Last month, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CCARD) also known as the Credit Cardholder’s Bill of Rights that’s been called “sweeping legislation that reforms the credit card industry” and a homerun for consumers. Is it? Let’s see…

Here’s some good news for consumers:

• Credit card companies can’t raise your rates on existing balances unless you’re 60 days behind.
• If the rate does go up, you can get the old rate back if you pay the minimums on time for 6 months.
• They can’t raise rates for at least a year after you open an account.
• If you close your account, the interest rate is frozen.
• Teaser rates must last at least 6 months.
• If you have multiple interest rates, anything more than the minimum goes to the balance with the highest interest rates.
• Cardholders must be given the option of having a fixed credit limit that cannot be exceeded, and card companies cannot charge overlimit fees on cardholders with fixed limits.
• Cardholders may elect to have transactions that would cause them to go overlimit declined.
• Overlimit charges can only be charged when a purchase, rather than a fee or interest charge, causes the credit limit to be exceeded.
• Overlimit charges can only be applied once during a billing cycle.
• No interest can be charged on fees (such as late fees or overlimit fees)
• Your bills must be sent out 21 days before the payment due date (current requirement is 14 days)
• No one under 21 can get a credit card without a co-signer or proof that they are able to repay the credit (a job)
• You can pay your bill by mail, phone, electronic transfer or online without additional cost unless you need to pay at the last minute.
• Consumers must get 45 days notice of any change in the terms.
• Gift cards can’t expire for 5 years and they can’t charge fees against the balance for not using it.
• No more universal default (one company could increase rates if you had a late payment to another creditor even if you had a good on-time payment record with the first company)
• They have to tell you how long it will take to pay off the balance if you only make minimum payments and the total amount of interest you’ll pay.

Here’s the bad news…

• Changes don’t go into effect for 9 long months.
• Expect credit card companies to jump up your rates between now and then even without a late payment.
• Credit card companies say that reward programs will be canceled, low-interest teaser rates won’t be available and overall credit may be harder to get. They may also re-institute annual fees and try to find other ways to increase their bottom line.

What should you do now?

• Pay your debt on time. This has always been important but is even more important now. Don’t give them a reason to hike your interest rates.
• Create a plan to pay your debt off. This is the hardest area for most people to do because they just don’t know how to pay their debt off in the most efficient and cheapest way. Check out my Pay Debt Quickly kit which WILL create a month-by-month plan for you to follow – it’s easy once you have a plan!
• Don’t close old accounts and keep all your cards active by putting a couple of small purchases on them every month. Pay off, of course.
• Watch your statements every month because some of the credit card companies may actually start implementing these changes even before the deadline.
• Watch your mailbox for instructions from your creditors regarding choices you’ll need to make to your account.
• Use your points or other rewards now because the plans are sure to get less generous or even eliminated.

It’s about time credit card holders are finally getting a break!

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Are Credit Cardholders Finally Getting A Break?

Question: Cindy, I have over the past few years been rolling over funds from one 0% credit card to the next. I now have one for $8K expiring in a few months and have not seen any offers come in for low interest rate credit cards. What do you recommend? My credit score is very good, around 750 last time I checked and I am not in a position to pay it off. BTW, you helped me restore my credit score, remember? ~ Lucy

Answer: Hi Lucy, I do remember and 750 is a terrific credit score. Unfortunately, it is going to be tougher and tougher to find those 0% credit cards. You can blame the sub-prime mess for it, too.

In many cases, the banks are going using their credit card division profits to prop up their other operations. That means less good deals for consumers.

Take a look at Card Ratings.com run by my friend Curtis Arnold and get the best card you can find even if it’s not at 0%, although Card Ratings.com is still showing a number of 0% cards out there. Hopefully those good deals will come back especially for those with great credit ratings like you!

Warmly, Cindy

P.S. Curtis has written a new book How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line.

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Are 0% Cards Still Available?

The other day I got a call from “Mastercard and Visa” offering to lower my interest rates. “Yippee,” I thought.

But, I was immediately on guard because I know that Mastercard and Visa are separate companies and I didn’t think they’d be working together. Not that I know this for sure, but that’s what came up for me.

The guy told me that a lot of people are cancelling their credit cards because of high interest rates and the banks would rather lower the interest rates and keep the customers. He asked me if I had any cards with balances over $5000 and interest rates higher than 10%.

I laughed and said, “I don’t know.”

He said, “You don’t know if you have balances over $5,000?”

