Don’t Get Bit by Snakes

snake-bite

I know what you’re thinking. What are snakes doing on a Christian Finance blog? Well, there’s a saying that says that if you play with snakes, you’ll get bit. Dave Ramsey even uses it to describe credit cards.

Well, I’ve got a great “bit by snakes” story for you. As many of you know, I’m on schedule to be completely debt free by next month. I’m still on schedule, but I hit a setback a couple days ago.

As many of you also know, I’ve been doing “credit card arbitrage” where I use 0% balance transfers and earn interest on the cash while using the cash to make payments. I don’t do this anymore, but I used a 0% balance transfer to pay off a student loan about a year ago and I made payments to a savings account to have the amount in a year so by the time the 0% was due, I would have the cash to pay it off. People can do the same thing with cheap home loans, especially when the rates are this low!

Before last week, I never had a late payment in my life. But I played with snakes and got bit! When I set my online bill payment for the credit card, I looked at the next statement date instead of the payment due date and so the payment was late. When I realized what I’d done, it was too late.

I checked my credit card account online today and almost passed out! My account “went into default” with one late payment and my interest rate shot up to 25.99% even though it was still under the one year 0% special. They also charged me a $39.00 late fee and a finance charge of $89.25!

This really wasn’t a surprise to me since credit card companies can do practically anything they want because their agreements (that you signed when you got the credit card) allow them to. So I decided to give them a call. Sometimes you can get a lot accomplished with one phone call.

To make a long story short, I got the CSR (customer service rep) to waive the finance charges and late fee and also reduce the interest rate from 25.99%! I actually was amazed at how easy it was. All I had to do was ask a few questions about the charges and then simply ask if they could be waived. It took maybe five minutes!

I’m glad I got those fees waived, but I’m still going to pay off the credit card tomorrow. This was too close for comfort and I don’t feel comfortable carrying a balance when I have the cash to pay it off. I will never use credit cards again. Lesson learned. I hope you will learn from my experience. God bless!

Post Updated November 12, 2012

Talk to Your Child about Students Loans and Smart College Plans

More and more, we are hearing about students who are buried under a mountain of student loan debt. Some default and suffer severe consequences. Others manage to pay back the loans, but the minimum payments are so high, they have to move back in with their parents and don’t pay off the loans for 20 or even 30 years. Meanwhile, their lives are on hold.

Instead, take the time to talk with your child about student loans. Many students who have such a high debt load chose to go to expensive private or out-of-state colleges.  Examine the many choices that are available. Can your child go to a community college first?  Can he or she get a good education at a local university? Using both of these strategies will cut your child’s student loan debt immensely.

Remind your student of life stages she may miss out on or have to delay if she has a five or six figure student loan debt:

  1. Home ownership.  Many people buy a home once they graduate from college, if they are not burdened with student loan debt.  Home ownership has many advantages—you have your own space, you can take advantage of significant tax deductions, and you are not “throwing your money away” as some say you are if you rent for a long period of time. In the current economic climate, interest rates are so low that a home loan is even more affordable. However, if your child has student loans with expensive monthly payments, he can’t take advantage of the power of home ownership.
  2. Getting married. The median marriage age for women is 25 and 27 for men.  However, young professionals who are deep in debt often push back this time frame until their 30s. If both your child and her partner have debt, they could be in an even more difficult financial situation. Many delay marriage until they have reduced their student loan debt considerably.
  3. Having children. Just as these students delay getting married, they also delay having children. Having children is expensive, and when the majority of your money is going for student loan repayment, thinking about the tenants of “adulthood” such as home ownership, marriage and children, can seem out of reach.
  4. Retirement savings. Many college graduates initially neglect their retirement savings so they can apply more money to their student loan debt.  However, they then miss out on the power of compound interest that can make their retirement savings stretch further. Instead, they wait to invest until their mid to late thirties, when they will have to invest more for the same retirement they could have had if they had started investing in their twenties with less money.

Often students don’t realize the consequences of deciding which college to attend. Take the time to explain to your child how much student loan debt can burden their future and their ability to buy a home, get married, have children and save for retirement.

What is a Credit Rating?

A credit rating is a score that summarizes the credit worthiness of a business or government.  It is usually made by a credit rating agency (such as Standard and Poors or Moody’s) and is based on the debtor’s ability to pay back the debt and the likelihood of default.  The higher the credit rating, the less likely the debtor is to default, thus the safer it is to loan money to them.

 

 

What Are the Common Credit Ratings?

 

Credit ratings are broken down into short term and long term credit ratings.  Some companies call them different terms, but short term ratings always look at the possibility of default within a year, while long term looks over a long time frame (such as 20 years).

