“Oops,” you’d say. “I seem to have left my wallet (or coin pouch, or whatever they had back then) at my rustic lodgings.”

“No problem,” the shopkeeper would say. “I know you’re good for it.”

You’d come back in the next day with the money for the nails, the shopkeeper would be happy, you’d be happy, and the next time you forgot the money for a purchase, he’d let you do the same thing again. You had credit with the shopkeeper.

If, on the other hand, you took your pound of nails and then studiously avoided the shopkeeper for the next year, you did not have credit with him. If you paid him back little by little, you might still have a bit of credit with him, but he’d be pretty apprehensive about letting you walk away with anything big. He can afford to wait on the price of a bag of nails, but probably not on a bolt of cloth or something. (Bolts of cloth were expensive. Trust us.)

Since it was a small town, everyone else in town knows what the shopkeeper knows. If you’re a fellow who always pays his debts promptly, all the shops in town are happy to give you credit, because they know you won’t leave them holding the bag. If you’re a fellow who charges things and never pays them back, or pays them back veeeeeery sloooowly, those other shopkeepers are not big on the idea of giving you credit in their shops.

Sounding a little familiar?

This is pretty much how credit still works. If you have three credit cards and a solid history of paying off your debts every month, it’s not that hard to get credit with other people, like a bank for a home loan. If you have three credit cards and a solid history of not paying your bill regularly, or only paying part of it, it’s hard to get anyone else to give you credit, because they think you’ll just do the same to them.

True, we don’t have the small-town system where all the shopkeepers whisper to each other about the dangers of loaning you money. We do have the internet, though. That just means more shopkeepers all over the world get to hear about what kind of fellow you are. If you’re the sort of fellow who doesn’t pay his debts, that means an awful lot of unsympathetic shopkeepers.

The one thing that’s changed significantly about credit debt from the first days of credit to the modern day is the repercussions for having bad credit. In the old days, if you had a huge list of debts and no way to pay them off, it was entirely possible that someone was going to come around and beat it out of you.

We’re a lot more civilized now. Now, they’ll just charge you a ton of fees. It still hurts, just in a different place.

So what’s my point?

When you have credit, think of it as though you had a debt to a real person. Trust us, it helps a lot. If you still owed a good friend of yours money after three years, you’d be feeling pretty ashamed of yourself. You don’t feel the same way about your credit card debt because . . . well, it’s a credit card. It doesn’t have feelings and it can’t make you feel guilty.

It still has the same effect on your good name, though. Credit card companies will still report to other companies, and eventually you’re going to be looking across the table at a real, live human being who’s going to tell you that your credit isn’t any good there. It’ll be a home loan officer, or a car dealer. They won’t trust your word that you’ll pay them back.

That’s not a situation we want you to be in. So get your good name back. If you need some help on that score, give us a call.

The credit card companies aren’t the only ones to blame, though. They got away with their tricky little ways for years largely because the general public didn’t know enough about the way their credit cards worked to keep those abuses from happening. So we’re going to go through the major components of the Credit CARD Act for you, to sort out what exactly is going on with your credit cards right now.

College Students Aren’t Pressured

Well, that’s not true. They’re still pressured to do lots of things, like stay up drinking all night instead of reading Kierkegaard. But when it comes to those ever-so-tempting credit cards with no limit and 0% APR for the first six months, just when they were wishing they had the cash to buy that gorgeous dress they saw on sale . . . yeah, that’s going to be a lot more difficult than it once was.

Credit used to be like smoking: hook ‘em early, have a loyal customer for life. In both instances, the industry relied on the addiction factor. Once you’re in, you’re in. If you rack up $20,000 worth of credit card debt by the time you finish college, odds are you’ll never stop paying it off, and you’ll never develop good credit habits. That’s a high price to pay for having once been 18 and a little too eager to believe in free money.

The new Credit CARD Act now requires credit companies to only allow credit card holders who have one of two things: an adequate income, or a co-signer.

An adequate income is hard to come by as a college student, so most college age kids will be looking to Mom or Dad for help getting a credit card, which eliminates a lot of what made credit cards so appealing in the first place – the ability to spend money on things without parental approval. Since Mom and Dad’s credit is now at stake, they’ll probably be monitoring the spending pretty darn closely, which means that huge credit debts before you’ve managed to get out of freshman English are pretty unlikely.

We think the income restriction is a smart one, too. Some college age students are pretty independent and mature. If they’re working their own way through college and making a good income, a little credit can come in very handy, so long as they use it responsibly. The sort of kid who decides to hold down a full-time job and go to school is a lot less likely to be the sort of kid who doesn’t understand the repercussions of the real world. That kid already lives in the real world. Good for him. Give him an AmEx and he’ll pay off the balance every month.

