Friday, January 29, 2010

Mega Millions

Today the Kansas Lottery issued the press release below. I had heard that this game was coming to Kansas, but didn't know when.

TOPEKA, KAN. – Starting this weekend, Kansas Lottery players will be able to play both Powerball and Mega Millions without ever leaving the state. As of January 31, Kansas will add Mega Millions to its game offerings, giving Kansas players an opportunity to participate in two big jackpot games.
All Kansas Lottery retail locations will sell Mega Millions tickets, with the first drawing on February 2. Mega Millions is drawn on Tuesdays and Fridays, while Powerball drawings are held Wednesdays and Saturdays. Both games have similar play styles with a base wager of $1. Each game also offers a multiplier option for an additional $1 per play. In Powerball, the multiplier option is called Power Play. In Mega Millions, it’s called the Megaplier.
The Mega Millions jackpot for Friday, January 29, 2009, is an estimated $144 million. If no ticket matches all numbers on Friday, the jackpot will continue to roll. For more information on how to play Mega Millions, please visit:
The agreement between the Multi-State Lottery Association, which administers Powerball, and the Mega Millions consortium is the largest in the history and gives all U.S. lotteries the option to cross-sell the two games. Previously, lotteries could sell one game, but not both.
As of Sunday, players in 33 jurisdictions will be able to purchase tickets for both Powerball and Mega Millions at official lottery retail locations. The market for these games has the potential to eventually expand to 45 jurisdictions.
“With the opportunity for more people to play both games, Powerball and Mega Millions jackpots are expected to grow bigger and faster than when they were sold individually,” said Kansas Lottery Executive Director Ed Van Petten. “We also expect to have more winners in Kansas and more prizes paid out.”
In addition, Van Petten said, there will be more opportunities for Kansas Lottery retailers to earn sales commissions and selling bonuses. The Kansas Lottery also hopes for incremental gains in revenue from the addition of Mega Millions.
Players can check their Mega Millions tickets at any Kansas Lottery retail location. Winning numbers will also be available on the Kansas Lottery website or by calling (785) 296-5700.
Players may also have winning numbers sent to them via e-mail if they are members of the free Kansas Lottery Players Club. To join the Players Club, visit:

While, this news is interesting, I am concerned. Concerned because the lottery is a tax on those that are poor, not to mention those that are bad at math. The problem is the poor are the most affected by it. They don't have the discretionary cash to buy the tickets, yet they spend it, hoping to get all kinds of "free" money handed to them to solve all their problems.

As for those that are bad at math. It would be better if you took the money that you would spend on the lottery and invest it in a good growth mutual fund. The rate of returns is better and when you reach retirement you will have enough to retire on.

Monday, January 25, 2010

Roth or Traditional IRA

My fiance is in the process of rolling over her old 401k. As such, I introduced her to my broker, who handled my rollover in 2008. She has had one meeting with him and is scheduled to go back this week, to finish up the process. One decision, she has to decide upon is does she set up a regular IRA or a Roth?

We both like the idea of the growth being tax free, but that means the current cash would have to have tax paid on it. Where if she made a straight roll over from the 401k to a traditional IRA, the taxes wouldn't be paid until she retired.

If she chose the Roth route, when would she have to pay the IRS? Right now? Next April (2010 tax season)? Or when?

At the same time, I am contemplating converting my traditional IRA rollover, I already have with him, to the Roth. Yet, I have the same questions. So what should I do? I want to get all my debts paid for this year and pay for a wedding with cash, so how will this affect me and my goals? Any thoughts?

Friday, January 22, 2010

Stock Split

Yesterday, the previously announced stock split occurred. That being the stock split for Warren Buffett's Berkshire-Hathaway class B shares. A stock that as my long time readers know, I hold. I was surprised, that it happened so quickly, since it doesn't seem like it had even been a month since, I had received the packet for me to vote my proxy.
Despite the declines across the broader market, Berkshire Hathaway's so-called Baby-B shares jumped $3.20, or 4.6%, to $72.72, on heavy volume after the company's shareholders approved a 50-to-1 split of its Class B common stock.

The split cut the price of each share to about $67, from a trading price of more than $3,000.
- Wall Street Journal javascript:void(0)

Due to the high cost of the stock, it was my smallest holding, with just .03 shares before the split. Now, I own 1.6050 shares and it is my third largest holding on Sharebuilder. Where I have a total current balance of $508.53, to go towards my future retirement. Now, I wonder, how long it will be before this stock is once again trading above the $100 range, the $500 range, etc etc.

Tuesday, January 19, 2010

Financial Peace Class 1

This past Wednesday, my fiance and I attended the Financial Peace University class nearest us. I had, as many of you know, attended the class in another location couple of years back. However, Pat had never been and this was the first time we had attended any financial classes as a couple.

When we first arrived, our hearts sunk, when we realized that the class was not in a handicapped accessible location. After a couple of trips upstairs by the Associate Pastor, the class was moved downstairs to a more handicapped accessible location.

Once, that was done, the class started, though slightly belated. During the class, I was reminded what one lady's grandma (or was that mom) called her emergency fund. That being the GOK Fund. GOK meaning God Only Knows. Through out this first video Have reminded us that, saving must become a priority and that we must pay ourselves first.
He also reminded us, by listing the Baby Steps:

  1. $1,000 in the bank (Emergency Fund)
  2. Pay-Off all debt utilizing the "debt Snowball" (except the house).
  3. 3-6 months expenses in savings.
  4. Invest 15% of household income into Roth IRAs and pre-tax retirement
  5. College Funding
  6. Pay-off home early
  7. Build Wealth! (Mutual Funds/Real Estate)

Both the fiance and I are looking forward to the class this next Wednesday.

go ahead share your thoughts with me now, my ears are open. I'm always eager to hear what you think.

