Credit Check for the Cell Phone

Photo by Marília Almeida

Add the mobile phone company to the list of reasons you don't want to mess up your credit.

Prissy Poorhouse needs a way to get in touch with Mom and Dad during the work day. We've had one to many times when the teenage babysitter told us during the day that she wasn't going to pick up the kids. (And yes, we're kicking her to the curb, but that's another story.)

So, now that my employer is picking up part of the tab for my mobile phone, we figured we could afford the $10 a month to make sure the kids get home safely every day.

How thrilled she would be to get a phone for Christmas.

Except.

Did I mention I may have been a bit sporadic in paying my bills this year? Yeah, well, I have been. Mind you, all my bills (except the taxes) are current now. But I have had that spotty payment history.

So to add a line, the phone company gets you for a two-year contract. At 10 bucks a month, that's $240, right?

But they run a credit check. And my credit, as loyal readers will know, is not so good right now. So they want a $300 deposit.

Mind you, I just turned on my Blackberry service for $40 a month additional (employer-paid) with never a how'dya'do. But for a 2-year contract, which we don't even want, it seems I need to pay a deposit.

Yeah, but I don't have $300 to tie up in a deposit.

Looks like we'll be looking at a prepaid phone for Prissy.

Bankruptcy and Foreclosures

The really smart people at Credit Slips made a good point the other day about homeowners in bankruptcy. Mortgages are the only loans that bankruptcy cannot modify! So it is possible to discharge or modify all your other debts, but if you can't make your mortgage payment, you're still outta there. I did not know that.

So pay your mortgage first, folks. And talk to the mortgage company when you first get into trouble, because if you get to bankruptcy, it may not help.

CitiBank Wants Me to Pay Off My Debt

Image via WikipediaCiti sent me a letter yesterday offering me to participate in their Payment Partner plan. Here's the deal: agree to stop spending on your card for 4 months, and at the end of 4 months they give you 10% of any payments you make over the minimum balance due up to $550. At the end of the period, they also reduce your credit limit by the amount of the payments over the minimum balance.

Not a good deal for me, because I have very low "for life" interest rates of 2.99, 3.99, and 4.99 on this card, and I have too much other high rate debt that I'd rather pay off first for this to make sense. The spending freeze is no big deal because I've never charged anything to this card--I just used it for balance transfers from higher cards. And this is one card at least where I haven't missed payments or any other such nonsense.

According to some quick Googling, this offer from Citibank has been around for a couple of years. Some speculate that it is only extended to those with damaged credit as a way to get folks to voluntarily reduce their credit line, reducing Citi's risk. See the article below on the recent trend of credit card issuers of reducing credit limits.

I have to say, that in all of my credit mess, Citi has been the best to deal with. They don't have the dreaded universal default clause that jacks up your rate if you are late with payments to other creditors. They have had reasonable balance transfer rates. Yes, you pay lower rate balances off before higher rate balances, but some of these low rates are for the life of the balance. You just have to be careful not to incur any higher rate charges that would negate the advantage.

Further Reading:
Consumer Credit Limit Crackdown by Jessica Dickler, CNNmoney.com

Related articles by Zemanta

• Battling rising credit card interest rates
• Managing credit scores, 401(k)

The Fedex Guy--Better than Ed McMahon

Image via Wikipedia It's better than winning the American Family Publishing sweepstakes. Out of the blue today, the Fedex guy brought loan modification papers for our mortgage.

Believe me when I tell you we did not even know this was in the works. The terms were beyond our wildest expectations. For a couple of hundred dollars extra a month, they will add our past due principal to the amount we owe and spread it out over the life of the loan. The low fixed interest rate does not change. The term of the loan does not change. There are no processing fees or closing costs. All we have to do is sign and notarize the papers and (cough) come up with the first payment, which has an extra $1000 towards the principal amount.

Wow. How did this happen?

Here's what I think it was. A few months ago, we hit rock bottom. Mr. Poorhouse was working minimum wage part time because nobody in retail was hiring managers. I've been working "for the man" since March, but my income just wasn't enough. We had missed a mortgage payment. The well had run dry--we had tapped out our home equity line, our credit cards, my business loan. We had borrowed against my retirement savings. There were no more pots to cover the mortgage and other expenses.

I googled consumer credit counseling services. I found one: Money Management International. I wanted to talk to them right then. But they didn't have an appointment for weeks. (I guess the Poorhouses and the MacMahons have something in common with lots of other folks these days.) I made the appointment.

