Credit Counseling companies???

[pamzam]

Hello:

Well, it's the new year and yes, my husband and I seriously want (NEED) to get out of debt. Let's see - we've got a $10k credit card, a $3400 credit card, a $1400 credit card, an $800 credit card and a home equity line of credit (total $16,500) - not including our $225k mortgage (roughly $1400/month).

One question I have is - should I transfer some of the $10k card to my $1400 card, which has a 3.9% rate for the life of the loan (also for transfers)? My minimum payment on the $10k is $225! The minimum for my $1400 is about $75-100, I believe. The $10k has a 2.9% rate. Would it make sense to transfer this over, or would the minimum balance(s) be about the same?

We are living paycheck to paycheck and it really sucks. We are both working and there is not a lot left over after paying the daycare for our son, groceries and all of these bills!! I'm also transferring money from our (now $3300) savings account and I'm worried, pretty soon there will be no savings left!!!

I was wondering about a credit counseling service...I've heard good and bad things about them, and I'm wondering if this is something we should look into. How do they work? I've tried looking on several companies websites, and I don't fully understand how it works.

The bad things I've heard is that your credit cards may report you as 'late' because you're not paying the full minimum payment (?).

Does using a credit counseling service screw up your credit? I'm not all that worried about credit right now - we just moved into our house almost a year ago, don't need new cars, and I'm not foreseeing any 'big' purchases anytime soon...

Thanks for your help!

Pam

[Anonymous]

Stay away from credit counseling. They are nothing more than a "kindler, gentler Collection Agency". They can trigger lates and wreck your CR's as bad as not paying, all for the next 7 years.

OK .. you're apparently not behind yet on the CC's right? Do you have a budget? If not - draw one up. Use software like Quicken or Money to track every penny you spend in a month. I did that and was shocked at where my money was going. I even keep track of CASH that I spend. Make a budget and STICK TO IT!

Getting $50 out of the ATM used to be a black hole. I never tracked where it went .. now I do.

If you're using the plastic to finance everyday expenses, stop it. That's what I call the "death spiral"...

I know - I've been there - spiraled all the way down and now 8-10 years later clawing back up.

Look at everything you spend money on and look at where to save. Whether it's buying generic groceries to turning down the thermostat in the winter.

[pamzam]

Hi;

No, we're not behind on the CC's (yet). I'm able to make at least the min payment every month, but again, I'm digging into our savings to do that sometimes.

As far as a budget, I do track 'everything.' I've just got an Excel doc that I have all of our monthly bills, as well as another sheet with all expenses (like dinners out, groceries, buying a cd or pack of gum...), but I guess I'm not that great at figuring out what to do with a 'budget.' Sure, I'm seeing where all of our money is going, but I guess I just need to 'watch it' more.

We've cut back on our electrical use (I'm always nagging my husband to 'turn the light off!') and we've turned down the thermostat...I guess I just need to really, really keep an eye on things.

It's funny, though - it's not like we're going out to eat all the time or buying stuff here and there...but we just can't figure out where the money is going (well, we DO know, but...).

So, you wouldnt' recommend a credit counseling service, then? Yeah, there's no way I'd want to screw up our credit or get late fees and things like that.

Thanks for your help!

Pam

[Anonymous]

No ... I think most on here will agree .. credit counseling is a speedbump on the way to bankruptcy court. Someone posted on here (and I'm too lazy to search) that most who go into counseling, end up out of counseling and declaring BK .. now that was under the "old" rules.

You're on the right track - keeping track of expenses. Just periodically review everything and see where you can save. Insurance (deductibles?), go on budget billing for utilities, clipping coupons, it all adds up. Buying light bulbs? Get the efficient ones. They may cost $1 more but they'll save on the electric over the long run. I'm sure if you look around on the 'net or some googling you'll find ideas for frugal cooking.

My personal favorite: 1 box Mac & Cheese, 1 can tuna, 1 small can peas. Cost: about $2.25 and that's two meals for me, double that and you can feed a family of three a cheap dinner.

You do know most creditors minimums are going up right? Have they done that on you yet?

And of course, look at what you did you get into this pickle in the first place. Where did it all go? What will you do to prevent this from happening again? because we only get one mulligan in our credit life. This will take time to resolve, so be patient. Don't fall for the quick fix.

[LNY]

Grim is right. Credit counseling makes it worse. It's held against you on your CRs, the payments are often HIGHER than you're making now (some creditors demand this in exchange for lower interest rates) and all too often your payments are applied late or not at all. I should know. It happened to me. I was in your shoes... $65,000 in debt, never late on anything, but having to choose between making payments and eating. So I went into credit counseling, and the hole they dug for me sent me to bankruptcy.

