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    • CDTV Launch! March 30, 2011
        Credit Dusters has just launched our interactive television show. The network is called CDTV and it will start out with a daily show about all things credit. You can go there now…tv.creditdusters.com.
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    • New VW and Other Purchases I Didn’t Make June 4, 2008
      It seems strange considering my profession.  I recently pulled a copy of my credit report through the credit watch service  I am a member of.  I needed to purchase a car so I wanted to see where my scores stood and shop for the best interest rate.  To my surprise I had purchased a brand new […]
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    • Loan Modification – The Best Chance for Success April 30, 2008
      This week we are discussing a painful, but important situation that a lot of American consumers are facing. It is so scary to think that you might lose your home, but we want you to know that there is hope. We want to be a resource to those folks because we have been there and […]
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    • Beauty in Simplicity Chapter IV – The Final Verse April 25, 2008
      My family lives in a small, rural town in Southern Indiana. We are surrounded by a soy bean field with hundreds of sprawling acres across the street and a large lake that adjoins our property in the back. Sounds nice, right? Why am I so discontented?What is it that continues to drive me toward always […]
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    • Beauty in Simplicity Chapter III – The Endless Road April 24, 2008
      I began writing about the subject as a result of my daughter and I going on a field trip to our county 4-H last week. All the modern day farmers talking about raising chickens, cows, rabbits, and living off the land made me yearn for a life like that. This is my journey…The truth is […]
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    • Beauty in Simplicity Chapter II – What’s in the Box? April 23, 2008
      In his book, Halftime, author and successful businessman Bob Buford comments on the purpose of money in the following manner: Mike Kiami is a strategic planning consultant. He is brilliant. He is intuitive. He is demanding. He slices through all the pretense and posturing, and hones in on the core. He does not believe in […]
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    • Beauty In Simplicity – Chapter 1 April 22, 2008
      “Stop this train, I want to get off!” – Vanilla Ice Yesterday I touched on the fact that I am soul searching for the simple life. My wife and I used to think the Amish had the answer. I now know, as I mentioned, that I do not have to buy a farm and work […]
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    • A Rabbit Meat Shortage, The American Consumer, and Something About The Simple Life April 21, 2008
      I went on a field trip with my 3rd grade daughter this past week to our county 4-H. I learned a lot about farm animals. It was quite amazing because I saw the farmer of today and even with all the modern technology, (like a $280K combine that has a stereo, GPS system, and two seats) it […]
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    • How To Not Blow Your Tax Refund April 2, 2008
      In my previous post I wrote about the importance of filing even when you owe. Today I am going to give some helpful tips on preparing for your refund. Whether you are getting $500.00 or $5000.00 it is human nature to spend your money two or three times before it even hits the bank. I would encourage […]
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    • How To Proactively Protect Your Identity March 26, 2008
      Freecreditdusters.com has a great article on ID Theft – Check it out
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New VW and Other Purchases I Didn’t Make

It seems strange considering my profession.  I recently pulled a copy of my credit report through the credit watch service  I am a member of.  I needed to purchase a car so I wanted to see where my scores stood and shop for the best interest rate.  To my surprise I had purchased a brand new VW (at close to $25,000)!  It turned out this new purchase had affected my scores somewhat and I would have to wait to get it off my credit before I could qualify for the interest rate I wanted.  The strangest thing of all is that I have never owned a VW and I also noticed that there was a strange address listed on my credit report from a nearby town. 

Coincidence?  I thought so until I went to my neighborhood Kroger to pick up a prescription.  When the pharmacy rep rang up my order, she confirmed my address as the nearby town I mentioned above.  Turns out the prescription was not even mine, but a totally different prescription from this ghost VW gal.  My best guess is that this mystery person has the same name as me, social security number very close to mine, and just happens to live less than 15 miles from my home. 

This sounds bizarre but you would be suprised how often these types of scenarios play out.  More commonly these mistakes are made due to family error or even family identity theft.  Are you a Sr. or a Jr.?  Better check your credit.  If you are a Sr. and have a Jr. floating around out there, it is likely you may have some things mixed up on your credit.  Have you been through a divorce?  Even more likely that the ex’s junk is showing up on your report  and affecting you long after their gone.  If you have ever filed bankruptcy, you better believe there is junk hanging around on your credit that shouldn’t be there.