The day came. I spent an excrutiating evening on the phone going over our financial situation with the mortgage counselor. At the end of the day (literally) he said we didn't have enough income to carry the debt. He talked about options. Selling Assets. Borrowing from relatives. Increasing income (now why didn't WE think of that!). Short Sale. Bankruptcy. Walking away from the property (not that he recommended that.)

I explained that my husband had an full time job offer for a job that would start in September.
The counselor said he would submit a request for loan modification to the mortgage company, but that he could not say what would happen.

I was pretty emotional during that phone call. He was good. He explained he had also had a failed business and had been in this place himself. A little compassion goes a long way.

A few weeks later, I got the "plan" in the mail. All it was was a reiteration of the financial information I had given him, and advice about options (short sale, bankrutpcy, yada yada). It said NOTHING about a loan modification.

(Aside: MMI also has a credit card debt division. Different counselors, and for me different outcome. I'll blog about that another day. See this post.)

In the meantime, the mortgage company called every few days. I mentioned to each and every individual that I had requested a loan modification through MMI. The answer was always the same: "We don't have any information about that."

One day, in a conversation with my husband, the lender suggested a payment plan which would add a hefty (like 50%) addition to each mortgage payment for six months until the loan became current. We talked about it, and I called the next day to work it out, but by then the acceptible payment amount had gone UP. No representative we talked to ever seemed to have any knowledge of any other conversation we had had with any of his or her colleagues. Hmmm.

Well, we agreed to a payment plan. On a payment plan, it turns out, the mortgage company will accept partial payments, so I started paying 50% of the new really high payment out of each paycheck so that I wouldn't be short at the end of the month. All this during a time when my husband hadn't yet started his new full-time job with a full-time salary.

So imagine my surprise when this loan modification fell out of the sky today! It doesn't make any reference to the payment plan we had agreed to. It doesn't make any reference to the credit counselor.

No matter how it came about. You bet your sweet bippy I'm signing these docs.

The catch: I need to send them a certified initial payment plus $1000 cash contribution to reduce the principal by September 25. Trouble is, I just made a partial mortgage payment, and I don't have the cash.

So, for the first time in all of this, I asked for money from a relative. I'll skip the long complicated family relationship story. But this wonderful woman simply said, "Of course, Polly. You don't have to ask. The money is already yours. It isn't a loan. You need it, I'll send you a check tomorrow. And if it isn't enough, let me know."

Saved. Thank you National City. Thank you Money Management International. Thank you lovely relative. I think I'm going to cry.

OK, I'm better. Just wanted to let you know if you didn't already that MMI and other credit counseling services get their funding from the lenders. This modification didn't cost me anything but sweat and tears. If you keep that in mind you may be better off. Follow the money to see whose interest in being served. In this case, it was both ours, and the bank's, which, I have heard on the news, is having financial troubles of its own. The difference is, in our case, the federal government is pretty unlikely to bail us out.

A good day.

Triple Play: Car Insurance, State DOR, Business Loan,

Image via Wikipedia I've been popular with the letter carrier recently. I got two more registered letters: one from my car insurance company, one from my state department of revenue.

And I followed up on them all. (Yay Polly!)

Out 1: The car insurance company wanted a certified check or money order for payment, but I had already sent an automatic payment through my bank. The very helpful rep suggested I try to cancel that payment and pay with a debit card from the same account to avoid the risk that they won't accept the payment and cancel my insurance. Seems like a good plan.

Out 2: The state was kindly informing me that they received my 2007 return and will be happy to levy my federal refund for taxes owed. Not a big deal, since there will be no refund. As a matter of fact, the IRS already absorbed my economic stimulus check. The state will have to get in line.

But, I did call and talked to a colleague of my previous contact at the State DOR (see back story). I explained that I had done everything requested of me but am still waiting for the forms for electronic payment for the payment plan we had negotiated. I live in fear they will levy my wages again. I do NOT want to go through that again. Success--he gave me the direct phone number of the woman I talked with a few months ago AND told me her hours.

Out 3: This poor collections guy from the bank where I have an outstanding business loan has been trying to reach me for months. I have called him back numerous times, but we never seem to be able to connect. (Plus I am not willing to give collectors or creditors my work number or my cell phone number, and I'm at work...a LOT.)

There's a long, and probably boring, story behind this business loan. I took it out as a line of credit when I opened my business to even out my cash flow. It's got a pretty good interest rate--lower than any of my credit cards. I used it as intended for years: borrowed against it, paid it down, borrowed again.

To pay taxes last year, I borrowed against it and ran it up again. Not to my limit, but enough that it became difficult to repay with no actual revenue coming into the business. At one point I had set up an automatic deduction to pay the balance from my business checking account. So, what begain to happen was that the payment would hit my checking account, which had nothing in it, and I got charged exhorbitant fees from the checking account for bounced checks. I was not on top of that.