He’ll probably be ruling the world in a few years, too, but hey. He earned it.

Credit habits are learned early. 82% of college students carry a balance every month, and the average balance was $3,173 – that’s a big chunk of change for a demographic that often doesn’t earn an income beyond a shift at a coffeeshop. These new restrictions will probably put the kibosh on a lot of the bad spending habits college kids learn with credit early on.

Hopefully, their parents have better habits. As co-signers, it would be nice to see them take an interest in what kinds of credit choices their kids are making and helping them build good credit habits for the future. It’d be sweet, really. We’re betting Hallmark has a card for that.

“Just a note to say . . . I’m proud of the way you negotiated a lower APR.”

Awwwwwww.

1. Make a Plan

Get all your credit reports, your bills, and your bank statements out on a table and take a hard look at them. If you don’t have any of these things handy, go online and get a copy of the most recent ones.

Go through that credit report with a fine-toothed comb. Look at the items that are hurting your credit particularly, and highlight any ones that seem wrong or that are having an impact that seems way out of proportion to the offense.

Go through your bank statement and look for expenses you can stop incurring (check out Mint.com). For most people, we recommend finding $150 somewhere in your budget. That extra $150 will make a huge difference in even the worst credit problems, trust us. Look for things like fast food, video games, rental DVDs, iTunes, unnecessary phone fees like texting, utility bills that can be cut down.

For the bills, make a calendar of when things are due. Don’t just go with the due date on the statement; find out when they report to the credit bureaus. That’s when you’re going to want to pay them. If you want to know why this will help your credit, take a peek at our article about the Credit CARD Act.

2. Dispute Inaccurate Items

Remember all the stuff you found on your credit report that seemed off? Go make a ruckus about it. It’s sad, but many companies count on the fact that few people actually go through their credit reports or dispute inaccuracies. This is a squeaky wheel gets the grease situation. Do your best mouse impression.

If you don’t know what you’re looking for to dispute, ask a professional. DO NOT use a credit repair agency that says they’ll dispute everything. This will do way more harm than good, especially since credit companies see that scam coming a mile off. You need someone who can tell the difference between an error and a legitimate mark against your credit. We’re one of those people, but there are others out there. If you have a friend who’s more knowledgeable than you, ask him.

3. Negotiate With Your Creditors

If you’ve been a good customer, you can ask for “goodwill”. Many creditors are willing to erase a late pay if you’ve had a good history. You’ll probably have to make your request in writing.

If you’re past the good history stage and are in collections, negotiate with them. Most collection agencies just want some money. The older the debt, the more willing they are to negotiate.

Be polite, be honest and make sure it’s all in writing.

4. Make Bigger Payments

Paying the minimum balance will keep you in debt for the maximum amount of time. Paying just a little bit more than the minimum will get you out a heck of a lot faster. That extra $150 you found in your bank statement is going to be of help here. Put it to good use paying off credit debt.

Your goal is getting your credit card balances below 30% of the limit. That means if you have a credit card with a $1,000 limit, you want to get your balance down to $300. Calculate one third of your credit card limit and make that your goal. It’s hard, but it’s not as hard as getting it down to zero.

5. Get Another Credit Card

No, seriously. If you don’t have 3 open, good credit cards, you need them. Even if they’re pre-paid cards, you need them. Those good accounts create a counter-balance to your bad accounts. You want the good accounts to outweigh the bad ones, so fatten them up. Make all your payments on time and pay off the full balance every month.

If you have trouble with using credit cards, use them only for small purchases. Make one your card for groceries, another your card for gas. Those are little purchases you’re not likely to overspend on, since you pay the same amount every month. That will keep you from going over the line and blowing $300 on new shoes.

That’s it. That’s the big 4-step plan. Anyone can do it. Most people don’t.

Be one of the ones who does.

One of the commonest tips is cutting out your morning latte. $3.70 per latte times 5 days a week times four weeks is $74. If you and your spouse both stop drinking your lattes, you can get an extra $150 a month out of that cutback. And we just talked about how critical that $150 can actually be.

Wow. Awesome. I am totally going to stop drinking lattes right now. It’s not good for my heart anyway. I will be healthier and wealthier and wiser and I will also read that stack of books I’ve been meaning to get around to. Go team.

Except that’s usually not what happens. Sure, you give up your lattes. And at the end of the month, you expect there’ll be $150 waiting around for you in your bank account, to do with as you will. But there isn’t. Why isn’t there?