Can I second the recommendation of compact fluorescent bulbs in all your lamps/fixtures? I have them in all of mine. A bulb with the brightness of 60 watts uses only 12-14 watts. Home Depot does them in big, cheap multipacks ($9.99 for 6)... they're the squiggly ones!

Also, heated mattress pads use half the power of electric blankets when you turn down the heat at night. Mine uses only 70 watts.

Coupons: DEFINITELY. I saved over $500 this year on my grocery bill with coupons. Find a supermarket that doubles. And Grim... that Mac n Cheese recipe goes even further if you buy a cheap 69-cent bag of elbow macaroni and add some!

[onlybrad]

That is some good advice...

1. Get on a budget. Write everything down.

2. Have a garage sell. Sell everything you can?

3. Leverage your savings... How much do you have in savings? Think about this... If it is only bring you 3%-4% why keep it in savings when you have credit cards that are 10% & up? Use that saving and pay off your debt. Once you are out of debt then you can focus on saving money my friend.

4. Raise you car insurance dedutablies to $1000. Why? This will save you 15% on your rates. Plus... When was the last time you had a wreck? Most people realize that they are just making the car insurance companies rich. Even if your deductible is at $500 and you have a wreck that most $750 would you put the $250 on your insurance. Probably not... Because they would probably raise you rates next year and may drop you. Plus most wrecks cost way more than $1000 dollars and your could put the $1000 difference on a 0% interest rate card once you get your credit under control.

5. Remove all your fancy telephone options. Get radical!

6. Lower your cell phone plans.

7. Do have have debt on your cars? What's your interest rates? Based on your credit scores you could get lower interest rates... Have you checked into that?

Let me ask you a question... How bad do you really want out of debt?

Heck, take a second job if you are serious... How serious are you about become debt free?

God Bless,

Brad

[pamzam]

Hi Grim:

When you mentioned going on the 'budget plans' for the utilities, is this a good thing? I only ask because sometimes our monthly bill is a lot less than the budgeted amount (for example, the gas for the house - Bill would be about $95, but the 'budgeted plan' is $137).

Yes, I do know that creditors are boosting the minimum payments - yikes - but I haven't checked mine yet to see if that's in effect.

Thanks for the advice (everyone) about the lightbulbs, too. We've got some in our home, but not in every lamp (but they will be soon!!).

For Onlybrad...

We have about $3300 in savings (that would pay off 1 card and maybe half of another). Would you really suggest plowing thru our savings (yes, this is all we have, unfortunately). And, unfortunately, this is what we're using (sometime) to pay bills here and there (I haven't transferred funds from our savings for bills in quite a few months - yah - but it looks like I'm gonna have to dig into it this month to cover the mortgage..). I get the concept of the 3-4% savings interest vs. paying 10%+ on credit cards, I do, but I'm afraid to let go of that savings!

I seriously appreciate everyone's help. You guys are awesome!!!

I know getting out of debt isn't going to be easy, and I'm DREADING it, but Grim, you're right - I am seriously thinking of how the heck we got in this mess ("oh, let's just put it on the card...") and I hate it!!

[drshields]

Using your savings to pay off credit cards may not be a bad idea. Because the sooner you have your credit cards paid off, the sooner you can deposit a lot more into savings. And, if an emergency did come up, you can always temporarily tap back into your credit cards, and hopefully have it paid off before interest kicks in (<30 days, right?).

[Anonymous]

You mentioned you're in a new house. You all electric or electric and gas?

The budgeted amount on a new house is a estimated guess by the utility. I'm on budget plan for gas, but run a huge credit because if I do get socked by the $1.10 per 100 cu. ft. of gas I'm not fumbling to settle in the spring. Normally budget is your average monthly bill, with a small fudge factor in case you go nuts with the thermostat.

[pamzam]

Grim:

We're gas (for heat) and electric for everything else. We live near Chicago, and it's been COLD, but even so, I've had the thermostat on 65.

So, if you're on a budget, and you do 'go over' in gas usage, then that's less you'll have to pay 'later on,' am I right? I guess I'm just 'flinching' when I see that I'd be paying about $40 more (for the budget plan), thinking that $40 could go elsewhere...

P

[LNY]

Lucky you, Grim. I pay almost $2.00. Even for a tiny 1 BR apt. that rarely goes above 60 degrees, my gas bill is about $200 a month.

[un4givn]

As for the budget plan with utilities in Ny at least they would either credit /refund you for any over payment in the 12th month or charge you if you went over.

If i had to do it all over I would not go to CCCS. Payments are more than you currently pay, they lie about the program length,and you are paying them monthly to do something you could do yourself.

Definitely cut out any extra stuff you don't need i.e. cable,cell phone,expensive coffee etc. Stick to what you need to survive groceries,mortgage. Loose change can add up, OT,P/t work, garage sales.