Don’t be caught by surprise like I was.  I had to wait an extra 60 days to purchase my car while I was waiting for mystery girl’s junk to be removed from my credit (after I disputed the information to the credit bureaus).  Now I keep watch on my credit every 30 days through my credit watch service and have instant notification of changes or new inquiries.

Zombie Debt: Coming now to a Credit Report near you!

Zombie   Did you ever see Night of the Living Dead when you were a kid? I am not talking about the new one – I am talking about the original. The 1968 George A. Romero’s cult classic. It is black and white with ketchup laden cannibals. It has no plot and it lacks rhyme or reason , yet it terrifies me to this day.

Speaking of cannibals and having no rhyme or reason – we are going to discuss collection agencies (The carcass feeders) and their business practices (the lack of reason).  Look, I understand that if I do not pay a bill then it should go to collections, but at what point am I still tracked down for the demons of my past.

However, collecting on old debts is a rapidly expanding industry. This year a whopping $110 billion of such debt is expected to be sold to collection agencies, up from virtually nothing 10 years ago. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar or less. Then, they use credit-scoring and other new technologies to identify which debtors are most likely to pay.

The players in this “junk debt” market range from fly-by-night outfits to well-established companies funded by Wall Street investors.  Many credit card companies have started selling delinquent accounts to collectors to boost quarterly earnings, according to a report by Kaulkin Ginsberg, a Rockville, Md.-based adviser on debt collection.

On face value, companies can make a profit if they can get debtors to repay even a tiny fraction. Along the way, some collectors realized they also could squeeze money from people who didn’t even owe it. Some consumers pay because their finances are so disorganized they don’t realize the debt isn’t theirs. Others are coerced into paying by illegal threats of lawsuits or ruined credit.

The consumer does have some protection: Six years after a debt goes into default, the collector no longer can sue to collect. And after seven years, the debt can’t be shown on a consumer’s credit report.

COLLECTION IS LEGAL

However, efforts to collect old debt are legal, as long as the collector doesn’t threaten to sue or report the debt to a credit agency.  

KEEP YOUR FRIENDS CLOSE AND YOUR ENEMIES EVEN CLOSER

The best thing you can do is to keep an eye on your credit by joining a credit watch service.  We recommend using True Credit they are a great service that provides a complete credit report with all three bureaus and scores for $14.95.

What To Do When Your Income Drops – Part I

What to do when your income drops.

A loss of income is traumatic, whether it is the breadwinner or a second income – a bad few months or even a year can destroy your family, your credit, and your finances. The good news is there are some steps that you can take to minimize an unexpected loss of revenue.

The very first step is to be honest. Be truthful with yourself and the place that you are in. Do not stick your head in the proverbial sand. You will survive and in fact you will be stronger because of it. I know when my wife and I were in the process of financial meltdown we both went through a time of freak out, but you cannot stay in that mode. You have to shake the dust off and put together a plan of action. This begins with honesty.

The next step is to communicate with your family. If you are married then sit down with your spouse. If you have children then call a Family Meeting. When it comes to your kids it is important to assure them that everything is going to be okay, but that the family is going through a rough spot.

I would recommend including them in some of the budgeting phase (we will go over that in a moment) so they can appreciate the fact that you are not going to be eating out anymore and that the Saturday shopping sprees are on hold for the next few months. I coached a lady who refused to let her two teenage kids know that they were going through a rough time. She attempted to maintain their lifestyle even though they we losing everything. She would get very angry at her kids every time they would ask for money.

On the flip side, I would not recommend hanging out all your dirty laundry to your kids. Especially if you feel like you can turn it around quickly. In other words, use good judgment. Above all, do it with kindness and love. Explain to them that stuff comes and goes, but that they will always be a family. Family can go through anything and be okay just as long as they are together.

