Cash Is No Longer King: Stockholm Homeless Now Take Plastic

We’ve been hearing about the “cashless society” for years, a time when paychecks are replaced by ACH and you swipe a card or even scan your phone to pay for everything from your morning paper to nighttime drinks. But, in the states at least, there are still plenty of times that you need cash on hand. Many small shops still don’t take plastic, and you are likely to find that cab drivers, farmers markets and others aren’t ready to take anything except folding money.

But, in Europe, many people have transitioned entirely to virtual transactions. And, members of Stockholm’s homeless population have learned to adjust. Many of the city’s homeless support themselves selling a local culture magazine called Situation Stockholm. The publication covers local celebrities and can be purchased for 50 kronor (about $8). Sellers keep half the money they earn selling the magazine. But, with a little less than 3% of transactions in Sweden being made with cash, very few Swedes carry coins or bills anymore, which made it hard for Situation sellers to get a sale.

To combat this, magazine sellers are now carrying mobile card readers. Experts at the magazine suggest that the switch could increase sales by 20% or more. Many people in Sweden believe that the country will soon be the first truly cashless society.

Going cashless has a number of benefits, but also some serious drawbacks. When you go plastic, you get to enjoy a few perks:

  • instant records of all transactions so you know where your money goes.
  • protection against theft. With debit and credit cards, you are usually only responsible for up to $50 of unauthorized charges if you report the irregularity immediately.
  • bonuses like points and cash back. Many people choose to put every transaction possible on a rewards credit card so that they can get reap these perks.

But, there are also some downsides to trading paper for plastic:

  • you need to be much more careful about your spending. People who pull out the plastic can spend up to 30% more than those who use cash.
  • you can get hit with a lot of fees. Gas stations often charge a small premium for using credit instead of cash. Many credit cards come with annual fees. And, if you are rebuilding and need to use prepaid debit cards, those can have everything from monthly fees to charges for using the card.

In the end, the most savvy shoppers will keep a combination of cash, debit cards from a free checking account and at least one credit card with no annual fee. By having all of those available, you can pick and choose in each situation which option works best for you.

Bankruptcy and Your Credit Score

Bankruptcy and Your Credit Score
Bankruptcy and Your Credit Score
There’s no way around it: a bankruptcy will unavoidably negatively impact your credit scores. However, there are a number of factors that will affect just how severe the effect is on your score, some of them unexpected. While there is no straightforward formula regarding how many points any one person will lose in a bankruptcy, there are a few factors that can help you make a healthy guess.

A few things to consider:

How High Was Your Score Before?

Ironically, someone with a higher FICO score will see a bigger drop as the result of a bankruptcy than someone with a lower score. In a mock scenario released by FICO in 2010, they compared two hypothetical scenarios: one person with a 780 and one person with a 680, both of whom file for bankruptcy. The person with the higher score lost 240 points while the person with the lower score lost only 150, leaving them both with scores in the mid 500s.

However, bankruptcy usually occurs after a long stretch of failing to pay bills on time, so, it is likely that late payments already negatively affected your score by the time that you file.

How Many Accounts Are Involved?

The more accounts that are included in your bankruptcy, the larger the effect on your credit score. The discharged debts each count as a negative filing. However, these will drop off your credit record seven years after filing, so, your credit rating will start to improve even before the bankruptcy is gone from your credit records.

How Long Ago Was the Bankruptcy?

A Chapter 13 bankruptcy filing stays on your credit record for seven years, while a Chapter 7 bankruptcy stays for 10. The longer it has been since you filed and the more responsible you have been in the interceding time, the less your bankruptcy will depress your credit score.

Rebuilding After Bankruptcy

After a bankruptcy, you can rebuild your credit and achieve goals that include a home purchase. Some methods to use during your credit repair journey to improve your score:

  • Review your credit reports. Make sure that all debts that were discharged in the bankruptcy are reflected accurately. As many as 79% of all credit reports have at least one error, so, it is worth it to check.
  • Pay every bill on time. Late payments can snowball and destroy your credit over time. Try automating payments so you never forget one.
  • Look for a secured credit card. Cautiously add revolving loans so that you can show creditors that you can be trusted with credit.
  • Use cards sparingly but regularly. Build up a regular habit of responsible use. One good way to do this is to charge a small, regular bill like a gym membership to your card and pay it off in full each month.
  • Do not close old credit card accounts. If you have any credit card accounts from before your bankruptcy, keep them open. The age of your credit accounts is a factor in your credit score, and the older your accounts, the better.

While a bankruptcy is a challenge, it is not the end of your financial life. Educate yourself about your credit, and carefully rebuild to restore your financial future.


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What is an FHA Loan? – Tips

When you start shopping for a mortgage, the number of types available can almost be overwhelming. If you have gone through a bankruptcy or foreclosure or if you don’t have a lot saved for a down payment, one option to explore is an FHA loan.

What Is an FHA Loan?

