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Keeping your perspective...

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  • Keeping your perspective...

    Although credit is highly touted as an important asset in today's society, you need to keep in perspective what credit/debt is, it is the spending of money you don't really have.

    From much personal experience, the last thing anyone should be worrying about when they are coming out of BK is their credit rating. Although I understand that in many bankruptcies, the cause of the bankruptcy is unforeseen circumstances; but aside from major medical problems, a modicum of quality financial planning or swallowing of pride, could have prevented most people from ending up in BK. Regardless of your excuse for having to file bankruptcy, the painful truth is, that somewhere along the line, you made some poor financial decisions that led you too this path. One of the general purposes of this website is to try to give advice so that history does not repeat itself.

    What I mean by keeping perspective is that you need to keep your priorities. The first priority is meeting your basic needs without incurring debt. The fact of the matter is, the most important factor in improving your credit will be TIME. The more time that passes from when you filed BK, the better your credit will become. This doesn't mean you shouldn't "clean-up" your credit report to remove inaccuracies, but at the same time, you should not be rushing out to get these horrible high interest rate credit cards or secured credit cards. The benefit of doing so is so incremental its really not worth it. And for that matter, you're just out of BK, you really should not be using credit cards. And making major, long term purchases within a year or two of BK, is, for the most part, just plain dumb. Why make a bad deal now, when you can make a much better deal in the near future. If you knew that the car you wanted to buy was going to be $5000 cheaper in 2 months, why would you buy it now?

    The same basic principal applies, why purchase a car at a 15% APR interest rate, when you can buy one at 7% in a year or two (and note, a refi of a car almost NEVER saves you money in the long run...sure, it may reduce your payment, but you ultimately end up paying much more for the car over the long run).

    Despite what some of you may think, I am not some wealthy guy, I was not able to take a trip around the world because I have money to burn, that trip was paid for with cash...with careful planning and some luck. It may seem implausible, but I am like many of you.

    In short, credit is not a bad thing, but it exist ONLY as a convenience...but with debit cards now, the convenience of credit is practically nil. The only real use for credit is for major purchases, house and car (but just coming out of BK, you should really think twice before financing a car). Your credit will heal with TIME, more than anything else you can do, TIME really does heal all wounds. So instead of worrying about which shitty secured credit card to get, or high interest rate loan shark card to get, put yourself on a budget, save some money, and go forth and sin no more.
    Last edited by HHM; 12-06-2006, 11:32 AM.

  • #2
    This was an excellent read HHM....
    very well said~
    especially the part where you stated that with the debit card availability~ why would you need a credit card.....
    I have already found that truth...
    I have found that what I "want" and what I "need" are most usually very different other words, if I don't have the money in the bank to use the "debit card", than I probably don't need it.....therefore, shouldn't spend it.
    I think the debit VISA card is a very smart tool. It can be used like any other VISA, yet it is your MONEY IN THE BANK. It's the only way to go for me.
    Personally~ I am not worrying about what my credit report looks like at this time, but even when all is said and done, I don't anticipate worrying about it, or what cards I will or won't be able to get....
    I look at it this way~ I WON'T need credit's too much of a temptation, sort of like an alcoholic should never take the route home where all the bars are.....a person with a history of money trouble should not have credit cards.......
    That's just my opinion maybe, but like I said~ what YOU said is exactly the truth~ no matter which way you turn it~
    Thanks for the read!!


    • #3
      Avoiding debt...if you've assumed too much


      Being in debt is a losing play in today's economic world. Fortunately, the average credit card rate today versus a year ago is one percent less, 17.03%, according to the latest survey, but that slight decrease is not enough to spur consumer relief.

      In fact, recent reports indicate that $715 million dollars will be charged off from consumer debt for 1996. Who's fault is all this debt? It's difficult to assess blame. Going into debt has been a socially accepted practice for the past 30 years and was even considered a wise strategy when inflation was pushing prices higher. "Buy now---pay later" was the motto. The lenders behind all this debt...are they worried? Perhaps, yet the preapproved offers still flourish.

      What can you do if you think you've assumed too much debt? There is one way to find out. Using the example in the Debt Limit Worksheet below, let's determine how much debt, as a percentage of your income, you can afford, and limit your borrowing to that amount. Note: This does not include groceries, utility bills, etc.

