Viewing the 'Debt' Category
October 31st, 2013 at 10:25 am
If you're like me, you've wondered at some point how they come up with that strange "credit score" that all of our borrow, and many of our payments are affected by, if not controlled by. I was browsing the Experian site, and came across the following.
30% of your credit score is based on your credit usage
Credit usage refers to how much money you've spent on accounts that have credit limits, such as credit cards. Also called a utilization rate, it measures your total balances compared to the total of your credit limits. High credit usage or utilization rate is a strong indicator of credit risk and can lessen your ability to gain new loans.
31% of your credit score is based on your payment history
The most significant factor in determining your credit score is your payment history and making your payments on time. Late payments remain on your credit report for 7 years from the original delinquency date. The original delinquency date is the payment date that was first reported late by your creditor.
15% of your credit score is based on the age of your accounts
Having a lengthy credit history shows lenders you have an established record of managing your debt. Closing older accounts, such as credit cards could negatively impact your credit score. Experian retains closed accounts with no negative information associated with them for 10 years from the date they are reported closed. As a result, positive credit information remains on your credit report longer than most negative information, such as late payments.
14% of your credit score is based on the types of accounts you have
There are four basic types of credit: Real Estate Loans, Installment Loans, Credit Cards, and Retail Cards. Having a good mixture of credit types along with high quality accounts, such as a mortgage loan, shows lenders you can manage your credit responsibly.
10% of your credit score is based on inquiries or "credit checks"
Every time you apply for credit, a "hard inquiry" is placed on your credit report. Having too many hard inquiries could indicate to lenders that you're trying to overspend. Hard inquiries stay on your report for 2 years.
So that's at least how one bureau does it.
October 29th, 2013 at 09:17 am
I guess I've waited long enough to post again here.
My mother and father are doing as well as can be expected. My father had a simple heart procedure - pretty much an external one-time pacemaker-level shock - to quiet his atrial fibrillation. Everything is now hunky dory, there. He also had a stress test and pretty much passed with flying colors. He has the heart of a thirty year old. Not bad for a 78 year old, I'd say.
On the not-so-good side, my mom's dementia is progressing. She's also been diagnosed with mild osteoporosis. My younger brother (divorced and kids are grown) moved in with them to help them out. My dad is in great shape, but he is still 78 years old. Getting old really stinks. Baby brother is now job hunting in the Richmond, VA area. I don't know the job market there, but he's always managed to do well. I'm just glad there's someone younger around in case my folks need the help.
MIL is now in a convalescent home recovering from her surgery. She's not extremely healthy, but they're very optimistic that they got all the cancer. They're still putting her through a round of treatment (I think radiation), but I think that's more precautionary more than anything else. She is slated to be back in her house before Thanksgiving.
My knee MRI results are "bad, but not bad enough for surgery." They didn't add, "So deal with it," but it almost sounded like they said it, to my ear.
On the financial front, DW has finished installing the new french doors. I really like them, and they came in a few thousand dollars under budget, but still a few thousand more than I wanted to pay. I will admit that the installers did a better and much quicker job of it than I could have done. I know they're better than the old doors, because when DW and I were on Facetime, she opened the new door, I immediately heard the train whistle from about ten blocks away. With the old doors, I'd have heard the train before she opened the door. DW also says they seal better than the old doors. Maybe this will get our utility bills under $100 per month. That's a milestone I wouldn't mind hitting. The bills were originally in the $400 per month range when I first started energy upgrades.
The painters have also finished repainting inside and out. When they started, I felt this wasn't really necessary, but they found some water damage, which was repaired relatively early. If they had not found that damage, I'm sure I would have had a much larger bill to fix the additional damage whenever the damage would have been later found. So, although I didn't want the house repainted, it was a good thing DW had it done, after all.
Debt repayment is progressing apace. The doors are two payments away from complete. We put them on a 0% card just for the convenience factor. We could wait longer to pay them off, but I'm just as glad that they'll be paid off before January. I hate credit card balances. DW's car payoff is going OK. Still a ton owed, but with a 1.19% interest rate, I'd rather leave my money in the mutual funds than pull it out for the car. We'll just cash-flow the payments. It should be paid off in less than two years, and maybe sooner.
