Tuesday, December 11, 2007

Credit score: How to bite it in one stroke

My credit score was rising steadily. It inched into the 700s and was looking good. Then I got a call. I had not paid a credit card for over 90 days. It was a card that I thought was paid off and for which I did not receive paper bills. Apparently I had signed up for online bills only but I forgot that and did not even know I had registered that account. It did not show up when I went to that bank site and logged on.

The reason it did not show up is that it is a business account and my other account was personal and the two automatically are on different pages. But I did not know that.

The upshot is that I was not paying this card, which had a low balance, because I didn't know I owed anything. As soon as I learned that I was behind I got caught up. Nothing overdue. But the damage was done. My credit score plunged about 300 points!

There was one other contributor: my high debt level. But that wasn't particularly new. The overdue bill was the biggie. So now my credit grade is "HR" - high risk!

Here's what's irritating about that: If you look at my credit history you will see nothing but green for miles. Bills paid on time, usually ahead, and more than the minimum, for many many months. Then this one bill is overdue. One out of fifteen cards. Anyone looking at that might ask me what happened and I have a reasonable explanation. But what happens is that the lenders look only at the score and they have no idea why it is so low. They think I must be a high risk. But I am not.

It's a dirty business, to be sure. Ugly. Fortunately, I don't need any more credit right now.

Getting into Prosper

I am in a Prosper "webinar" right now. These seminars are conducted through gotomeeting.com, and I just discovered that you have to call in to get the audio. I hate that so I'm not calling, just watching the stuff I can see. And what I see is basic. These seminars appear to be for beginners. Yes, I am a beginner, but I have figured most of this out already. It is helpful, though, to see the choices available to me on Prosper, as a lender. It's also possible to ask questions using a separate chat-type box, so I did that. Then I answered my own question.

Tuesday, November 13, 2007

Big money

I will be receiving an unexpected windfall in December. A nice sum of money. Ever since I learned of it I have been trying to work out how to make good use of it, how to stretch it yet have fun with it. My main goal is to reduce the payments I make every month, and I will be able to pay off all of my credit cards and set aside the money for my car loan (the interest rate on the car loan is so low it actually makes sense to put that money into a savings account and pay the loan off from there rather than pay the car loan off immediately), which will cut my expenses by about $800 per month.

I am relieved, of course, to have this piece of luck on my side. I didn't do anything to earn it. At the same time I fear myself. My daughter suggested that I set aside a specific amount to blow on fun stuff, and I love that idea. I can put that amount in a separate account and keep track that way and then I am less likely to go through the money without realizing it.

In addition to the fun money, I will take out some for putting down a chunk on my house loan, giving a bunch to various charities, and finding some ways to keep the rest earning money. I will also purchase items I want: energy-efficient, more effective appliances and some camera lenses and other equipment. Items that will make my life more pleasant and that will save some energy, too.

What has been funny is that knowing about this money has not made me deliriously happy. It has given me headaches.

Saturday, October 27, 2007

Calling the credit card companies

It's no secret that the way to get the interest on a credit card reduced is to ask. The companies won't do it out of their sense of good will or from any sense of right and wrong. Would they be in the business of charging over 30% per year if they were?

So I finally got up the stuff to start making calls.

First I called the Bank of America. This card, incidentally, started out as a Wachovia card and had excellent interest rates. Then it was sold to another bank, and then to Bank of America. Now the interest is somewhere around 27%. My payments are always on time and always more than the minimum. I did nothing to "deserve" this ridiculous interest rate.

I tried one customer service line and got voice mail options that did not include any for changing interest rate and did not include ever speaking to a real person. I tried several of the options and just went endlessly into voice mail options, none useful for my purposes. So I hung up. I found another number for them and called that. Got exactly the same thing. So I went online and sent them a message through their message form. The information on the website said they would respond within 12 hours. That was two days ago. And of course I have gotten no response. So I am nowhere with that card, yet.

Then I called citiCards. I spoke to a real person. He talked fast and with an accent I did not recognize (not Indian). He reduced my rate by ten percent, from 23.74 to 13.74%. That's a victory. At the same time I somehow signed up for credit protection that I do not want. I can't cancel it until I actually see it on a bill, and you can be sure I will cancel it then. I wish that I had a tape of that phone call because I had so much trouble understanding what was happening that I kept asking him to repeat and repeat. Ultimately I couldn't take it any more so I did not try to cancel that credit protection thing on the phone. A victory, nonetheless. A reduced rate.