I said, “I don’t know if I have interest rates over 10%.”

Then I asked him if I would have to give him my credit card numbers.

Click.

I guess not.

Just a reminder to be aware of anyone who calls you looking for personal information. Legitimate companies, banks and the government DO NOT do that! Getting lower interest rates sounds like such a great thing that it’s easy to be taken advantage of.

It is OK to call your creditors and ask for lower rates. If you’re making the call to a verifiable phone number (such as the one on your credit card statement), go ahead and provide the information requested to identify you. They’ll probably ask a number of questions to verify that it really is you who’s calling.

Warmly, Cindy

P.S. Please pass this warning on to your friends and family.

P.S. Scam artists are also calling about the Economic Stimulus Money from the government.
NO ONE will call from the government about this check!

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Lower your Interest Rates? SCAM WARNING

Question: I am contemplating using a convenience check from my credit card company instead of taking out a personal loan from my credit union. The convenience checks carry a 3.99% interest rate for the life of the loan. However, a personal loan from my credit union would carry a 10.25% interest rate for the life of the loan which can be no longer than 5 years.

I am thinking about borrowing between $10,000 to $15,000. I have about a $400 balance on my credit card and would pay that balance off completely if I used the convenience check and resolve not to use the credit card again until the “convenience check” loan was paid.

I don´t have any debt obligations at the present time and was wondering which route would be the best route to go. Thanks in advance to any advice you could provide. ~ John

Answer: Hi John, excellent question. I can’t tell you exactly to do without knowing more info, but I can ask some questions that might get you thinking more broadly and lead to the answer that is best for your situation.

First, what will you be using the $10,000 – $15,000 for? How do you plan to pay it back?

If you pay it back using the minimum payments (15,000 loan at 4%), it will take you 209 months to be rid of your debt. In that time, you will pay $2,275.87 in interest. (play with it yourself at BankRate.com). This is a minimum payment of 2.5% of the balance or $375 per month.

If you take 5 years to pay it off (like the personal loan from the credit union) (found at BankRate.com), it will cost you $276.18 every month.

Interesting with the 2nd calculator: if you pay $375 per month, you’ll pay it off in 43 months.

Another thing to check is the fine print. Can they raise your rates if you are late on any other bill? This is a new “twist” many credit card issuers are adding (see previous article on Universal Default).

Just be sure what you are able to afford in terms of payback and the use of the money. Set aside reserves for the life’s usual “emergencies” like home/auto repair, medical expenses, job layoff or reduction, etc. Please don’t use the money to create additional lifestyle expenses like purchasing a boat or airplane or fancy car. These “toys” are far more expensive to keep up than the initial payment!

Hope this helps. Let me know if you need more info.

Warmly, Cindy Morus

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Credit Card Convenience Checks

Question: My fiancee has a lot of debt. I’ve already helped her get out of some of it, but I’m not sure if this is a good situation to be married to. What should I do? ~ Sheldon

Answer: Hi Sheldon, you’re right to be concerned! I’m sure many of our readers can give you some good advice. (Readers can comment below).

My advice is for you to be very concerned. I have lots of divorcing couples in my office who say “I paid off his/her debt before we got married.”

Here are some questions for you to think about:

• How did she get the debt?
• What has she done to get out of it?
• What is she doing now to get debt free?
• Has she changed her money behaviors?

If she’s continuing the patterns that got her in to debt and looking for outside help (you), it’s a situation that will probably not get any better and you might find yourself in my office looking for divorce financial help.

Please encourage your fiancee to straighten things out before you commit to the marriage and if she’s unwilling, “RUN“. We all know the statistics on what money problems do to a marriage. Set yourselves up for success, not failure.

I’d be happy to work with you, too. As a Certified Divorce Financial Analyst, I much prefer to help couples before they end up in divorce.

Warmly, Cindy Morus

P.S. A good book to read is David Bach’s Smart Couples Finish Rich.

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Fiancee has Lots of Debt

Why Does It Matter?

Most of you know that a low credit score will hurt you on mortgage, car and credit card interest rates. But did you know that a low credit score can hurt you in other areas, too? Such as…

• Car and Home Insurance
• Getting a Job or a Promotion
• Utility Deposits
• Cell Phones
• Some Medical Procedures
• School Loans
• Your Marriage

6 Ways To Improve Your Credit Score:

1. Make Sure Its Right

Mistakes in your credit report will ruin your score. So, get copies of your Credit Report through Annual Credit Report.com (not free credit report.com) or by calling 877-322-8228 (it’s OK to give your Social Security Number because you called them).

