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Old 06-13-2011, 07:27 AM
sark22 sark22 is offline
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Default Young and in debt

About two years ago, my parents filed for bankruptcy and they had trouble paying for a lot of our bills. I was 20 at the time and I had a Chase student credit card and a Target credit card that I made small purchases on and paid them to build up my credit. My mom asked me if she could use my Chase card to pay bills if she paid the monthly balance so I of course said yes. She also asked to use my Target card to go grocery shopping.

Well she maxed out both cards, the Chase had a $700 limit and the Target had a $400 limit. The monthly minimum balance due for the Chase card was $27 and the Target was $17. She did pay them for about 6 months then she stopped paying them because she didn't have the money. However, she didn't tell me she stopped paying them and she didn't show me the monthly statements, so I just assumed she was paying them. The cards went into delinquency and both credit cards were shut down and sent to collection agencies. I found out about them when I happened to get the mail before her one day. The collection agency wanted $1,200 for the Chase and $685 for the Target. I negotiated with them and got them to lower the Chase to $989 and the Target to $585. I paid off the collection agencies and now my debt is gone.

The problem now is my credit score. Before all of this, my score was 707 and now it's 530. I've applied for two credit cards so I can slowly build my credit score back up, but I've been denied both times due to low credit and delinquencies on my credit report. Now I'm basically screwed if I want to get a car or an apartment because my score is so low. Needless to say I'm furious with her for killing my credit score. I live with my parents because I can't afford to live on my own due to our financial situation. Most of the money I make goes straight to supporting the family. None of the bills are in my name. How can I raise my score if I can't get a credit card?
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Old 06-13-2011, 09:02 AM
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DavidBibby DavidBibby is offline
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Default Re: Young and in debt

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Originally Posted by sark22 View Post
About two years ago, my parents filed for bankruptcy and they had trouble paying for a lot of our bills. I was 20 at the time and I had a Chase student credit card and a Target credit card that I made small purchases on and paid them to build up my credit. My mom asked me if she could use my Chase card to pay bills if she paid the monthly balance so I of course said yes. She also asked to use my Target card to go grocery shopping.

Well she maxed out both cards, the Chase had a $700 limit and the Target had a $400 limit. The monthly minimum balance due for the Chase card was $27 and the Target was $17. She did pay them for about 6 months then she stopped paying them because she didn't have the money. However, she didn't tell me she stopped paying them and she didn't show me the monthly statements, so I just assumed she was paying them. The cards went into delinquency and both credit cards were shut down and sent to collection agencies. I found out about them when I happened to get the mail before her one day. The collection agency wanted $1,200 for the Chase and $685 for the Target. I negotiated with them and got them to lower the Chase to $989 and the Target to $585. I paid off the collection agencies and now my debt is gone.

The problem now is my credit score. Before all of this, my score was 707 and now it's 530. I've applied for two credit cards so I can slowly build my credit score back up, but I've been denied both times due to low credit and delinquencies on my credit report. Now I'm basically screwed if I want to get a car or an apartment because my score is so low. Needless to say I'm furious with her for killing my credit score. I live with my parents because I can't afford to live on my own due to our financial situation. Most of the money I make goes straight to supporting the family. None of the bills are in my name. How can I raise my score if I can't get a credit card?
Sark22,

That is a tough situation to be in, especially since you are still living with them and helping them with the bills.

Here's my advise... feel free to take or leave any part of this.

1) Forgive your parents: Yes...they have made some big mistakes here...but it seems they were never taught how to handle money properly. They SHOULD have come to you when they were unable to pay the bills and should have let you know that your credit was about to be trashed.

What's done is done... you should forgive them... but NEVER let them use your cards again.

2) You, your mother, and your father should enroll in a Financial Peace University class by Dave Ramsey. It's $100 per FAMILY so that would be about $33 for each of you. If there is no class near you than buy or borrow the book "The Total Money Makeover" by Dave Ramsey.

It's your HOW-TO book for getting out of the situation you're in.

3) If you can't get a credit card at the moment. Then save $500 in a savings account and get a SECURED credit card. Then charge NO MORE than $100 each month on it and pay the card off in full every month. That's how you can get your score back up over time.

Do you parents have income? Will you ever be able to get then in to a position where they are not dependent on you anymore?

You sound like a very smart guy...who got burned by the very people who were supposed to teach you about money. Now...you have to teach them if you can.

