U.S. FICO Score

Tags: credit rating, credit score, debt, FICO, United States

Bankruptcy should ONLY be considered as a final, last resort for getting out of debt only after every other resource has been exhausted.  Bankruptcy is not the “get out of debt free” (or for nominal legal fees, actually) option it once was being used for and/or has been used for in the past.

Bankruptcy laws have undergone drastic changes within the past few years.  Simply filing for bankruptcy WILL NO LONGER guarantee that you will not have to repay any outstanding debts you owe.

Student loans, taxes, and other debts, such as those which occurred through or as a result of fraud, alimony and child support that you owe (and will STILL be expected to pay), and any money that you owe as a result of criminal or civil liability which was brought, and proven, against you will not “disappear” as a result of filing bankruptcy.  You will still have to pay these debts, and you can still be held responsible if you default on any of them.

There are different types of bankruptcy.  The most common ones are Chapter 7, Chapter 11, and Chapter 13.

Chapter 7 bankruptcy is considered the “worst” (as if any form of bankruptcy were good).  True, it gets rid of the majority of debts, except those in which the creditors request payment, and of course those mentioned above which cannot be discharged through bankruptcy; however, this form of bankruptcy can cause the most damage to your credit history, and should be avoided if at all possible.

Chapter 13 bankruptcy does not make debt “go away”; rather, debts are restructured, and more time is given to pay off creditors.  In addition, one may even be given a “grace period” before having to begin repayment of the restructured debts.  Small business owners and individuals avail themselves of this form most frequently.

Chapter 11 bankruptcy is the one you frequently hear about when a large business or corporation “goes under”.  It works along the same lines at Chapter 13 bankruptcy.

A bankruptcy will go on your credit report, and will remain on there for anywhere from seven to ten years.  During this time, it will not be impossible to obtain credit; however, you will most likely not get the best interest rates, nor might you be able to borrow as much as you need, if indeed you are able to borrow at all.

Some credit card companies, for example, do offer credit cards to those who have a bankruptcy on their credit report.  Because a credit card is required for so many things besides charging purchases (holding hotel or flight reservations, for instance), you might wish to go ahead and get one of these cards.

However, remember that the card is NOT to be used except in cases of extreme emergency, or for such uses as those mentioned above.  If you do get one of these cards, do something to make it harder than it would normally be to use it.  Either keep it “off-site”, to where it will require some effort just to get it in your possession, or do something so that you will not be tempted to use it.

The best way to avoid bankruptcy is to remain aware of your current financial status.  If you see that you are starting to fall seriously behind in your payments, immediately contact your creditors and see if you can work something out with them.  If you are honest with them, and get in touch with them before you are too delinquent, you might be pleasantly surprised at how willingly they will work with you.

Tags: bankruptcy, credit cards, debt, student loans

The news is rife with stories about how bad things are in the US economy, and the fact that many Americans have been living beyond their means. Usually, the articles take a stance that the latter is largely responsible for the former. Americans are frequently talked about as if they are the worst consumers, or maybe it’s just that, as the world’s official scapegoat, it often seems this way. When statistics about the US economy are then presented in comparison with those of other developed (or wealthy) nations, many would be surprised by the outcome.

Data from The International Monetary Fund is widely referenced for its market research and financial analyses by leading popular and scholarly texts due to its accuracy. According to its 2007 Financial Report, the 10 wealthiest nations in the world (in terms of GDP) were:

The actual nations that make up the highest GDP list are probably not surprising, and their combined GDP is equal to roughly half of the world’s total economy. Generally speaking, the countries that produce the most are going to be ones that spend the most. This is more or less the case for individuals as well. A nation’s external debt can include any number of factors, including loans, trade deficits, budget deficits, and the sum of its citizens’ outstanding consumer debt and other factors. This is similar to how an individual’s debt can include business loans, mortgages, credit card debt or student loans.

Surprisingly, there is not a wealth of literature written about the size of these large economies after their debts have been considered. Effectively, this could be referred to as an ad hoc net worth of the above nations’ economies. This is very interesting, as the nation is in essence the sum of its parts, meaning its citizens. Someone’s debt-to-income ratio is one of the main factors in someone’s credit, and their ability to buy a house or finance a car. Why does it not play a major role in a nation’s ability to conduct business and borrow money in such a way?

According to the CIA World Factbook, the top 10 debtor nations (meaning the countries with the most external debt) are as follows:

Seven of the top ten debtor nations are included in the world’s top ten economies. Not surprising. This is largely a result of widespread availability of affordable credit, and relatively large middle classes in these countries, and consequently a large ratio of home/property owners. Most popular rhetoric on the topic would claim that wealthy countries have grown accustomed to being wealthy and they are enthralled by consumerism – it could be argued that this high level of debt could be a result of a culture that is used to and willing to buy now, and pay later…even if it means with interest.

According to our data, Japan has the highest positive income (in gross terms) at US $2,892 Billion. Similarly, the US economy is $1,594 Billion. At the other side of the spectrum, Great Britain’s income to debt ratio is a US -$7,677 Billion, and that of France is -$1,890 Billion. But what do these statistics mean on an individual level? Well, if you were to boil down what each person in this country contributed to the nation’s income vs. debt ratio, the results would be startling. We would have to take into consideration the nation’s population to better understand this. And some may be surprised to see that the US does not fare quite as bad as imagined, comparatively:

So what are some of the reasons why these nations have such high outstanding debts, even to the point where it may dwarf its GDP in comparison? Typically, in what are considered to be established capitalist economies, interest rates are kept low on purpose in order to encourage entrepreneurship and to promote the growth of businesses and spending. The idea is that those who contribute to the growth of the economy would make up for those who do not, and those who do not contribute positively to the economy would at least spend money in it. Remember Reaganomics and the “Trickle-Down” mantra?