For those of you who keep up with your Credit Report, Annual Credit Report.com is just fine. If not, I recommend myFico because it’s easier to read and you’ll be able to see all the info at once. It’s also the most like the one that will be sent to your creditors. Annual Credit Report.com gives you one report for each (lots and lots of pages.

You can dispute any errors by writing a letter to the credit reporting agency (you’ll have to do it for all three if the error is on all your reports). Tell them what’s not correct and send copies of any documentation you may have. Request that it be removed or corrected. Go to the post office and send it “return receipt requested” so someone has to sign for it. Keep copies of everything.

Next, let the creditor know that what’s incorrect because if they keep reporting the error, it won’t be removed from your credit report.

2. Know the Truth

Before you can improve your score, you have to know what it is!

You can get copies of your credit report at Annual Credit Report.com for free but you’ll have to pay for the credit scores.

I recommend getting your FICO score straight from the source…

If you get your score regularly and just want to make sure nothing creeps in, you can use two new free credit score website: Quizzle and Credit Karma. I tried both and was impressed with them.

3. Pay Your Bills (on time)

The best “secret” for having and keeping a great credit score is to pay your bills on time. And watch out because the credit card companies are getting sneaky - if your bill arrives after the specified due time (not just the date), it will be late, you will pay a late charge and it will affect your credit score. Mail it in plenty of time or pay online at the creditors’ website (check the fine print first). You might also want to set up automatic payments for at least the minimum payment so you’ll always pay on time even if you are out of town. You can always pay more separately.

Paying any bills late may affect all your other bills. This includes unpaid parking or speeding tickets, library fines, medical and utility bills. These creditors are reporting late and non-payments to the credit reporting agencies, too. I received a bill the other day from my daughter’s college town for a parking ticket shed thrown away; I made her pay it immediately before it hurt my credit score.

By the way, if you are on on-time payer and are late, call the creditor and ask them to reverse the late charge and not report it. Most will but you have to catch it promptly.

4. Don’t close old credit cards.

After you’ve paid it off, put the card in a safe place and keep the account open. The length of your history is an important part of the calculation. Another reason to keep it open is that your “utilization ratio” is another big part of the calculation. This means how much of your credit limits you’ve used up. The ideal is in the 30% range.

Weird, I know. Why would they give you a high credit limit and then not want you to use it? Statistics show that people who are bumping up against their credit lines have a higher chance of defaulting.

5. Don’t Go Crazy

Be cautious about applying for lots of credit in a short time frame. Lenders call this “excessive credit seeking” and it makes them think you’re desperate.

If you’re applying for home or auto loans, you have a 30 day window where multiple applications will only be counted once. You’ll want to shop around before actually applying.

6. Don’t Delay

Unfortunately, these steps will not fix your credit score overnight. It can take 3-9 months before you see improvements. However, I can pretty well guarantee you won’t see improvements if you do nothing.

The good news is that even if your score is really down in the dumps, you can improve it and the last 2 years count the most.

What Next?

I know that all of this can be overwhelming from ordering it to reviewing it to making the corrections. If you need help with your credit report, call me. I’m a Certified Credit Report Reviewer and I’ve reviewed hundreds of credit reports.

You’ll order your credit report and send it to me by mail or email. I’ll look it over and well have a 30 minute review to tell you exactly what you have to do. And… If you don’t want to write the letters, I’ll do that, too and send them to you by email so you can put in your private information, sign them and send them out. What could be easier?

You can call me directly at 541-387-2995 to find out more.

Warmly,

Cindy

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“Why Your Credit Score Really Matters – In Ways You Might Not Know – And 6 Ways To Improve It”

Question:I don’t know how to pay off my debt. My debts are more than the money I earn each month. What can I do? ~ Naomi

Answer: Hi Naomi, that’s a tough spot to be in. I’m not quite sure from your question if your total debts are higher than your monthly income or if the payments are higher than your income. I’m going to address that your debts are higher than your income but you’re still able to make the payments.

It sounds like this is really worrying you — maybe that you won’t be able to make the payments soon. So, now is a good time to be asking this question.

