Beating Broke

Personal Finance from the Broke Perspective

How to Recover From Bad Credit

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If you’re one of the millions of people that has been negatively impacted by the global financial crisis, then you may find that your credit rating has suffered. Realize though that no amount of good advice can be a replacement for responsibility. Living within your means and giving a proper amount of deference to your financial situation will always be better than trying to pick up the pieces after a meltdown. Still, a lot of responsible people have been suffering lately due to no fault of their own, and if you find yourself in this group you will be able to reestablish your credit and recover. In this article we explore what options you have available to recover from bad credit.

  1. Apply for a Secured Credit Card
    These types of credit cards require that you keep some collateral, typically $100-$500 in an account. The nice thing is that after about a year of doing this you can upgrade to a regular credit card. Make sure to check for any hidden fees and that the issuing lender reports to all 3 of the major credit agencies before you apply.
  2. Make Sure All of Your Debts are Paid Off
    If you have recently been denied credit then you are entitled to a free copy of your credit report from one of the three major credit reporting agencies (Experian, Equifax, and TransUnion). These agencies also offer a one-time deal, so if you can, take advantage of that as well. Make sure to pay off any outstanding debts and to challenge anything on there that you did not legitimately incur. It is also possible to write the lenders asking for forgiveness, and have them remove bad marks against you, but it’s not quite standard procedure for them to do so.
  3. Watch Out for Phony Credit Reduction Scams
    There are some legitimate non-profit credit counseling services available that can act as a middle man in dealing with creditors and help you to reduce your debt. There are also a ton of scams out there that will do nothing but put you deeper into debt. Make sure to thoroughly research these types of services before using them.
  4. Get a Small Loan to Help Build Your Credit Further
    Once you are able to reestablish a line of credit, and are paying it off on a monthly basis, don’t expect lenders to just automatically open their coffers to you. Factors they will take into account typically include your monthly income to debt ratio, how much debt you have tied up in high interest accounts, how much savings you have, your credit history for the last 7 years, and other issues related to stability like the number of residences you’ve had.

Make sure to explain the circumstances that lead to your financial troubles, and don’t forget to mention things like you were 1 of several thousand workers to be laid off at your job, or that the company has gone out of business. The better you are able to show the lender that you are financially responsible, the better luck you will have at getting a loan.  Once you’re on the road to recovering from bad credit, learn how to build and use good credit.

A World of Cash Only

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What if you couldn’t use a credit card.  What if you couldn’t get a loan?  Imagine a world where “credit” as we know it no longer exists.  Or never existed in the first place.  Would that world be better or worse than what we live in now?

visa signatureIn many ways, credit that is used wisely can be a benefit to our lives.  It allows us to get a house without having hundreds of thousands of dollars in cash available.  It allows us a car without having to have tens of thousands available.  I know, if you purchase smartly and within your means, you don’t need hundreds of thousands of dollars for a house and you don’t need tens of thousands for a car.  But, for those that feel that they can afford to pay those payments, credit makes it all possible.

What would a world where there was no credit look like?  Instead of spending our last dollar to pay off the loans we get with our credit, we’d spend more of our time working for fulfillment.  If we didn’t have the ready cash available to pay for something, we’d have to save for it.  Or trade for it.  And we’d do more for ourselves.  We’d mow our own lawns.  We’d do our own handyman work.  Do-it-y0urself tasks wouldn’t be something of a novelty, but more of a normal thing.

For some, it may seem trivial.  What difference does it matter whether I use credit or not.  I’m responsible and pay my bills, they’ll say.  And then, they’ll get up on Monday morning and go to the job that they’ll freely admit they don’t like much, but they keep it because it pays well.  But, if there was no credit, they wouldn’t need a job that pays well.  They probably wouldn’t need any resume tips. They’d have the ability to find a job that they enjoy.  A job that is fulfilling and rewarding.

And that makes a difference.  The stress and turmoil that a job you don’t like can bring into your life is not only unpleasant for you and those around you, it can actually be fatal.  Without credit, keeping up with the Joneses becomes a thing of the past.  You only need to keep up with what skill sets they have that you don’t and find an amicable trade.

Will this world ever exist?  Wholly? No.  There are way too many hands in the pot of credit for it to ever go away.  Too many millionaires made by taking advantage of other people through credit.  But, that doesn’t mean that you and I can’t strive to lead our lives in the direction of no credit. We can take control of our finances through good financial management principles and lead a life as free from credit as possible.  And, it is possible.  Don’t be afraid to dream of that.  And don’t be afraid to guide your finances with intention.

Breaking free from the harness that we’ve given ourselves can lead us to a better life.

photo credit: TheTruthAbout

Frugal Christmas Tips

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Close Up of Christmas TreeI don’t want to panic you or anything, but Christmas is just around the corner.  Inf act, it’s only a hair more than 10 days away.  Some of you are way ahead of the curve and have had your presents bought and wrapped for months.  Others, like myself, are still finishing up your shopping.  For me, it’s a procrastination problem.  Others, it’s a funding issue, and they just have to wait until they have the money to spend on all those presents.

If you ask me, the presents are the worst part of the season.  I enjoy the holidays, but I truly despise the commercialization of them.  I’d rather not do any of the presents schtick and merely enjoy the time off work spend with family and friends.  Never mind that it would save us all from having to endure the marketing blitz that is the month of December, or the horror stories of those who risk life
and limb to get that super cool toy at 3 a.m., only to have their children play with it for five minutes and then go off to build a fort out of the box.

But, unfortunately for most, that part of the holiday has become so ingrained into the holiday that it is impossible to remove.  For those, I offer a few tips to help lessen the burden.

  • Give Homemade Gifts.  Maybe you are an excellent baker, or a scrapbooker extraordinaire, or maybe you’re handy with a tool.  Not only will making your own thoughtful homemade gifts be cheaper, but they also show that you put more thought into the gift than just perusing the circular and finding the latest thing.
  • Go in on gifts.  Many people, including myself, don’t have a very long list of smaller priced items that they want or need.  But, most have at least a thing or two that is higher priced that they either want or need.  Go in with a group of relatives or friends and buy that one big item.  You’ll get away with paying a lesser amount, while the person will receive a bigger gift that they want rather than a bunch of smaller gifts that they don’t really want.
  • Go dutch.  Instead of hosting a big meal and cooking it all yourself, make it a potluck.  Not only will you get the best that your friends and relatives have to offer as far as holiday food goes, but it will significantly reduce the amount you’ll spend on groceries.
  • Fill the holidays with activities.  It sounds silly, but the more down time you have to ponder the lack of presents, the worse everybody feels.  If everybody knows they’ll only have a little bit of free time before going off to play board games, they won’t notice a few less presents.

Whether you take advantage of ways to save money this holiday season or not, do try and keep in mind that the season is about spending time with those that you care about.  Try to overcome any of the usual holiday squabbles and enjoy their company, and enjoy the season!

photo credit: Tatiana12