Lordy Lordy, Look who's Forty (Percent Paid off)

Whoo! I'm cruising along!

Ladies and Gentlemen, I am very happy to announce that I have managed to pay off almost 40% of my debt now! Isn’t that incredible? It’s barely been a year! Not only that, I have paid off more than $11,000 in credit card debt! I am unbelievably happy about the way things are going with my repayment plan. Now that the interest payments are getting massacred, I am paying off more and more principle so MasterCard doesn’t know what hit them. What makes me even happier is that I bought 2 plane tickets home for the holidays for $700 each AND gave $100 to charity and despite having purchased $1,400 worth of stuff; I still managed to reduce my card to $3,558! Finally I am feeling more like one of the converted.

During this economic meltdown, I am becoming quite grateful that I started this process when I did. I can’t imagine what some people out there must be feeling with debt like I have and the possibility of losing their jobs looming over their heads. I think the message is becoming ever clearer: we need to plan better. Not everyone is going to agree with everything I say, but I think it’s about time some of us got a debt enema and cleansed out some of this $hit. I read an interview with my besty, Gail Vaz-Oxlade where she talks about getting rid of credit scores and eliminating credit card debt. She describes a generation out students that got duped into signing up for credit cards with high maximums and embarrassing interest rates.

Inspiration!

To make matters worse, the government’s student loan program has ridiculous interest rates and students are paying the price. To add to the frustration, it is getting harder for graduates to find a good enough job to even start to pay back their loans properly other than with just the minimum payment. The repayment plan is so lousy that they have people paying off their student debt for 10 years and accumulating thousands of dollars in interest. It’s no wonder this generation is not learning any positive lessons about credit. Now don’t go thinking that I’m going to be sitting in some tent somewhere protesting about the world’s inequalities and all the problems that causes (believe me, the list is huge), but I really just want to shake some sense into some people who think that it is sustainable to live the way they do and rack everything up on credit. Why do we always try to keep up with the Joneses when they are probably in just as much (or more) debt than us?

This is the part where I challenge you. In Gail’s interview, she is challenging everyone to live without using their credit cards for the week of November 13 to 19. Just one simple week and it’s so much easier than you think (believe me; I go months at a time). If you are one of the people who is automatically thinking, “no effing way John, I can’t live without my credit card, especially during black Friday”, then you probably really need to try this exercise. Really, calculate how much money you are spending every year on interest. On a card with 19.9% interest, your $100 item becomes a $119.90 item in a year. You buy a $1,000 item and that jumps to $1,199.00 for that item. In my case, my interest rate was 18.9%. I carried a $14,581.45 balance, which means that in one year, I would pay $2,755.85 in interest! It’s no wonder the credit card company kept increasing my limit; they wanted me to be able to carry more money on my card!

I think the sign is self explanitory

So here’s where I challenge you (see what I did there, it’s called role reversal); try to go a week without using your credit card, or better yet, go the entire month. Leave your card in the freezer, throw it behind a heavy piece of furniture, and just learn to leave the house without it. For those of you who are feeling extra ambitious, go the extra mile and calculate how to get rid of the balance on it once and for all.  There is a great debt repayment tool on CNN that allows you to enter as many of your debts that you have and it tells you exactly how much you will need to pay on each one of your debts. You can then set it the time you want to pay it off in and it will adjust the figures accordingly. Give it a go! You really can pay of the debt, it just takes a bit of focus but it is certainly possible.

Good luck with your challenge everyone!

John

Report Card

Political Attack Ads always tell the truth

Today I did something that I have been dreading for a while; I got my credit report! Getting my credit report was actually the first thing I did today (well next to the getting out of bed). It was just like Christmas morning when you’re a kid and you leap out of bed in your pajamas and open your stocking; only in this case I leapt to my computer (in true total nerd fashion) and instead of pajamas I was wearing my tiny underwear and an open bathrobe, much to the delight of my neighbours across the street.  I wasn’t really sure where I was supposed to go to get my report and I was certainly weary of entering all my personal information into some credit site. If it were a scam I would be completely effed and my credit rating would nosedive into a steaming pile of $hit. I had heard about Equifax on the tee-vee machine so I figured if it’s on television, it’s got to be legitimate – much like a political attack ad - right?