Even if you only make $5 more then minimums. Realize to see balances drop it is going to take along time.You are lucky that you have such low rates work hard to keep them one late pay and you can be banished to the land of universal default.

[onlybrad]

Hi Grim:

When you mentioned going on the 'budget plans' for the utilities, is this a good thing? I only ask because sometimes our monthly bill is a lot less than the budgeted amount (for example, the gas for the house - Bill would be about $95, but the 'budgeted plan' is $137).

Yes, I do know that creditors are boosting the minimum payments - yikes - but I haven't checked mine yet to see if that's in effect.

Thanks for the advice (everyone) about the lightbulbs, too. We've got some in our home, but not in every lamp (but they will be soon!!).

For Onlybrad...

We have about $3300 in savings (that would pay off 1 card and maybe half of another). Would you really suggest plowing thru our savings (yes, this is all we have, unfortunately). And, unfortunately, this is what we're using (sometime) to pay bills here and there (I haven't transferred funds from our savings for bills in quite a few months - yah - but it looks like I'm gonna have to dig into it this month to cover the mortgage..). I get the concept of the 3-4% savings interest vs. paying 10%+ on credit cards, I do, but I'm afraid to let go of that savings!

I seriously appreciate everyone's help. You guys are awesome!!!

I know getting out of debt isn't going to be easy, and I'm DREADING it, but Grim, you're right - I am seriously thinking of how the heck we got in this mess ("oh, let's just put it on the card...") and I hate it!!

What are you afraid of... That 3,000 is not much security now is it? These credit cards are more stress than that $3,000 is security. Use it...

How many hours are yall working a week? Being a new year... Could either one of you get a part-time job and bring in some more money?

It's time to get serious!!!

Your Friend,

Brad

[onlybrad]

Don't focus on the pennies and forgot the dollars!

Brad

[pamzam]

Hey Brad...

Here's the scoop...

My husband works anywhere from 40-50 hrs a week (w/overtime). I only work 30 hrs a week. I'm a part-time secretary (and we have our son in daycare - actually it's a home-daycare, so it's not nearly as expensive as Kindercare or one of those).

The reason why I'm working part-time is so that 'someone else isn't raising our son.' The other reason I'm working part-time is that we're paying about $500 a month is because our rationale is this: If I were to work more hours, then that would be more hours to pay in daycare (and less time with our son). So, for the few extra dollars I'd be making full-time would go to a full-time daycare.

My husband is a delivery driver, with no set 'closing' time. He could be home one day at 4p and the next at 7p. He's talked about getting a part-time job, but w/his hours (he works Tues-Sat, again, from 6:30a until 'whenever'), it's hard to find something 'stable.' He could work Sundays/Mondays, but that would take away from family.

Now, I know what you're saying.."What's more important? Getting out of debt and living comfortably or spending time at home?" Well, they're both important, obviously.

And yes, I could get a part-time job as well, but then again, if I have a job after my day-time job, I never know when my husband will get home, therefore, I couldn't be able to have a job where I'd be expected to be there at a certain time. And, there's the whole issue of who would watch our son until my husband got home? We just moved into the neighborhood, we don't know anyone, and we don't have family close-by (My son's daytime 'babysitter' lives my job, which is 30 min's from our house).

Sure, I know it sounds like 'excuses,' but really, I don't know what else to do, unless again one of us works every weekend...

I've thought about 'watching kids out of my house' (like my son's babysitter). She's gotta be making at least $2500/month...But then, there are the expenses of that, too.

I don't know...sometimes I feel as if there's no way out. I read somewhere on this board that the 'next step down from living paycheck to paycheck is homelessness.' Man, that scares me...

[Anonymous]

Grim:

We're gas (for heat) and electric for everything else. We live near Chicago, and it's been COLD, but even so, I've had the thermostat on 65.

Oh good night ... ComEd Only the most expensive energy in the lower 48. And NiCor or People's Gas ... $$$$$$$$$$$

LNY: $2 per 100 cu ft? Good night ... I'm at 99.5c per 100 and I thought I'm getting rooked, but I figure by February or March it'll be at $1.10 to $1.25.

[LNY]

Pam, at this time last year I had $15,000 in savings. Now I have about $1000. I'm self-employed and went through a period of several months with absolutely no work, but bills of $2500 a month. I also had a very expensive move to pay for (almost half of my savings went for that alone).

But you know what? I refuse to mourn that money. I saved it for one purpose... to get me through a time of need, should one arise. And it served that purpose. I made it through and I made through without going into debt AT ALL.

Savings are for a rainy day. It's raining, sweetie. Brad's right. Use the money to pay down your debts.

