By John G. Merna, Esq.
Many people suffer under the stress of having poor credit for years, decades, sometimes their whole life. Too often when they discuss their situation with a friend or family members, they simplify the situation by saying they have “bad credit”. The truth is they have unpaid debt, debt which continues to negatively report to the credit bureau and eventually will sue and garnish them. But living in the fairy tale of just having “bad credit” seems to lull people into inaction and unconsciousness about the reality of what not paying your debt ultimately means.
Happy Endings
There is a solution and a happy ending to this story which I want to put out there early so readers do get discouraged. But before I talk about the solutions, I want to go a little further to penetrate the illusion and unconsciousness that people with bad credit submerge themselves in.
If today the debt collector is not calling you then you don’t have to think about your bad credit. For many that is a good day. Right? If you get a call about paying a bill and especially if they threaten action like a lawsuit or garnishment your stress level goes through the roof. Right? So, if you are lucky enough, meaning you move addresses enough, so your collection letters don’t find you, change jobs and banks enough that lawsuits and garnishments don’t catch up with you, you can continue to delude yourself that you are okay. You just have bad credit. Right?
Wrong. Years tick by. Your bad credit and unpaid debt become a background stress and ultimately even an identity. You start to live in that identity avoiding the phone calls, taking steps to use credit to get what you want but having to resort to high interest loans from companies like One Main or Mariner Financial. Even worse, you resort to the shark infested waters of payday lenders, auto title loans, or even internet loans.
Lose the Fear
Ultimately, your “bad credit” identity is built on fear. Fear of what might happen, fear of not knowing, and maybe a little guilt about being in that situation. Lose the fear. Your friends and family don’t care if you have bad credit. If that is a concern of yours then you need to get new friends. Sorry. I can help you with swapping out family members.
Fear of taking action like filing for a bankruptcy can also immobilize you due to misinformation. A little information gathering like picking up the phone and calling a bankruptcy attorney to ask how bankruptcy really effects your credit can put your mind at ease. Most street information your friends or family are feeding you about bankruptcy is wrong. Get the right answers.
You Are Running Out of Time
Most people don’t realize until too late in life that “time” is the most important element of wealth. Some people live their whole life waiting for a big payday or lottery winning to drop in their lap. Others invest a little over time and become wealthy. Even those successful people we become aware of through the news because they made a lot of money selling their company put enormous amounts of time in to getting there.
A more simple but powerful example of how time helps wealth is just investing in a house. You owe what the house is worth generally when you purchase it, especially if your down payment was small. Yet over time and without even noticing the house becomes more valuable. Additionally, over the same time what you owe goes down as you sleep. Your choice is to pay rent to make your landlord wealthy or pay a mortgage to make yourself wealthy. That is the basic wealth building machine in America that people need to access early in life. It doesn’t do much for a person to purchase a house at 60. It just means you go into retirement with a house payment. But if you buy a house at 30, it is likely you will purchase one or two more of greater value as you leverage the equity from the first. That is simple wealth building.
The Invisible Costs of Bad Credit
Everyone knows “bad credit” means “higher interest” on loans which means you pay more to borrow than someone with “good credit”. When I tell you that a person with “bad credit” can pay almost twice as much for the same car as a person with “good credit” are you surprised?
“Time” is limited but so is the amount of income you will make over your lifetime. Yes, if you stop dreaming about winning the lottery or waiting to be picked out of the crowd as the next Hollywood A-lister you can sit down and do a simple guesstimate of how much you will earn in your lifetime. Yes, I know there are variables. But putting aside the noise of the need for certainty the guesstimate number is sobering. When you take into account your basic monthly cost of living that guesstimate generally means you better spend the money you make in your lifetime wisely.
First, invest in your retirement religiously and max out on any matching employer contributions. Second, purchase primary residence as soon as possible. Stay away from condo fees and time shares they just sap your wealth. And third, address any issue that is holding you back from getting good interest rates on your investment borrowing otherwise you are just working against the wealth building machine you are building by syphoning off your hard-earned income to make high-risk lenders wealthy.
Happy Ending
Get over the fear. Forget what your friends and family may be saying. Save the dreams for after you have set up your basic wealth building machine through your retirement and home investment and take action now. Bankruptcy can wipe out your debt, put you in a position to rebuild your credit score fast so you can buy a house in as little as two to three years, and decrease the cost of so many other less-thought-of necessities like the cost of your car insurance, buying furniture for your new house, and anytime you use credit.
Call Merna Law today for a free consultation with an attorney and get the facts on bankruptcy. 800-662-8813.