So here I am, a sunny Sunday morning, sitting at the Equifax website and entering in all my personal information and after a few clicks of the mouse and several strokes (on the keyboard that is), I came to a screen where they gave me a number to call to speak to someone at Equifax. 9:30 am, waiting for someone to answer the phone and 20 minutes later, my phone battery is almost dead so I’m attached to the phone charger waiting for these Equifackers to answer their gosh darn telephone.  You’d think that most people wouldn’t be checking their credit history at 9:30 a.m. on a Sunday (apparently no one goes to church anymore), but alas, I wait and wait. Finally, someone answers and the line is so fuzzy that I can hardly hear what the guy is saying. Whoever he is, he has an accent, but that’s not the issue, I can totally understand what he’s saying, but I have to keep asking him to repeat himself. I could hear the frustration in his voice and I’m sure he thought that I was some racist making him repeat himself because he wasn’t speaking proper “American” but the reality was the awful static on the phone line. Our conversation went something like this:

Equifacker: Thank you for calling Equifax, how can I keeerssssssssssshhhhhhhh

Me: Yes, hi. I’m calling to verify my account so I can see my credit report.

EF: Certainly, no probkerrsssh. Can I get your kkkkkkkkkkerrrrrrrrrrrressssssssssssh?

Me: My what?

EF: Your neeeessssssssssshhhhhhhhhhh

Me: Sorry what?

EF: Name, your namssssssssssssshhhhhhhhh

Me: Oh, my name is John.

EF: Thank you. Can you please tell me you current shhhhhhhhhhhhhhhhhrrrrrrrsshhh

Me: This is going to be a long conversation.

This went on for a good 10 minutes, and that my friends, is why it took 20 minutes to get through to an operator at Equifax. In the end, he had an incredibly difficult time entering my address in the computer since I live at a “half” address which no computer anywhere seems to understand and the conversation always involves the poor operator running to ask their supervisor how to enter my address. Anyway, now my account is all set up, so I logged in to receive the news that I have been avoiding to hear for the past forever.

Equifax has a rating scale of poor, fair, good, very good, and excellent. Apparently 47% of people have an excellent credit rating according to them. I on the other hand have a better credit rating than 10% of the population. Yes, I am not good, I’m not poor, but I’m “fair”. I don’t know how out of all those options they were able to determine my skin tone, but I can’t say I am overly happy with my “fair” rating. Being told you have a “fair” rating is like being told you’re not quite the smelliest fart, but most people would still have to leave the room if you broke wind.

So what does this mean? Double Rainbow? Fair? Equifax tells me that my rating means that most lenders would consider me to be a high risk; that I may have difficulty qualifying for conventional loans and credit cards - and when I do qualify for credit, I may be charged high interest rates. Well no $hit Sherlock. I must say that it is comforting to know that most banks are not going to approve me for a credit card so that if I get into some money emergency, I can’t run to the bank and get some credit to bail me out. What I didn’t know is that because of my rating, banks may force me to pay higher interest rates. This makes sense to me though since the banks know that they can make a truckload of moolah from my interest since (until 6 months ago) I carried really high balances. The rest of my credit report didn’t surprise me with any other information that I didn’t already know about myself. I knew who was looking into my credit, and I knew where I had screwed up (like that stupid Ikea card for example). I was happy to see that my damaged credit is only going to be on there for 6 years (not the 7 that I thought it would be) so my history with Ikea will be gone soon. I was surprised to see that MasterCard was checking up on me to see my credit history which coincided with all the telemarketing calls and balance increases that I have been getting from them and Rogers and TD were just as guilty. It’s no wonder that I am all of a sudden getting all the special offers from these companies.