The United Kingdom is an interesting economy in particular because its aggregate consumer debt alone ($2660 US Billion) is roughly equal to the nation’s total GDP. In this sense, the UK is just like your friend that spends exactly what they make, or even beyond their means to try and impress his/her friends. This is worse than living month to month – it’s like living a month to two months behind! And now, the UK is accumulating new debt at a faster rate than the economy. If the UK were a private citizen, it might be time for him/her to sell off what they can and move to Panama, or declare some type of bankruptcy.

So what are the causes of the high debt-to-income ratios in Europe? Expensive labor. Expensive exports. Expensive currency. Small population. High levels of taxation and large social welfare systems. On the international front, European nations are having a difficult time competing with an increasingly devalued dollar (and consequently the Chinese Yuan and The Japanese Yen), and domestically, these nations are taking care of their citizens to a point that would make any red-blooded Texas Republican cringe. And of course, the wealthy classes in these countries are so heavily taxed that money is being pumped back into the country’s extensive social programs that, perhaps counter-intuitively, can affect the economy negatively.

Conversely, in Japan, it is often pointed out that the nation has had a history of being a leader in technology and manufacturing – it is also a nation that is a net exporter, or a nation that exports more than it produces. Japan’s economy is rather large and it’s population very small. The country’s social welfare system is modestly sized, and the Yen has purposely been kept at a rate that has traditionally made Japanese exports more desirable compared to its US and European counterparts. There are also arguments that pertain to the differences in culture, and those that relate back to the fact that Japan’s position in the global economy is a relatively new phenomenon. Maybe the ‘buy now, pay later’ philosophy has not yet set in. If you were to attribute human characteristics to Japan, you’d have to conjure an image of a high-level executive who brings a sack lunch to work everyday, and drives to the office in his 1982 Toyota Pickup – because it’s paid off.

It is important to note that few economists would make any real case for some type of financial plan as a result of this data simply because most of them will never pay back any of their debt. But also, because there are not really any solutions - if the citizens of each country were taxed in a way to pay off their debt, there wouldn’t be much money (if any) left to spend domestically and put back into the economy. One of the benefits of being a wealthy nation, I guess! At the end of the day, if no one is coming to collect on these nations’ debts – what is the big deal, right? But, nations are not like people, and the rules of credit are not so applicable. The determinants of whether or not money will be lent between two countries are more likely to be a result of the two countries fraternal histories, or if they collaborate in military operations, etc.

It will be interesting to see if any of this will affect the international economy, especially with the doomsday talk about the world’s housing, stock and credit markets. In effect, most of this debt will probably be neglected, because you can’t send a country to medical collections, or into foreclosure. But what these European countries are in particular doing, is saying, “go ahead try to collect on me – I won’t pay you! And furthermore, when I decide it’s time for a new Audi, I’ll figure out a way to pay cash for it.” To take the analogy one step further, and if you are still one of the few people still in the real estate market, you would probably only be able to finance a home loan for Japan.

SOURCE

MSNBC

http://www.marketwatch.com

Tags: America, consolidation, countries, debt

Millions of Americans find themselves spending more than they earn each month. Thus, to “get by” they pull out their credit cards and personal equity loans to pay for necessities. After putting six months of grocery bills and gas expenditures on a high interest rate credit card, the average American then looks at their debt with panic. After all, one trip to the grocery can take up to a year to pay off when using a high interest credit card and only making minimum payments each month. Because millions are overextended, maxed out and having trouble paying their monthly bills debt consolidation or debt relief is often a popular option sought out.

Pros Of Debt Consolidation

Debt consolidation is one of the most popular means of dealing with debt in America. With debt consolidation, a consumer who is overextended can easily get back on track. The process entails taking out a loan and using it to pay off all other debt. The main point of the operation is to get a loan with a lower interest rate and use it pay off the high rate credit cards and loans. Debt consolidation often results in a lower payment and a shorter pay-off schedule. Thus, the consumer will pay less each month and get rid of their debt much faster than if they paid each individual debt.

In addition, there is only one payment to keep up with and consumers often find it easier to navigate their finances with a solitary bill due each month. Debt consolidation and debt relief can be an excellent way to get rid of debt. It can help consumers become debt-free quickly, as most consolidation loans have terms of five years or less. Considering the average credit card will take a consumer fifteen to twenty years to pay off (with minimum payments), debt consolidation or debt relief is quite appealing.

Cons Of Debt Consolidation

While there are many benefits to considering debt consolidation, it can be a damaging choice for consumers to make. Realistically, going into debt is a cycle. Just like abuse it is often repeated and relived by people over and over again. Often consumers will acquire a large amount of debt, consolidate it under a loan to get lower payments and then go out and charge their paid off credit cards to the limit once again. It can be a vicious cycle!

In the end, the consumer is stuck with a consolidation loan payment and once again maxed out credit cards they just paid off with the consolidation loan. It can leave them in a worse place than they first began. Thus, many consolidation companies require borrowers to cancel all credit card accounts before they’ll approve a consolidation loan.

Overall Outlook On Debt Relief

Debt relief and debt consolidation can be a very responsible action to look into. However, consumers who choose to consolidate their debt (gaining lower interest rates and lower monthly payments) should also choose to cancel all credit cards and possible loan accounts. If a consumer’s not responsible enough to stay debt-free while paying off their consolidation or personal loan; otherwise, the entire process will fail.

Tags: America, cards, consolidation, credit, debt, loan, relief