I just received this email…
Hello Mr. Diaz and team, (it's Diez, but close enough)
My name is Pat. In 2008 I lost my job of 11 years working from home shortly after moving to our remote retirement home in the mountains – when they declared bankruptcy. We are now an hour away from the nearest grocery store so finding another job was really, really hard.
As a matter of fact, I could not find a job so I just opened up my own Virtual Assistant business and only recently starting making enough to keep our heads above water. I work from home making appointments for insurance agents now.
(Awesome. You looked adversity in the eye and didn't blink. You did not play the victim but instead became proactive and found a solution. You are an inspiration to others in your situation. Kudos!)
From checking your website, I believe I may have made a bad decision. At the time, it seemed the best thing to do. We had about $25,000 in credit card debt and it was eating us alive…penalties, late fees, and increased interest rates all went to keep us from lowering the balance at all so I signed up with Freedom Debt Solutions and have been on with them for about 5 months.
They are supposed to be able to "settle" the credit cards for about 50% and it has helped us to be able to make a monthly payment of $429 to a separate account that they monitor and keep our budget together.
My understanding is that all should be settled and creditors paid within 3 years so I suppose that means my credit score will be in the dumps for that length of time…or until I can afford to pay enough in that they can settle with the 5 creditors I turned in to them.
I am also in the process of trying to get a loan modification on our home – don't know if that will work or not and don't know what effect that will have on the credit score. Our current interest rate is 6.975 and we bought our place in 2007 so our credit was not in too bad a shape at that time.
We do have our house up for sale and if we can sell it, then we would pay the balance needed to Freedom Financial to settle with everyone and try to scale way back on what we have so far as a home….and I am sure the way things stand right now, I would have to "rent" until we could get our credit built back up.
(Between you, me, and the thousands who read this blog…the real estate market is going to drop another 10-20% by 2012. Don't buy yet. Rent for as long as possible. Improve your credit. You will be able to scoop up houses for pennies real soon.)
Currently this is our monthly financial snapshot:
• Mortgage: $1628
• Auto Payment: $610
• Freedom Debt: $429
• Life Insurance: $240
• Gas: $150
• Utilities: $300
• Groceries: $600
• Auto and Health Insurance: $100
• Telephone: $250 (used in Virtual Assistant business)
• Misc. $150
(A little tip…Try using skype instead of your standard phone line. Its way cheaper and comes with all the bells and whistles. Make sure you use a USB headset and you'll sound crystal clear. We use them at Score More Credit. Get pamela for skype. Its a free download that will let you record calls and even transfer calls to other telephone lines. It should save you about $150 a month on the phone service expense.)
Our family consists of my husband who is almost 63, I will be 66 in September and my Mom who lives with us will be 86 in September. We all draw Social Security and David and I both have a little retirement check from AT & T and Alcoa each month plus my Virtual Assistant income.
(Note to all seniors. Social security and medicare are going to crash if the dollar doesn't crash first. If you are surviving on fixed income, you had better find some work. Cost of living is on the rise and government programs will fail.)
Both my husband and I have made good money most of our lives and now that we are supposed to be getting ready for retirement all I see is me working at this desk until I die. Bad investments have depleted our savings so yes – good credit means a lot. I just don't ever want to have credit cards again that I cannot pay off at the end of the month.
(Smart decision about the credit cards. Unfortunately, you are dead on. You will have to work, and so will your husband. My parents and relatives as well. Everyone on fixed income will have to work. I wouldn't lie to you.)
Ok, that is the history. My question to you is WHAT would you suggest I do? I am completely open to listen to suggestions and would like to find a way to expedite our credit repair. I do like that about your service that you are "fast" but should I try to do it now or wait until I can get the credit cards settled or DO you settle credit cards too?
Thanks
Pat
A:
I'm not going to pull any punches, so put your hands up for a dose of harsh reality.
Fixing your credit is your last priority. Paying off your debts as quickly as possible is your first priority.
Focus on building your business and paying down your debts. There are dozens of free resources that offer mentoring for small businesses like yours. Try SCORE for one.
Your husband should start looking for consulting work. Anything that will help you get out of debt faster. Do it now and he'll have established clientele before the rest of the country starts competing with him.
You're stuck in your credit squeeze. The damage 5 months worth of late payments has already done to your score is irreversible, so you might as well ride it out.
At least settling your debts will only affect your score for 7 years. A bankruptcy would've taken 7-10 years depending on the type filed. Don't forget you'll have to pay taxes on the unpaid amounts, so factor that into your budgeting.
Uncle Sam needs money bad. Not only are they raising taxes across the board, but it seems the only place to get a job for the next few years is at the IRS. They'll probably be hiring in the hopes of collecting more taxes.
The fact that you stepped up and started your VA business tells me you're going to be just fine. I just wanted you to have all the facts, so you could adjust your mindset about what more is coming your way.
You are a shining example of what you should do to take back control of your future. Thank you for sharing your story and question, Pat.
If you, dear reader, don't know what you can do to make more money, please check out www.CreditRepairAcademy.com/freevideo.
I'm looking for partners to help me reach 100,000 people and get their lives back on track financially. It's a great opportunity to give to your community and make a great income while you're at it.
The best part? Its free.
Hurry! I'm closing the doors this Monday.