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Tuesday, January 12, 2010

Tacoma bloodmobile offers beer to blood donors

This morning as I read my morning news, I found something a little shocking. Yet at the same time interesting. The Associated Press reports,

TACOMA, Wash. -- A Tacoma-based blood center offers donors a deal: Give a pint of blood, get a pint of beer.

Cascade Regional Blood Services says the promotion has worked so well at six Tacoma pubs and breweries, it's expanding its "Give blood, get beer" offer to its bloodmobile for pubs in Federal Way and Steilacoom.

Cascade's director of donor resources, Dan Schmitt, says it's a fun way to get more donors, and it's good for the restaurants as well.

The News Tribune of Tacoma reports donors who are at least 21 years old are given a coupon for a free pint of beer. The pub must wait at least four hours after the blood drive ends before donors can cash in on their free pint.

I mean, really? Come on! You have to be kidding me. I like a nice drink from time to time, but giving out free drinks as an incentive to give blood? You might as well say, "hey, thanks for the blood donation, now get drunk so you can go drink and drive." Is that pretty absurd? Why would anyone think that was a good idea?

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Thursday, January 7, 2010

Renewing the Focus in 2010

With the new year comes a renewed focus on my debt freedom. Not only mine though, but also that of my fiance. We both are almost debt-free and realize we must focus and stay committed to that progress, if we want to see debt freedom.

So on Jan. 13, 2010 my fiance and I will be attending together Dave Ramsey's Financial Peace University (FPU) in our area. It was tough finding a class on the only day I have off, but we finally found one, and got registered for it. The great thing is, that it is also the closest location to us.

I think it is important so that we are both on the same page financially. Though, she and her first husband cut up their credit cards years ago. We both need that reminder (and education) to get on the same page to get debt free and build wealth. We want to be able to retire without having to spend our golden years at the Golden Arches.

go ahead share your thoughts with me now, my ears are open. I'm always eager to hear what you think.

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Wednesday, January 6, 2010


Last Wednesday I had another procedure that was part of the root canal that I had done in November or early December. This oral surgery was called an APICO and set me back another $358 on top of the $170 for the earlier procedure.
Yesterday, they removed the stitches.

Today, I will be going to the family doctor to remove a growth off the top of my head. Not sure what my portion of this procedure will be, but once it is gone, I will be able to comb my hair without as much pain.

go ahead share your thoughts with me now, my ears are open. I'm always eager to hear what you think.

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Tuesday, January 5, 2010

Merger Complete

As mentioned Dec. 22, 2009, we took over another blog and merged it into this one. In that same post, I wrote
The site had several articles, that will be integrated into our site over the next week. Not all the articles line up with our beliefs and thoughts. However, they will be noted as coming from the other blog and will have a disclaimer.

Well, it took two weeks to edit them for misspelled words and slowly integrate them into this site so that I didn't overwhelm my readers. A task that still overwhelmed readers who had apparently missed the post welcoming the readers from the other site. By now, all caches of the old site should be eliminated and all readers visiting will automatically arrive here at DebtFree4ever.NET. So once again welcome to all the new readers, and I hope you will like what you have found here as many of my existing regular readers have.

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Saturday, January 2, 2010

Toss Out Debt: Credit Card Theft & Your Identity

Identity and Credit Card Theft

Criminals know the way to steal your identity, and the worst part is that it’s not all that difficult. You know all those credit card applications you get in the mail? If you don’t shred them, they can use that to steal your identity.

It’s not above them to sift through garbage just to obtain a social security number or a driver’s license number. Once they have these vital bits of information, it’s easy for them to steal your identity.

What they will do is scary. They will apply for credit cards in your name and max them out within days. They will obtain loans in your name and never make a payment. Then the loan company comes after you for the money. It’s something that affects millions and millions of people each year and it can be a real mess when it comes to your credit report.

As many as 85 percent of all identity theft victims find out about the crime only when they are denied credit or employment, contacted by the police, or have to deal with collection agencies, credit cards, and bills.

A study on the aftermath of an identity theft by the non-profit Identity Theft Resource Center found that victims spend 600 hours recovering from the crime because they must contact and work with credit cards, banks, credit bureaus, and law enforcement. The time can add up to as much as $16,000 in lost wages or income.

The number of reported cases of identity theft is increasing steadily. There is no one reason for this, but rather this is due to several ways in which our lives have changed in recent years, all of which make it easier for people to obtain our personal information.

In the United States, Social Security numbers are used more commonly as a means of identification. The Internet has made the transmission of personal information easy and, at times, less secure. Online retailers store our credit card information and contact information in databases we assume to be secured.

Marketing databases not only contain personal information, but they aggregate information on our spending habits as well as contact information. But potentially nefarious employees of these companies could have access to that information. They can then sell it online in chat rooms where criminals meet to swap information.

Even in the days of e-mail and instant messaging, the postal mail can also play a surprising role in identity theft. Checks can be stolen from the outgoing mail. Credit card companies bombard their customers and potential customers with pre-approved offers that need very little personal information to complete.

Credit card issuers also send what they call "courtesy checks" to customers who can use them to make charges on a card. Many experts consider them an invitation to identity theft.

One of the increasingly common ways that criminals try to obtain personal information is by using what is called a "phishing attack." If you have e-mail, the chances are good someone has tried to get you to bite.

Phishing combines a criminal attempt at obtaining personal information with another plague of the Internet age — spam. Potential victims receive an e-mail from what appears to a bank, an online payment company like PayPal, or a retailer like eBay or The message is usually sent using HTML e-mail and, when opened, uses company logos and symbols to make it appear to be legitimate.

The e-mail asks the receiver for user names, passwords, account numbers, or some other type of personal information by saying they are updating records or something related to their account requires their attention. The e-mail usually links to a site that also appears to be legitimate using logos and other symbols of a real company, where visitors are asked to supply the information.

