Financial Conversations Session 3DEVIN STUBBLEFIELD, FINANCIAL COACH/TRAINER
Debt and Credit Best Practices
Topics Discussion
How to Turn Bad Credit
into Good Credit
Dealing with Debt-
Related Stress
Part 1
How to Turn Bad
Credit Into Good
Credit
HELPING PARENTS TO GET
OUT OF THE CREDIT AND
DEBT TRAP
• Understanding Do it
Yourself Credit Repair
• Working with the Credit
Reporting Agencies
• Removing Inaccurate
Derogatory Accounts
• Credit Building Tips
Credit Repair
Credit Remediation
Credit Building
Helping Parents to Help Themselves
Rights
Can ask for an investigation at no charge of information determined to be inaccurate or incomplete
Negative inaccurate information must be removed from the credit report
Up to 45 Days (30 + 15)
WORKING WITH THE CREDIT
REPORTING AGENCIES
Removing Items from Credit Reports
The Process:
Dispute Letter Writing
Corrections
Deletions
Include any supporting documentation
Helping Parents to Help Themselves
Accurate Negative Information:
Can stay on for as long as the regulations allow
7 years + 180 Days from the date of last activity
10 Years for Chapter 7 Bankruptcy
The Credit Repair Organizations Act
Credit Repair Organizations Must Explain
your legal rights in a written contract that also details the services they’ll perform
your three day right to cancel without any charge
how long it will take to get results
the total cost you will pay
any guarantees
Report Credit Repair Fraud
Washington State Attorney General’s Office
http://www.atg.wa.gov/
Federal Trade Commission
http://ftc.gov/complaint
Questions & AnswersDo it Yourself Credit Repair
Credit Building Tips
For Parents with No Credit History in their Name:
Secured Credit Cards
Department Stores (Furniture, Target, WalMart,
etc.)
Authorized User on Existing Account
FICO 2015
New Credit Reporting from Non Traditional Sources
Utility Bills
Cable
Insurance
Credit Building Tips
For Parents with Established Credit:
Cap your monthly debt payments to a maximum of 38% of
gross monthly income
Pay all debt payments on time
Keep credit card balances at or below 30% of the high credit
limit
Pay off all recent derogatory accounts
Pay off all rolling late fees and finance charges
Questions & AnswersCredit Building Tips
Part 2
Dealing with
Deb-Related
Stress
HELPING PARENTS TO WORK
WITH CREDITORS AND DEBT
COLLECTORS
• Tips on Dealing with
Collection Agencies
• Debt Payoff Methods
• Working with
Spouse/Significant Other
http://www.credit.com/tools/lifetime-cost-of-debt/
A tool for
Parents
to
Consider
Using
Tips on Dealing with Collection Agencies
Create a list of the collections
Rank the list in terms of urgency
Create a savings plan to establish the funds to pay off the debt in lump sums
Prepare to offer a one time
lump sum settlement
Call the Collection Agency to
negotiate lump sum payment
Request written receipt for
payment and following up
with credit reporting agencies
Questions & AnswersDealing with Collection Agencies
Debt Payoff
Methods
OPTIONS
• The Ideal Repayment Plan
• Debt Snowball
• Debt Avalanche
The Ideal Repayment Plan
A repayment plan is a method for
paying off all of your debt.
Should not be at the expense of the
quality of your own life.
Determine how much— in total— you could pay
toward your debts each month without inflicting lack
or deprivation upon yourself.
List your creditors and the amount you owe each.
Mundis, Jerrold (2012-05-08). How to Get Out of Debt, Stay Out of Debt, and Live Prosperously*: Based on the Proven Principles and Techniques of
Debtors Anonymous (p. 211). Random House Publishing Group. Kindle Edition. Determine Your Debt Payoff Path
The Ideal Repayment Plan
Add up your total debt.
Use your calculator to determine each
creditor’s share, or percentage, of the total.
The formula is: C ÷ T = CP. (Creditor’s Amount divided by Total Debt equals Creditor’s Percentage)
Mundis, Jerrold (2012-05-08). How to Get Out of Debt, Stay Out of Debt, and Live Prosperously*: Based on the Proven Principles and Techniques of
Debtors Anonymous (p. 211). Random House Publishing Group. Kindle Edition. Determine Your Debt Payoff Path
The Ideal Repayment Plan
Example
Mundis, Jerrold (2012-05-08). How to Get Out of Debt, Stay Out of Debt, and Live Prosperously*: Based on the Proven Principles and Techniques of
Debtors Anonymous (p. 211). Random House Publishing Group. Kindle Edition. Determine Your Debt Payoff Path
The Ideal Repayment Plan
Creditor Balance Total of all Debt
Owing
%
Share
Uncle
Bob
$300 $900 33%
Since the debt owed to Uncle Bob is 33% of the total debt owing, you
would give him 33% of the available money you have to pay towards your
debt.
Example
Creditor Balance Total of all Debt Owing % Share
Student Loan $8,670 $11,947 73%
Car Loan $2,200 $11,947 18%
Credit Card $652 $11,947 5%
Collection $425 $11,947 4%
100%
If $200/month is what you
could comfortably pay
between all creditors. The Ideal Repayment Plan
Creditor Balance Total Debt
Owing
%
Share
$200
Student Loan $8,670 $11,947 73% $146
Car Loan $2,200 $11,947 18% $36
Credit Card $652 $11,947 5% $10
Collection $425 $11,947 4% $8
100% $200
Debt Payoff Methods – Snow Ball
Pay off debts in order – one by
one – by rolling your payments
over like a snowball from one
debt to the next.
How to Implement the Debt Snow Ball
Order your list of debts:
Lowest balance to highest
or
Highest interest rate to lowest
$
Calculate how much extra money can be to added to your
monthly payments.
Put that extra amount toward the debt at the top of the list.
Pay the minimum amount due on all your other debts.
Once you pay off your first debt, apply the payment from that
debt to the next one.
Repeat this process every time you pay off a debt, roll that
debt’s payments to the next one in line.
How to Implement the Debt Snow Ball
Debt Payoff Methods – Snow Ball
Your payments grow with time
and build momentum and
effectiveness – much like a snowball rolling down a hill.
The Debt Snow Ball Effectiveness
Continue paying the same overall amount of
money every month until all debts are paid off.
Debt Reduction Calculator
http://www.vertex42.com/Calculators/
debt-reduction-calculator.html
Questions & AnswersDebt Payoff Methods
Working with
Spouse/Partner
HAPPY HOUSEHOLD
FINANCE
• What Money Memories
Can Teach Us
• Ways to Combine Your
Finances
Money Memories
Help Parents to Understand What’s Behind Their Financial Thinking…
What is your earliest money memory?
How was money used in your family?
What was your family’s financial status?
What do you expect from money?
Ways to Combine Your Finances
Understanding the Household Approach to Finances…
The “We are All Equals Here” Approach
The “To Each According to his/her Earnings” Approach
The “I’ve Got It” Approach
The “Pick Your Bill” Approach
Financial ConversationsDEVIN STUBBLEFIELD, FINANCIAL COACH/TRAINER
Thank You!