Is it better to pay off debt slowly or all at once?

Your Credit Minute Show Notes:

  • 00:01                                   Marlena Perkins, thank you for your credit question on our Facebook page earlier. And Marlena’s question is, “This would be a blessing. Is it better to pay off debt slowly or all at once?”
  • 00:13                                   Okay. Real simple, guys. It’s just the numbers. If you’ve got the money in the bank, it’s earning .0015%, like literally nothing. Okay? Your money, uh, if you compare it to, or if you compare the interest rate you’re getting from the bank to the inflation, your money’s actually losing value in the bank. Your credit card company’s charging you 28%. Right?
  • 00:36                                   So, your money’s sitting in the bank is costing you 28%. Okay? If you’re nursing credit card debt. So, should you pay it off at once if you have the money? Absolutely. Hell, yes. You better do it. Um, you will be fine if you want to leave $100.00 in your pocket just in case something happens between now and the next paycheck. Rock and roll, but pay off the debt. Don’t nurse it. It’s not your friend. Credit card companies don’t like you. They’re trying to get paid by you. Okay. So, get away from debt. If you need to pay it slowly, then what you want to do is start with the smallest debt, pay the minimums on everything else. Pay that sucker off and move your way up the list. It’s called the Snowball Effect, but we can talk about that another time.
  • 01:16                                   Have a great day, guys.
Is it better to pay off debt slowly or all at once?
Is it better to pay off debt slowly or all at once?

Is it okay to only pay the minimum payment on my credit card? (Curse words)

Your Credit Minute Show Notes:

 

  • 00:00                                   All right, guys. Credit question from Paige, Paige Majelki. I’m sorry if I butchered your name, Paige, and the credit question of the moment is, is it okay to only pay the minimum payment on my credit card? And, I’m going to give you- I’m going to- I’m going to use a curse word. Hell no.
  • 00:19                                   Guys, if you’ve read the disclosure, if you’ve read your credit card bill, you’re going to see there’s a little disclosure box that shows how much you will pay back and how long it will take you to pay off a credit card, um, if you only pay the minimum payments. And, you know what the average is ladies and gentleman on a $2,000 credit card? 18 years. 18 years because you bought a coat. That’s insane.
  • 00:45                                   So, the answer is hell no. Even if you have to send in a dollar extra, you need to do it guys. You cannot maintain these balances. You- You cannot send in the minimum. You can’t nurse these things. They’re not your friend. If you have too many credit cards or you have to list them out on a spreadsheet, you’ve got a problem. You cannot organize credit card debt. It’s debt. It’s the devil. Get away from it ASAP.
Is it okay to only pay the minimum payment on my credit card? (Curse words)
Is it okay to only pay the minimum payment on my credit card? (Curse words)

What is the best way to manage your credit card spending?

Your Credit Minute Show Notes:

  • 00:00                                   All right guys, awesome credit question. What is the best way to manage your credit card spending? You want to know the best way? Don’t use them. It sounds insane. Guys, you just don’t use them. Carry cash. I know it sounds insane. You want to spend all the money in your pocket, rock and roll.
  • 00:20                                   I’m not a believer in budgeting, okay? When you get paid, put some money aside. Everything else, if you want to burn through it, burn through it. Guess what? If you’ve simply burned through the money in your pocket and haven’t accumulated debt, you are doing better than the average American that’s got about $14,000 per household or some absurd number that keeps going up on a consistent level. Stay away from it. Don’t use it. You don’t need it.
  • 00:44                                   If you feel like you can’t avoid the temptation, I would say, I wouldn’t say close out the credit cards. Um, if you’ve seen some of my previous videos, I’m going to teach you a little hack. Take those credit cards, stick ’em in a cup, a red cup. Everyone’s got a red beer cup at their house. Stick ’em in a cup, fill the cup up with water, stick that sucker in the freezer.
  • 01:02                                   You think I’m insane? Think about the psychology. You find something shiny. You want to buy it, okay, but you can’t because you don’t have the credit card on you. Or maybe you’re just using your cash, so be it, that’s fantastic. Use your cash, but let’s say you don’t have enough. You need your credit card. Well, guess what? You gotta leave the mall, you gotta drive home, you gotta walk into your kitchen. Everyone’s yelling at you, the kids are yelling, it’s, it’s, it’s a busy house. You’ve probably forgotten about your purchase, and if you haven’t, you gotta go into the freezer, take this cup out of the freezer, stick it on your counter, and wait for it to melt.
  • 01:36                                   How silly do you feel doing this? Well, guess what, in feeling silly about this, you might, number one, change your mind, okay? Also, time will pass. It’s gonna take a day or so for that thing to melt, right? Time will pass, you’ll get busy, and you’ll probably see something else that’s shinier, and you might just forget about it, okay? Compulsion has, uh, an expiration, and it’s usually about six to 12 hours, okay, so if you can get through that compulsion period, um, you can make a more educated decision. If you really want it at that point, again, I don’t recommend buying it, whatever you need on the credit card, but at least you had given yourself a chance to think about it, guys, so see ya later.
What is the best way to manage your credit card spending?
What is the best way to manage your credit card spending?