The first step to avoid becoming the victim of a phishing attack is to know what companies do business with you by e-mail and familiarizing yourself with the types information they request and how they request it.

What you will likely learn quickly is that, while online retailers you frequent and financial services firms you use online often send you e-mail to make you aware of new products or services, or even to alert you when your online bill is ready to be viewed, they rarely if ever ask for any information from you.

Banks and financial services firms will never ask you for any personal information via e-mail because e-mail can be notoriously insecure. So any e-mail asking you for personal or account information, such as passwords, Social Security numbers, PINs, credit or check card numbers, or other confidential information should be deemed suspicious.

Often the sender of a phishing e-mail may appear to be legitimate, but e-mail addresses are easily spoofed. Just look at the amount of spam you probably get that appears to be from friends, co-workers, or even yourself.

If a phishing e-mail directs you to a link using an HTML e-mail, the text of the link may appear to be legitimate, but following that link often brings you to a Web site where the URL (in your Web browser's location bar) is often an IP address (basically numbers separated by periods, like 128.0.0) or a site other than the institution you think sent you the e-mail.

Often a sense of urgency is conveyed in the e-mail, such as an alert saying your account will be closed if you don't provide information. Take a moment and don’t fall for this.

A close look at the body of the e-mail itself may reveal typos, misspellings, or horrendously poor grammar. One reason for this is that many phishing attacks are launched from overseas, and many are believed to be related to international organized crime.

Despite all the attention phishing has received of late, there remains precious little enforcement of the widespread problem and there are simply too many attacks to handle. It is an easy buck for online criminals.

We already covered many of the ways you can detect a phishing attack, but there are several simple steps you can take to keep your private information safe that bear discussion. Experts say that educating consumers not to follow links in e-mails is a good way to help them avoid phishing attacks. Rather than following a link in an e-mail, open a browser and go to the site of the retailer or bank in question.

When submitting personal information like credit card numbers, you can ensure you are using a secure connection by looking for "https://" in front of the site's location on your browser rather than "http://."

Speaking of your browser, make sure it is up to date with the latest security patches. If you use Microsoft's Internet Explorer, visit to see if you need any updates.

Here are some simple software tools you can use to help guard against online identity theft:

  • CoreStreet makes a free product called SpoofStick. It's a browser extension for both the Internet Explorer and FireFox Web browsers that helps users avoid spoofed Web sites. If you do follow a link in a suspicious e-mail, SpoofStick can tell you if the Web site you visit really is the Web site you think you are visiting.

    The EarthLink toolbar, which is also free to Internet users, has a feature called ScamBlocker. EarthLink keeps a database of known phishers, and if you visit a page known to be operated by a phisher it will alert you right in your browser.

    How To Restore Your Credit Score

    Unfortunately, correcting your credit report when you have become a victim of identity theft is no easy proposition. But with some patience and a lot of work, you can recover from identity theft and restore your credit report.

    Identity theft can result in damage to your credit rating - damage that could take years to fix. Generally, victims of credit and banking fraud are liable for no more than the first $50 of the loss. In many cases, the victim will not be required to pay any part of the loss.

    To reduce your risk of identity theft, protect personal information and do not carry your Social Security card with you. Shred items that contain your personal information and account numbers. Keep your mail safe and store your personal information in a safe place. Order your credit report at least once a year to make sure no one is using your identity to open accounts.

    If you think your identity has been stolen, take the following steps:

  • Contact the three major credit bureaus. Contact the fraud departments of all of the three major credit departments to place a fraud alert on your credit file. The initial fraud alert is for 90 days. You can ask for an extended fraud alert if you file a police report.

  • Close accounts. Close the accounts that you know or believe have been tampered with or opened fraudulently.

  • File a police report. Get a copy of the report to submit to your creditors and others who require proof of the crime.

  • File your complaint with the Federal Trade Commission (FTC). The FTC maintains a database of identity theft cases, which is used by law enforcement agencies for investigations. Filing a complaint also helps us learn more about identity theft and the problems it causes victims.

  • Armed with your police report, FTC affidavit, and sample letters, you must contact your creditors to alert them to the situation. In addition to obvious creditors like your credit card issuers, don't forget utility companies, wireless phone provider, and your ISP.

    Also remember any private label credit cards to department stores, for example. Don't forget about other personal documents. If your passport was stolen, for example, or if you have reason to believe someone is using a passport in your name, contact the State Department.

    When you are trying to correct your credit report due to identity theft, you will have to provide information that proves you are you. That means digging out your birth certificate and making a lot of copies of your driver’s license and social security card. You’ll also have to try and prove that you didn’t make the purchases that the thief or thieves did.

    When you have become a victim of identity theft through phishing, this becomes a real problem as these purchases can be made anywhere with a few strokes of the keyboard, so proving that the purchases were made by someone other than you can be a real headache.

    Just try to be patient and point out to the company or companies who say you owe them money that you have filed a police report as well as a report with the FTC and that you have been a victim in other places as well.

    As we’ve said, it will take time, but it can be done. Your credit rating and credit score is very important, so taking the time to do will pay off in the long run. Realize that in the long run, you’ll be able to enjoy good credit again.

    Even if you are denied credit, you can appeal the decision by pointing out that you have been a victim of identity theft and are trying to correct it.

    ***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***

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  • Toss Out Debt: Raising Your Credit Score

    How To Increase Your Credit Score

    Let’s say you want to buy a house but your credit score is somewhere around 675 instead of 720 which will get you the best rate on a home loan. If you want to raise your credit score quickly, there are some steps you can take that can guarantee a great home loan or any other credit line for that matter.

    The mantra for getting a great score is pay your bills on time, keep account balances low, and get a new credit only when you need it. People who do that faithfully have very high scores. It usually means you're being conservative and cautious about credit. It's not a toy and it shouldn't be a hobby.