Hope this helps...
David
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Old 06-13-2011, 10:33 AM
littleroc02us littleroc02us is offline
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Default Re: Young and in debt

Maybe this is a good time to sit back and analyze the situation and say, "what do I need credit for?" It's interesting to me that you were intelligent enough to negotiate with the cc companies to lower the settlement and were able to pay off the debt, but somehow you don't think you can buy a used car with cash. I think you've got it all backwards. As for an apartment there are plenty of places you can rent without a credit score. What you'll find in the future is that you can become independently wealthy not using credit for anything, even a mortgage. They will do mortgages for those who don't have credit scores using manual underwriting like Churchhill Mortgage does if you apply. If the credit score does matter then all you need is one and only use it sparylingly. Don't borrow your parents anymore money you know now they cannot be trusted....
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Old 06-14-2011, 06:05 AM
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pink_briefcase pink_briefcase is offline
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Thumbs up Re: Young and in debt

I would just focus more on what's important for me. No matter how hard the situation is there is always a way out of it. the only way out of your wilderness is through your mouth. ^_8

Keep on keeping on...
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Old 06-16-2011, 08:40 AM
dalemdunn dalemdunn is offline
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Default Re: Young and in debt

Why would you be in so much debt? That is the first question you have to know. Why? then follow it up with how did it happen, when did it happen. From there, you can find the fist step of your solution. Where did you got it wrong. Start from there.
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Old 06-17-2011, 08:11 AM
lerrygibson lerrygibson is offline
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Default Re: Young and in debt

When you are young you dont know how much you have to spend and it is thus very problematic for you to manage your expenses and that is why it is necessary to manage it well.
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Old 08-05-2011, 01:21 AM
Fredy Atwater Fredy Atwater is offline
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Default Re: Young and in debt

Sark22 :

1) Create an emergency fund equivalent to your former credit card limit.
2) Your close ones using your credit card must be your kids or your wife, otherwise, the card should be for your exclusive use only. Now you know why.
3)I would follow David's steps too. They are very respectful of you and your family.

Once you realize how difficult it is to save your own money,you will value that money more than anybody else in the world, because it is all the money you can hold onto in your whole life. It's the only money you have. Real money. Really yours.

Living in debt is being poor. Living without debt and having money is being rich.

Once you save your first $1,000.00 dollars put them aside and go for the next 1k.Then decide if you want to spend them all.

Buy the Transforming Debt into Wealth System by John Commuta. The principles are simple but not so easy to accomplish because of our poor spending habits.
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Old 08-05-2011, 09:02 AM
kate032 kate032 is offline
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Default Re: Young and in debt

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Originally Posted by littleroc02us View Post
Maybe this is a good time to sit back and analyze the situation and say, "what do I need credit for?"
Credit affects us in ways we don't realize. Especially for the op, a potential employer may look at his credit report and see that cards under his name were delinquent, which suggests that he may not be responsible. From what he's told us, he was just being a very caring son, which now has cost him.

How much you pay for car insurance and a mortgage is dependent upon that almighty FICO score, like it or not.

To the original OP: I'm so sorry to hear what happened with your parents. But a great lesson to learn is never to give other people control over your finances, and this includes girlfriends. Helping someone out by giving some cash will almost always be better for you than giving your credit cards and then expecting them to make the payments.
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Old 08-05-2011, 09:35 AM
littleroc littleroc is offline
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Default Re: Young and in debt

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Originally Posted by kate032 View Post
Credit affects us in ways we don't realize. Especially for the op, a potential employer may look at his credit report and see that cards under his name were delinquent, which suggests that he may not be responsible. From what he's told us, he was just being a very caring son, which now has cost him.

How much you pay for car insurance and a mortgage is dependent upon that almighty FICO score, like it or not.