I called Chase. I have two cards, one personal, one business, with Chase - both Amazon cards. For some reason I have not been getting my business statements and I had charged something a while back on it and thought that I had paid it off. Just a few days ago I learned, from a phone call, that in fact I still owed something and that it had not been paid in over 90 days. Well, that sucks. I made a payment then but of course that 90 days is bad. I also made one late payment on the personal card, a few days late, this month. My head was just not on straight and I got it done late. Because of the 90 day thing I understood that the interest rate on that card could not be reduced. But I was really irritated to learn that the personal one could not be changed either because of one payment a few days late. After years of paying on time and more than the minimum. The guy said I could try again in a couple of months. I said "sure" in a sarcastic tone and hung up. So no victory there.

I will call about my paypal card today. I forget what bank has it now - like the others, it has changed several times. I have a couple of cards that I have not used at all - Ikea and Dillards - and maybe I can get those rates reduced, but I suspect not. They probably like to see some activity first.

So far, then, one for three. I have an idea about Bank of America. These systems all seem to work the same, and most of them say you can talk to a real person by pressing zero. Even though the BofA operator does not say this I suspect it's true. So I am going to try that.

EDIT: October 28, 2007

I called the BofA number again. This time I pressed 0, even though this was not an option offered to me. And it worked. I got a real person. I told him what I wanted to do, to lower the interest rate. He said that the people to call for that are not working today, and he gave me the number to call tomorrow. In the meantime he tried to talk me into opening a line of credit at a lower interest rate so I could move all of my credit card debt there. I wasn't going to apply for that without thinking about it, so I said no thank you.

EDIT: October 30, 2007

I called the new number for BofA. I spoke to a person who was actually personable, like a real person. For those of your with B of A cards who want to try this, call 1-800-718-6135.

She reduced my percentage rate to just under 25% from just under 29%. Not much of a drop. She also suggested that I apply for a "Gold Option Line of Credit", which I did (she transferred me to someone else). The line of credit was denied. It sounds like a better option than a credit card for those who qualify: unsecured, up to $50,000, no annual fees, no prepayment penalty. It is for a set term, like a mortgage.

Wednesday, October 24, 2007

Prosper Days

I will be going to the Prosper Days with a press pass. So I will be recording my experiences and what I learn from it here.

That will be February 25 and 26, 2008. You can read about it here.

A prosperous trip?

I just read of "Prosper Days" on the prosper website. Prosper is the place where real people, like me, can loan money to real people, like you. Or get a loan. I have made three small loans so far and am happy with the regular little payments coming in. A lender can do much better here than with a savings account, if she manages loans to minimize risk. The basic rule there is to look at the credit rating and make small loans. I am guessing that at Prosper Days there is a lot more information that can help me make the most of what I can lend.

For the buyer there is certainly a plus, too. You can ask for a loan at a much lower rate of interest than you are already paying on credit cards and other loans. And it's nice knowing that average joes like me are getting the money instead of money-grubbing institutions.

So I am considering attending this conference. It's in San Francisco and is just a day and a half. That would mean two nights' lodging there, not so bad, and registration.

Tough going

I worried that when I had to start making house payments I would find it to be quite a struggle. That is, in fact, the case. I don't yet know if I can manage it on my present income with my present expenses, because there have been extraordinary expenses, mostly related to the move. It all needs to shake down so I can see what's what more clearly.

On the plus side, I am eating out a lot less often than I was before. This because I have a nice new kitchen that is easy to use, has plenty of space, and has appliances that work. I am especially delighted to have a working oven. Oh, the cooking that goes on! I am quite savvy about making meals cheaply, too.

I just requested a change to my house loan. When approved I will be making two payments a month instead of one. And thereby I will shave two years off the loan and save about $12,000 in interest. This won't help me on a daily basis but it's no harder than paying once a month so it's clearly the right thing to do.

Monday, September 17, 2007

costs

For my foodstamp challenge I am accumulating some approximate prices. Using receipts from various stores I can approximate:
(prices are not necessarily the cheapest possible)
5 # white bread flour: $3.50
2# bag white rice: $2
1# bag beans:
red: 1.05
white: 1.05
lima: 1.80
kidney: 1.35
great northern: 1

1# bag lentils: 1.05
1# bag split peas: .85
3-pk, 19 oz ea, tofu (Costco): 3.15
12-pk stewed tomatoes (Costco): 7.50
10# large yellow onions (Costco): 3.30
lge bag broccoli (Costco): 3.80
large box mushrooms (Costco): 4.50

As I get more prices I will enter them into this post, to keep them together and make this whole thing less boring to read.