    That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to get the great rates? As explained before, the first place to start is with your credit report. Check it over and find out what your credit score is right now.

    You will want to concentrate mostly on correcting any errors by taking the steps we’ve outlined. Look for errors such as accounts that aren't yours, late payments that were actually paid on time, debts you paid off that are shown as outstanding, or old debts that shouldn't be reported any longer. Negatives are supposed to be deleted after seven years, with the exception of bankruptcies, which can stay for as long as 10 years.

    After repairing errors, the fastest route to a better score is paying down balances on credit cards. There's really no silver bullet, but over 60 day’s time, it is possible to increase your score 20 points by paying down your credit lines.

    Had a few late payments in your past? If you find yourself in some financial difficulties, you can protect your score by making sure your payments don't go 60 days past due. Some lenders don't report 30 days past due, but they all report 60 days past due.

    Even if you've paid your bills late in the past, you can improve your credit score by paying every bill on time from now on. Forget about grace periods. If you want to have a really good record with the credit agencies, pay your debt before it's due and keep your balances low.

    One thing you shouldn't do if you're just trying to boost your score is close unused accounts. If someone tells you to close unused accounts to improve your score, they're pulling your leg. It won't help you and it can actually hurt you.

    Closing unused accounts without paying down your debt changes your utilization ratio, which is the amount of your total debt divided by your total available credit. You appear closer to maxing out your accounts. That's why your score can drop. It doesn't mean people shouldn't close them, but don't close them to improve your score.

    If you do cut up cards, though, leave the oldest one open. The length of your credit history is another factor in your score. If you close the account of the credit card you got when you were a freshman in college and leave open the ones you just got within the last couple years, it makes you look like a much newer borrower.

    Another strategy for bringing up your score is to transfer balances from a card that's close to being maxed out to other cards and even out your usage. You can also just spread out your charges between a few cards. Try to get the usage on all of them at 20 to 30 percent instead of a bunch at zero and one at 80 percent. You're not spending less; you're just shifting it around to different cards.

    Transferring Credit

    Transferring the balance to a card with a lower utilization could help, but it's much better to actually pay down the debt if you have the cash kicking around.

    If you're really into fine tuning the system, check your credit report to see what day of the month your creditors send updates on payments to the credit bureaus. They're rarely on the same cycle as your payment due date.

    That's why you can pay off your card every month and your credit report will show you carrying a balance. Then, make your payments several days before the reporting date.

    All of these strategies generally take at least 30 days because lenders don't report payments more than once a month.

    If you're in the throes of qualifying for a mortgage and need a score boost in a hurry, you can speed the process along with rapid rescoring. If you've got legitimate negative information on your credit report, such as late payments or accounts in collections, you're out of luck. But the process of rapid rescoring can help increase your score within a few days by correcting errors or paying off account balances.

    You can't do this one yourself; you'll need a lender who is a customer of a rapid re-scoring service. Generally, the service will run roughly $50 for every account on your credit report that needs to be addressed, but it could save you thousands on your loan. If a consumer can find a lender who is a customer of a rapid re-scoring service, new information can be posted within 72 hours.

    ***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***

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    Friday, January 1, 2010

    Toss Out Debt: Credit Counselor & Debt Consolidators

    Understanding Credit Counselors and Debt Consolidators

    These companies have started popping up everywhere. In fact, as you are reading this, there is a commercial on television for yet another credit counseling company. It seems like they are everywhere. It also seems like they can really help you with your debt problems. But can they?

    There are some credit counseling agencies and debt consolidators that can actually help get people out of debt. But there are also others who are simply trying to get money (that you don’t have) without helping you at all.

    There is a difference between these two types of companies. Credit counselors will help you get out of debt and stay out of debt. That means that they will help you realize where you went wrong on the financial road and then help you get out of debt. After that, they will put you on a budget and offer services that can help you stay out of debt and live a financially stable life.

    Debt consolidation companies are different, though not entirely. They also will help you get out of debt, but they do so by working with your creditors to help combine all of your debts into one large debt with one monthly payment. That usually entails getting some type of loan on your behalf that will pay off your creditors and you will pay the loan company instead.

    Because of the services they provide, many people would rather go with a credit counseling service. That’s because they need someone to help them stay away from the mindset that got them into debt in the first place. There are many, many credit counseling companies out there.

    What do you need to look for in a reputable credit counselling company? Here are a few suggestions:

  • They should be associated with the Better Business Bureau. The service's website should have a BBB logo and a link to their record on the Better Business Bureau website. Click through the link to check that there are no unresolved complaints against them.

    Many people only think about the Better Business Bureau after they've been cheated, but by then there's not much you can do. Working with a credit counseling agency that is a member of the Better Business Bureau means that you can go to them to help mediate any dispute you might have with the service provider.

  • Reputable credit counseling services will be accredited by an independent non-profit body, just as many schools are. One such accreditation body is the National Institute for Financial Counseling Education.

  • A good credit counseling agency will charge a small, reasonable monthly fee, usually around $30. Some also charge a fee upfront, though this fee should be reasonable (around $50 tops). It may be possible to get a hardship waiver of these fees if you truly do not have the $30-50.

  • You will have to fill out an application when you decide to go with a credit counseling agency. The application must clearly say what the fees to be paid are, what the services to be provided are, and in what time-frame all of this will be provided.

  • Run far, far away from any organization that proposes to "wipe out" your debt for you, rather than simply helping you to repay the debt. Short of your creditors just deciding to forget about the debt (unlikely), there is no way to erase debt–even bankruptcy leaves a huge mark on your credit report for ten years.

    True, your car may not go missing from your driveway if you stop paying unsecured debt (i.e., debt that is not "secured" with collateral, like most credit cards, unlike most auto loans). But you are still legally obligated to pay the debt, and the possibility of being taken to court will loom over you. You will likely be unable to get even "bad credit" financing if you still have debts in collections–good luck buying a car or house.

