Digging Out Of A Money Trap
Last Update: 6:25 pm
Reported by: John Matarese
Never mind the housing crisis.
Bad credit may be the most immediate threat to the economy... with loan defaults and credit card debt causing a bigger concern for many families.
If you're one of the many Tri-Staters who've hit tough financial times, you may be wondering what's the best way to dig yourself out.
We have some suggestions.
Why are so many filing Bankruptcy?
After a string of tough luck on the job front, proof reader Andy Siegel found himself on the brink of financial disaster.
"I was supporting myself with my credit cards. I was getting cash advances to pay my rent and pay all my bills, "
So he filed for bankruptcy.
Like Andy, many families are teetering on the brink of bankruptcy these days.
Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights says "People are buying and borrowing, borrowing and buying. Credit card companies send out over three billion solicitations every year inviting people to take out a credit card and it should be no surprise then, that a lot of people do that.
Bounce back from Bankruptcy
Shopzilla.com --owned by our parent company, EW Scripps -- has some advice on how to get back in the financial game after bankruptcy.
Helen Malani of Shopzilla says"You need to contact all three credit reporting agencies to ensure you are listed as bankrupt because you want to make sure that "overdue" does not continue to appear on your credit reports."
Another good idea: A cash-only wallet to prevent overspending.
Meantime, you can't get a regular credit card after bankruptcy...so you have 2 options.
Helen says "You want to reestablish credit quickly. There are two ways to go about it. Either get a secured credit card, which in essence is like leaving a deposit. Or, you want to become an approved user on somebody else's credit card."
Once you get a new credit card...Pay in full each month to stay out of trouble, help raise your credit score.
Avoiding Bankruptcy
But what if you want to avoid bankruptcy in the first place? Many of the same tips apply. In addition....
--Go on a spending "diet."
--After paying the rent and utilities, Focus on paying down your credit cards.
--Transfer high interest credit card debt onto low interest credit cards if you can.
--Avoid cash advances and payday loans: Their interest rates will put you deeper into a hole.
--And visit a non profit credit counselor, which may be able to renegotiate some debts.
Most consumer groups recommend "Consumer Credit Counseling," with local offices in the Cincinnati area. You can reach them at 800-355-2227.
And dont worry about credit counseling hurting your credit: Your credit has already been damaged. At that point, it can only help.
The Warning Signs of Trouble
Finally, three warning signs that you could be heading for bankruptcy.
--One: You find yourself charging more than you can pay off every month.
--Two: You are paying only the monthly minimum on your credit cards.
--And three: You have no emergency fund, and are borrrowing from a home equity line or your 401k to pay bills.
If that applies to you, experts say call a credit counseling agency...so you stay afloat and you dont waste your money. I'm John Matarese.
wcpo.com
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