Friday, September 14, 2007

The recipes for the food stamp challenge

I have developed a list of dinner menus in a general form:

Red beans and rice (one batch = 4 meals)
Noodles & stirfry vegs(2 meals)
Lentil soup & bread (3 meals)
Pizza & salad (2)
Ratatoulle (3)
Stuffed bell peppers & salad (2)
Black beans and rice (4)
Potato soup & bread (3)
Garbanzo beans & bread (3)
Split pea soup $ bread (3)
Chili & salad & bread (3)

That's 32 meals. The number of meals is, of course, approximate.

Lunches

Red pepper grilled sandwich (1)
Vegetable soup & bread (2)
Pizza (2)
Tofu stir fry w/rice (2)
Split pea soup (3)
Rice mix (jambalaya?) (2)
Chili & crackers (3)
Stuffed cabbage (2)
(need more)

Breakfast items:

Potatoes
Oatmeal
Pancakes
Toast & cashew butter

The Foodstamp Challenge

I am getting ready to try the foodstamp challenge. What this means:

I will attempt to feed myself on approximately three dollars a day, the average amount that food stamps pay for an average recipient. I recognize that:

1. Foodstamp recipients often have other ways to obtain food. It's likely that most of them do not rely solely on food stamps.
2. I am educated, have lots of free time, and I not only know how to cook but I like to cook. I suspect that most foodstamp recipients do not have my depth of knowledge of nutrition and of cooking, and that most do not have ample free time and energy to devote to providing food. Therefore I do not count myself as an example that actual food stamp recipients can easily follow - although I do hope that some would be able to.
3. The challenge, then, for me, is to find out if I can live on much less than I do now, and do so healthily.

The rules for my particular challenge:

1. I will spend $100 for one month's worth of food. I decided on a month because I am only one person and it is more difficult to purchase food in small quantities at a good price than in larger quantities. A month also allows me to make the same dish once for several meals. I will eat one meal and freeze the others.

2. I won't purchase staples such as herbs as part of the $100. This type cost would be spread out over many months as this type product lasts a long time.

I will begin when I have developed a list of recipes and a shopping list that is reasonably accurate in terms of quantities and costs.

Monday, August 13, 2007

Up again

What's a story without a little drama? We get to ask ourselves, will she make it? At this point the answer is still out there.

My debt has increased in the last month or so. I was on the road from June 10 until about July 20, which created quite a strain on my financial resources. Then I moved into my new place, assumed a huge debt, and went out to buy new stuff.

Oddly, I don't feel awful about it. I don't expect to be buying stuff for the house constantly. I still am going out there to fill in some gaps (yesterday a new hose and hand-held vacuum) but the spending has slowed and I expect it to get down to a trickle. More importantly, I am okay.

I was determined, when I moved to my new house, to make a fresh start. This meant not taking old furniture with me, not even taking old plates and glasses. I did bring a lot of stuff with me (there is still a storage building waiting to be emptied) but most of the furniture is new.

My vision was that I would accumulate enough savings to be able to furnish the house without taking on further debt. That didn't happen. But neither have I been recklessly extravagant. At this point I have enough to live. I am no longer feeling pressure to run out for sheets or towels or cleaning supplies. So I can take breaths and look for what I want in a more leisurely fashion and even buy some things from thrift shops. I'm looking for mirrors.

Friday, June 8, 2007

down more

My credit card debt is now about $8100, down from over $11,000 in January. At times I feel like I'm getting nowhere so it is good that I'm keeping these records. I can see the progress, even though from time to time I have an expense for which I do not have cash and I put it on a card. I try to get that paid off as soon as possible, that extra expense, so I can be back on track.

Even better, with some of the cards paid off there are fewer payments so it is easier to deal with what's left and to continue to make bigger payments on the higher-interest cards.

I am still worried about how I will pay for everything when I have my new home but I suspect that with some judicious cutting here and there I will do all right, although I will certainly notice.

Wednesday, May 23, 2007

worries

I do not have a good handle on my money yet. This week I have had to shell out several hundred dollars for veterinary care and I didn't have the reserves. I need to have the reserves.