    Now let’s look at how a reputable credit counseling service will work. First, they will negotiate with your creditors to establish a debt management plan (DMP) for you. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

    After joining a DMP, the creditors will close the customer’s accounts and restrict the accounts to future charges. The most common benefit of a DMP as advertised by most agencies is the consolidation of multiple monthly payments into just one monthly payment which is usually less than the sum of the individual payment previously paid by the customer.

    This is because the credit card banks will usually accept a lower monthly payment from a customer in a DMP than if the customer were paying the account on their own. Some DMPs advertise that payments can be cut by 50 % although a reduction of 10 to 20 percent is more common.

    The second feature of a DMP is a reduction in interest rates charged by creditors. A customer with a defaulted credit card account will often be paying an interest rate approaching 30 percent. Upon joining a DMP, credit card banks sometimes lower the annual percentage rates charged to 5 to 10 percent and a few will eliminate the interest altogether.

    This reduction in interest allows the counseling agencies to advertise that their customers will be debt free in periods of three to six years rather than the twenty plus years that it would take to pay off a large amount of debt at high interest rates. That’s a very attractive advantage – especially for people who are in debt quite a bit.

    A third benefit offered by credit counseling agencies is the process of bringing delinquent accounts current. This is often called “re-aging” or “curing” an account. This usually occurs after making a series of on-time payments through the DMP as a show of good faith and commitment to completion of the program.

    For example, a client with an account that has a monthly payment of $50 but that monthly payment has not been paid in two months might be considered by the creditor to be 60 days past due. After joining the DMP and making three consecutive on-time monthly payments, the creditor could “re-age” the account to reflect a current status.

    After that, the monthly payment due on the statements would be the monthly payment negotiated by the DMP and the account would be reported as current to the credit bureaus. Now this process does not eliminate the prior delinquencies from the credit reports.

    What is does is merely give a fresh start and opportunity for the client to begin building a positive credit history. Like all negative credit information, only the passage of time will lessen the impact of the negative marks when credit scores are calculated.

    So how do credit counseling companies make money? They do charge a fee to you for their services, and it is important for you to get all of that information in writing before you sign on the dotted line. However, this fee is not usually enough to make them a huge profit.

    The credit counseling companies make most of their compensation from the creditors to whom the debt payments are distributed. This funding relationship has led many to believe that credit counseling agencies are merely a collections wing of the creditors.

    This fee income, known as “Fair Share,” consists of contributions from the creditors that originally earned the agency 15% of the amount recovered. However, in recent years, Fair Share contributions have dwindled steadily, with contributions of 4-10% being the most common.

    There is a lot of criticism, in fact, when it comes to credit counseling agencies and their effectiveness as well as legality. The Federal Trade Commission has filed lawsuits against several credit counseling agencies, and they continue to urge caution to consumers when it comes to choosing a credit counseling agency.

    The FTC has received over 8,000 complaints from consumers about shady credit counselors. Many of those complaints concern high or hidden fees along with the inability to opt out of so-called “voluntary” contributions. The Better Business Bureau also reports high complaint levels about credit counseling.

    Not surprisingly, the IRS has also weighed in on the subject of credit counseling and has denied non-profit, tax-exempt status to around thirty of the nation’s 1,000 credit counseling agencies. Those thirty agencies account for more than half of the industry’s revenue. Audits of non-profit credit counseling agencies by the IRS are ongoing.

    The lobby against credit counselors arises from the belief by the collection industry that the not-for-profit status of the credit counselors gives them an unfair financial and market advantage over them. The IRS apparently agrees.

    Selecting Debt Consolidation Companies

    The tax exempt revocations seem to be centered on whether or not a tax exempt credit counselor actually performed their mandated mission by assisting the community at large as opposed to offering their whole attention to their own DMP customers in a “collection practice”. However, that has yet to be proven.

    Congress has also investigated the credit counseling industry and has issued a report that says while some agencies are ethical, others charge excessive fees and provide poor service to consumers. The report also states that NFCC member guidelines, if applied to the entire industry, would go a long way toward eliminating the abuses they have uncovered in other parts of the industry.

    When it comes to debt consolidation companies, you are talking about an entirely different concept. What a debt consolidation company does is negotiate with creditors to get a lower pay-off amount for your debts and then obtain a loan on your behalf to pay off those creditors allowing you to make just one payment instead of multiple ones.

    The two types of companies are similar in nature, but with debt consolidation, the only thing they do is negotiate with credit lenders and then get you one payment instead of many. They do charge a fee for their services as well just as the credit counseling companies do.

    The thing about debt consolidation companies is that they do what you can do yourself with just a little bit of work. You can call your creditors and negotiate a pay-off balance for your accounts and then obtain your own loan as a debt consolidation loan. Even if you have less than perfect credit, most banks and lending institutions will have debt consolidation loans available to almost everyone.

    Really, the bottom line when considering either a debt consolidation company or a credit counselor is to weight the advantages and disadvantages first. Then check out the company you are considering to make sure they are reputable.

    These types of companies can really and truly help people who are seriously in debt. But proceed with caution and choose wisely lest you get yourself involved in yet another problem besides your debt!

    Now that we’ve addressed no credit, bad credit, and people who can help with credit problems, let’s focus on your credit report and your credit score. Often, there are mistakes that are on your credit report, and correcting them is essential.

    ***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***

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  • Toss Out Debt: Credit Score Repair

    How To Repair Your Credit Score

    Don’t despair if you find yourself with a less than desirable credit score and credit history. You are human and can make mistakes. It’s natural. The key to this is recognize that your spending habits are out of control, your credit has been damaged, and then vow to never get yourself back in the same situation after you have your credit repaired.

    First, get your credit report. Get one from all three agencies. You get one free and then you’ll probably have to pay around $10 a piece for the other two. It’s important to get reports from all three agencies so that you have a full picture of your credit history.