Since you can make the payments, every month, you’re actually in a good position to be able to eliminate the debt over the next couple of years (perhaps sooner). Here’s what to do…

1. From Minimum Payments to Fixed Payments. Convert all your current minimum payments to fixed payments. That means that if you are paying $55.55 this month, you’ll pay that every single month until the debt is paid off — no matter what the minimum payment is on your bill.
2. Stop Using Your Credit Cards. There’s  no grace period on cards that have a balance so you start paying interest on new charges immediately.
3. Get Clear on Your Debt. List every one of your debts on a piece of paper (you can get my form here) so you know exactly what you’re dealing with. Sometimes it’s worse than you thought and sometimes not so bad but you won’t be able to really know until you see it all in black and white.

If you’d like to instantly create a Debt Payoff Plan and see exactly the date you’ll be out of debt, try our PDQ Pay Debt Quickly system (with a 30 day no-questions asked guarantee). It’s great to have a plan that you can follow every month.

Naomi, please let me know if you have any other questions.

Warmly,

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Debt Payments Higher Than Income

Amanda recently came to see me because she was at her wit’s end. Amanda has a stressful job as a Chiropractor and she often goes shopping after work. She says, “I just need to relax before I go home to Steve and the kids”. She has a closetful of clothes many she’s never worn – and some still have the tags on.

6 months ago, Amanda tried to hide her purchases from Steve but he found out when he opened the bills and yelled at her. Recently she opened up a new credit card in her own name and used her office address so Steve wouldn’t find out. She’s scared that he’ll leave her if he ever finds out.

At the end of our last phone appointment, Amanda said, “I’m so glad I found you, Cindy. It’s such a relief to be able to tell somebody everything and not have you get mad at me or tell me I’m a bad person.”

Most of us know in our heads that this is a dangerous road but we all have a vice or two. If you’re faced with this dilemma here are a few things you can do:

• Shop with a friend or family member who will hold you accountable (and who won’t join you in making purchases you both know you shouldn’t)
• Use a list and promise yourself not to deviate from it
• Use your debit card (did you know that if you are carrying a balance on your credit card, there is not grace period – interest starts adding on immediately)
• Create a “cooling off” period by putting items on hold and coming back in 24 or 48 hours
• Ask yourself “Do I need this or do I want it?” (Download my free “Needs and Wishes” Worksheet)
• Develop a list of fun things to do and choose one when you feel like shopping
• Know that it’s OK to have the urge to shop and not respond
• Find another way to get your “fix” (thrift stores and garage sales can be just as addictive)
• Stay out of the stores and off the internet if that’s your shopping vice

What’s your vice? What are your alternatives? How will you keep from feeling deprived with your new choices?

If you’d like to talk about your shopping worries (or anything else), check the Event Calendar for my next open office hours.

Warmly,

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Shopping Too Much?

Question: Should I consider a Debt Program that would pay off all my high interest debt ($25,000) but leave me with no credit cards for the next three years?  I am considering this because I am only able to pay the minimum monthly payments, on these five different accounts.  ~ Judy

Answer
Hi Judy, one of the most important questions to ask is “will this really pay off the $25,000 in 3 years?” I used the calculator at http://www.bankrate.com/brm/calc/creditcardpay.asp to play with your numbers. You didn’t mention what interest rates you would be paying or your monthly payment.
So, I made some assumptions.

If you put in $25,000 as the balance and .01% (which is almost 0% — it doesn’t take 0%) for 36 months, your payment will be $694.55 every month. At 12%, the monthly payments are $830.36 every month.

If you can’t pay the monthly payment, you won’t be able to pay off $25,000 in 3 years.

My concern with these kind of high balance/long term plans is:
1.  Are you still so strapped that the first emergency will cause the whole plan to collapse?

2.  What happens if you lose your job or get sick?

I generally recommend that people also check out bankruptcy with a qualified attorney if they can’t reasonably expect to get out from under the debt in 4-6 years because if you can’t do it in that amount of time, the chances of something like #1 or #2 happening is pretty high. That would mean that you had been paying a lot of money for a lot of years and still end up in the same going through a bankruptcy.

The most important thing, Judy, is that you examine what caused the situation you are in and how it has served (or not served you). What will you do differently to make sure that you don’t slip back into the situation again?

Best wishes, Judy.

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Debt Reduction Program

Before making the decision to add more debt, you need to make sure that you:

* Allocate sufficient money for your essentials.
* Borrow only for items that you need and can afford.

* Borrow only if you’re spending less each month than you take home.

1. Start with your monthly take-home pay.

This is the amount you have left after taxes and other deductions have been made.