      Loan/Credit Line Monthly Payment
      VISA $335.00
      Gas Card 89.00
      Department Store Card 129.00
      Auto Loan 279.00
      Mortgage (P&I only) 826.00
      Student Loan 50.00
      Total Monthly Payments 1,708.00
      Gross Monthly Income* 2,416.00
      Divide payments by income 71%

      *Based on annual salary of $29,000

      It's no doubt that lenders and credit card issuers make it easy for you to borrow money or establish high credit lines. Unfortunately, the end result for many consumers is that they're over their heads in debt. If you pay for everyday necessities, such as food, rent and gasoline with a credit card or if you frequently receive overdue notices from creditors, you may be overextended.

      Here are few other tell-tale signs that you've assumed too much debt.

      You only pay the minimum payments on your debt, and you never pay off the principal owed.You have reached the limits on most or all of your credit cards and credit lines.You pay so much in interest on your debts that your payments rarely touch your principal balance.You apply for credit but are denied because of negative blemishes on your credit report.You do not know how much you owe or what you spend on interest.If you find that your credit card bills are out of hand, the worst thing you can do is ignore them. Most creditors would rather help you work out a debt repayment schedule than send a collection agency after you or take away your assets.

      Consider the Consumer Credit Counseling Service (CCCS) 800-577-CCCS, which offers its service free of charge or for a small fee. Under the guidance of CCCS, your counselor will help you work out a realistic budget and debt repayment plan and work with your creditors. The goal: To ensure that you pay back your debts over time.
      The information provided is not, and should not be considered legal advice. All information provided is only informational and should be verified by a law practioner whenever possible. When confronted with legal issues contact an experienced attorney in your state who specializes in the area of law most directly called into question by your particular situation.


      • #4
        Me Neither

        im not worried about FICO and credit rating either, if i die any second, what's it worth? thats how i view life, live simple.

        July 2006: Filed Ch13 :blink:
        Oct 2006: Converted to Ch7 :clapping:
        Jan 2007: DISCHARGED :clapping:
        Nov 2007: CLOSED :yahoo::yahoo::yahoo:


        • #5
          Amen, HHM!

          While my husband and I have had more than our share of medical expenses and job losses, the truth is that we have bought things we did not absolutely have to have. My biggest weakness was nice clothes. That's one reason I do not want to carry credit cards anymore--EVER!

          I do plan to clean up my credit report, but don't plan to get any credit cards!
          Filed: 2/24/2006
          341 mtg: 4/4/2006:angel:
          Discharged: 9/25/08!!!!!:yahoo::yahoo::yahoo::yahoo::yahoo:


          • #6
            One of my weaknesses (although weakness is probably the wrong word) is custom-made shirts. However, there really is a qualitative difference in both fit and overall quality, but in the end, it is a luxury.

            Note, I have tried having my shirts made in Thailand for about 1/3 the price, but those shirts just never measured up to the ones I would get from my tailor here.


            • #7
              Hey~ I think you deserve to have that luxury HHM~
              After all.....tailor made probably lasts much longer~
              I sew and I KNOW the difference between good and fabulous!!
              A friend of mine lived in Indonesia~ and she said she could go down town and have things tailor made and it was pretty good~ she sewed too....but they did it for such a low cost~ kind of sad,but she said she usually gave more than what it cost to them~


              • #8
                Perspective in check!

                I am so happy to have a credit card.....after a five year hiatus!

                My perspective on the new piece of plastic....keep any monthly purchases under $100 and pay the bill in full when it comes.

