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!