Conquering Personal Debt J. Peters & Associates, Inc. Jerry Peters 651-645-7558 Employee Assistance Programs.

Conquering Conquering Personal DebtPersonal Debt

J. Peters & Associates, Inc.J. Peters & Associates, Inc.Jerry PetersJerry Peters

651-645-7558651-645-7558Employee Assistance Employee Assistance

ProgramsPrograms

Financial FactsFinancial Facts

6.4 percent of payments on bank-issued credit cards were late last year, a 20-year high

7 percent of homeowners were 30 days or more behind on loan payments—a jump of 60 percent from March 2008

Nearly 60 percent of Americans 40-79 years old have experienced a life crisis such as job loss, death of a spouse, or a major disability.

Source: AARP

Financial Facts Financial Facts (cont’d.)(cont’d.)

Women are more likely than men to be significantly affected, both financially and emotionally, by these life events

Many people report making poor decisions or taking no action at all when experiencing these events

1.4 million people will file for bankruptcy this year

$41-$56 billion will be written off by credit card companies this year

10 Signs of 10 Signs of Too Much DebtToo Much Debt

1. You don’t have any savings2. You only make the minimum payment on

your credit cards each month3. You continue to make purchases on your

credit card while trying to pay it off4. You have at least one credit card that is

near, at, or over the credit limit5. You don’t know how much total debt you

actually have.

10 Signs of 10 Signs of Too Much Debt Too Much Debt (cont’d.)(cont’d.)

6. You are occasionally late in making payments on bills, credit cards, or other expenses

7. You use cash advances from your credit cards to pay other bills

8. You bounce checks or overdraw your bank accounts

9. You’ve been denied credit10. You lie to family and friends about your

spending and debt

Impact of DebtImpact of Debt

The reality:

Debt problems can take

a regular life and make it

a complete mess very quickly

Ways Out of DebtWays Out of Debt

The best way to deal with a debt problem is to be organized– Do a budget at least four times a year—and

more often if necessary

Have a plan for paying your bills on time each month– Late fees average around $29-$35

Pay more than the minimum amount each month if possible– Pay the most on the credit card with the

smallest balance

Ways Out of Debt Ways Out of Debt (cont’d.)(cont’d.)

Always pay your mortgage before everything else

Foreclosure help is available—with new government programs, the key is to act early

For financial assistance, call Jerry Peters at 651-645-7588 at your company-sponsored Employee Assistance Program

What’s in a What’s in a Credit Score?Credit Score?

Payment history– This is the biggest factor in your credit score,

and accounts for about 35 percent of the score. If you’ve had late payments or other problems, getting them behind you and letting time pass will help.

Total debts– Your total amount of debt counts for about 30

percent of the score. If you have debts other than your mortgage—such as a car or personal loan—a higher debt load could hold your score down.

What’s in a What’s in a Credit Score? Credit Score? (cont’d.)(cont’d.)

Types of credit– The variety of credit you have counts for about

10 percent of your score. This includes credit cards, mortgages, installment loans, student loans, and other types of credit.

New credit– The amount of new credit you are applying for

and/or receiving makes up about 10 percent of your score

What’s in a What’s in a Credit Score? Credit Score? (cont’d.)(cont’d.)

Poor—350 Fair—590 OK—610 Good—680 Great—750

Other Issues that Affect Other Issues that Affect Your Credit ScoreYour Credit Score

Bankruptcy Judgments Tax liens Foreclosures Settlements Charge-offs Seriously late payments (90+ days) Currently late payments

Credit Score Credit Score Bottom LineBottom Line

The better your credit looks, the lower the interest you will have to pay.

Top 5 Credit QuestionsTop 5 Credit Questions

1. I can’t pay my home loan and my credit card debts are out of control. What can I do?– Take action NOW: Talk with an expert about a

debt management, investigate bankruptcy or foreclosure

2. I just lost my job. How can I survive financially until I find a new one?– Have a cash reserve– Reduce your expenses– Talk to your creditors– Consider COBRA insurance

Top 5 Credit Top 5 Credit Crisis Questions Crisis Questions (cont’d.)(cont’d.)

3. My credit card limit was lowered. What does this mean for my credit score? Banks lower credit limits to reduce their

risk exposure– Your credit score could drop dramatically—it

appears you’re maxed out– Call the credit card company to see if you can

have your limit increased– Reduce your balance– Open a new credit card account to counter the

reduction

Top 5 Credit Top 5 Credit Crisis Questions Crisis Questions (cont’d.)(cont’d.)

4. I already have bad credit. Will a foreclosure, repossession, debt settlement, or bankruptcy make it worse?– Once your credit score is under 500, you don’t

need to worry much about it getting worse– Once on stable ground, work on rebuilding

your credit

Top 5 Credit Top 5 Credit Crisis Questions Crisis Questions (cont’d.)(cont’d.)

5. The credit crisis hasn’t hurt me yet. What can I do to be prepared?– Get out of debt– Build up 3-6 months worth of emergency

savings– Have a good credit score

Credit Score FactCredit Score Fact

Negative records stay on your credit report for 7-10 years

Rebuilding Rebuilding Your CreditYour Credit

1. Survey the damage• Order credit reports from all three credit reporting

companies and review all three of your scores (see www.annualcreditreport.com and www.beingfrugal.com )

2. Check the expiration dates• You will see major improvements in your score when

these records expire (bankruptcy, late payments, etc.)

3. Dispute the errors1. If you find inaccurate records, fraudulent accounts, or

records that should have expired, you have the right to dispute the errors (see www.credit.com)

Rebuilding Rebuilding Your Credit Your Credit (cont’d.)(cont’d.)

4. Start adding positive information– The best way to improve your score is to add

new positive information– Open a new credit card or a secured card and

use it responsibly each month (see www.bankrate.com)

– Keep balances low and always pay on time

5. Monitor your progress

5 Ways to Save Money 5 Ways to Save Money During a RecessionDuring a Recession

1. Insurance– Are you getting the best deal on your home and auto

insurance? The better your credit score, the better the insurance deal

2. Phone plans– Call your cell provider to see if there is anything you

can do to cut your monthly bill.– Compare cell plans from other providers– Consider only one phone or a pay-as-you-go plan

3. Save energy at home• Check out the U.S. Dept. of Energy’s Home Energy

Saver Tool

5 Ways to Save Money 5 Ways to Save Money During a Recession During a Recession (cont’d.)(cont’d.)

4. Cable TV can cost $40-$100 per month– Negotiate a better deal or downgrade your

service– Switch to a free antenna with the major network

channels

5. Credit cards– Increase monthly payments– Reduce your balance or interest rates– $5,000 debt @ 16 percent interest—you save

$4,500 by increasing your payment percentage to 6.57 percent and reducing your interest rate to 12 percent