt, usually over about 60 months. During that time, you are making court-ordered payments and you have to go before the judge.
Let me break it down for you this way: Chapter 7 bankruptcies are a pretty good deal, if you need to do it, it’s a good way to go if you can qualify. I don’t see Chapter 13 bankruptcies really being in the best interests of anyone.
Unfortunately, some people have been tricked or fooled into filing Chapter 13 bankruptcies. So far, I haven’t seen it come out as the best option for most. This is why:
If you don’t make it, you’re done! There’s no forgiveness, there’s no helping. You go through tough times! If you don’t make that payment, the Chapter 13 bankruptcy is over.
It’s also going to stick on your credit for seven years as a bankruptcy, which is one of the worst things you can possibly have on your credit report. It stays around for seven years after your payment plan is over. If it’s a five year payment plan, you’ve got 12 years of bad credit from that bankruptcy.
A Chapter 7 bankruptcy shows on your credit for ten years, but its usually completed within a few months. You’ve now got ten years that the Chapter 7 is going to be on your report, which is going to hurt your payment history. It will however, improve the other areas of your credit by wiping out your debt and optimizing your debt-to-income ratio and your debt to credit limit ratio. It eliminates those problems, whereas a Chapter 13 bankruptcy really cripples your payment history. Plus, with Chapter 13, you still owe a good portion of your original debt with payments over a long period of time so your debt-to-income ratio is not much better than before the bankruptcy.
You have to make the payment the judge sets, and it’s the maximum amount you can possibly pay, which is usually quite high. You’re not left with much to live on, and you don’t really have any say in the matter. Of course, it’s also not wiping out the utilization fees until it’s all over years and years from now.
If you can qualify for Chapter 7, it might be a good choice for you if it’s the way you want to go. If you can only qualify for Chapter 13, my advice is to run! Give me a call. We can talk, see if there’s another option. I haven’t seen Chapter 13 work out well for most people. Usually, they make the decision to enter into it out of ignorance or bad advice.
Let’s look at Nicole, a client I worked with in Virginia. She’s in her early thirties and has a 20-month-old daughter. She had $53,000 in credit card debt. She and her husband had some challenges over the past few years with employment and steady income, so they fell behind. She used to have perfect credit. All the debt is in her name and once she fell behind the interest rates jumped up, the payments jumped up.
It started snowballing, she couldn’t keep up and so she went to see a credit counselor. Credit counselors put together a plan and gave her a payment. It was approximately $1,400 dollars a month for five years, and they said with a straight face: “Can you afford to live on negative 87 dollars a month?” And they were serious.
They actually started that program with credit counseling and dropped out after a couple of months because they simply couldn’t afford the payments. If you can’t afford your current minimum payments, it’s kind of tough to afford something as much or more which is usually the case with credit counseling. But, once she dropped out she went to go see a bankruptcy attorney, and she asked if she would qualify for Chapter 7. The bankruptcy attorney said: “Well, we will get you qualified for bankruptcy, no problem.”
She didn’t qualify for Chapter 7 bankruptcy. So here is a woman who has a job, makes $27,000 a year income, does not own a home, has $53,000 in credit card debt, and she still doesn’t qualify for Chapter 7 bankruptcy.
Very few people qualify for Chapter 7 bankruptcy since these new laws were passed. You’ve got to be in a pretty tough situation. The best phrase I’ve heard to describe the new laws are that they are “very creditor friendly.” It’s too bad, because it really hurts the people that need the bankruptcy protection from Chapter 7. Unfortunately, a lot of people are getting dropped into the Chapter 13 category instead. There is usually a better option available. They just don’t know about it.
Was this valuable to you? Feedback? Question(s)?
Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
Instead of paying off your debt with a lump sum check, here’s another accelerated debt relief option which may be the next best thing.
It’s promoted by David Bach, Dave Ramsey or Steve Smith; pretty much any financial guru out there. It’s called an “accelerated debt pay off plan”, and goes by many names: “margin roll up plans”, “debt roll down plans”, the “debt snowball method” and the “DOLP method”. There are three main flavors of these accelerated debt relief plans, yet they all boil down to the same principles.
The basics are these accelerated debt relief plans are this: if you want to get out of debt as fast as possibly without any negative impact on your credit whatsoever, you just need to pay off your debt.
If credit is ultimately most important to you now, then you must cut your expenses to the bare minimum and put EVERY DOLLAR you can towards paying off your debt in an accelerated fashion in order to get out of debt ASAP.