To the original OP: I'm so sorry to hear what happened with your parents. But a great lesson to learn is never to give other people control over your finances, and this includes girlfriends. Helping someone out by giving some cash will almost always be better for you than giving your credit cards and then expecting them to make the payments.
If you stop borrowing money eventually your FICO score will go to zero, even though you have a ton of money and no debt. You can still take out a mortgage for a house with manual underwriting. You can rent an apartment with lanlords that don't require credit checks, you can explain to potential employers how smart you are with your money and that's why you don't have a credit score and yes the insurance companies do give you rates based on your credit score which should be against the law, because how is it fair that if you are responisible, you have no debt and they give you a higher rate because you are doing better with your money then most, but since you don't have a stupid FICO score you get hit.
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Old 08-05-2011, 10:10 AM
kate032 kate032 is offline
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Default Re: Young and in debt

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Originally Posted by littleroc View Post
because how is it fair that if you are responisible, you have no debt and they give you a higher rate because you are doing better with your money then most, but since you don't have a stupid FICO score you get hit.
It is unfair. However, I would also be just a bit leery of a landlord who didn't do a credit check. You're absolutely right that a FICO isn't necessarily a predictor of how responsible a person is. But there are just too many instances when a necessary entity (car insurance, employers, landlords, etc) will use it that it works more in our favor if we can establish credit of some kind. But for a person who cannot control themselves with credit, then it's probably better to just stay away. However, the fact that a person cannot control his spending habits with a credit card also says a little bit about the responsibility of that person, as well.
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Old 08-05-2011, 12:00 PM
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DavidBibby DavidBibby is offline
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Default Re: Young and in debt

I consider myself to be a very responsible person. Those who know me can certainly attest to that. I pay my bills on time, and I've been consumer debt free for quite a while. I only have two debts left and those are my mortgages (my home and a rental house).

If you were to take a look at my FICO score you might conclude that I am a huge credit risk and therefore an irresponsible person.

Case in point: I tried to open up an account at a credit union. They said because my score was below 600 (happened when my mortgage was modified) that I would have to be put on the "New Beginnings Plan"... for people with bad credit. This account would be $10 a month for a checking account and I could only see a teller 5 times a month.

I promptly said "no thanks" I get treated better at my BANK. I have no fees, no minimum deposit requirement, I can bank online, and I can see a teller anytime I want.

The only problem I had with my bank was that it was INSIDE a Walmart and was further down the road from the credit union.

Guess they didn't want my business after all.
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Old 08-05-2011, 12:02 PM
littleroc littleroc is offline
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Default Re: Young and in debt

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Originally Posted by kate032 View Post
It is unfair. However, I would also be just a bit leery of a landlord who didn't do a credit check. You're absolutely right that a FICO isn't necessarily a predictor of how responsible a person is. But there are just too many instances when a necessary entity (car insurance, employers, landlords, etc) will use it that it works more in our favor if we can establish credit of some kind. But for a person who cannot control themselves with credit, then it's probably better to just stay away. However, the fact that a person cannot control his spending habits with a credit card also says a little bit about the responsibility of that person, as well.
I will be a lanlord someday and I won't do credit checks. I will simply call employers current and past. I will call former renters and have a sit down conversation with the individual. If I went by the credit check that doesn't tell me much except that the person enjoyed borrowing money and paying it back...
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Old 08-05-2011, 05:06 PM
kate032 kate032 is offline
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I consider myself to be a very responsible person. Those who know me can certainly attest to that. I pay my bills on time, and I've been consumer debt free for quite a while.
That is fantastic. Although the FICO score obviously doesn't give the entire picture, it is one vehicle available that creditors/employers/insurance companies can use to determine creditworthiness. There are other ways, of course, but the FICO score is one reliability factor (which isn't always accurate, as you've pointed out) that is easy to obtain for companies, so they tend to use it more often than not.
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Old 08-05-2011, 05:09 PM
kate032 kate032 is offline
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If I went by the credit check that doesn't tell me much except that the person enjoyed borrowing money and paying it back...
But one can also have a high rating by having credit available but not using it, ie credit cards that are paid off each month. I was finally offered a credit score for free, so I checked for the first time, and my score was well over 800, yet I haven't borrowed money for many years.
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Old 08-05-2011, 05:13 PM
littleroc littleroc is offline
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Default Re: Young and in debt

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But one can also have a high rating by having credit available but not using it, ie credit cards that are paid off each month. I was finally offered a credit score for free, so I checked for the first time, and my score was well over 800, yet I haven't borrowed money for many years.
So you have credit cards but you don't use them? Why? What's the point when you can do everything without them? I myself keep one around just to play the stupid FICO game and we use it just for gas. It wasn't my choice but my wife has it open. We don't rely on it for anything except to keep the FICO score around. We don't borrow money for anything besides gas. It's always paid off and in any case it bothers me to just have the dumb thing.
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