Don't become a victim of bad credit
Many people are buried deep in debt long before they realize it. Many consumers
continue to pay once they lose their ability to borrow. Uncontrollable debt can
jeopardize:
- future credit
- current credit cards rates
- homes and/or cars
- job opportunities due to credit checks
- portions of pay due to garnishment
- relationships with loved-ones and family
- self esteem
If your payments are greater than your income, ask for help.
Consumer Credit Counseling Service
(CCCS) is a non-profit organization which helps people every day. CCCS works directly
with creditors to help borrowers set up repayment agreements (even for the most hopeless
cases imaginable). Northwest Community Credit Union helps support CCCS, and we have
witnessed many success stories thanks to their continuing efforts.
Don’t file bankruptcy
Some lawyers heavily advertise bankruptcy as a way to escape debts. The truth is
that bankruptcies are profitable only for the lawyer. In addition to legal fees, the
other costs of bankruptcy can be very painful. Bankruptcy can make it almost
impossible to get credit for up to 10 years after filing (depending on the state and the
type of bankruptcy). Also, bankruptcy does not mean a complete escape from debts.
Possessions, like your house or car, could be taken in order to satisfy creditors’ claims.
Last, many consumers feel ashamed at their inability to meet their obligations once they
file.
Avoid the temptation of own-and-out financing
Many organizations and business are legitimate in their desire to help people with poor
credit; however, there are countless operations which are all too happy to take
advantage of someone with limited finance options. In short, be
cautious of any business which advertises, "no credit, no problem." Carefully read
and understand the contract before you sign.
"Get credit regardless of past history!" We've all seen the ads, but buyer
beware.
Oregon has very few consumer finance protections. Operations from
auto paycheck loans to title loan companies can (and do) charge rates of 36% APR or more!
Such high rates mean that the borrower can end up paying two (even three) times the
borrowed amount. Some phone reconnection plans and cellular phone outfits also
charge incredibly high fees and deposits to people who have bad credit or low income.
Some secured credit cards charge almost normal interest rates but get to keep the
customer’s cash without paying interest earnings.
Rent to own companies, for example, promise "no credit checks" for home furnishings.
However, there is a high cost for their "financing " (as high as five times the fair value
of the item). Here’s an excerpt from the Springfield News, December 12, 1998:
One example is a computer desk, finished in oak-veneer . . . a customer can rent
the desk for $30 a month for 18 months, for a total of $540 . . . or purchase the desk
anytime for half of the total, $270. The customer also has the option to buy the
desk for $175 cash. A comparable desk can be found at department and furniture
stores for about $100.
Be cautious of "Payday Loans"
Payday loans are a viable source of quick cash for many people, but there are a few
points to consider. In the state of Oregon, payday lenders can charge 15% for a
one-month loan, plus 3% for each month thereafter. In other words, a one-year loan
would have a 48% APR. Most people won’t go that long. If a payday lender loan
isn’t paid off, the borrower will lose the collateral item (often worth much more than the
borrowed amount).
Beware of credit repair scemes
Credit repair ads often appear in the classified section, conspicuously near the
employment ads or the "for sale" ads. A few credit repair plans attempt to be honest;
most are just come-ons to part the unwary from their money.
One example is the legal clerks who advertise legal name changes (which will supposedly
clear bad credit histories). This is far from the truth. A name may be changed, but a
credit history will follow someone’s social security number (which cannot be changed).
In truth, most creditors like to see stability, so a name change can even further hurt
someone’s credit.
Credit repair ads can also be outright cons. For example, someone may mail in
money to get a book of "sure-fire" methods for credit repair. When the advertised
book arrives (if it arrives), it will turn out to be a pamphlet with tips such as, "learn
to pay with cash." In reality, there is no quick way to repair credit—only time and
paying off debts will repair credit. Credit repair plans often turn out to be
advertisements for guaranteed credit cards (with a cash deposit required to equal the
credit amount) or high interest finance companies. These companies promise that
maintaining a good history under their loan will somehow fix a bad history. Not true.
If problems appear on your history, they will stay there regardless of how many additional
loans you take out.
Last of all, credit repair schemes advertise expensive programs which will purportedly
challenge any bad ratings from past creditors. Supposedly, the creditors won’t answer
the challenge and any bad marks will have to be taken off. Not true.
Finance companies are required to maintain records on customers for many years after a
loan or credit card is closed. Financial institutions are also very careful to back
up any derogatory notes they have ever reported to the credit tracking bureaus.
We’re here to help
For 50 years, we’ve helped members stretch their dollars. If you want to review
your spending habits, set up a budget, or shift more of your money from discretionary
spending towards making investments in your future, talk to us. We can look at
reducing the amount of interest you pay on cards and loans.
We can set up your accounts for automatic savings or automate your bill payments.
Perhaps you want to discuss home equity
and consolidation loans. We can even help you with tax-advantaged financial planning.
We know that everyone loves to shop, but we also know that anyone can enjoy
a disciplined budget and a secure future.