Conquering Personal Debt

1
Conquering Personal Debt

• J. Peters Associates, Inc.
• Jerry Peters
• 651-645-7558
• Employee Assistance Programs

2
Financial Facts

• 6.4 percent of payments on bank-issued credit
  cards were late last year, a 20-year high
• 7 percent of homeowners were 30 days or more
  behind on loan paymentsa jump of 60 percent from
  March 2008
• Nearly 60 percent of Americans 40-79 years old
  have experienced a life crisis such as job loss,
  death of a spouse, or a major disability.
• Source AARP

3
Financial Facts (contd.)

• Women are more likely than men to be
  significantly affected, both financially and
  emotionally, by these life events
• Many people report making poor decisions or
  taking no action at all when experiencing these
  events
• 1.4 million people will file for bankruptcy this
  year
• 41-56 billion will be written off by credit
  card companies this year

4
10 Signs of Too Much Debt

• 1. You dont have any savings
• 2. You only make the minimum payment on your
  credit cards each month
• 3. You continue to make purchases on your credit
  card while trying to pay it off
• 4. You have at least one credit card that is
  near, at, or over the credit limit
• 5. You dont know how much total debt you
  actually have.

5
10 Signs of Too Much Debt (contd.)

• 6. You are occasionally late in making payments
  on bills, credit cards, or other expenses
• 7. You use cash advances from your credit cards
  to pay other bills
• 8. You bounce checks or overdraw your bank
  accounts
• 9. Youve been denied credit
• 10. You lie to family and friends about your
  spending and debt

6
Impact of Debt

• The reality Debt problems can take a regular
  life and make it a complete mess very quickly

7
Ways Out of Debt

• The best way to deal with a debt problem is to
  be organized
• Do a budget at least four times a yearand more
  often if necessary
• Have a plan for paying your bills on time each
  month
• Late fees average around 29-35
• Pay more than the minimum amount each month if
  possible
• Pay the most on the credit card with the
  smallest balance

8
Ways Out of Debt (contd.)

• Always pay your mortgage before everything else
• Foreclosure help is availablewith new government
  programs, the key is to act early
• For financial assistance, call Jerry Peters at
  651-645-7588 at your company-sponsored Employee
  Assistance Program

9
Whats in a Credit Score?

• Payment history
• This is the biggest factor in your credit score,
  and accounts for about 35 percent of the score.
  If youve had late payments or other problems,
  getting them behind you and letting time pass
  will help.
• Total debts
• Your total amount of debt counts for about 30
  percent of the score. If you have debts other
  than your mortgagesuch as a car or personal
  loana higher debt load could hold your score
  down.

10
Whats in a Credit Score? (contd.)

• Types of credit
• The variety of credit you have counts for about
  10 percent of your score. This includes credit
  cards, mortgages, installment loans, student
  loans, and other types of credit.
• New credit
• The amount of new credit you are applying for
  and/or receiving makes up about 10 percent of
  your score

11
Whats in a Credit Score? (contd.)

• Poor350
• Fair590
• OK610
• Good680
• Great750

12
Other Issues that Affect Your Credit Score

• Bankruptcy
• Judgments
• Tax liens
• Foreclosures
• Settlements
• Charge-offs
• Seriously late payments (90 days)
• Currently late payments

13
Credit Score Bottom Line

• The better your credit looks, the lower the
  interest you will have to pay.

14
Top 5 Credit Questions

• I cant pay my home loan and my credit card debts
  are out of control. What can I do?
• Take action NOW Talk with an expert about a debt
  management, investigate bankruptcy or
  foreclosure
• I just lost my job. How can I survive financially
  until I find a new one?
• Have a cash reserve
• Reduce your expenses
• Talk to your creditors
• Consider COBRA insurance

15
Top 5 Credit Crisis Questions (contd.)

• 3. My credit card limit was lowered. What does
  this mean for my credit score?
• Banks lower credit limits to reduce their risk
  exposure
• Your credit score could drop dramaticallyit
  appears youre maxed out
• Call the credit card company to see if you can
  have your limit increased
• Reduce your balance
• Open a new credit card account to counter the
  reduction

16
Top 5 Credit Crisis Questions (contd.)

• 4. I already have bad credit. Will a foreclosure,
  repossession, debt settlement, or bankruptcy make
  it worse?
• Once your credit score is under 500, you dont
  need to worry much about it getting worse
• Once on stable ground, work on rebuilding your
  credit

17
Top 5 Credit Crisis Questions (contd.)

• 5. The credit crisis hasnt hurt me yet. What can
  I do to be prepared?
• Get out of debt
• Build up 3-6 months worth of emergency savings
• Have a good credit score

18
Credit Score Fact

• Negative records stay on your credit report for
  7-10 years

19
Rebuilding Your Credit

• Survey the damage
• Order credit reports from all three credit
  reporting companies and review all three of your
  scores (see www.annualcreditreport.com and
  www.beingfrugal.com )
• Check the expiration dates
• You will see major improvements in your score
  when these records expire (bankruptcy, late
  payments, etc.)
• Dispute the errors
• If you find inaccurate records, fraudulent
  accounts, or records that should have expired,
  you have the right to dispute the errors (see
  www.credit.com)

20
Rebuilding Your Credit (contd.)

• 4. Start adding positive information
• The best way to improve your score is to add new
  positive information
• Open a new credit card or a secured card and use
  it responsibly each month (see www.bankrate.com)
• Keep balances low and always pay on time
• 5. Monitor your progress

21
5 Ways to Save Money During a Recession

• Insurance
• Are you getting the best deal on your home and
  auto insurance? The better your credit score, the
  better the insurance deal
• Phone plans
• Call your cell provider to see if there is
  anything you can do to cut your monthly bill.
• Compare cell plans from other providers
• Consider only one phone or a pay-as-you-go plan
• Save energy at home
• Check out the U.S. Dept. of Energys Home Energy
  Saver Tool

22
5 Ways to Save Money During a Recession (contd.)

• 4. Cable TV can cost 40-100 per month
• Negotiate a better deal or downgrade your service
• Switch to a free antenna with the major network
  channels
• 5. Credit cards
• Increase monthly payments
• Reduce your balance or interest rates
• 5,000 debt _at_ 16 percent interestyou save 4,500
  by increasing your payment percentage to 6.57
  percent and reducing your interest rate to 12
  percent