Often, when we know we’re saving money, we allow ourselves to spend it in other places. “Oh, I cut out lattes, so we can afford to go out to dinner this week.” “Oh, I cut out lattes, so I have a little extra cash. I think I’ll get a candy bar.” “Oh, I cut out lattes. Maybe I’ll get a mocha instead.” You get the idea. That money never makes it to the end of the month.

Which is why you have to spend it at the very beginning. All in one go. Before you decide that you need it.

Think about it. When you were buying your lattes, you got by fine without that money. Possibly this was because you were caffeinated to high heaven, but more probably it’s because your budget does actually sustain you and your lattes.

That’s good. What we’re trying to do now is find extra money to get out of debt. So here’s what you’re going to do with your latte money, in advance of spending it: you’re going to pay bills.

Take that $150 out of your account and pay off a credit card. Don’t give yourself the option to spend it in five dollar increments throughout the month. The money’s gone. It’s no longer in your bank account. It’s going toward repairing your credit.

The other great part about this strategy is that it doesn’t allow you to backtrack on your resolutions. With the old method, you could still buy a latte if you really, really NEEDED one. If the craving for caramel and whipped foam was just too much for you, you could still get your fix.

Now you can’t. There is no latte money. There is only less debt, and a less-jittery heart and nervous system. You’re stuck with your resolution.

Sucker.

Do this for every budget cut you decide to make. Going to axe the cable bill? Great. Put that $30 a month toward debt and spend a little more time playing outside with your kids. Cutting junk food out of your grocery bill? Put that $25 aside too. Stack it all up and you’ll have carried out your New Year’s resolutions. Including that debt one.

FYI. If you're thinking about becoming a client of MyCreditGroup, when we get to the part when we help you restructure your budget - you know Starbucks is is Gone

In almost every instance, it is far better to put your extra cash into paying off debt. Though it is a huge advantage to have savings put aside, the more immediate problem is the huge interest rates and fees the credit card is costing you (see this post). Even if you save up several thousand dollars into a savings account and still make the minimum payments on your credit card, you’ll still wind up in the hole. Here’s how.

The minimum payments on your credit card are going to keep you in debt for a very long time. They’re not there to pay off the card with the minimum cost to you as a consumer – they’re to make sure the credit card company makes as much money as possible while still protecting its investment. From the credit card company’s point of view, the more interest they can collect, the better. That means the payments are set up to allow for you to be paying interest as long as possible.

So even though you have several thousand dollars in savings, you may also be paying an equal amount of money in interest. That means you haven’t saved money at all – you’ve only come out even. And that’s if you’re lucky. If your debt is high enough, putting money into your savings can actually mean you spend more money in interest than you put away in savings. Saving money is actually costing you money under those circumstances.

Meanwhile, if you pay off your credit card debt instead of putting the money toward a savings account, you’ll pay far, far less in interest. What’s more, once the debt is fully paid off, you’ll be able to put money toward a savings account without continuing to lose money in interest. So put every penny you save on budget cuts toward paying off that debt, and start saving for a nest egg only after that step is complete.

Yep, it's that time again. Another round of Ask My Credit Group. This one is one of my favorites, and I'll tell you why.

I really REALLY love it when we get questions from people who have done their homework. People who are taking their credit and budgets seriously.

Most of the questions we get are the "How do I remove all my bad credit" types of questions. We help everybody we can, but it's always a little funner helping the more "Realistic" questions. You can tell Mary and her family has spent a lot of time and energy into repairing some of the mistakes they've made.

"Hi,

Over the last 7 months or so, my husband and I have been working on our credit. We’d love to buy a house this year, but want to make sure we get the best deal we can.

We are down to 2 collection accounts, and both of them are past the statute of limitations for our state. We live in Colorado, and the debts are both near 6 years old and both pretty cheap (under 1200.00 each).

So my question is, should I just ignore them both since they can’t sue me and wait for them to fall of my credit report?

Your feedback is much appreciated.

Sincerely,

Mary F."

Hello Mary,

First of let me congratulate you. Dedicating 7 months to repairing your credit is a big step. Let me also commend you on the homework you’ve obviously done. Dedication and homework is the one way to guarantee success.

Now on to your question.

Based on the information you’ve provided, I’m going to offer another solution. Waiting it out is a possibility. However, the fact that they are past the statute of limitations for Colorado it’s very likely they will settle the debt for pennies on the dollar.

You can even request they remove the trade line from your credit report if you do come to an agreement. They won’t always remove it, but at this stage, it’s definitely worth asking.