2. Subtract the amount you need for necessities and fixed expenses.

This includes savings, your mortgage or rent payment, utilities, food, transportation, child care, medical care, clothing, and recreation. Include payments made on a quarterly, semi-annual, or annual basis, such insurance and taxes.

3. Subtract monthly payments for existing loans and credit cards.

4. The balance is the amount you can safely apply to debt repayment.

Avoid thinking you can spend all this amount, since emergencies do occur, and you may not wish to use your regular savings account to cover small, unexpected expenses.

Monthly Take Home $ _______________
Fixed Expenses $ _______________
Loans/Credit Cards $ _______________
Amount Available For Additional Debt $ _______________
Moral of the Story: If you’re planning to buy a new house or car, pretend you have already done so and start “making the payment” but to yourself. Within a few months, you’ll know whether or not you can really afford it and you’ll have some money set aside for repairs, etc. when you actually do make the purchase. If you can’t make the pretend payment, you certainly won’t be able to make the real one consistently. Time to go back to the drawing board and figure out what else you’re willing to give up in order to have the new debt.

I welcome your comments, ideas and tips that have worked for you.

Warmly, Cindy

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How Much Credit can you Afford?

Besides paying your bills regularly and on time, the single most important thing you can do to show that you are a good credit risk is to know what’s in your credit report.

Studies have shown that many credit files contain errors that can harm your credit rating, leading to rejections when you apply for loans, insurance or even a job. The errors range from simple human error to being mixed up with a similarly named person.

It’s essential that you check your credit files and monitor your credit regularly in order to protect your good credit standing, even if you always pay your bills on time.

And if your credit needs improvement, checking your report will help you find any problems that can be cleared up. A correct credit report, paying your bills on time and the passage of time will ensure the highest scores.

You can get a free copy of your credit report from each credit reporting agency at www.AnnualCreditReport.com. Try getting one at a time and you spread them throughout the year. At this site, you will have to pay for credit scores.

If you’d like to get them together (credit score and credit report) go right to the original source: MyFico.com to get all three.

You could get your free reports and then use My FICO free Credit Score Estimator to get a ballpark credit score (if you’re planning to get a loan or mortgage, you’ll want the real thing).

It is a good idea to check your credit report once or twice a year so you keep on top of any problems that might creep in.

Feel free to share your thoughts and questions about Credit Scores.

Have Cindy personally review your credit report. Order your Certified Credit Report Review.

Warmly, Cindy

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Why Check Your Credit Report Regularly?

Are you struggling with debt? I’ve been there (and it was a major cause of my divorce). This is information I wish I had known then. As always, feel free to comment below.

Step 1: Draw a Debt Picture

Gather all your statements and enter your information in the Debt Payoff Info worksheet. You’ll need to know your balance, interest rate and current payment. Total the balances and the payments. Acknowledge that you used your credit cards to fund your lifestyle and move on to debt-freedom. Get my free Debt Payoff Info worksheet in Excel or Adobe.

Step 2: Stop using your Credit Cards

The credit card companies are masters at this game and if you’re carrying a balance, you’re on the losing end of the deal.

• Did you know that new purchases don’t have a grace period if you have a balance?
• Did you know that new purchases don’t usually get the existing teaser rate?
• Did you know that if you have multiple interest rates on the same card that most or even all of your payments will go to the balance with the lowest interest rate while the balances at the highest interest rate just keep compounding?

These are all great reasons to stop using your credit cards now!

Step 3: Convert Minimum Payments to Fixed Payments

This is the beautiful part! Let me explain.

When you get a home and auto loan, you pay the same amount of money for a specific amount of time and then you’re done and the debt is paid off. With a credit card, though, your payment is a percentage (usually around 4%) of your balance. As you make payments, your balance drops and so does your minimum payment. This is what will keep you in debt jail for a very long time.

However, you don’t have to make just the minimum payment. I recommend that you take the minimum payment from this month and pay that same amount every single month until it is paid off.

Converting your credit cards payments to fixed payments can save years and years and thousands of dollars. Let’s see how much this method can save by looking at one client’s debt information:

Paying the minimums only will take 350 months and cost $49,007 (total interest is $23,067 almost double the current balances!). Changing the payments to fixed (paying the same amount every month as listed above) will take 47 months and the total will be $33,272 ($7,332 in interest). Total savings is $15,735 and over 25 years!!

AND they didn’t pay any more than they paid this month.