If an item is in collections should you still pay it?

Your Credit Minute Show Notes:

  • 00:01                                   What’s up, guys? This is Nik Tsoukales with Key Credit Repair. Um, we posted an awesome raffle this week just asking you to post your questions, so one lucky winner this week is going to get a $250 American Express gift card and all you have to do is post your question, so please continue.
  • 00:16                                   So, one of our questions that we got from Teresa Walker-Woodroth, and excuse me as I’m reading off my screen is, “If an item is in collections, should you still pay it?” So, let’s actually peel the onion back just a little bit more. If it’s something that’s questionable, if it’s something that’s old, if it’s something that’s past the statutes of limitations, which could be anywhere between 10 or as low as, uh, uh, three years in the state that you live in, you might not want to. You might want to challenge the record. You might want to request validation of the record to ensure if you’re gonna pay it, you’re paying off the right person, you’re paying the right amount, uh, and really that it’s just not an invalid debt.
  • 00:55                                   Also, if the debt does come back as validated, keep in mind that if it’s with a debt collection agency and the debt collection agency is doing all the right things and you do want to pay it, it doesn’t mean you can’t negotiate a settlement. So, let’s say the, the, the collection agency has bought the debt for ten cents on the dollar, there’s nothing that stops you from offering them twenty cents on the dollar. They still make a little money and you get a discount. You can get a lot of the junk fees waived off of the collection amount. Um, and you can get rid of the debt. Now keep in mind, paying off the collection doesn’t necessarily remove the record. In fact, most of the time, it does not remove the record. But it’s still a step in the right direction if you feel like the debt is a valid. If you want to work on removing the record post paying it, then it’s something we can have a conversation about.
  • 01:41                                   Thanks, guys. Nik Tsoukales with Key Credit Repair. Again, thank you to Teresa Walker-Woodroth for posting this awesome question. Have a great day.
If an item is in collections should you still pay it?
If an item is in collections should you still pay it?

How can you be charged for closing a credit card?

Your Credit Minute Show Notes:

  • [00:00] All right. This credit question is coming from Wendy Rush. Um, she posted on our Facebook page a couple days ago, and I like this question, and you might not like the answer. So, I’m going to read this off. How can a credit card company charge you to close out a credit card if it’s already paid off? If that makes sense. It makes a ton of sense, and I want to remind everybody that when you sign up for a credit card, the disclosures, although they’re digital, and you don’t- no one reads the room, you just check the box. They’re probably about this thick if you were to print them out. Okay. So, keep that in mind.
  • [00:33] There are all types of hidden fees. Although, credit card companies just like any financial institution, they are regulated, they are not in favor of the consumer. There’s a reason where if you sneeze the wrong way, you’re getting charged a fee. The interest rates going up. The reason- There’s a reason why credit card debt is so prevalent in the United States because the balance is grow, grow, grow, and fees accumulate, accumulate, accumulate. So, keep that in mind. It’s not a fair system, but it does sure happen, guys. Thanks.
How can you be charged for closing a credit card?
How can you be charged for closing a credit card?

Credit Score – How is it calculated?

Your Credit Minute Show Notes:

 

