Student loans, taxes and child support are with you

till death do you apart.

Even bankruptcy won't wipe them off. You could even have your wages garnished if you are behind on tax or student-loan payments.

Credit score question from the reader

Q: I have a credit card that I opened back in 98 or 99. Anyway, I haven't used it for at least 2-3 years. If I close it, what kind of impact will that have on my score?

Also, I just finished paying off my sofas with Harlem furniture; it took about 2 years, since I had the 0% financing. should I close that account now?

A: When it comes to revolving accounts, like credit cards or home equity lines of credit, credit scoring model considers the ratios between the balances you carry and credit limits. That ratio shouldn't exceed 35 percent, maximum 40%. You are getting penalized at 35% to my best knowledge. Then, the higher the ratio, the more points is deducted from your FICO credit score. If this ratio is over 80%, that it is really bad. Also note that the ratio is calculated 2 ways. First, it is for each account, second, all the credit balances are summed up and divided by the sum of all the credit limits.

Here is the example, suppose you have Visa with $1,000 credit limit and $500 balance. Then you have MasterCard with $1,000 credit limit and $800 balance. Then, you have Discover with $2,000 credit limit and $1,200 balance. Finally you have other MasterCard with $2,500 credit limit and $0 balance.

The credit score will be affected by each balance-to-limit ratio which are:

50% for Visa, 80% for MasterCard and 60% for Discover and 0% for other MasterCard.

These ratios are high, and your credit score will be affected. But overall ratio is good so it will compensate the negative impact of the separate ratios. Total credit balance is $(500 + 800 + 1,200)= $2,500. The total credit limit is $(1,000 + $1,000 + 2,000 + $2,500) = $6,500. You divide $2,500 by $6,500 and get the ration of 38% which is decent.

If you close the MasterCard with $2,500 limit and 0% balance, your overall ratio will be 62.5% calculated as $2,500 divided by $4,000. So it is not a good idea to do, especially with the card that has been opened for at least 2 years. So ... you got the idea.

Student loan debt and credit repair

Student loan debt repayment is very crucial in keeping your credit good. Remember that student loan debt must be satisfied. It can not be discharged even with Chapter 7 bankruptcy almost under any circumstances. So be very gentle how you paying it off.
Another thing to remember is that if you did or going to do student loan consolidation, many lenders will give your an interest rate break after you stay current on payments with them for 2-3 years. The break is .25% or sometimes higher.

North Carolina makes payday loan company suspend business

Advance America, payday loan company operating 2600 payday loan stores in 36 states will suspend business in North Carolina until the state banking commissioner concludes an investigation into whether the company is operating illegally here.

The company stand to lose several million dollars because of business inactivity, even if allowed to operate further.

"A ruling by the bank commissioner, which could come next month, will follow a year-long probe into whether the company broke state payday lending laws".

Payday loan stores were essentially banned since 2001, after expiration of a law that had allowed the practice.

Debt Negotiation

There are so many sites about debt negotiation. Business must be very good. Many people are willing to give away whatever little they have left to some crook with sweet promises. And for what,
someone please explain to me? To get into even much worse situation. You want to negotiate, do it yourself. If someone can do it for you, you can do it for yourself. Will be way cheaper with probably the same results. Same goes for debt settlement. What are you going to settle? Nothing but give up your last cash.

Credit Counseling - Is there a good site of it?

So much negativity about the credit counseling doesn't seem to have any reflection on this business. It's doing just fine... I guess, for some people the credit counseling is the only option... or the only option that they've learned about. Bankruptcy is scary for most people.. no matter how many times they say it shouldn't be. Your money and your credit are the only two things that may get affected when joining credit counseling debt management plan. What else you got to loose...?

Payday Loans

I've noticed lately that the payday loans are really booming on the web. It seems that every payday outfit is having its presence on the web... Think of it... it is so easy these days to fill an application online, get approved in minutes, and have 500 dollars cash added to your checking account next day... This business must be rocking at this Holiday's time.