What if you could become completely debt-free faster than you ever thought possible?
What If You Could Instantly Create A Plan To Pay Off All Your Debts Including Your Mortgage? And without “pinching pennies”, getting a second job or cutting your spending in any way!

Introducing the PDQ Pay Debt Quickly kit!

Warning: This program is NOT for everyone. If you are months behind on your bills or about to lose your home, you require more help than the PDQ Pay Debt Quickly kit can provide — Please do not order this program.

If you ARE paying your bills but just can’t seem to get ahead, the PDQ Pay Debt Quickly kit is for you. It’s also for those who are doing extremely well and getting ahead but still trying to get rid of their debt and eager to learn how to get rid of it once and for all.

If you are in either of these two situations, then reserve your PDQ Pay Debt Quickly kit while you’re thinking of it and instantly create your plan to eliminate debt forever.

Warmly, Cindy Morus

P.S. You can also earn money recommending the PDQ Pay Debt Quickly program to your friends. Email me to find out more details.

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3 Steps to Getting Out of Debt

This is part of our Pay Debt Quickly series sponsored by
PDQ Pay Debt Quickly kit.

Over the last few years, I’ve seen more and more people pull out “plastic” to pay for everything they need — from gas to groceries to fast food.

Why not? When all it takes is a quick swipe of the card through a little electronic box and a signature then, everything’s okay. You go home happy, content, and almost worry-free. On the other hand, the convenience of using credit cards can lead to a false feeling of financial security. And this realization will strike you as soon as the bills arrive.

I used to get my credit card bills and month after month, I would be shocked at how much we had spent. I’d say, “that can’t be right” but every month I’d add up all the charges and it would be right.

So, then I’d look at each item and each item was justifiable. Every one had been legitimate at the time of purchase. But, they did add up so quickly.

If you recognize this story and are and having credit card debt troubles, it’s time to get a plan in place to pay off your debt. Our Pay Debt Quickly kit will start with your debt information and instantly create a plan you can easily follow to pay off your debt.

What would you do with all the money you are spending on debt?

Warmly, Cindy Morus

P.S. If you like the PDQ Pay Debt Quickly kit for yourself, your friends and family will too. And you can use your earnings to pay down your debt even faster!

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Credit Card Convenience vs. Credit Card Debt

Question: Can I stop all those credit card offers I receive in the mail? ~ Ron

Answer: Yes. It’s really easy to do – just phone 1-888-567-8688 and follow the prompts and provide the requested information including Social Security number, date of birth, etc.

Do this for every adult member of your household, including college students. Your “opt-out” status will be sent to each of the four credit bureaus (Equifax, Experian, TransUnion and Innovis). In four to six weeks, you’re mailbox will be a lot emptier!

You can also go online to Opt Out Pre-Screen if you prefer.

While you’re at it, take a few minutes to stop unwanted catalogs by calling each of them. You can also reduce your junk mail by contacting the Direct Marketing Association Mail Preference Service.

Save a tree!

Warmly, Cindy

P.S. It is OK to give them your Social Security Number because you are the one who is making the call. Never give out your private information to someone who calls you.

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Can I Stop all the Credit Card Offers?

Question: My boyfriend of 5years and I are considering getting married. His only concern is that he has $3,000- $4,000 in bad debt, and would like to pay it off before we get married. Is this wise, or should we get married, and reduce our monthly payments in insurance, rent, electricity, etc., to make it easier to pay his off? Beth

Answer: Hi Beth, good questions! Congratulations for finding a partner who wants to be a good money manager.

How old is the debt?

When a creditor does not receive payment on a debt they will eventually “write it off”. This is one of their costs of doing business. If the debt is approaching 7 years, it will come off your boyfriend’s credit report at the 7 year point.

If he does start paying it off now and is late again that will show up on his credit report.

If, however, he does want to pay it off and he actually has some money set aside, he should consider contacting the creditor to see if they will take less than the balance. It would be a win-win for both him and the creditor, because after a period of time, they don’t expect to ever see any of it so they are often glad to get anything at all. They usually want whatever they’ve agreed to right away.

He should also ask them to report it as paid in full and closed at consumer’s request.

There are tax consequences, however, because the portion that doesn’t get paid is considered taxable income. You should consult your tax preparer about that and what that would mean to your tax situation.

I would explore these options first. Debt free is a lovely way to start a marriage!

Best wishes to both of you.

Warmly, Cindy

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Boyfriend has Debt