Accelerated debt pay-off plans come in three main types. In each, you continue to pay the minimums on all accounts and all the additional money you can afford beyond this becomes the money you’re going to use to pay off your debt. This is often called your “margin.” Your margin is then focused on ONE account at a time, the differences between the three types of accelerated debt relief plans is in which account you choose to pay off first…
The three different approaches to Accelerated Debt Pay-Off Plans are:
1) List your debts in order of the highest interest rate to lowest. Use your margin funds to pay down the highest interest account first (it’s costing you the most) until it’s paid off, then pay down the next highest interest rate account and so forth, until your debts are eliminated…
2) List your debts in order of the current balance, paying down the account with the lowest balance until it’s paid off, (this can help your credit by showing open accounts with low to zero balances, improving your debt to credit limit ratio), then pay down the next lowest balance account, etc., until your debts are eliminated…
3) Take the current balance of each account and divide it by the minimum payment (= division number), then list your debts by this division number from the smallest to the biggest, paying down the account with the lowest division number until it’s paid off, then pay down the account with the next smallest division number, and keep going until you’re debt free…
Any of these three Accelerated Debt Pay-Off Plan approaches can usually get you out of debt in about five to seven years if you can afford to pay double or triple your minimum monthly payments, and IF you are committed to budgeting and putting as much money as possible into your margin. This can be less or more obviously depending on your total debt. It requires self discipline and long term commitment.
Each of these “accelerated debt relief” approaches require paying significantly MORE than your minimum payments. If you really get serious about it, you could be debt free even faster by putting more money towards paying off debt.
You will have no negative affect on your credit with an “accelerated debt pay off plan.”
It’s a very simple idea but not a lot of consumers organize their accounts or payments in this fashion. People may put their extra money towards the largest balances, or take turns putting extra money throughout all of their accounts, continually paying interest on their entire debt profile. Instead of spreading your payments between accounts, the accelerated debt relief plan is a much better way to structure your payments and put your money to its best use to be debt free ASAP.
Was this valuable to you? Feedback? Question(s)?
Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com
The first option you have is to whip out a check and pay it off, but if you’re reading this now that’s probably not an option you can pursue. There are possibilities you may not have thought of. You may be able to borrow against a 401k. You may be able to pull money out of your home through an equity line of credit or by refinancing and pulling cash out. You may have assets you can sell to come up with the lump sum amount to pay the debt off.
Overall, here’s the thing you want, to find a way to stop paying interest and start earning interest. Why is this debt such a bad thing? Debt is a very bad thing if you have to pay the interest.
Debt can be a great thing if somebody else pays the interest for you and you’re financing an asset that’s putting money into your pocket. That’s good debt but bad debt is when you’re paying interest on it, especially on a depreciating asset. Buying a car is a good example of a bad thing to do with money overall. You’re buying something that goes way down in value quickly while you’re paying interest on it. You’re paying for it again and again.
They asked Einstein:
“What’s the most powerful force in the universe?”
Einstein said, “Compound interest.”
Now, when you’re in debt like this, you’re not feeling the full force of compound interest if you’re making some payments. That’s the problem! You’ve got the most powerful force in the universe working against you 24/7. So one way or another when looking at these options to get out of debt or to deal with your debt, you want to find a way to stop paying this interest and start earning interest.
Why?
The basic formula for wealth, no matter who you ask, all boils down to this (if they’re telling the truth); simply spend less than you earn and invest the rest for compounding interest so your money grows. If you do this then eventually you’re going to become wealthy!
Your money will be working for you and you will no longer have to work for it. I imagine the goal for everybody is to one day retire, maybe one day sooner than later. If we ever want to do that we’ve got to get out of this bad debt. If you’re paying interest, to me that sounds like a financial hardship; if you have to work for money so you can pay interest.
I have a client in Oklahoma. A good old boy, a really nice man, in his elderly years and for seven years straight he has been on social security. He has been taking cash advances from his credit cards so that he can make his minimum payments.
Think about that one… He’s taking cash advances from his credit cards, where he has to pay 30% interest to make his minimum payments.
Those minimum payments are 80% interest or more. It’s just a ridiculous cycle! I don’t know if you have ever felt like this; being in debt and making these payments is somewhat like running on a treadmill with a backpack full of bricks. Somebody keeps dropping more bricks into the backpack and turning up the speed and the incline on the treadmill.
Unfortunately, unless you find a way to get out of the trap, that’s your destiny.
So let’s take a look at these options again…
Number one is paying off your debt. Whether through a refinance, a 401k or by pulling money out from under your mattress, if you can write a check somehow you can pay your balances off and stop paying interest.
Always think about the math. For instance, if you’re earning 10% interest from a 401k you have to pay taxes on the capital gain that you get, and it’s also not guaranteed, it’s uncertain. It goes up and down. Let’s say you’re earning 10% or even 20% on some kind of aggressive 401k, you still have to pay taxes on it. Maybe it’s a good rate of return, but think of the credit card debt that you have. Your interest rates are probably between 10% and 34%. The average in America is 18.9% (probably higher these days). Just look at your recent credit card statements and look at the minimum payment, then the finance charges for the month. You shouldn’t be surprised if 70% to 90% of your minimum payment is going towards interest (out of your pocket and into the pocket of the creditor), but you should be very disturbed about it. If your interest rates were 20%, you would be doing better than my average client.