I sent the "contract" about the Bank of Mom & Pop loan to DD2 and SIL2. I told them that there was no need for a signature - it's not like we'll sue them if they don't repay it - but I wanted to make sure everyone was aware of the terms. I included a "late payment" penalty of 1% per month after 90 days, but I set back the "first payment" date to January of 2014. They were happy with the terms (0% interest and about a ten year term), which is not surprising.
About my bonus... I'm quite upset. They still haven't paid me for my April bonus. They have reasons, but those reasons are now sounding like excuses to me. Things go more slowly over here, but we are beyond a reasonable delay, in my mind. I plan to speak to our CFO tomorrow to sort this out once and for all.
I will be traveling back to the US over the Thanksgiving holidays. I hope to see my folks and all of my brothers. All four of us children are planning to be there, but I haven't got the details of their planned visits. Time is growing short, so I need to get on the stick about this. It has been over 25 years since all four of us got together at the same time. Two of us live in Texas, though I reside in Dubai. One lives in the DC area. My folks are just outside Richmond, VA. Baby brother just moved in with my folks from Kansas. Maybe his move means we'll all get together more often, but probably not. We keep in touch by phone and such, but to actually get all of us in the same city has just not happened much. It is mostly my fault, as I've lived in Europe and the Middle East for much of my life, and traveled frequently for my entire adult life, rarely visiting when I'm not on the road.
DW and I slowed our mutual fund purchases to cover the water damage repairs. It turns out we pretty much skipped October, but we'll make it up in December, or when I get my bonus. I could pay off DW's car with the bonus, but it's ear-marked for retirement instead. That's part of the "great car compromise" DW and I made. DW's early move back to the US is having more of a financial impact than I would have liked. She has held off on buying new furniture, at least, other than the beds and other assorted items. Only one room really needs new stuff, but of course it's the living room. That's better than another Tempurpedic mattress, anyway.
September 1st, 2013 at 03:24 am
Anyone who has listened to Dave Ramsey (insert evil or triumphant music here, depending on your proclivities), knows he suggests "baby steps" for paying off your debt.
As a reminder, his steps are:
1. Save $1000 for an emergency fund.
2. Pay off all consumer debt sans mortgage.
3. Save up 6 months of expenses.
4. Put 15% toward retirement.
5. Save for kids' college.
6. Pay off your mortgage.
The last time we were paying off debt - and now we're doing it again, but that was last month's biotch - we didn't follow his plan for the debt snowball (lowest balance to highest balance). We also didn't follow the debt tsunami (highest interest rate to lowest interest rate). We followed the "loans then lines of credit." DW and I figured it's easier to not ask for another loan (paperwork) than to leave a credit card alone (swipe! cha-ching!).
Fast forward to now. DW just bought a new car, made some home improvements, is buying some furniture, and loaned some money to DD2 and her DH for their new house home improvements. So, we have consumer debt again as well as our mortgage.
So, we're on baby step 15:
We're paying off her new loans at a good clip (yes, already): Baby step 2
We're saving up the emergency fund again: Baby step 3 (total: 5)
We're putting more than 15% toward retirement (baby step 4: total 9)
And we're paying down the mortgage (Baby step 6: total 15)
This is possible because the "great car compromise" included NOT buying another house. We aren't building that fund until baby step 15 (or at least through "9") is done. I think we've already got step 3 back in place, more or less. I still have the "float" and there is still quite a bit of "furniture money" in the checking account, so I'm not worried on those lines. I would like a bit more cushion, though.
We should be back on an even keel - only car and house, with full EF - before the end of the year, with both the car and house still being attacked quickly.
August 25th, 2013 at 02:19 am
"Won't Power" is a new phrase I've just coined. It is the opposite of "will power."
How do you use your won't power? When you're at the store and you see a cute outfit that would be great for work, but that you don't have in your budget? You tell yourself, "I won't buy it." When you pass by the candy aisle at the grocery store, you tell yourself, "I won't need those calories." When you see the iPhone X come out, you say, "I won't need any new functions, my old phone still does what I need."
How do you develop "won't power?" You keep looking at the big picture down the road. Do you want a house more than you want those shoes? Do you want to fund your children's college more than you want that mocha latte? Do you want to get rid of your debt more than you want another 0.3 inches on your phone screen? Do you want to retire and travel to see your grandkids, or do you want to rely on social security to pay your electric bill?