Step 3 is take inventory of your financial situation. The first thing I would recommend is to take a look at your credit report. This will give you a snapshot of your debts and open credit lines. It will also let you know what your credit score is from all three credit bureaus. My wife and I recommend a service through Credit.com – it is only $14.95 and that includes all three credit bureaus with scores. It is a good deal. Once you have pulled your credit you need to analyze it. This is very easy with Credit.com – you can print it out and go over it.

The first thing you want to do is write out all of your monthly bills in the form of a budget. Now calculate your bring home income (after taxes). So, how bad is it? If you have a significant shortfall – which I am sure you do since you are reading an article on your income dropping then we go into the Action Plan phase.

 If your income gap is negative, you’ll have to start cutting expenses and get your payments reduced to balance your budget.Determine where to cut corners to balance your budget and reduce spending, you have to know exactly how much money you have coming in and going out. 

• Stop spending leaks. Leave credit cards at home and pay in cash. Using a credit card to maintain current living standard is incurring high interest debt and is adding to, not resolving, your problems.Change eating habits. We spend 14% of our income on food, and more than a third of that in restaurants, on fast food, and vending machine snacks. Eating at home or bringing your own homemade lunch or snacks is a lot cheaper.

• Conserve utilities. Turn off the lights and the television when not in use. Run the dishwasher, clothes washer, and dryer with full loads and less frequently. Lower house thermostats in winter and use fans instead of air conditioning in summer.

• Communicate. Agree with your family that every purchase over a certain amount will be brought to the family for discussion prior to purchase.

• Plan. Prepare for upcoming bills, such as an insurance payment due twice a year.

 • Make lists. Weigh the importance of each item on your shopping list. Reduce the number of shopping trips.

• Explore entertainment alternatives. Disconnect cable TV; play board games or visit the library. Walk more.

Take an inventory of your resources

How much does the family own? Take a few minutes to add up your family’s assets—the result just might boost your spirit. Add up the total value of all your belongings on Worksheet #2 (next page). Remember to calculate everything owned at current market prices, not the original price.

Cash—those things that either are or can be easily converted to cash. Remember: Cashing in certificates of deposit (CDs) before they mature results in an interest penalty.

Marketable assets—financial assets that can be cashed in or sold for their current market value. Prices will fluctuate with market conditions.

Other assets—real estate and personal property that can be sold but usually not as quickly as the assets above. Assets such as vehicles, furniture, and appliances usually depreciate in value, so they are worth less now than when you purchased them, even though they are still in good condition.

Non-marketable assets—assets that cannot be sold or are more difficult to turn into cash. Withdrawing money from your retirement plan, pension, or Individual Retirement Account (IRA) before age 59 1/2 usually involves a substantial penalty.

Use savings – If cash is required, use emergency savings or take out a loan if you can get one. This will depend on your individual circumstances, but there are some disadvantages either way. When you take money from your savings account it will no longer earn interest. If you take out a loan, you pay interest for the privilege of using someone else’s money.Check into a secured loan based upon money you have on deposit in a savings or a certificate of deposit account. You will pay interest on the loan, but the total cost might be less than the interest on another type of loan. If your family decides to withdraw money from a savings account, take money from a regular account first and leave any certificates of deposit untouched. You’ll lose interest and may have to pay a penalty on the certificates if you cash them in before they mature. If any case, think carefully about taking on any additional debt until you get back on your feet.

Should you use retirement savings? Don’t be tempted to start spending what you put away to use in retirement for everyday living expenses without some careful consideration of the long-term consequences.   And remember, under the tax rules, you must have your company deposit the money directly into your IRA rollover account at your new custodian—a bank, brokerage firm, or mutual fund.

If you take possession of the check—even for a few days—the company must withhold a sizable amount for income taxes.  But perhaps you truly need some of this retirement savings in order to meet some current bills. Prepare for this by rolling your 401(k) into an IRA invested in a money-market mutual fund or a bank money-market deposit account. Use this money only if your other savings run out.