[Anonymous]

Don't focus on the pennies and forgot the dollars!

Brad

That is true Brad, don't trip over dollars to pick up a penny .. but one has to start somewhere. Pinching pennies eventually leads to dollars.

That's why I now own a motorcycle. Yes I had the expense of buying the cycle and learning to ride, insurance, helmet, etc. However when fuel gets to over $3.00 next summer which I figure it will do, I'll be keeping miles off my vehicle [helping its eventual resale value] and getting 55 MPG. I'm also moving and saving about $100 per month on rent by going to an 18 month lease.

[un4givn]

Have you tried some other stuff like maybe being a freelance resume writer from home? I know when I was in college I used to make money walking dogs,running errands, even made money moving cars for alternate side of the street parking (NY). I know babysitting pays a ton also an MD recently offered to pay me 20/hr to watch her 8yo and walk the dog. Hang in there I know its tough.

[pamzam]

Ok...

I guess I'm freakin' out here, because there are suggestions to use my savings for my debt...

Here's the deal - We've only got about $3300 in savings...that's not even going to make a 'dent' in the debt we have!!

Citibank: $10k at 2.9% (I believe)

Chase: $1,400 at 3.9%

A home equility line: $16,900 at 5%, I think

Comp USA: $800 - 0% until June, 06 (think we can get this one knocked out).

Visa: $3,500 at 5.9%

Oh yeah, and our car ($278/month) at 6%...!!!

I'm just really scared, again, of dipping into that $3300 to pay off, say the Chase and the Comp USA - and then not having ANYTHING to help pay for the mortgage/other bills as they come up!

I just don't want to have NOTHING in case we really need some cash (for car repairs or whatever).

I know I'm not the only person in the world going thru this, but man, it sure feels like it!!!

[Anonymous]

We've all been there ... or worse.

You are not in that bad of shape, but as you say one glitch and you're in deep doo-doo.

It still looks like #1 priority should be making a budg.... err .. SPENDING PLAN (like that Brad?) and sticking to it.

The CompUSA one - that's HSBC. Normally on those 0%'s you have to pay it off or else they will backdate the interest and whack you with the retroactive interest. Good idea to pay it off.

If you can make your payments assuming DH only works 40 hours, work from that. Then as DH gets OT, put that to payments on the debt. You have great rates on the cards, so DON'T BLOW IT BY MISSING A PAYMENT!!!

How much you getting back in taxes this year? If you get a huge refund (say $1500-$2000 or more) then adjust your W4's to get money into your pockets during the year and put that to your debt. You are putting this years tax refund to pay off debt right?

[humdinger]

Nipsco (Northern Indiana Service company) October gas prices $1.40 per therm in October this year, the year before it was .40 cents per therm

[pamzam]

Grim:

YES!! We are SO planning on using our tax refund for paying off something!! We usually get about $2000, I believe, although we just moved in May, I'm not sure if that would still 'happen' this year...I always get so nervous at tax time, that we'll have to pay.

Speaking of which, you mentioned setting up our W4's for 'more money for us during the year...' I always list us as '0 dependents.' And I never know which is the best way to do that...If 0 dependents = more money at the end of the year or what?

When we got our taxes done last year, the tax guy told us that the 'ultimate goal is to not get back ANYTHING' because that shows that you've got the right amount going to taxes...If we get money back, that means we've paid too much during the year. Hmmm...

I'm going to go down and talk with our HR dept in about an hour to get the scoop. I'm also going to lower my TIAA-CREF (retirement) from 6% to 1% (temporarily), just to give us a few bucks every paycheck...good idea?

P

[Halbard]

Get in there and adjust those W-2's..... ASAP

Why give the government your money to hang on to till the end of the year.... just so they can give it back with no interest. The idea is to get nothing back.... means your money stays in your pockets. May not sound like much, but an extra $50 to $100 bucks a month... maybe more (think... if you get back $1500, that means you overpaid by $140/month) put that money toward your debt.... it'll make a huge differance.

[pamzam]

Hal...

I just spoke with my HR dept and she explained the whole 'excemption' thing...She suggested taking about 3 exempt's from my husband's pay (since he makes more)...She said this should give us a 'buffer' in case we do have to pay at the end of the year (which I'm really afraid of! We can hardly afford to pay our bills NOW (gee, because we're claiming "0" dependents/exemptions???), let alone paying them, too!!).

She said it's possible we may get about $500 back (just a guess), but she also said it's more of a 'trial and error.' She said to claim 3, see how the taxes/paychecks look and compare them with last years/months. Make sense?

Erggg...Just wish to heck we weren't in this stupid debt situation!!! I could just strangle myself (and my dear hubby) for letting it get to this point!!!!

Thanks for your help!!