  • 00:01                                   Awesome credit question, guys, from Lori Magelky, Lori Magelky, nice to meet you, Lori. Um, and her, her question is real simple. How is a credit score calculated? So, guys, I’m actually going to pull this up and show you how it’s calculated. Okay. There are five parts. We call these the FICO 5 and if you simply just Google “FICO scores” and you click the images button, which is exactly what I’m doing right now, you’re going to see what makes up the credit score. Okay. So we have, let’s actually document this for you. We’re going to erase my pretty house.
  • 00:39                                   So, the FICO 5 is going to consist of … we’ve got 30%, actually 35%, we have pay history, guys. Okay? 30% is debt. Then we have 15% length of history. Then we have 10% credit mix. And then another 10% for new credit. Now, let me elaborate a little bit on these numbers. Let me move to the side so you can see them. The first one is payment history. 35% of the score is just payment history. Anytime you get a 30 day late, guys, it’s going to effect your credit score in a negative way. Okay? That’s going to effect the 35% of your credit score. Okay? Uh, of what makes up your credit score. Any time you make a payment on time, okay? It’s due on the first, you made it on the first. It’s due on the first even if you made it on the fifth, it counts as an on time payment. You’re getting the great credit for it. Okay? So on time payments are number one.
  • 01:41                                   The second thing is amounts owed. This is the big flop for a lot of, um, for a lot of our clients. Okay? Specifically the amount you owe in proportion to the credit limits on credit cards. Having past due balances and having items in collections. The amounts you owe is 30% of what makes up your score. So, for those of you that have never missed a payment on time, or excuse me, have never missed a payment, you’re paying everything perfectly for 50 years but you’re maxed out on your credit cards, you’re going to take a hit here. Okay?
  • 02:10                                   The next 15% is the length of credit history. How old your accounts are. Older people tend to have higher credit scores. Why is that? Well, because their accounts tend to be older. Okay? Age does not go into the credit score but the age of your accounts certainly do.
  • 02:27                                   Beyond that we have 10% which is new credit. When you get credit, people want to give you credit. Okay? Do you ever get approved for a credit card and then all of a sudden you get five new flyers in the mail for five new credit card offers that are even better than the one you just got? The reason for that is that inquiry is registered. That new account that hits your credit report is registered and you get a bump in your score. And all of a sudden you get more credit offers, guys.
  • 02:52                                   And last but not least we have credit mix. This is a big one. Okay? Although it’s only 10%, it’s an easy opportunity. Some of you only have student loans. Some of you have only had a mortgage. Some of you only have credit cards. Those are the three types of accounts. Mortgage or real estate related, revolving, and installment. Okay? You want to have a mix of all of that. You don’t just want to have credit cards or mortgages or installment or two out of the tree. The ideal mix is one of each. Okay? The number of accounts isn’t as relevant as the mix of the different types of accounts.
  • 03:26                                   So, guys, thank you again. Um, big thank you to Lori Magelky for that awesome question. And if you have any additional questions, obviously, hit us up directly at keycreditrepair.com. See you, guys.
Credit Score - How is it calculated?
Credit Score – How is it calculated?

Credit Repair – How Do I Start?

Your Credit Minute Show Notes:

  • 00:00                                   What’s up guys? Nik Tsoukales here with Key Credit Repair. Another great question we got … I’m going to read this actually right off our Facebook, um, post. Yvonne Drummer is asking, “How do I start to fix my credit?” Well, the way you start is by pulling your credit report, okay? This is half the battle. We get a lot of people that think their credit is a lot worse than it is because they’ve been hiding from their credit for so many years. And then we pull it and find that half the stuff they thought that was there is just not there. Okay?
  • 00:28                                   Also, when you look at the data, immediately your brain will start to formulate a plan, even without Key Credit Repair, even without Nick, even without my team, you will begin to formulate a plan almost automatically by just simply looking at the credit report, okay? Put together your own plan, look at your own credit report, and then if you feel like you’re out of luck, you’re not sure how to handle it, then you can reach out to a professional agency that can help you formulate a more in depth plan. But the way you start is by starting. Pulling the credit report. Credit Karma, annualcreditreport.com, PrivacyGuard, there are a million and one websites. Just make sure that you’re getting all the data from all three bureaus and some sort of score, whether it’s a FICO four, five, eight, whether it’s a VantageScore, as lon as it’s a score that can gauge where you are, you know, in the rankings and the grand scheme of things and it can give you kind of an A, B, C, D or F grade, you’re in great shape, but again, recap, just get started.
Credit Repair - How Do I Start?
Credit Repair – How Do I Start?

Credit Cards – How often should I be using them?

Your Credit Minute Show Notes:

  • 00:00                                   YouTubers, what’s going on? This is Nik Tsoukales with Key Credit Repair. Excuse me, my voice is a little uh, beat, beat up here. Bear with me. A question of the day is, “Nik, how often should I be using my credit cards?” And, it’s a great question, and I think you’re going to be shocked at my response, and that response is never. I don’t think you need to. Um, I know you don’t need to, okay? One of the greatest little secrets of credit is the fact that if you don’t use your credit card, the bill comes in, it says zero due, and you don’t have to send a check, um, even though you’re not sending in a payment, it’s still reporting an on-time payment, guys.
  • 00:34                                   And a lot of people don’t know this. Your banker’s not going to tell you this. The credit card companies are not going to tell you this, but this guy’s going to tell you this, because I’ve looked at, I don’t know, a hundred bazillion credit reports in my lifetime, okay? Let’s say you have a slew of four or five credit cards right now that are active, but you really don’t use them. I mean you can just don’t use them every single month, you are getting an on-time payment from that credit card, okay?
  • 00:58                                   To fol-, uh, to follow up with that question, some people ask me, “Nik, but if I don’t use it, they’ll close it out.” That’s a good question. Okay. Um, if you’re scared of that, um, I, I haven’t seen it yet, I’ve not seen a card get closed, uh, because of no use. Uh, in my experience I have cards that are over 10 years old, I haven’t touched them, they’ve never been closed, okay? They’re expecting you at some point to make a purchase. But, if you’re worried about that, and you want to once every six months buy yourself a cup of coffee and pay it off the same day, if that makes you feel better, go ahead. Even that, I don’t think is necessary.
  • 01:32                                   Also, some people will say, “Nik, but there’s an annual fee for that card. Should I pay the annual fee just to keep it open?” Heck yeah, you should. You know, if it’s a $29 annual fee, or $59 annual fee, or whatever it’s going to be, there’s a higher likelihood they won’t close out the card. Because they’re getting something, okay? It does have a little … The card does have um, some costs associated with it, they mail out a card every so often, they have to send you a statement, so if that alone covers their cost, there’s a higher likelihood that they would never close it out. So, I would absolutely pay the annual fee. I’m cool with it, okay? Because you know what you get. You know, you get a card, it’s active, it’s open, and it’s reporting on time, because you didn’t use it.
  • 02:11                                   Keep the cash in your pocket, keep the cards at home. Throw them in the freezer. If you’re wondering what I mean by that, check out one of my previous episodes about, you know, how to freeze your credit cards, literally. Freeze them.
  • 02:22                                   Guys, this is Nik Tsoukales, with Key Credit Repair. Thank you so much, have a great day.
Credit Cards - How often should I be using them?
Credit Cards – How often should I be using them?

 

Voluntary Repossession – Is it a bad idea?

Your Credit Minute Show Notes:

 

  • 00:01                                   What’s going on, guys? This is Nik Tsoukales with Key Credit Repair. So, today we’re going to talk about car repossessions or voluntary car repossessions. So, the question I get a lot is, I owe too much on my car, I can’t afford the payment, I want to give it back. What should I do, Nik? Well, let’s talk about that. So, let’s say you do give the car back, okay? Um, and I’m going to give you a short little, uh, uh, example of w- what the worst thing that could happen is, okay?
  • 00:23                                   So, let’s say you owe $25,000 on your car, okay? You give it back, uh, you call the car company, you call Chase or Bank of America, whoever it’s going to be, and you say, “Come and pick it up.” They’ll gladly do it, okay? But let’s realize they’re not in the car business, so the second you do that, they’re going to turn around and they’re going to get it over to a wholesaler. They’re going to give it off to an auction, okay? That auction, for a fee, is going to sell it back to the marketplace to probably a used car dealership, okay? That used car dealership, obviously, needs to make a profit, so they’re going to buy that car pretty cheap.
  • 00:55                                   So, let’s say in this scenario you owed $25,000, okay? And you turn around, you voluntary or had it voluntary repossessed, okay? Car goes to auction and they sell it off for $15,000. Now keep in mind, now that you have or the bank has collected that $15,000, they can come after you for the difference, okay? Uh, not in every state, but probably half the states in the U.S. So, you got a $10,000 deficiency balance here, and this is scary, okay? That deficiency balance in half of the states in the U.S. can be collected, okay? And they will collect on it, and what they’ll do is they’ll, typically they’ll hire a collection agency that’ll start to solicit you and they’ll try to get that deficiency balance from you.
  • 01:37                                   Now, if they can’t collect on it, a few things could happen. It could turn into a judgment. They could try to take you to court, okay? In some cases, they will forgive the debt, in which case they’ll send you something called a 1099-C document, okay, where that $10,000 will be considered taxable income. I obviously prepare … I- I- I prefer to pay the taxes on $10,000, um, versus, uh, the entire $10,000, okay. Also, there are some laws in place regarding taxation where you can claim insolvency. Obviously, speak to a tax professional if this does happen to you, and it could be the case where you wouldn’t pay much of anything, okay?
  • 02:12                                   Um, but obviously they can come after you for the difference, so it’s not just, hey, let me hand the keys back and- and it’s all over, okay? If you do find yourself in a situation like this, there are other alternatives, guys. Let’s say you only have a year left in the car loan, okay, or it’s a car lease, in fact. You could turn around and swap it out to somebody. Find someone that only needs a car loan for a year that’s willing to pay the premium. Maybe sublease it to them. Find a friend. Try to sell it yourself, okay? Maybe in a case like this, if wholesale was $15,000, it’s possible that this car in the open market would go for $20,000, and then you’d only be making up a $5,000 deficiency versus $10,000, okay?
  • 02:50                                   Also, another thing to keep in mind is if it does get to the point where it does go to a debt collector, okay? If the debt collector has bought the debt for, as you hear, 10, 20, five cents on the dollar, you are in the position in a lot of cases to negotiate, uh, some debt relief on that and get a settlement on that debt. So, that always is an option, but that’s always something that we want to keep kind of as a back up plan. It’s not something we want to strategically approach because while we take that strategic approach, our credit really is going to take a bath, okay? So, there is no, uh, clean getaway from these, uh, uh, companies, unfortunately.
  • 03:23                                   Also, in regards to the deficiency balance in your state, that’s definitely something you want to speak to a professional about, okay? Because if it is a predatory loan you’re in, if it’s a 20 per- 20% interest rate, you got sold a lemon, there are some laws that protect you. Some states are a little bit more consumer-friendly in regards to deficiency balances, so you might not, this might not even going to be applicable for you, okay? Something to keep in mind and something you can actually ask us here at Key Credit Repair and we can help break down for you.
  • 03:50                                   So guys, this is Nik Tsoukales with Key Credit Repair. Thanks again for checking out our Credit Minute, and if you need anything else, feel free to email me at Nik, N-I-K, at keycreditrepair.com. Have a great day.
Voluntary Repossession - Is it a bad idea?
Voluntary Repossession – Is it a bad idea?

