My Debt Blog

I decided to take a peak at my credit reports, and score for the fun of it. First off my credit score didn’t really change much, it’s at 700 as of today, although that doesn’t really matter much. What I was looking for was what was in my actual credit report.

Mortgages shows I have two which I do. According to the area that I could improve my score if I got more mortgages that would help. Not sure how that makes sense but I guess that is what the models suggest.

Revolving accounts (credit cards) I have 18 in total. There are 10 of them that are closed, or should be closed because they are not used or their history really has no actual value. I don’t want to close everything all at once because I think that might look bad. Some interesting stuff I found was I have an Old Navy store card I don’t remember opening or using from years ago. It has no balance but did have a high balance of $39 at one point. The other interesting one was a Sears card with a $7500 limit opened in 1996. I’m not sure how a 14 year old kid could open a credit card like that with a line that large. There’s only four cards with balances which I fully disclose their balances and limit every month.

Installment accounts there are 12 of these. Now 8 of these are either closed or need to be reported closed by all three bureaus. Two of those are closed car loans, the remaining are student loans that were consolidated/transferred but not properly reported as closed. The remaining 4 are my student loans and for some reason my gas company reports to TransUnion that I pay my gas bill. I have never seen anything like that before on a credit report.

Every account is current and there are no 30/60/90 days late. There are no other accounts or collections, nothing flagging a negative account.

Inquiries there are still a ton of them from when I shopped around for mortgages at the time I bought my house. The latest was from my bank in April when I opened up my emergency fund account to hide 1k cash from myself.

I need to draft some letters to contact the bureaus to have them update the status on some of these accounts. One reports something closed and the others think it’s open. There is stuff that is open on all three but I neither use nor need, so I will try to close those accounts myself. It takes a month or few to get these things resolved so I will revisit my credit report at a later time to make sure everything is cleaned up.

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It has been yet another rough month with some unexpected expenses. All the bills at least got paid, including the dreaded car insurance bill. Some extra money had to come in from the EF and other sources (my birthday) to cover things this month. Part of the problem is things became due early in the month when the money is not available. I also hate playing the catch up game from the previous month. There was way too much month for the money to go around.

I also need to come clean on something. My wife and I celebrated our first wedding anniversary and we started out the month in the red. I ended up using my credit card to buy her gift and go to a fancy restaurant. The damage is about $400 and this month’s payment pretty much covers the finance charges but does not do much to the principle balance. She also used her credit card to buy my gift, something I needed, and another smaller one, something I did not. I at least convinced her that the other thing was not necessary, so it could be returned. Resorting to a credit card when we didn’t have the money is not something I’m proud of anymore. I feel guilty and embarrassed, but did not want to ruin our first anniversary because the money wasn’t available for that moment.

Last big chunk of news is my teeth are breaking down from a lack of responsibility in my early years. I never had much of a problem taking care of my teeth as a kid, but when I got braces it became complicated to try to keep everything clean. A lot of the problems could have been addressed if they were caught early. I also was not the best at going to the dentist during my college years to even have the opportunity. At my dentist appointment this past weekend, I need to have about 3-4 molars crowned at about 1k each out of pocket because I have maxed my insurance for the current year. There is not much of a time frame for how long my chompers will last before they start break down. So far I have had prep work done on 2 of them just to hold me over for now. The good news to all of this (yeah what good news) is I have no problems with the nerves or roots and won’t need any root canals done. The dentist offered me a payment plan system where I could borrow what would be needed to cover the cost, and then make monthly payments over a predefined term. I really don’t want to borrow money, but at the same time I don’t want to lose my teeth trying to avoid debt.

I’m not sure if this is the best time to be selling the house. There is no money on hand to do it right now, which my wife hates to hear. She has been drooling over apartments lately, some of which the rent is higher than our current mortgage payment. That is not a direction I will even let her pretend to justify to me. We’re going to lose money on the house in closing costs because the house is not going to sell for much more than we bought it. The market is soft and slow, there are 26 other houses in our area on the market, and only 1 has a contract. The realtor says we should jump in quickly and get on the market if we want to have a chance to sell. I’m not completely on board 100% about selling anymore which pisses off my wife to no end. We are not in a very good position right now to sell and at the same time get an apartment. She currently has a summer job, but I’m not sure what job she will do later this year if she delays student teaching. I would like her to finish her master’s degree and be officially done with school so she can focus next year on getting a job as an actual teacher. Part of me feels she is not happy about everything is that she has been in college for the past 6 years and is having trouble finding the end. I’m not sure what I’m going to do anymore. It feels like my foundation is coming apart beneath me.

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There’s an article out there, “Ohio Man Tells Senate Panel About Confusing Credit Card Practices”, that I found interesting. Here’s the short version of this story:

An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

This guy charged himself a little over 3k on his credit card and now owes 3 times that amount. Credit card debt affects some of us in extreme cases, but what this guy did is beyond irresponsible.

Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times…..The interest charges and fees on Wannemacher’s account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin, D-Mich., the subcommittee’s chairman.

This guy made payments of 1k a month a year ago over six years, but was late 47 times and over limit 3 times. There isn’t much detail about whether or not he was just paying this account off or if he was continuing to use it. Taking two steps back and three steps forward does not pay down the account. The credit card company felt his pain though:

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. “In this case, we simply blew it,” he said.

What was he using the credit card for and where did the fees come from?

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.

So half of the total is interest charges, part of it is over limit fees and part late fees. After paying on it for years and years Chase decided he paid enough and waives the balance? I wonder if I could call up one of my credit card companies and just ask them if they could waive my balance due because I paid them for a few years.