I worry about my new house and how much it will cost every month. I think I may become a serious recluse, only leaving the house once or twice a week, once I have that house, so I can cook all my meals and not pay much for vehicle use.

Wednesday, May 16, 2007

My new home

My new mobile home has been ordered. I am worried about making the payment every month. I've been worried about this since I first started on this trail. My life is likely to change significantly unless I find another source of income.

Wednesday, May 9, 2007

Prosper loan request number 1...

My first effort to get a loan through prosper.com failed. That is, nobody bid on it. A number of members wrote to me, saying the trick is to set a higher max interest rate up front. After a few days, people will start bidding lower rates and I should get the rate i want, or close to it. Others sugggested that I join a group, that I would be more likely to be funded. Of course it was group leaders who suggested this.

I haven't made up my mind about groups yet. It turns out that my credit score is "C", and with that score the averages show that I would do better in a group, a hair better. If my score goes up to B it may be less certain. And I am very close to B.

So I went through a simple process to become a lender in the meantime! And I bid on another loan. Bid $100 at 15% on a loan request with a max interest rate of 20%. I figure I might as well see about making some money while I make up my mind about the next request for a loan.

That request may happen soon, though. I got the estimate for the landscaping and replacement of my driveway (asphalt dug up, concrete poured) for my new home and it was a lot higher than I expected. I may need to get a loan to pay for it. I spent the last couple of days getting past the pain of this new debt. I have been working very hard to reduce my debt and it looks like I'll be kicking it up quite a bit very soon.

Monday, April 30, 2007

Prosper part 2

I made my request for a loan through Prosper. I have gotten no bids yet but have gotten messages from four different groups on there, all offering to take me into their folds. The groups form to create lending and borrowing power. I am frankly at a loss to figure out which group I should join. It appears that going it alone is a lot more difficult. People want more of an assurance that the loan will be paid back and when one is part of a group that assurance is there. Rather like group insurance.

So this will be the next challenge: to figure out which group.

Wednesday, April 25, 2007

Prosper.com

From some other personal debt sites on the web I just learned about prosper.com. This site gathers people who need money and people who have money to lend and puts them together. The borrower asks for a specific amount of money and gives a max interest rate. The lenders bid on the loan. Prosper puts together the "winning" bids for the final interest rate and the borrower makes one loan payment per month, deducted from her bank account. Loans are spread over a three-year period, which is, interestingly, the length of time Pay it Down (see book at right) says we should strive for to reach debt-free status.

Prosper gets a fee for putting the pieces together. I just asked for a $3000 loan at 12% interest max. For this loan, Prosper will take a $30 fee, if it is funded.

New credit card

Over the past year my credit score has gone from about 590 to 690. So now I get many offers for cards in the mail. After checking bankrate.com (I love that site) for what's available, I settled on one that had come in the mail, and yesterday I went online to accept the offer. I got the 8.99% interest rate that the letter had offered (with an asterisk - depends on credit) and I noticed that they charge a fee of 3% for balance transfers. I figure that still is going to put me way ahead if I transfer a balance from an account with an interest rate of almost 33%. Which, I might add, should be illegal.

I therefore also requested a transfer from that high-interest account. I will find out in about three weeks if that has gone through. I don't see that there will be any problem. And I am proud of myself for doing this. I have other high balances on other high-interest cards that I need to deal with too, but I will be happy for this moment.

Sunday, April 15, 2007

The tax money

I got my refunds and I have spent almost all of them. I put $1000 into an account for future new furnishings (I am trying to replace my home with another home). I paid a lot on several credit card accounts. I have made several small purchases as well. I am sure some of them, maybe all, were unnecessary, but I am getting pleasure from them so I don't regret it.

My credit card debt is now under $9,000. That's a lot but I'm encouraged.

Sunk Costs and Regret

The book, The Paradox of Choice: Why More Is Less, has invaded my brain. In a good way. The discussion of regret and of "sunk costs" in particular are concepts that are well worth thinking about.

"Sunk costs" are those costs you have already paid for an item or service. People in this country have a tendency to pay too much attention to sunk costs as a determinant for future actions. For example, if you bought a ticket to a concert you will likely feel compelled to go to the concert because you paid for it. The better way is to make the decision to go or not go based on what you actually want to do. The money is gone either way.

Yesterday I paid for new lenses for my current eyeglass frames. I paid a lot for these lenses and as soon as I left the store I started to regret it. But it is done. Regret serves no purpose, unless it is to use it to decide how I will approach such purchases in the future.

