Bad debt can really harm your credit history

If you are a creditor and the person who owes you money declares bankruptcy, this bad debt can be a problem. After all, even though a good deal of the remaining estate will be separated out to the many different creditors, you will probably not get all of the money that you are owed. For this reason, most creditors try to work with the debtor in order to make it possible to pay back the debt - that way, they'll get all of the money back, instead of just a little.

When you have a bad debt, it makes a big hit on your credit history. This can be a big problem, especially if you need to get a credit card or a loan. In fact, the credit history can effect pretty much anything you do in the financial world, including mortgages, buying a car, and being able to take out a much needed loan. Therefore, you should do whatever you can to make sure that you'll be able to pay off the debts you have.

To prevent bad debt, you should first minimize the number of debts you incur to begin with. For instance, if you can possibly avoid buying something, then you should wait until after you've saved the money for it, instead of buying on credit. If you already have a lot of debt, then you should look at some of the debt solutions, for instance, debt consolidation

Source :http://www.buzzle.com/editorials/3-29-2005-67755.asp

Bad Loans Putting Us Deeper in Debt Washingtonpost.com

The loan crisis in America keeps getting worse. Here in the D.C. area, home foreclosures are spreading to wealthy neighborhoods, as The Washington Post's Kirstin Downey reported in " Area Suburbs See Rise in Foreclosures ," (June 30).

It's not just mortgages. Post economics reporter Nell Henderson reported this week that "borrowers fell behind in their payments on a higher percentage of consumer loans in the first three months of the year."

But despite this grim news, many organizations and companies are coming to the aid of consumers, as noted in staff writer Dina Elboghdady 's story: " Alarms Sound on Dangerous Loans " (June 30), which includes a list of good resource information if you've missed a payment or two.

Financial Independence Day

At least the banking industry regulators are trying to help consumers before they sign up for all the various new loans being offered. Read more in my column today: " Declaring Financial Independence ."

To help achieve financial independence, the Heinz Family Philanthropies and the Women's Institute for a Secure Retirement have released an online book entitled, "What Women Need to Understand About Retirement." It's available for free at www.womensretirement.org

Although the information is also useful to men, it's important to note that women face a lot of financial difficulties in their senior years. Here are some scary statistics from the publication:

* Two-thirds of working women earn less than $30,000 a year.

* Nearly half of all women work in low-paying jobs that do not offer a pension or 401
(k) plan.

* The median income in 2004 for retired women was $12,080, compared with men's
income of $21,102.

Getting Relief From Student Loans

Now that summer is here and there's a chance for new grads to breathe, it's time to take a hard look at all that debt you accumulated while striving for your degree. This is never a fun subject to tackle, but it's an important one. That's why last month I chose Lynnette Khalfani 's new book, "Zero Debt for College Grads," for my Color of Money Book Club selection .

She joined me for an online discussion today. If you missed it, you can read the transcript .

Here's a sample of some of the questions and our answers:

Q: Is it even realistic for parents to believe they can pay for an entire college education for their children, when the costs of college increase by double digits and our paychecks don't?

Lynnette Khalfani: Unfortunately, the price of college is getting increasingly out of reach for many middle-class families. That's why the typical college grad from the class of 2007 will leave school with about $20,000 in student loan debt, according to the College Board. The best strategy for parents is to save as early as possible for college -- I'm talking when little Junior is still in diapers; not while he's wearing his high school football jersey. Additionally, families should seek every possible financial alternative to pay for a higher education. I like to see people pursue five different areas of college funding before turning to the student loan market: Scholarships, Grants, Work study (yes, many students need to get a JOB!), paid internships, Family funding (from the student, Mom and Dad, Grandparents and who ever else in the family can help out).

Q: I know that you are against taking out loans for graduate school, but I feel like you might want to temper your responses to people-- yes, I took out nearly $80,000 in loans to go to private graduate school; however, my state school, given their lack of scholarships, would have cost me the same for that degree, and I'm making $30,000 more than the highest paying job offered me right out of college. Yes, it's stressful, and no, I won't get to enjoy the increased standard of living that the higher salary should give me for a few years... but financially speaking it's still worth it for me and for many others.

Michelle Singletary : Not planning to tone down my warnings about college or graduate school debt one little bit. There are hundreds of thousands of folks out there taking on this debt because they were told it's good debt. It's not. Perhaps it's necessary to take on some debt for this -- perhaps. But for every story like this one I can show you 100 more of people who borrowed heavily for graduate school and their pay increases don't even come close to handling the debt payment for decades to come.

You are welcome to e-mail comments and questions singletarym@washpost.com . Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Source : http://www.washingtonpost.com/wp-dyn/content/article/2007/07/05/AR2007070501294.html