When credit cards are used, for whatever reason, you usually know you’re going to pay more for what you’re buying than if you had the money to buy it. Don’t have the money to buy it? Use credit and just pay more later, after all that’s the way people have to do it, right? I do think there are credit card companies out there that put so much in their fine print that if you trip up they will sock you with a world of hurt.

I have been late before paying a credit card online by an hour because they changed the time frame a payment can be processed in. They still took the payment but I got dinged with a late fee. Called the company up and got the late fee refunded, and figured things would be fine. One hour late even with having the refunded fee got me a penalty rate which I had to deal with for, get this, 13 consecutive months of payments! Now that it is a year ago I don’t have that lousy rate to deal with, so if I were to continue paying the same amount towards that card more money will pay the principle balance faster. I will eventually get it paid off, it just takes some time and higher payments.

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Today I have finally turned 25 and am glad I am at the point where I am with my life. I remember back when I was 15 what high school was going to be like, and then at 20 dealing with the challenges of college. Now at 25 it seems like what was once so complex is now much simpler than it used to seem. Sure I have made mistakes, made good choices and bad ones, got into some debt, but I’m finally working on moving towards a more positive direction.

So for the past few weeks I have been listening to The Dave Ramsey Show and am starting to understand why people become motivated by him to handle their debt and take control of their money. It isn’t completely him that makes this happen, it’s the callers who have real life situations probably much similar to some of our own, and people almost help other people through the show. At any rate my wife got me his Total Money Makeover book for me to read about his system. I also went on his website and found his software for only $10 along with another book I want to read, The Millionaire Next Door. I am cautious to consider his system because he does not believe in credit period.

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The whole concept of have now, pay later has always bothered me, but sometimes things need to be replaced quickly. I should be saving money to probably just buy a washer and dryer. The washer is not very old but very cheap, and the dryer is very old and expensive to operate (both came with the house.) I thought about just continuing to use them until they just break down and we’ll get something else, but my wife does not like that idea. If these things break, we might not be at the point to replace these things. I’m trying to find ways to avoid financing this purchase besides just saving for it.

On the upside, Sears is currently offering no interest, no payments for a year, so technically the purchase will not cost me anything in the end, as long as I pay it off before that year expires. I did the same type of deal with my stove and paid that off in March. At the same time I wonder if having newer and more efficient appliances will help save me money on my utility bills. I do most of the laundry (I’m a guy too, I know it’s rare) and wash nearly everything in cold except the under things and socks I use warm. My dryer takes sometimes 2 hours just to try an average size load of laundry, and it’s a gas dryer. The little knob on the dryer is broken too so sometimes the stupid thing doesn’t turn off and will run much longer than necessary, which is a huge waste of money.

This has been going through my head lately while at the same time I’m trying to pay off my debt. It’s really hard to move forward if you fall backwards and get deeper in debt. I hate pretending to own things but at this point I might not have a choice. My wife likes the idea of new appliances because she also thinks they add value to the house. I don’t think an appraisal of the house would be any different based on the appliances in it. They would probably help drive a better offer some day when we’re ready to sell. I hate justifying this stuff to myself it is driving me nuts.

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I have been talking to my credit card companies for some time now trying to get myself better rates. One of the major problems I was having was my balances were too close to the limit in order to offer me a better interest rate. A technique I applied was to ask them for a credit line increase, sometimes this can offset the utilization to reduce the interest rate.

My Bank of America card got raised by 1k and I called this month and got the interest rate down to 17.24% APR which is much better than that 25.24% I had been paying. My Citi Dividend card got a nice $3600 increase bringing my utilization way down. Called them last night and asked them if they could reduce my 11.24% APR, they said no. I asked for a supervisor and sat on hold awhile, got a rate specialist and asked her for a lower rate. She told me I had a good rate, which I told her that is a decent rate, I want a great rate. After telling her that I get offers in the mail all the time for much better rates she finally threw 9.9% APR at me, sold!

Now I must admit the bad news regarding debt not the event. It is coming up to my one year wedding anniversary and we both would like to celebrate it in style since it is the very first one. We’re going to stay at a Jacuzzi suite and go to a fancy restaurant, and for now the plan is to hold over the cost on a credit card. I’m also trying to figure out what we should be spending on each other. I don’t want to start any fights over trying to budget this stuff. These minor increases are temporary and will be my focus to get rid of so I can get back on track. I’m also going to start setting some money aside now in preparation for Christmas so I try to avoid doing this in the future.

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I’ll start out by saying that I do have some student loans. In college it felt like I had no choice but to resort to getting a loan to pay for education. I could have put education on hold while saving up the money, but the problem with that is actually going back to school.

Growing up my parents reminded me to save my money for college. So I saved a lot of money, spent very little of it, always paid my bills, and stayed debt free throughout grade school. When I got to college and the bill came, I paid it from my savings. After three semesters that money ran out fast. Then I did something really stupid, paid for college with a credit card! My girlfriend (now wife) had been borrowing money the whole time thus far and urged me to get a student loan. Signed up for a loan, to cover school related expense so that I could the (beer) money from my student job for myself.

Graduate college with a bunch of credit card debt and now student loan debt. At least my student loans are consolidated into a nice low rate under 3%. Living on credit cards in college is about the stupidest mistake I could have made. Now I am paying, and then some, for that mistake. The student loans in my opinion are not a mistake, just necessary at the time to get to the point to get a job. I still remember that first paycheck from my salary based job and thinking I’ll be able to get out of debt in no time. Bills came in and then I realized how little I had left after the basic needs have been met.

Once the credit card debt is gone my next priority is paying off these student loans because I’m not going be paying these things for 20+ years. I set my goal to pay off my credit cards by March 2009, we will see how well that date is come this time next year. After that is gone I will be debt free except for the house. Are student loans worth it? I think it would take me longer to be at this point in my life without them.

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