Eventually, I would figure out what happened, make a transfer from my personal account to my business checking account, and then it would start all over again. After a few late payments, I guess the bank decided to run my credit report. They sent me a letter that they were closing my line of credit because my credit score had declined. That wasn't a big deal to me--I wasn't planning to borrow anything more--just trying to figure out how to pay it off.

So, they referred my account to collections, and this one individual would call me every month, and I would make good on the payment, or a couple of times, they just 'took' the money.

I wanted to close my business checking account because it doesn't make sense to be paying this loan out of an account...that never has any money in it. It's costing too much. My branch manager said I have to clear up the loan first before I close the account.

So, I finally actually got through to the collections guy today. And he was great. I told him the situation, and he said, "Well, Polly, it really doesn't look TOO bad."

I laughed, because from where I sit it looks awful.

He said, "Yeah, I don't have that kind of money lying around either, but I deal with people who owe hundreds of thousands of dollars who have closed their business, so in comparison, this isn't that bad." Yikes!

He suggested I fax a letter asking to have my overdue interest deferred until the end of the loan period so that he could refer me to the guys who can help me work out a reduced payment schedule. (I guess they won't talk to me if I'm behind schedule.)

I asked him if they had reported this loan to the credit bureaus, and he said they hadn't because he had kept me from ever going 30 days overdue by this trick with the checking account.

So, I'll write the letter, and keep the account open, and see whether the guys can help me.

I'll tell you, the journey is a lot easier when the voice on the other end of the phone isn't in a snit.

A good day.

Related articles by Zemanta

• 6 Way To Beat Over-Drafts
• Manage debt, protect savings
• How Online Bill Payment Adds Months To Your Life

Money and Neighbors and Friends...Oh My!

The worst part of being in financial trouble for me is the local service providers we know personally, and to whom we owe money.

I play the piano. It's actually really important to me. My kids have been taking lessons for a couple of years too. Their piano teacher is a friend of mine. Her kids are in the same class at school as my kids. She's wonderful, talented, friendly, smart, and a terrific teacher.

And now I'm afraid to talk to her.

Her studio policy is that we prepay by the semester. Last year, I didn't have the money up front, so I paid her a few hundred dollars every time I could until we were caught up. She was wonderfully understanding. In the spring, she asked returning students to make a commitment for the fall and pay a deposit. She waived the deposit for us, because, again, I didn't have the $200.

Over the summer as the unemployment situation dragged on, it became obvious to us that there is no money for piano or any other activities this year. I sent an email to the piano teacher apologizing profusely and explaining that we would have to suspend piano lessons. I didn't hear back from her, but that wasn't surprising, because she spends the summers out of the country.

This week, she left a message on our voice mail, wondering where our daughter was during her lesson time. EEK! She never got the email! And now she's got a hole in her schedule for not one slot but TWO students--because of us. Ugh. I feel rotten. But I just don't have the money.

I will call her tomorrow. I will.

We also owe the local dance studio for last semester's fees. The owner, who is our daughter's instructor, is a neighbor of ours. I feel so icky not being able to pay her. For the record, the check that I wrote at the time the payment was due bounced because I wasn't managing my (lack of) cash flow very well. We will pay her, but we need to save the house first.

One Step Forward, Two Steps Back--Now It's the IRS

Image via Wikipedia The other shoe fell today. I got 4, that's right F-O-U-R, registered letters from the IRS. Something has gone wrong with the payment plan I set up to pay off my back taxes from two years ago. Actually, two somethings have gone wrong:

1. They returned the payment plan application I sent in months ago because I left a blank on the form (at the instruction of the phone rep, I might add).

2. They are threatening to levy my wages (been there done that) because I couldn't afford to pay my 2007 taxes either (which I just filed). I actually got a refund on my 2006 taxes, which, together with my economic stimulus check, were immediately gobbled up by the previous year's outstanding balance. Such is the life of the self employed. Apparently, when you agree to a payment plan, you also agree to pay any current taxes as they become due. But I don't have the money to do that. The back story on all this is below.

I did open the letters right away, and I did call them right away, but nobody's home, so I'll have to try again in the morning. Wish me luck.

Be Wary of Credit Card Tactics

It's too late for me, but do check out this article, The Evil Strategies of Credit Card Companies, which details some of the tactics credit cards companies use that get people into trouble. My problem was the increase in interest rates--not just for a late payment, but also if a problem with a completly different creditor shows up on your credit report. If it looks too good to be true....well, you know.

Related articles by Zemanta

• Crack the credit card code
• Credit Card 101