    Some companies only report to one agency. Some report to all three. But if you are committed to repairing your credit, you need all three so that you don’t miss anything.

    Then go over those credit reports carefully. See the section above on how to read these credit reports. Check to see that there are no errors such as a bill you’ve paid but that is still being shown as owed.

    People at credit bureaus are human too and make mistakes just like you! If you don’t call attention to these mistakes, no one else will. We’ll cover correcting those mistakes a little bit later.

    The next part involves pulling out those accounts that are delinquent and making a re-payment plan. Unless you are declaring bankruptcy, you’ll still need to pay your debts and doing so can go a long way towards improving your credit history. Creditors will see that you are doing the best you can to get back on your feet and this improves your credibility.

    If all the bills are too overwhelming for you to consider paying back at once, just concentrate on one at a time. Break them into pieces, contact the company and let them know you are trying to come up with a repayment plan and if there’s anything they can do to help you out.

    These companies really just want their money in the long run, so they are going to be willing to help you. Once that company is paid off, move on to the next one until everyone is paid off.

    After that happens, it’s not like your credit is immediately pristine. Late payments and charged-off accounts remain on your report for seven years; bankruptcies for 10 years.

    Most creditors, however, look for a pattern of payment rather than focusing on one-time or rare occurrences. That’s why consistent on-time bill payments will improve those blemishes.

    As soon as you have paid off your creditors, then you can start all over again. Follow the steps given above in the section about establishing credit. Nothing can compare to consistent, on-time bill payments and responsible credit practices when it comes to repairing your credit.

    Experts say the average time required to rebuild one's credit to the point at which you can be accepted for a major credit card or small loan is approximately two years.

    Here are some other things to consider when trying to repair your credit:

  • Pay down your credit cards. Paying off your installment loans (mortgage, auto, student, etc.) can help your score, but typically not as dramatically as paying down -- or paying off -- revolving accounts like credit cards.

    The credit-scoring formulas like to see a nice, big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help.

    While most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.

  • Use your cards lightly. Racking up big balances can hurt your score, regardless of whether you pay your bill in full each month.

    What's typically reported to the credit bureaus, and thus calculated into your score, is the balance reported on your last statement. That doesn't mean paying off your balances each month isn't financially smart -- it is -- just that the credit score doesn't care.

    You typically can increase your score by limiting your charges to 30% or less of a card's limit. If you're having trouble keeping track, consider using a check register to track your spending, logging into your account frequently at the issuer's Web site, or using personal finance software like Microsoft Money or Quicken, which can download your transactions and balances automatically.

  • Check your limits. Your score might be artificially depressed if your lender is showing a lower limit than you've actually got. Most credit-card issuers will quickly update this information if you ask.

    If your issuer makes it a policy not to report consumers' limits, however -- as is the usual case with American Express cards and those issued by Capital One -- the bureaus typically use your highest balance as a proxy for your credit limit.

    You may see the problem here: If you consistently charge the same amount each month -- say $2,000 to $2,500 -- it may look to the credit-scoring formula like you're regularly maxing out that card.

    You could go on a wild spending spree to raise the limit, but a more sober solution would simply be to pay your balance down or off before your statement period closes.

    Check your last statement to see which day of the month that typically is, then go to the issuer's Web site about a week in advance of closing and pay off what you owe. It won't raise your reported limit, but it will widen the gap between that limit and your closing balance, which should boost your score.

  • Dust off an old card. The older your credit history, the better. But if you stop using your oldest cards, the issuers may stop updating those accounts at the credit bureaus. The accounts will still appear, but they won't be given as much weight in the credit-scoring formula as your active accounts. That's why many financial companies recommend to their clients that they use their oldest cards every few months to charge a small amount, paying it off in full when the statement arrives.

  • Get some goodwill. If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company (and the better your credit in general). But it can't hurt to ask.

    A longer-term solution for more-troubled accounts is to ask that they be "re-aged." If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.

    When trying to improve your credit score or credit history, avoid any of the following:

    Tips For Credit Score Repair

  • Asking a creditor to lower your credit limits. This will reduce that all-important gap between your balances and your available credit, which could hurt your score. If a lender asks you to close an account or get a limit lowered as a condition for getting a loan, you might have to do it -- but don't do so without being asked.

  • Making a late payment. The irony here is that a late or missed payment will hurt a good score more than a bad one, dropping a 700-plus score by 100 points or more. If you've already got a string of negative items on your credit report, one more won't have a big impact, but it's still something you want to avoid if you're trying to improve your score.

  • Consolidating your accounts. Applying for a new account can ding your score. So, too, can transferring balances from a high-limit card to a lower-limit one, or concentrating all or most of your credit-card balances onto a single card. In general, it's better to have smaller balances on a few cards than a big balance on one.

  • Applying for new credit if you've already got plenty. On the other hand, applying for and getting an installment loan can help your score if you don't have any installment accounts, or you're trying to recover from a credit disaster like bankruptcy.

    By the way, all these suggestions work best if you have poor or mediocre scores to begin with. Once you've hit the 700 mark, any tweaking you do will tend to have less of a positive impact.

    And if your scores are in the "excellent" category, 760 or above, you'll probably be able to eke out only a few extra points despite your best efforts.

    There's really no point, anyway, since you're already qualified for the best rates and terms. Here's one area where it's really OK to rest on your laurels and worry about something else.

    If you are in serious, serious credit problems, sometimes the only solution is to file for a bankruptcy. This is a last-ditch thing, though, and should only be done if you’ve dug yourself in so deep that the odds of getting out of debt are little to none.

    ***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***

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  • Toss Out Debt: Bankruptcy

    How Bankruptcy Affects You

    Filing for bankruptcy has a very negative connotation in society, but it’s a way for people who have found themselves in serious financial trouble to ease the burden of what they’ve done and allow them to start over. Businesses don’t like it, but for consumers, it can be a life saver.