FHA loans are backed by the Federal Housing Authority. The program was established in the 1930s in response to the massive number of foreclosures that occurred during the Depression. The guaranteed loans meant that lending was less risky for banks and mortgages more accessible. Since the loans are backed by the federal government, they are less risky for lenders. These loans can be a good match for people who have recently gone through credit repair. They require lower down payments and even people who have had serious credit issues such and bankruptcies and foreclosures can be approved.

What Are the Benefits of an FHA Loan?

An FHA loan requires only a 3.5% down payment. The money for the down payment can be a gift from a friend or relative, which can be a boon to young first-time buyers. FHA loans are often available even to people who have had bankruptcies or other credit issues.

Another interesting benefit of an FHA loan is that it is an assumable loan. What that means is that, when selling a house, the next owner can simply pick up payments where the last owner left off. This can make the house more desirable to buyers if you ever choose to sell.

Are There Drawbacks to an FHA Loan?

While FHA loans have a lot of qualities that make them an attractive home purchase option, there is also one big potential drawback to this sort of loan. Because an FHA loan has more lax requirements, it comes with hefty insurance payments.

To get an FHA loan, you’ll need two types of insurance. The first is an upfront mortgage insurance premium (MIP) that is equal to 1.75% of the mortgage. This is either paid at closing or can be added to the loan amount. The second is an annual mortgage insurance premium which is paid monthly. The cost of this insurance varies depending on the term of the loan and how much you are borrowing.

Do You Qualify for FHA?

FHA borrowers have to meet a number of requirements. Some are very rigid, but others can be worked around if the lender has justification. A few key qualifiers:

  • You must be over the legal age to sign a mortgage in your state and have a valid Social Security card.
  • You must be steadily employed. For the FHA, this usually means that you have been with the same employer for two years or more or that there are no gaps in your work history.
  • To qualify for the 3.5% down payment, you need to have a credit score of 580 or better.
  • You need to be two years out of bankruptcy and three years out of foreclosure.

FHA loans make home ownership a much more attainable dream. When looking for a loan, check all your options to find the one that works best for you.

For more information on FHA loans feel free to contact our office at 617-265-7900 or feel free to request a free consultation you can click here.

Is a Credit Union Right For You? – Bigger Isn’t Always Better

With all the negative press that big banks are getting these days, a lot of people have started to wonder whether a credit union would be a better bet. The answer to that question depends a lot on your specific circumstances and what you are hoping to get out of a banking experience.

What is a Credit Union?

Credit unions are non-profit, member-owned financial organizations. Their primary objectives are to serve members best rather than to maximize profits. Members can borrow money at lower rates and often have access to fee-free productions, like no-fee checking accounts. In most cases, you need to be a member of a specific organization to join one. They can be a boon to people going through the credit repair process, as they are often more likely to approve someone for an account than for-profit banks.

The Perks of Dealing with Credit Unions

There’s a lot on the plus side of dealing with a credit union instead of a bank, including:

  • Lower interest rates. During your home purchase process, check out rates for mortgage loans at a credit union. Often you will find that they are lower than those at banks.
  • Better service. Most credit union members report much higher rates of satisfaction then customers with similar accounts at big banks do.
  • Lower fees. While zero-fee checking is an endangered species at regular banks, most credit unions still do their best to offer it.
  • More likely to approve you for financial products. Since credit union membership is often based on group membership, they are more open to providing credit cards and loans to members.

The Drawbacks of Credit Unions

But, there can be some downsides to doing all your banking at a credit union:

  • Fewer branches. This can mean that getting to a physical branch is less convenient. People who deal with a lot of cash, such as servers or bartenders, might find it less convenient to make deposits if the closest branch of their credit union is too far away.
  • Fewer services. Credit unions often lag behind their big bank rivals in features such as mobile banking or online bill payment. If you are considering a credit union, ask what features come with the account.
  • Lower perks. If you are looking for reward credit cards, you may be better off looking for one from a big bank. When Bankrate recently rated the top 50 credit cards that offered cash-back or other rewards, only five were ones offered by credit unions instead of banks.
  • Membership requirements. While there are many credit unions open to the public, many others have limitations on who can join. Some only take members of certain professions, while others are limited to alumni of certain schools or people who work for a specific employer.

When you are bank shopping, compare and contrast offerings from both local credit unions and local branches of big banks. Have a list of features and services that are important to you and see which will give you the best deal. By doing thorough research, you can find the financial services that will serve you and your family best.

For more information on how to fix your credit scores feel free to contact our office for a Free Consultation.

Credit Laws : Check out our new page!

Check out our new page dedicated to the rules, regulations and laws that govern credit and debt collections. You will find a downloadable pdf of the fair credit reporting act (fcra), the fair and accurate transactions act (facta), the fair debt collections practices act (fdcpa) and the credit repair organizations act (CROA).

Nikitas Tsoukalis, President

p.s. As always, feel free to give me a call at 617-265-7900 with any questions regarding the credit repair process. Feel free to request a free consultation to speak to one of our consultants.