I have a rule about not buying an item from someone over the phone or at the door the first time that person calls or comes by. That rule has served me well. It gets me out of having to make a decision until I have given it more thought. I simply tell the person, "I have a rule...". That person usually says, "Yes, but if you buy now you'll get this deal. If you put it off you lose the deal." I shrug and say, "Well, that's too bad but that's my rule."

I can now make a rule about such things as these glasses that when the purchase is some amount over what I expect that I will delay the purchase. I may still buy them, but I'll feel better about it. As for this time, I refuse to dwell now on the negative aspects. I have simply created a new rule that will help me in the future and I will enjoy those new lenses.

Thursday, March 22, 2007

Being responsible

I'm not well-organized, I procrastinate, I'm lazy. But sometimes in spite of all that I get something done.

I finished my taxes two days ago, sent them in electronically, and they were accepted. I still need to file a return for Michigan because of some income I get that is made there (partnership). Irritating. I figure I will do that one by hand. Get the Michigan forms and go for it.

I have also got an excellent start on a living trust. I have written the trust and gotten my signature notarized, which makes it legal. I have transferred those items that do not have "titles" to it. Like my grand piano. I am slowly working on transferring those things that do have title to it. I sent out a request to transfer partnership shares to the trust yesterday. I still have to do that for another partnership, related, but that one requires that I find my copy of the certificate showing my ownership. I may have to claim I lost it and get on with it another way.

Oh, the taxes. I am getting refunds! That's why this is about money. Some of that money is going toward paying off those damned credit card debts. Other parts will go into savings. And some will go for stuff I want.

Friday, February 2, 2007

Credit card work

Well, here's the deal. I have been paying more than the minimum on all of my credit cards. But Pay It Down! (see book list, right side of this page) says put all that extra money on the card with the highest interest. It makes sense if you think about it.

The first step in reducing credit card debt is to see if you can get the card company to lower the interest. The book includes a script I can use when talking to the representative. It says, though, to have another card offer in front of me (because the script starts by saying X company is offering me Y interest...). If I get an offer for a card in the mail I check out the terms and if they are favorable (in comparison to the high-interest card) I can use that as the alternative card. If not, I can go to BankRate.com (one of my fave places) to hunt down another card that's good for balance transfers.

I don't have an offer in front of me. I've been too quick to shred those. So I went to BankRate.com and used their program for finding the best card for a balance transfer. I got three results. My next step is to apply for one of these three. That's today's goal, folks.

Thursday, February 1, 2007

Not very organized

What did I do today to further my goal to be debt-free? That is, to be free of credit card debt. Not a lot. I paid an overdue car insurance premium plus made a couple of credit card payments. One of which is my highest-interest card.

I already developed a list of all of my credit cards with their balances, monthly payments, and interest rates, so I know which card has the highest rate of interest. I have, in fact, been working to cut that baby back, over several months. What this program says to do, though, is to take the ten bucks a day that I find by cutting expenses here and there (the book - see Pay It Down! - on the right - offers many ways to go at this) and put it right into that one credit card account, on top of the minimum payment. I recklessly did just that, before I have sifted through and found the cuts I need to make to pay for it.

Below my list of credit cards, on the same Excel sheet, I listed other regular payments. Yesterday I also went back to Quicken, downloaded transactions from my primary bank account, and started in categorizing each transaction. I've got a way to go, but it feels good because I know that if I stick to this, and go back to writing down every cash expenditure and entering those as well, I will really know where it is ALL going. There's just no substitute for knowing.

Wednesday, January 31, 2007

A Way Out?

Like most of the middle class in the U.S., I am in debt. I have a credit card debt of over $11,000, and a car loan that is about the same. And yet I am in the midst of trying to get a loan to replace my mobile home (with another one on the same space), and when I get that loan (I feel fairly sure I will) I will have a huge new payment to make each month. Can I do it? I am sure the lender wonders the same thing, and is perusing how I spend my money and pay my bills.

I created this blog to track my progress, and offer suggestions to others in the same boat, in getting off that debt horse. My first plan is to follow Jean Chatzky's Pay it Down! program (see link at right). It is likely that this little book is really all I will need to get on track, because it not only offers a detailed program for getting out of debt but also offers a lot of help for those times when we face really bad financial times. But I expect to draw upon a ton of other resources along the way. Many of these are in the book. Others I will no doubt discover.