    Let’s start by exploring the different types of bankruptcies. There are three different filings you can make: Chapter 7, Chapter 11, and Chapter 13.

    Chapter 7

    Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors.

    The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick "fresh start".

    One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts.

    New legislation has been passed regarding Chapter 7 bankruptcies. Laws can vary from state to state, so you will want to check with someone who knows or do extensive research as to what is allowed to be discharged with a Chapter 7 and what is not.

    Essentially what the new laws ask of people who are filing a Chapter 7 bankruptcy is twofold. First, they must take an approved credit counseling course within six months before filing. They must also complete an approved financial management course before any debts can be discharged.

    Even though those two new stipulations are in place, it is still relatively easy to file for a Chapter 7 bankruptcy. There are, of course, governmental “hoops” you will have to jump through which is why it is often a good idea to secure the services of a bankruptcy lawyer. However, it is possible for you to do this yourself as long as you do your research and “cross your T’s and dot your I’s”!

    What are the most common reasons given for filing a Chapter 7 bankruptcy? Well, of course, it’s the accumulation of excessive debt! But seriously, here are the most common reasons why people get into such debt:

  • Medical bills
  • Unemployment
  • Divorce
  • Overextended credit
  • Large, unexpected expense

    A Harvard Study reported that half of US bankruptcies were caused by medical bills. The study was published online in February of 2005 by Health Affairs. The Harvard study concluded that illness and medical bills caused half (50.4 percent) of the 1,458,000 personal bankruptcies in 2001. The study estimates that medical bankruptcies affect about 2 million Americans annually — counting debtors and their dependents, including about 700,000 children.

    If you find that you have to file for a Chapter 7 bankruptcy, you may be worried about whether or not you’ll get to keep some of the things that are important to you and essential to life. These things include a car and your home, among other things.

    Unsecured debts, such as credit card debt, personal loans, money judgments and certain taxes are wiped out in a Chapter 7. However, certain debts are not dischargeable under Chapter 7 bankruptcy; these debts include, but are not limited to, most student loans, certain taxes, alimony and child or other court ordered support payments.

    If a debt is secured by property, such as a home mortgage or an automobile loan, then you get to decide how to handle that debt. For example, in the case of a vehicle, you could:

    1. Keep the automobile and the debt as long as you are current and continue keeps your payments current.
    2. "Redeem" the automobile which means pay it off at its current "fair market value"
    3. Return the vehicle, include any balance due in your bankruptcy and pay nothing further on the vehicle. The choice is yours.

    In 99% of the Chapter 7 cases, the person filing bankruptcy keeps all of their property. Bankruptcy law is not meant to punish you and allows you to keep your property under what are called "exemptions" or things you get to keep. You keep your car, your house, your jewelry, the boat, your clothing, everything!

    Of course, if you still owe a debt on anything like your car and your house, you should refer to the above scenario. If you want to discharge your car loan, you’ll have to either pay up or give up the car.

    Chapter 13

    Another option for bankruptcy for individuals is the Chapter 13. This is more commonly known as a reorganization bankruptcy. Chapter13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years.

    This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.

    There are many reasons why people choose Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. Generally, you are probably a good candidate for Chapter 13 bankruptcy if you are in any of the following situations:

    1. You have a sincere desire to repay your debts, but you need the protection of the bankruptcy court to do so. You may think filing Chapter 13 bankruptcy is simply the "Right Thing To Do" rather than file Chapter

    2. You are behind on your mortgage or car loan, and want to make up the missed payments over time and reinstate the original agreement. You cannot do this in Chapter 7 bankruptcy. You can make up missed payments only in Chapter 13 bankruptcy.

    3. You need help repaying your debts now, but need to leave open the option of filing for Chapter 7 bankruptcy in the future. This would be the case if for some reason you can't stop incurring new debt.

    4. You are a family farmer who wants to pay off your debts, but you do not qualify for a Chapter 12 family farming bankruptcy because you have a large debt unrelated to farming.

    5. You have valuable nonexempt property. When you file for Chapter 7 bankruptcy, you get to keep certain property, called exempt. If you have a lot of nonexempt property (which you'd have to give up if you file a Chapter 7 bankruptcy), Chapter 13 bankruptcy may be the better option.

    6. You received a Chapter 7 discharge within the previous eight years. You cannot file for Chapter 7 again until the eight years are up.

    A Chapter 13 can be filed if:

  • The debtor received a discharge under Chapter 7, 11 or 12 more than four years ago

  • The debtor received a discharge under Chapter 13 more than two years ago.

  • You have a co-debtor on a personal debt. If you file for Chapter 7 bankruptcy, your creditor will go after the co-debtor for payment. If you file for Chapter 13 bankruptcy, the creditor will leave your co-debtor alone, as long as you keep up with your bankruptcy plan payments.

  • You have a tax debt. If a large part of your debt consists of federal taxes, what happens to your tax debts may determine which type of bankruptcy is best for you.

    As of October 17, 2005, new bankruptcy laws took effect for all three types of bankruptcy. When it comes to Chapter 13, you cannot file this way unless the following conditions are met:

  • The debtor received a discharge under Chapter 7, 11 or 12 more than four years ago.

  • The debtor received a discharge under Chapter 13 more than two years ago.

  • When a motor vehicle was purchased within 910 days (2 1/2 years) of the filing and a secured creditor has a lien on it, the creditor retains the lien until payment of the entire debt has been made.

  • The following debt is NOT discharged:

    o debt for trust fund taxes;
    o taxes for which returns were never filed or filed late (within two years of the petition date);
    o taxes for which the debtor made a fraudulent return or evaded taxes;
    o domestic support payments;
    o Student loans;
    o Drunk driving injuries;
    o Criminal restitution;
    o Civil restitutions or damages awarded for willful or malicious personal actions causing personal injury or death.

