The Positive Effect of The Increase in Consumers Debt Since 2008

CreditCards.com has published the following credit card statistics: About 51% of the population of U.S. owns at least two credit cards; the credit bureau has a record of 13 credit obligations on the average per consumer and with the oldest one recorded for 14 years. These statistics simply prove that the payments on consumers’ credit debt greatly affect their monthly spending.

In a sense the economic recession from 2008 up to the fourth quarter of 2011 has taught lessons to consumers to reduce their personal debts through wise spending during this period.

According to the Wall Street Journal, the Federal Reserve said that there was an increase by 0.25 % in household debt which includes credit cards, mortgages, vehicle loans and student loans in quarter four of 2011. This increase was the first one recorded since quarter two of 2008 prior to the collapse of Lehman Brothers which resulted to financial problems and recession. Economist attributes this small increase to the reduction in debt and consumers’ effort to save.

Another positive result is the increase by $1.2 trillion in the net worth of U.S. households. From October to December the total net worth is $ 58.5 trillion, the first increase that took place for two quarters.  The rise was the result of the 12% improvement in the Dow Jones Industrial Average. The disposable income of Americans improved allowing them to pay their debts. In terms of disposable income, at the close of 2010, debt fell from 118 % to 113 %. Though this is small, what is important is the positive shift.

The consumers’ confidence is improving because of all the positive results that are happening. But in order to sustain the improvement, they should continue to be wise in their spending to further cut debts.  Fed’s graph shows that since 2010, there has been a sharp decrease in the GDP percentage for financial businesses and households. It was flat for non-financial businesses and increased at the Federal government level.

Avoid Credit Repair Scams

One of the negative impacts of the worsening economy is the increase in number of people who would like to repair their poor credit ratings. Because of this, there are many credit repair services that offer  assistance to help these consumers with poor credit ratings on how to fix them. But consumers are warned about credit repair services that are engaging in tricking people.

There are things that consumers must be cautious about a credit repair company:

• The company misrepresents the amount of savings the consumer can save or the substantial reduction in the consumer’s debt through getting the services they offer.
• The company sets a definite time to achieve the goal of repairing the poor credit rating of the consumer.
• The company provides an inaccurate percentage of outstanding debt.
• The company charges an upfront fee before giving the service to repair the bad credit.
• The company advises the consumer to make false statement about his credit history.
• Before signing a contract to get the service of a credit repair company, he should ask a copy of the “Consumer Credit File Rights under State and Federal Law” and he should also ask for a written contract of his rights and duties.

The contract must include:

• The amount of payment that is required.
• The description of services that will be done to fix the bad credit.
• The estimated time to attain the goal of repairing the credit.
• Cancellation form notice that needs to be filled up in case the contract is cancelled.
• A clear statement that no charges will be paid in case the contract is cancelled within three business days.

The consumer is advised not to waive any of his rights. He can file a complaint with BBB at www.bbb.org or with the FTC at www.ftc.gov and at www.coloradoattorneygeneral.gov.

It requires patience to repair a credit. You have to start now and choose the right road and avoid scams.

Check Your Credit Rating Before Getting a Mortgage

Tara Lynn Wagner said that it is very essential for you to determine your credit score before securing a mortgage loan if you want to avoid paying more money.

Most people especially women know their Social Security number, their weight but when you ask them about their credit scores, they are not aware of it.

CEO Amanda Steinberg, founder of Dailyworth.com, said that loans are needed to buy a vehicle or a house because it is quite impossible to obtain them in cash. But in order to get the best term, it is important that consumers should know their credit scores before securing a mortgage. She said that it might cost you to pay tens of thousands dollars more if you do not check your credit rating before securing a mortgage.

To illustrate her point she cited this example. There were two women who wanted to secure a mortgage amounting to $200,000. The first woman was Susie. Susie’s credit score was 740 points. Her high rating qualified Susie to get a 30-year mortgage at 3.9 % interest. She was paying $953 per month. The second woman was Jane. Jane had a credit score of 640 points. She was also granted a 30-year mortgage at 4.75 % and paid $1,043 monthly. The total difference in the payments of two women for 30 years was more or less $35,000.  This is quite big, says Steinberg. The big difference was the result of the credit scores of Susie and Jane.

There are three steps to take before taking a mortgage. First is to check your credit score. Then, if it is excellent maintain it. Finally, if it is not good, do something to improve it.

Steinberg says that aside from paying their dues on time, the consumers have to control their spending habits because the credit companies are checking their spending to determine their credit scores.

She further added that consumers have to spend only about 20% of the available credit or they should not go beyond 90% of the available credit.

Bad Credit Leads to Higher Interest Rates

It was reported on February 2012 that the interest rate of credit cards charged to consumers is 16.88 percent on the average. This report was made on FoxBusiness.com. Worse is that, there is a possibility that this interest rate will go higher by as much as 4.21 percent if you have a bad credit.

In 2012 the credit cards interest rates keep on rising. Because of the high interest rates on credit cards, people with poor credit histories are losing interest in getting credit cards. Credit card companies are very careful in selecting customers who would like to own credit cards and one of the ways they are doing to eliminate customers is by imposing high interest rates.

It is very important, therefore that customers have to pay their dues on time if they want to avoid the rising interest rates of credit cards.

Steps to repair your bad credit rating

It takes patience, discipline and focus to work toward better credit ratings. There is no quick fix for them. The Fed warns consumers to avoid getting the services of credit repair agencies which might be involved in scams. Instead of helping you, it will only worsen your debt situation. But do not lose hope because there are means which can help you to repair your credit rating.

1. Make concentrated effort to reduce your debt by paying first your credit cards which charge you the highest interest rates.
2. Avoid delayed payments. Make reminders using Post It stickers to be sure that you will not miss paying your credit cards due on time. You may also employ automatic withdrawal for credit cards payments.
3. Do not close unused cards and open new ones. Opening a new one is disadvantageous because it may not qualify you for the number of years that the company might require to give you a good credit rating.

Farmington Convention and Visitors Bureau’s Former Exec Director Charged for Embezzlement

An audit is being conducted at the Farmington Convention and Visitors Bureau. The auditor has found out the former executive director of the Bureau has embezzled it by $400,000.

Debbie Dusenbery was the former executive director of Farmington Convention and Visitors Bureau. She told police that she embezzled the Bureau for personal expenses and for extravagant trips. After telling the police, she committed suicide in Arizona on Jan31. She was found dead with a gunshot wound.

According to City Manager Rob Mayers, a private audit must be conducted no matter how much the cost is because it is very important to investigate what took place for several years when Dusnbery was the executive director. The initial estimate of the audit cost is $15,000 but it may cost up to$50,000.

The Bureau will have to pay for the cost of the private audit. It is getting its $700,000 budget through the 5percent tax on hotel rooms. For the mean time a temporary director is running the operation of the Bureau.

Dusenbery acknowledged through her email to police that every month for the last 12 months she made two transactions to pay for her credit cards. She also admitted that each month she paid $1,500 on an equity loan.

After the board members of tourism learned about all these reports, the board decided to suspend her. On Jan. 17, Dusenbery submitted her resignation.

Robert The investigation is still going on and it is under the supervision of Farmington police Sgt. Perez.

Perez found personal effects and other financial documents in Arizona in Dusenbery’s jeep. There are five personal letters addressed to people in Farmington. The source of the money found is being tracked by the police. They are investigating if the money came from Totah Festival or Freedom Days events. Dusenbery holds key positions in these two associations.

While the investigation is going on, the operation of the convention and Visitors Bureau is recovering.

Larry baker, the board president said the board plans to get a new executive director. The board plans to advertise for interested applicants.