All of the lessons in Dave Ramsey’s Financial Peace University are full of practical advice, but the Week 5 lesson, Credit Sharks in Suits, comes straight from Dave’s personal experience with debt collectors.
Dave also debunks the ideas of what most people think the FICO score is. And even includes some great advice on what to do if you are a victim of identity theft. It’s a great lesson.
How many credit offers do you receive in a week, or a month? You know credit is a big business, by all the advertising money spent on mailings to try and entice you into accepting more credit.
A common myth about the FICO credit score is that you need to take out a credit card or car loan to build your credit score. Banks have become very good at drawing young people in with this false assumption. Having a large FICO score does not make you financially successful – read on to find out why!
Do you know what a FICO score is? Dave says the FICO score is nothing but a measure of how much you love debt. Did you know that every component of the FICO score relates to debt – your debt payment history, your debt level, the length of your debt, the type of debt, and how much new debt you have?
It is very important to check your credit report at least once a year, if only to make sure you are not a victim of identity theft. Each of the three credit bureaus (Transunion, Experian, and Equifax) will give you one free report a year, so you can spread this out and get one every four months if you like. You can request a free credit report at AnnualCreditReport.com .
Here’s a shocking statement – make it your goal to have no FICO score at all, meaning you have no debt!
If you find out you are a victim of Identity Theft, it’s very important to do these three things right away: 1) File a Fraud Victim Report with all three credit bureaus; 2) Call the police, file a report, and send it to all three credit bureaus, to make your Fraud Victim Alert permanent on your files; and 3) Contact the fraud victim division of all the creditors involved.
Be persistent! If you don’t want to hire a company to clean this all up for you, understand you now have a new hobby. This will take a lot of your time, and a lot of patience and persistence to fix. Understand this is theft, you are not liable, and owe nothing!
This lesson is not about dodging bills you legitimately owe. If you have debt, you need a get a plan to pay it off. Unfortunately, debt collectors are not your friends. They have one purpose – to get your money! Dave gives lots of great ideas on how to deal with debt collectors.
Always, always take care of your family necessities first. These include food, shelter (mortgage, rent, and utilities), and transportation, and clothing. Never pay for luxuries at the expense of necessities. It makes no sense to pay credit card payments, and then lose your home as a result.
If you are deep in debt, and can not make even the minimums on your credit card bills, then use a Pro Rata plan. Add all your minimum payments due to get a total minimum payments due. Divide each minimum payment by the total due to get a percentage for each payment.
Take the percentage for each bill of the total amount you can afford to pay, and pay that amount for the bill. At least you will be paying something on each bill, which is better than ignoring a bill altogether. Remember, people who live in denial of their debt are more likely to get sued or garnished for payment. Do the honorable thing and put together a plan to work it out.
Imagine how great it would feel to have no FICO score at all. Now that would be a great indication of financial success – having no debt!
Pamela Otten is CEO of Pamela Otten LLC, a Registered Investment Advisor. She loves to work with women business owners and entrepreneurs, and women in transition due to job change, death, or divorce. Pamela will help you set and reach your financial goals, educate you to understand your investments, and teach you how to do more charitable giving. Pamela is a Qualified Kingdom Advisor (www.kingdomadvisors.org), trained and committed to integrating biblical principles with her investment advice.
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