Think about the 20% interest you’re paying on credit card debt. If you were to pay it off by taking money out of your 401k, where it’s earning 10%, to pay off an equal amount of debt you’re paying 20% on, that means a 20% after tax guaranteed rate of return. Paying taxes and still getting 20% on your money, and it’s guaranteed! I don’t know of any other investment out there available to the common public paying this kind of return.
Remember the Big Idea! (See Blog: “The Big Idea- How to Solve Your Financial Problems” if you haven’t!)
We’re going to look at a couple of ways to get some leverage and pay off the debt you have for even less money, an even better return on investment! You want to find a way to stop paying interest and start earning it, allowing yourself a chance at retiring in this lifetime!
10 BIGGEST REASONS TO BE DEBT FREE WITH BETTER CREDIT & CASH FLOW
The resolution I’m going to ask you to make today has the power to change your life in many profound and specific ways.
* People will respect you more.
* You’ll have more power to control your life, your career, and your future.
* You’ll be richer, happier, and more confident.
* You’ll have a much easier time getting people to do what you want them to do … on your timetable and on your terms.
I’m talking about becoming debt free with strong cash flow and credit, even to build wealth and become a cup overflowing.
Whether you’re ___ … or ___… or ___ … you’ll have much more success if you’re debt free with strong cash flow and credit.
YOU HAVE YOUR OWN REASONS
I’m sure you have your own reasons to get out and stay out of debt, manage your spending, save money, and have good credit right?
How do I know?
Because you are here right now.
So WHY do you want to become debt free with better credit & cash flow?
Take a minute right now to think about WHY you want to get out and stay out of the “bad debt” you’re in.
I know you “need to do something” about your debt.
I’m right here with you.
My success in life is directly proportional to how much I help others solve their financial problems.
Only if these words are valuable and useful to you will you recommend this to your friends and family. It might be the biggest gift you ever give them.
PLUS, SOME OTHER THINGS WILL HAPPEN.
Financially healthy people are automatically held in higher regard than those who struggle with debt and bad credit. You’re seen as someone who’s intelligent, successful, and dependable. Your thoughts and ideas carry more clout. People respect your opinions more and give more credence to what you say. They trust you more, because they can “feel” the sincerity and confidence that’s associated with being debt free with good credit and positive cash flow.
As Adam Smith said, “What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?”
I think you’re getting the idea here. Your financial health can be the difference between getting people to champion your ideas – and having your ideas set aside (or, worse, dismissed altogether).
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Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com
Credit Repair
Credit repair is the process of using the Fair Credit Reporting Act to dispute negative items and get them removed from your credit report, resulting in an increase to your score. I work with my clients to show them how they can do this on their own or hire a low-cost law firm to do it for them. Either way, you are likely to get some positive results once your debt is paid off, and each negative item that is removed from your report will have a positive effect on your credit rating.
The FTC website provides all you need to “do it yourself” here: Credit Repair: How to Help Yourself
Another great DIY resource is the Credit Info Center. HOWEVER, while the credit repair information is good and can help you, beware of the rest of the information. The website has become extremely hypocritical. On one hand, they say all “debt consolidation companies” are bad, grouping all credit counseling and debt settlement companies together and publishing a long list of which ones, in their opinion, are “bad”. On this list is Credit Solutions, which I agree is one of the most notoriously shady companies with a looong list of complaints on their BBB report. My last check showed over 1,500 complaints!! Also on the list are companies which I know are providing a good service to consumers with few complaints.
Here’s the hypocrisy: Credit Info Center is now promoting “debt relief” and generating leads for these same “debt consolidation companies” they have demonized for years.. and GUESS WHO they will send you to when you fill out the form on their website for help? Yes, in the spirit of true hypocrisy, Credit Info Center is selling their leads to Credit Solutions. Might as well sell your soul to the devil.
So use the credit repair info, sample letters, etc. It’s good stuff, BUT watch out getting debt help from these guys.
Also, no need to pay $45 for a 15 minute consultation,
http://www.creditinfocenter.com/repair/Repair.shtml
Credit Rebuilding
You can re-establish a good payment history quickly by using credit in an optimal way.
Without having to throw hundreds and hundreds of dollars into the toilet each month on minimum payments (most of which is interest), you will be able to create a savings very quickly after your debt is eliminated. You can then open 2-3 “secured” credit cards with banks. Use these cards responsibly by charging them up to just below 50% of their limits (so you don’t get dinged on your credit score for going over 50%) and pay them off each month down to about 25%.
* You actually want to carry a balance because creditors will flag you in their computer systems as a “deadbeat” if you pay your cards off each month, as they make no money on people who do this.
If you use secured credit cards in an optimal way like this for 6-12 months during the credit repair process, you will begin to re-establish a good payment history, while keeping your DTI low and avoiding utilization problems. From there you should be in good shape with your credit score and much better long term credit worthiness.
Was this valuable to you? Feedback? Question(s)?
Please share your thoughts and ideas below. I respond to any questions posted as a comment in detail by email.
Thank you for the opportunity to serve you!
Here To Be An Asset To You,
Jesse Niesen
DebtGoToGuy.com