I think I've got some problems keeping my won't power at full strength, but it's definitely better than it has been.
Lastly, the bane to "won't power" is "want power." If you really, really, really want that big screen TV, it's hard to muster the "won't power" to overcome the urge. Maybe tape a picture of your child and a photo of your diploma to your credit card. That should tend to limit the want power and reinforce the won't power, I would think.
August 6th, 2013 at 01:57 am
Many of you have seen and commented on my rant about DW spending and using our debt cards - they certainly aren't credit cards - to do upgrades and changes around the house.
Yesterday, my portable scanner failed. It just doesn't work anymore. I've had it about four years, and I used to use it all the time. Well, about 8 months ago, my portable printer failed. It didn't really fail, but the ink "spilled" (I don't have a better word for it) inside the printer so it leaves a colorful "trail" along one edge of the paper, and that trail is just not going away.
Anyway, I use these a lot when I travel for work, but I haven't been able to use the printer for nearly a year. So, why haven't I bought a new printer? And why did I almost cringe when I thought about buying a new scanner when I decided it was actually broken?
I think the pendulum has gone too far, and I've become too averse to spending money. I think I need to loosen up more and go a bit back toward my old spendy self, just not all the way toward my old self. I'll just have to remember to remove the ink cartridges when I pack up my printer. And that scanner... well, this will be my fourth one in the last 12 years or so. I guess the scanners are just consumable.
There's no "shopping around" over here for anything. Many of the stores have Ramadan sales going on now, so I think I'll go out today and see if any of the electronics stores have printers and scanners on sale. I'm not holding my breath.
August 4th, 2013 at 04:33 pm
When I was back in the US, I noticed some peculiar damage to the trees in our back yard. We live in Houston, TX, and the power company can come in and trim any trees away from power lines to help limit wide-spread, long-term outages when storms blow through.
Four of our trees, three oaks and a pecan, are on the easement, and they keep getting butchered every time the power company does their trimming.
The damage I noted, though, was near the bottoms of the trunks, but above where a weed eater or other lawn tool would hit; maybe three feet (one meter) up from the ground. The bark was splitting, leaving very large spots that had bare wood under them. Trees are very, very long term investments, so we scheduled an arborist to come out and look at them, in the hope that we could nurture the trees back to health.
The diagnosis is dire. First off, the "best tree," which is an elm off the easement and closer to the house has been hit by lightning, probably multiple times. It is dead on the inside, and the arborist said we have about two more years before it must come down. We're not waiting two years. The tree is too large to risk it falling, and I lost a porch on my last place because I went too long before removing a dying tree.
The four trees in the easement have been butchered badly by the power crews - I don't blame the crews, because the benefit to the majority of the people outweighs my personal losses. The damage is so bad that these trees, too, need to come out. Two of the oaks have lost their capillary layer, and just don't know they're dead yet. The pecan is structurally dangerous now, which we already suspected. I don't know what's wrong with the other oak.
Long story synopsis: I'm losing all of my backyard trees, and it's going to cost about $3K to take them out. I've already asked DW to go to the "good" nursery near our house to start shopping for new trees. We're probably going to put in fairly large trees, because we don't have 30 years to wait to have "real" trees.
The good news is that the trees in the front are healthy, including the oak I put in to replace a tree I had taken out 5 years ago after Hurricane Ike. So, the curb appeal is not affected, only the backyard ambiance.
DW has agreed to wait to pay cash for this, at least. It is not an emergency, so we're going to pay for it without hitting the debt cards. We'll probably have it done before Christmas.
I'm going to miss those trees.
August 2nd, 2013 at 08:31 pm
Arrrrgh! Just got off the phone with DW.
DW and I used to have very significant non-mortgage debt. Through diligence and dedication, we paid off or sold off well over $100K in a relatively short period of time. We've been "except for mortgage" debt free for quite a while, and the money has been going to retirement accounts and investments since then, as well as accelerating the mortgage pay off.