 

While each rating company is slightly different in the term it assigns, the general breakdown is as follows:

 

Investment Grade Ratings

Prime Credit: AAA (or Aaa for Moody’s)

High Grade: AA (AA+, AA, or AA-)

Upper Medium Grade: A (A+, A, or A-)

Lower Medium Grade: BBB (BBB+, BBB, or BBB-)

 

Non-Investment Grade Ratings

Non-Investment Grade Speculative: BB (BB+, BBB, or BB-)

Highly Speculative: B (B+, B, or B-)

Substantial Risks: CCC (CCC+, CCC)

Extremely Speculative: CCC-

In Default: D (or C for Moody’s)

 

 

What Are They Based On?

 

These credit ratings are based on a variety of factors, but all relate to the risk that a borrower will fail to make the payments which it is obligated to do.  The risk is that the lender could lose principal and interest, and face increased collection costs.  The loss can also be complete or partial.

 

Some typical factors for analyzing risk include operating experience, management expertise, asset quality, whether they have a current account, leverage and liquidity ratios, and more.  Most lenders employ sophisticated algorithms to analyze and manage risk.  Most of these algorithms are confidential, but you can assume the basics are included, like cash flow, amount of debt, and more.

 

Furthermore, any lending is typically subject to terms and conditions on what the company can do going forward, to lower the credit risk to the lender.

Five Key Facts About Credit Ratings

Having a good credit history is very important when it comes to making an application to borrow money, and most people agree that credit ratings are extremely important. However, very few people actually know precisely what a credit rating is and how they’re constructed, so we’ve pulled together five key facts that will give you a much clearer idea about everything concerning credit.

Your Files Are Not Secret

A lot of people say “it’s too complicated to check my credit history” but it’s actually very easy with companies like CreditExpert and time extremely well spent. You have the right to see your credit rating and to make sure that any errors that are on it are corrected immediately. Most of the time the credit companies will do amend any errors for free. Bear in mind that simple things like old mobile phone contracts that were never fully cancelled can have an effect, so it’s good to do a spring clean at least once a year.

Black Lists Don’t Exist

Each lender has their own criteria of what represents the perfect customer, and it might not necessarily be the same from lender to lender (in fact, the odds are that it’s not). So, just because you’ve been turned down from one bank doesn’t mean that you’ll get turned down by another. However, it’s a good idea not to make too many applications in quick succession, as each time you do a ‘search’ will be carried out on your credit rating, and too many searches in a short period could raise the alarm.

Profit Is More Important Than Risk

Most people assume that the banks decide who they’ll lend to on a basis of risk. If you’re not likely to pay back any debt in full, they shouldn’t lend. Unfortunately, that’s not the case, if you have a perfect credit history, never have credit card debt and pay everything off in full as quickly as possible you could still be rejected because you won’t make the bank very much money. This is rare but it does happen.

Use Your Rights

As mentioned above you can correct any errors on your credit report simply by writing to the credit agency concerned, however, sometimes you may have to talk to the company who filed the report, rather than the credit agency. There are a whole strings of rights attached to credit reports, and you should never have to pay to have something amended. If you’re having real problems, you can always talk to the Citizen’s Advice Bureau.

Your Credit Score is Not Fixed

You may have seen adverts for products that will ‘repair your credit score’ and these will usually cost you money without making any difference to your score. However, there are a whole list of things you can do to improve your credit rating, whether it’s something simple like getting on the electoral roll, or cancelling an old phone contract. So, if you do check your rating and it’s not so good, there’s no need to fear the worst.

Payday is Simply Too Far Away

Cash advances are matched to your payday and will need to be returned on your payday itself. Cash advances are helpful for unexpected emergency cash needs. Cash advances are short-term cash advances meant to fulfill your urgent monetary needs. Cash advances are compact, short-term loans with higher than normal interest fees.

Cash advances undoubtedly are a short-term way to obtain credit which should be used for unanticipated emergencies along with other immediate needs. Loans which are made for people that have especially poor credit are known as bad credit Cash advances. Cash advances are occasionally less difficult and much more inexpensive than a credit card cash advance. Payday loan is also known as a cash advance, paycheck loan, or payday advance.

Cash advance is meant as a stopgap solution, not an ongoing cure for financial difficulties.

Loans are typically obtained up until customer’s up coming pay day, hence its name, cash advance loan. Cash advances certainly are a quick and dependable way of getting a money advance until your following pay day. Cash advances are extremely beneficial indeed. You will get them although you may have bad credit scores. Cash advances are absolutely hassle-free, given that they require no credit assessment. Cash advances are generally created for poor credit borrowers who may have difficulty obtaining money quickly in order to meet urgent costs.

Cash advance is generally accepted within hours, so you have cash in your bank account the very next day. Cash advance has come forth with the lone function of filling in a hole within the conventional lending solutions. Cash advance is a reasonably new idea within the customized financial services for today’s hectic society. Cash advances are amongst the fastest and most effective ways you can get a loan today. Cash advances can even be found online today.

Cash advances aren’t too costly or too difficult to settle on the next payday. Cash advances are providing you with some top notch benefits. Cash advances can assist in paying bills until you reach your next payday. Cash advances aren’t a long term solution for any real problems. Cash advances are a great way to get out of a tight situation, and they are much better than bank loans.

Guest Post by David