                I just sent out my first payment as bill came w/annual fee ($72) and I (do not use checks anymore as they never come out of the bank fast enough) got my money order & mailed it right away! Paid in words besides, "I do, I will, and I love you"!!!
                Filed Oct 2005discharged February 2007,Shapeless in the fire's glow, tell me if you think you know,
                Who it was we were below, where we've been and where we go


                • #9
                  Great Post! I am fresh out of BK and at this point in time am not in a hurry to rebuild credit...going to try to build a safety net now... but would like some clarification if possible. I keep reading on this board about how time will heal your BK in your credit report and that your score will eventually go up given time. As an example if I have a current Fico score of 629(after BK) and I never use credit again for 10 years and then the BK falls off of the credit score just magically goes up even though for ten years I never used a CC? Thanks


                  • #10
                    That's a great perspective... and contrary to what most people are taught. If you go through a bankruptcy or foreclosure, the first thing you're told is how to rebuild credit. But maybe credit isn't the first thing you should be thinking about.
                    [URL Removed by Admin]


                    • #11
                      I have been reading Total Money Makeover and watching the TV show on Hulu. Dave Ramsey has this idea as well. Credit was a tool we abused to get into this mess and really a good score just means we have spent a lot of money we don't have in the hopes we will have it in the future and got LUCKY! Who can say for sure they will have a job next month? Next year?

                      I keep reminding myself that while we still need to buy a house, we are YEARS from doing so as we want to save 20% for a down payment. Having that cash is what I need to work on and let time do it's job on our credit!

                      Thanks for the reminder!


                      • #12
                        Originally posted by slystone View Post
                        Great Post! I am fresh out of BK and at this point in time am not in a hurry to rebuild credit...going to try to build a safety net now... but would like some clarification if possible. I keep reading on this board about how time will heal your BK in your credit report and that your score will eventually go up given time. As an example if I have a current Fico score of 629(after BK) and I never use credit again for 10 years and then the BK falls off of the credit score just magically goes up even though for ten years I never used a CC? Thanks
                        No, in that case, your score will probably go down. When your BK falls off, you will be compared to those who never had a bankruptcy - and if you have no credit to show over the last 10 years, your score won't be high. Basically, you would have to start all over again.

                        Rebuilding credit and relying on credit are two different things. I'm rebuilding credit with a few CCs - some of them secured - and a secured installment loan at my local CU. So yes, I am rebuilding my credit right away but I certainly don't depend on my secured loans or my new unsecured credit-card with a $200 credit-line...
                        Filed CH7 9/24/2010, 341 on 10/28/2010, Disch.&Closed: 1/6/2011. FICO EX: 9/2: 672.
                        FICO EQ: pre-filing: 573, After BK Public Record: 568, 10/3: 673.
                        FICO TU: pre-filing: 589, After BK Public Record: 563, 9/2: 706.


                        • #13
                          Well said HHM. You should only use credit for large purchases. The goal is never need to use credit but that may be unreasonable for most of us. So when I say large purchases I mean a house! Not even a car. Do you know US is one of the only countries that people take 30 (some 40) years to pay off a home.


                          • #14
                            The more time passes the better the score becomes? That has not been my experience. More like what IBroke says above...

                            When we came out of bk, in August 2011, my scores were in the mid 600's. I had a very long credit history, and had been in bad shape 2 times previously with credit in my own name being affected, and climbed ourselves back out of the hole by paying everything off our selves. Time number 3 was when I combined finances with my current husband and he brought lots of defaulted credit to the party. That didn't affect my ratings, though it did affect my life, as we cleaned up that mess with both of our incomes. Fast forward from 1995/96 to 2010 when we fell down a financial mineshaft - a combination of multiple unemployments, failing self-employment, dot com bubble burst, housing bubble burst, and unemployed again. Restarting in lower income jobs (like 2/3 cut in income to start a new career path) led to bankruptcy.

                            Didn't get any credit cards or try to rebuild credit because I was aware there was a certain amount of stupidity that had contributed to our lack of resiliency when the world under our feet started shifting rapidly. I needed to know I was going to be able to demonstrate "live below your means no matter what that takes," so no rebuilding effort was made.

                            Have just looked at my scores and they are in the low to mid 500's now. Why? All the reported accounts are negative, things that were closed in bankruptcy. No recent activity at all.

                            Now that I have interest in being able to purchase a home... I wish I had started to rebuild a couple years ago.
                            Figured out we were in trouble: (Wait, we're in trouble? ) Stopped paying creditors: Aug 2010 Filed Chap 7: Apr 29, 2011 341: Jun 1, 2011 Report of no distribution: Jun 1, 2011 Discharged Aug 2, 2011


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