I recommend that you get a credit score to find out where you’re at with your credit. It is a useful tool when you’re embarking on a debt repayment journey to show you the whole picture as to why you’re in the position you’re in but don’t take it too seriously. You might be surprised to see that you are one of those 47% with an excellent rating. If you’re in the “poor” category or even in the “fair” category like I am, don’t panic. Your credit score is not the only tool that lenders use to determine if you are a high risk for a loan. Depending on the lender or the type of loan you are looking for, other factors come into play such as your income, marital status, and so on. Now, Gail hates the credit score system, but she does recommend that you check your credit score at least once a year, so in her blog and in her awesome book “Debt Free Forever” she has her own scoring system to help you understand other factors that can affect your rating. The more “points” that you get, the better you’ll fare with the banks. Some of this information may come as a surprise to you so get a pen and paper and let’s do your score à la Gail (with a twist of John humour).

MATLOCK!!!!!

One of the first rules is not to lie about anything. If you’re lenders catch a whiff of your bull$hit, they’re probably not going to believe anything else you tell them either. If you’re under 21, you don’t get any points – and why should you? You can’t even rent a car or drink in AMERICA! If you’re between the ages of 24-64, you get a point because odds are; you’re working at a real job (unlike those under 21s who are probably all drug dealers and prostitutes – so untrustworthy). If you’re over 65, you don’t get any points either because you’re old and probably going to spend the entire bank’s money on prune juice and Matlock VHS tapes.

If you’re single, you don’t get a point. If no one else will marry you, so why would the bank, right? If you’re married, you get a point. Apparently you know how to commit to something – congratulations. Divorced? Who cares? Not the bank anyway – zero points.

You don’t have any kids – well then you don’t get any points. As Gail mentions, you’re probably some party animal who spends their nights out drinking and dancing at the clubs instead of being responsible and taking care of the baby. You also don’t have any ties to bind you to your home so you’re considered a flight risk since NO ONE would leave a baby behind – riiiiiight. If you have 1 to 3 mouths to feed, then you get a point. You’re a responsible, baby making citizen and you’re making future debt holders. If you have more than 3 dependents, you don’t get a point. Can’t you keep it in your pants? How ever will you stay out of debt with all those people depending on you to survive?

Where do you live? Are you still mooching off your parents? Are you living in some tornado-ridden trailer park? If this is case, no points for you! Are you one of those incredibly sexy individuals renting an apartment – you get a point! Own your own home with a gi-normous mortgage – you get 3 points! Woohoo! Own your house, but don’t have a mortgage? We need to talk about how you got there and give yourself 4 points for being so freaking perfect! Where did you live before and how long were you there for? If you only lived at you current address for less than 5 years, you don’t get a point. Your life is clearly too exciting for a lender to trust you to stay put. Have you been in the same spot for more than 5 years? Well lucky you, you can add on another point to the tally.

How long have you been stuck with pleasantly content with your employer? According to Gail, the longer, the better; and I thought you ladies said that size doesn’t matter?! Less than a year with your current employer gets you a big, fat zero! One to three years will snag you another point; four to six nabs you another 2 points, seven years or more, you’re probably ready to throw your computer out the window, but don’t fret, you get 3 more points – and you thought all those years of service were for nothing!

Not so surprisingly, banks do keep track of the loans that you pay off with them. If you have paid off a loan in full with your bank, you get five more points! Wowsa! If you have a good record with your other lenders, you might just grab yourself another 2 to 3 points! The more money you make, the more credit you get. If you have a checking or savings account with a balance over $500 then you get 2 more points.

Here’s where I was surprised, having a landline in your home actually will earn you 2 extra points. This is because when the banks call you and you answer, they know exactly where you’re hiding. Looks like my iPhone was a wasted investment!

So there you have it. The higher your score, the better you’re going to do when asking for money from the bank. Remember that these factors blend with your credit score when lenders are considering you for credit. If you need to get a loan to pay for school or something else that actually makes sense to take money out for and you can’t get a loan, you can get a cosigner. You have to make sure you’re paying this off though otherwise you’re not just effing up your credit history, you’re effing up the other person’s credit too. Checking your credit report is a good way to see what’s been happening with your credit and who’s checking up on you and it lets you know what you need to do to get your rating out of poor and into excellent! Right now my credit rating is 636 out of 900. A year from now I’ll check it again and I hope that I’ll be at least in the 800s!

Thanks for reading this super long blog entry. I now know that length does matter. Thank you, Gail.