 

Debt Consolidation – Is it a good idea?

Your Credit Minute Show Notes:

 

  • 00:00                                   YouTubers, what’s going on? This is Nik Tsoukales with Key Credit Repair. Your credit question of the day is, is debt consolidation a good idea? Guys, so this is, uh, something I feel really strongly about, which really coincides with a lot of pieces we’ve been doing lately on credit education, understanding the different phrases and really kind of a glossary of terms of what a lot of this stuff means, and th- this is the problem.
  • 00:22                                  It is a good idea, but there are a lot of programs that a lot of our consumers, a lot of our clients, perceive as debt consolidation. Some people think consumer credit counseling is. Some people think debt relief or debt settlement is.
  • 00:40                                   Now, the- the- the problem is, is when we mix up these different programs and consider them something that they’re not. So, some people will, um, entertain a debt relief program thinking it is a, not realizing that in a debt relief program, technically they have to either fall behind on their debts and then negotiate settlements, or they have to already be behind or possibly in collections then negotiate settlement. So, that’s a different type of program sometimes perceived as.
  • 01:07                                   Other times, people are trying to do consumer credit counseling, not realizing that a consumer credit counseling program allows a remark on their credit report in the comments section that says, “Being managed by consumer credit counseling.” Although that’s credit score neutral, that could hurt your ability to finance something in the future if banks and lenders see those comments on your credit report. Again, could be perceived as . It performs pretty similar, um, to a  but it is not one, okay?
  • 01:34                                   Now, what is a debt consolidation? Well, pretty simple. What you’re doing is you’re getting a new loan to replace all your other smaller loans. So, let’s say you have $20,000 in credit cards over 10 different credit card, uh, companies or 10- 10 different accounts, okay? What you’re doing is you’re getting one new big loan, okay, which will then, uh, you’ll take the proceeds of that loan to pay off all the other 10, okay, and then you’ll be sending one payment into that new company or that new l- lender, okay, versus sending 10 payments to each of those other lenders.
  • 02:04                                   Now, that’s a great program because if you’re taking credit card debt, consolidating it into an installment loan, usually the interest rate’s going to be drastically lower, you know. Let’s say an unsecured installment loan, the interest rate’s 7% versus typical credit card rates of 18%, 20%, 25%, pretty common. So, you’re saving a lot of money, a lot of interest, and that way if you can’t afford the monthly payments on the minimum payments on the credit cards, you’re going to take that extra money, send it into the installment loan or the new consolidation loan and get out of debt far, far, far quicker.
  • 02:36                                   Um, so if you qualify for a debt  loan, it’s fantastic, but make sure it’s a consolidation loan, um, it’s not a debt relief program, it’s not consumer credit counseling, it’s not debt settlement. Those are great programs in their own regards for their specific purposes, but let’s not mix up the phrase, guys. So, this is Nik Tsoukales with Key Credit Repair. Thanks for checking us out, guys. Have a great day.
Debt Consolidation - Is it a good idea?
Debt Consolidation – Is it a good idea?