You’ll pay taxes and penalties on the money withdrawn. But as soon as you find work, you can stop your withdrawals and protect any remaining IRA money left.  Some 401(k) plans let you borrow from retirement savings. There are rules about how much you can borrow, the interest you will pay, and the deadline for repaying the loan. For a short-term financial need this can be one way to borrow money quickly and without a lot of paperwork. 

Stay Tuned for Part II

Subprime: Bankruptcy bill faces roadblocks

Earlier this month I posted on the new Bankruptcy legislation attempting to railroad through Congress. Here is a quick update from CNN Money…

WASHINGTON (Dow Jones/AP) — The U.S. House Judiciary Committee could vote on a bill as early as next week that would make changes to bankruptcy law aimed at helping borrowers with subprime loans avoid foreclosure, the body’s chairman said Tuesday.

“Time is of the essence,” Rep. John Conyers, D-Mich., told reporters after a hearing on the topic. “If we’re going to do something, we’re going to have to do it right away.”

Reps. Brad Miller, D-N.C., and Linda Sanchez, D-Calif., introduced a bill last month that would allow bankruptcy judges to change some mortgage terms on a borrower’s primary residence, potentially changing the interest rate and other features of a loan.

Consumer groups have thrown their full support behind the measure, saying that it could help 600,000 homeowners avoid foreclosure in the next two years.

The banking industry, however, has lobbied intensely against the measure, arguing that it would increase the cost of credit and create confusion in the market for mortgage debt because loan terms would be less reliable.

“Lenders, securitizers and loan servicers would have to take various precautions to avoid or offset the significant new risks (the bill) would impose,” David Kittle, chairman-elect of the Mortgage Bankers Association, said at the hearing.

Conyers conceded that industry opposition to the bill could make it difficult to pass, but he said that it was necessary to help homeowners.

“We can talk all we want, but this bill is going to be tough to get through the House and the Senate,” Conyers said.

Staff from the offices of Miller, Sanchez and Conyers plan to meet Wednesday with Rep. Steve Chabot, R-Ohio, to try to negotiate terms of a compromise, Conyers said.

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Please comment below on what you think. I would love to hear from you.

Thanks,

 Matt Sullivan, CEO / Credit Dusters, Inc. 

Advice for a Couple Thinking of Filing Bankruptcy…

There are so many tiny moments that make up my day. So many that when I realize it – I come to the irritating conclusion that most of my day is spent on auto pilot. I do not calculate the things I see, hear, and do until it is time to make a decision. It is at that moment that the sum total of all of those voices, images, and senses come together and the decision is already made.

 

The Couple From Shopperville:

 

There was no more painful reminder of this truth than earlier this week. The morning began with me counseling a couple about their out-of-control spending habits. The husband literally worked three jobs to support his wife’s shopping addiction. Interestingly enough, as I looked over their credit report I noticed that all of the credit cards maxed out were the ones she had stopped paying on. The store cards with any room at all for charge-ability were paid beautifully on time.

 

There are no Easy Outs!

 

How do you explain to someone that this is not an income issue? The husband looked at me exasperated and exhausted. He had bags under his eyes because he had been working 48 hours straight. She just wanted to file bankruptcy and start over and he had no clue of what to do. I could tell that they both knew something was deeply wrong with their situation. I sensed they felt the shakedown coming and it was going to be ugly.

I gently took them down a road that I knew would be treacherous. This is what I told them:

     

You are not bankrupt – What you have is a spending problem. You both make great money and there is no reason why you have no savings. 

 

Cancel the cards and destroy them – I am not a big fan of credit cards, but I am also not an extremist. I don’t believe that credit cards are evil. However, in this situation credit cards are toxic to their financial and marital well being.

 

Mindset: This is going to be painful – The bottom line is: It was fun being on the hill and you didn’t really notice that you were going down, but now you are in the valley. Getting back up the hill is going to take a lot of work. Both of you are going need to get on the same page and realize this is a team effort. 

 

There is hope, but only if you have a plan – You have stopped over spending, but now what? You have to be on a plan. Not just a budget. A written out game plan that will be a declaration of independence from your current madness. (I will be writing on this subject more in the coming days.)

 

 

Bankruptcy ‘tweak’ could save 600,000 homes

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