We were left with our only debt being a relatively low mortgage principal due. Late last year, I had worked out an amortization schedule on that (remember, I'm still an Excel nerd), and determined we could pay the whole thing off in less than a year. I ran some numbers on a refinance and determined that the interest rate reduction wouldn't cover the closing fees over the period we could reasonably expect to pay off the loan.
Fast forward to now. DW is back in the US setting up home again in our "old" house, and she's spending like a Congressman who doesn't have an opponent for the next term. Between the BMP loan to the kids, a new bed (gotta be Tempurpedic, not just memory foam), a new garage door (yeah, that's an emergency, right?), repainting the outside of the house that really doesn't need it except for cosmetic reasons (paint is for protection, not beauty), the two sets of new French doors, and her new car LOAN... well the EF is gone.
She's starting to use the credit cards. I told her that I'm NOT cashing in any of the mutual funds for this (after tax, no penalty, but we're not going to touch any retirement funds until we retire). I guess now she's going to buy all new furniture and probably have the driveway re-paved.... Sorry, that's hyperbole and frustration, not actual plans. At least she hasn't mentioned all new furniture (yet?).
Anyway, all the work to get us out of debt is being thrown away. I let her get the car loan in a compromise, and now she's continuing - no accelerating - the spending without any more compromise.
To top it off, she's even asking to decrease the amount we had agreed to pay toward the mortgage in the "great car compromise." For that one, I told her a flat-out "No, we're going to pay the amount we agreed to." I even "threatened" to pay the note from here rather than transferring the monies to her account which has all the autopays. She agreed to keep that compromise, but I think that she just wants to make those Jones next door envious.
Now that I have that out of my system...
There's nothing she's doing that we hadn't planned to do over time, but she wants to do it all right now. The problem is that she's putting us back into debt and also killed our EF at the same time to do it.
Does anyone have any advice for me when I talk to her next time? I swear, this feels like she's an alcoholic who skipped out on an AA meeting to go to a bar.
July 14th, 2013 at 07:17 pm
I just got off the phone with DW. She's met with our financial advisor, and of course sent me forms to sign and instructions to follow. She said it might rain today, so we'll save a few dollars on watering the new sod we put in.
DD2 and SIL2 have started the structural changes in their new house, and found that one of the walls she wants to pull down contains the risers for the plumbing upstairs. She's bummed, but they're going to do an archway with support beams (rather than just a stand-alone column to conceal the plumbing) instead of only the breakfast bar with no verticals. I'm sure it will look fine.
The Bank of Mom and Pop has extended the credit line to DD2 and SIL2 to accommodate a new fence. SIL2 had great plans to put in a new fence by himself, but I'm not surprised he's not doing this one. I've done fences before, and even using a two-man auger, postholes are a pain in the butt to put in. He's not all that mechanically inclined, so they got a bid for others to do the fence. The old one is already torn down and the new one should be going in as I type.
DW asked why parts of our house are cold and other parts are not-so-cold. I told her it's because it is an old house, and DD2 doesn't run the ceiling fans, closes all the doors, and blocks all the air flow from the registers back to the inlets. I told her to just leave the doors open and all the ceiling fans running and that things would moderate. DD2 cannot be told anything that doesn't agree with her preconceived notions. She thinks that air conditioning should work according to her desires and not according to physics. I can't wait until she starts seeing the results of her ideas in her new place. Remember that I've done thousands of dollars in energy updates in my 1950's bungalow. She refused to do the updates in her 1970's Brady Bunch place.
The puppies are loving the yard, still. I, on the other hand, mopped the floors this evening. I miss the vacuum cleaner aspect of those two.
July 13th, 2013 at 08:50 pm
I was going to go to bed, but I checked my credit score on Credit Karma just now. In my April 20th post about credit scores, I said that DW had a credit score approaching "deity," while mine was close to 100 points lower than hers. Her score was so high, I'd think that folks would PAY her to borrow from them.
When we went to the US, we got a new car for her. This put two new inquiries onto my account; that should've been just one, but I'm not worried about the inquiries. Inquiries are "negative" in effect on credit ratings. We also borrowed a healthy amount, increasing our debt-to-income ratio, which is another "negative."
So, what was the result of adding two negatives to my credit record? The score went up to nearly DW's level after nearly six months of just sitting where it had been.
As I said in the comments to the April post: I just don't understand credit scores or how they work.