  • All tax returns for the four years prior to filing Chapter 13 must be filed.

  • Debtors must provide to the trustee, at least seven days prior to the 341 meeting, a copy of a tax return or transcript of a tax return, for the period for which the return was most recently due.

    Chapter 11

    A Chapter 11 bankruptcy is filed by businesses and is quite similar to a Chapter 13. A Chapter 11 is available for individuals, but it is generally used by businesses to reorganize their debts and dealings so that they can be more financially solid.

    When a troubled business is unable to service its debt or pay its creditors, they can file with a federal bankruptcy court for protection under either a Chapter 7 or a Chapter 11 bankruptcy.

    In a Chapter 7 bankruptcy, the business must cease operation and a trustee will sell all its assets and distribute the proceeds to the business’s creditors ratably in accordance with statutory priorities.

    A Chapter 11 filing, on the other hand, is usually filed in an attempt to stay in business while a bankruptcy court supervises the reorganization of the company’s contractual and debt obligations. The court can grant complete or partial relief from most of the company’s debts along with its contracts so that the company can make a fresh start.

    Often, if the company’s debts exceed its assets, then at the completion of the bankruptcy, the company’s owners or stockholders all end up with nothing. All their rights and interests are terminated and the company’s creditors end up with ownership of the newly reorganized company in the hopes that it will eventually succeed financially as compensation for their losses.

    So, in general, an individual bankruptcy will be under a Chapter 7 or Chapter 11. It’s a big decision for you to make, but sometimes, it’s the only way you can “get out from under” and begin anew.

    Before you resort to filing for a Chapter 7 or Chapter 11, consider the alternatives. Creditors might be willing to settle their claim for a smaller cash payment, or they might be willing to stretch out the loan and reduce the size of the payments. This would allow you to pay off the debt by making smaller payments over a longer period of time. The creditor would eventually receive the full economic benefit of its bargain.

    Occasionally, you may "buy time" by consolidating your debts; that is, by taking out a big loan to pay off all the smaller amounts of debts that you owe. The primary danger of this approach is that it is very easy to go out and use your credit cards to borrow even more.

    In that case, you end up with an even larger total debt and no more income to meet the monthly payments. Indeed, if you have taken out a second mortgage on your home to obtain the consolidation loan, you might lose your home as well.

    When there really is no other way out, you’ll need to file for a Chapter 7 personal bankruptcy. Try looking at it in a positive light, however.

    There are some advantages to filing for bankruptcy. By far the most important advantage is that debtors may obtain a fresh financial start. Consumers who are eligible for Chapter 7 may be forgiven (discharged from) most unsecured debts.

    A secured debt is one which the creditor is entitled to collect by seizing and selling certain assets of the debtor if payments are missed, such as a home mortgage or car loan. With those two major exceptions, most consumer debts are unsecured. You may be able to keep (that is, exempt) many of your assets, although state laws vary widely in defining which assets you may keep.

    Collection efforts must stop as soon as you file for bankruptcy under Chapter 7 or Chapter 13. As soon as your petition is filed, there is by law an automatic stay, which prohibits most collection activity.

    If a creditor continues to try to collect the debt, the creditor may be cited for contempt of court or ordered to pay damages. The stay applies even to the loan that you may have obtained to buy your car.

    If you continue to make payments, it is unlikely that your creditor will do anything. However, if you miss payments your creditor will probably petition to have the stay lifted in order either to repossess the car or to renegotiate the loan.

    You cannot be fired from your job solely because you filed for bankruptcy.

    Of course, there are disadvantages to filing for bankruptcy. Since your bankruptcy filing will remain on your credit record for up to ten years, it may affect your future finances. A bankruptcy is a troublesome item in your credit record, but often debtors who file already have a troublesome history.

    In one respect, bankruptcy may improve your credit records. Because Chapter 7 provides for a discharge of debts no more than once every eight years, lenders know that a credit applicant who has just emerged from Chapter 7 cannot soon repeat the process.

    Research in this area has produced mixed results. A study by the Credit Research Center at Purdue University found that about one-third of consumers who filed for bankruptcy had obtained lines of credit within three years of filing; one-half had obtained them within five years.

    However, the new credit itself may reflect the record of bankruptcy. For example, if you might have been eligible for a bank card with a 14 percent rate before bankruptcy, the best card that you can get after bankruptcy might carry a rate of 20 percent—or you might have to rely on a card secured by a deposit that you make with the credit card issuer.

    There are a couple of ways you can go about filing for bankruptcy. The most reliable is to secure a bankruptcy attorney and have them do it for you. They are experts in this area and will often take care of everything for you including appearing in court on your behalf.

    They do charge a fee for this service, however. That fee can range anywhere from $500 to $2,000 depending on your area. Yes, it is odd that they’ll charge that high a fee to file a bankruptcy for someone who doesn’t have money in the first place, but many will accept payments.

    You can also file the bankruptcy yourself. There are many places on the Internet where you can download the forms you will need. Be advised that they are often lengthy and in-depth, but they are fairly straight-forward when you take the time to fill them out completely.

    Once you have the forms all filled out, take them to your local courthouse and pay the filing fee which is usually around $100 to $200. You will receive a notice of a court date at which time you will need to show up and the judge will grant your request for bankruptcy.

    The bad part about filing yourself is that you have to contact all your creditors yourself to let them know that the bankruptcy has been filed. You have to be very careful to list each and every one of your debts so they will apply under the discharge order. If you miss even one, you will have to pay it after the bankruptcy is granted.

    Filing for bankruptcy might not be your only option. One of the newest trends in achieving financial freedom and a good credit score is to secure the services of a credit counseling or debt consolidation company. But do they work?

    ***Note: This article is from a website that was recently merged into this site and may not represent the views of the sites owner. ***

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