Going this route is going to accomplish a few things.

1. You had said you wanted to buy a house this year. Well, you’ve got a year before they fall off naturally.

2. If you negotiate to have it removed, you could be ready to buy that house much sooner.

3. Doing the right thing always feels better.

So, I suggest you give them a call. Be polite, honest and up front. If you negotiate a deal, make sure it’s all in writing and I recommend you use certified mail for all correspondences.

Keep us posted and good luck.

Great, you say. But if I had the money to pay off the debt, I probably wouldn’t have the debt in the first place, smartypants. How am I supposed to get rid of these bills when I don’t have the money for them right now? 

Fair point. Here’s at least one place to find some extra cash this month, and every month thereafter: your electric bill.

We know you’re all smart people, so we’re not going to be so obvious as to say you should turn off the lights when you’re not using them. However, there are probably a couple of things you could be doing that you haven’t considered – and those things will save you a fair-sized chunk of change every month.

Get Used to the Temperature Outside

Air conditioning uses a ton of energy. Fine. But summer is hot and sticky and it sucks and damned if you’re living without it. Ditto for heat in a below-freezing winter. We’re with you thus far. However.

Most of us don’t use the heat or the AC only when they’re really necessary. What we’re trying to accomplish with these little luxuries is making the inside of our house duplicate the weather in another part of the globe. We are actually trying to create a different climate for our own little house-sized country. Maintaining the temperature of a crisp fall day in New Hampshire when your house actually wants to be the temperature of a melting summer day in LA? Very difficult. Takes a lot of energy. Costs much.

With the AC, use it for as long as it’s necessary to actually cool down the house a notch. You don’t need it to be 60 degrees in there – you just need it to be a little less than the 107 degrees outside in the sun. Often, a plug-in fan will do the trick, and for far less cost. In the winter it’s the same deal. You’re not trying to make it summertime in the house. You’re trying to make it NOT freezing.

So get used to the temperature it is. If your actual health is at stake, as in some very hot or cold areas, by all means use the very handy climate-control devices we have invented so as not to expire. That is why they are there.

They are NOT there to transport your house to another climate entirely. You’d be better off buying a plane ticket to the climate in question and leaving your house’s electricity alone for that amount of time.

Make Smart Decision About New Purchases

Heard this spiel? “If you replace every lightbulb in your house with an energy-saving lightbulb, you can save up to $500 a year in energy costs!”

Brilliant, you think. I’ll just go buy 10 energy-saving lightbulbs. At $15 apiece. Because I totally have that kind of money to spare.

All right, so you don’t have the money to spare right now, so you won’t replace all the lights at once. The next time one of them burns out, though, get the energy-saver one instead of the old kind. You will save money on your electric bill – more than enough to cover the extra cost of the bulb in about two months – they’ll last longer, and while you may not have $150 to blow right now, you can probably find the extra $12. Especially when it’s going to save you that much over the next few month’s worth of bills.

Another good strategy for this one is to replace the light you use most with an energy-saver bulb. So if your garage light burns out, go unscrew the light bulb in the kitchen, stick that one into the garage socket, and replace the kitchen light with an energy-saver. Since you use that one more often, it’ll pay off faster.

Ditto goes for buying new energy-saver appliances. We know you’re not going to replace your stove for an energy-saver right now. If yours breaks and you need a new one, though, shell out the extra cash for the energy saver.

Get the Family On Board

You may be very diligent about turning off appliances, lights, and power cables when you’re not using them, but the rest of your family may not be. If your teenage son wanders through and turns on a light right after you’ve turned it off, you may as well not have been so conscientious.

Stupid kid. What is he thinking?

He’s not thinking. The kid does not see the light bulb and think, “Man, that’s costing my parents money.” Nor would he necessarily care if he did. He doesn’t pay the bills. He doesn’t really get it. He won’t until he gets his own apartment. The kid sees the light, thinks nothing at all about it, and goes into another room to listen to that damned newfangled music.

So get the kids – even the little kids – involved. One brilliant way to do this that I’m almost sure does not actually constitute scandalous parenting practices is through bribery. Offer your kid a percentage of the money you save off the electric bill every month. If you can shave a buck off of your light bill by having just one light in your house off whenever it’s not in use, that’s like found money for your kid.

He’ll see the light, and this time he’ll think, “Sweet, I found a quarter.”

And he’ll click it off.

Yesterday we started a post where we outlined some of the new credit card laws; and how they affect you. Today, we're talking about a couple more of the new laws that you need to know about as well.

Advance Notice on Rate Increases

This one doesn’t seem major, but trust us, it is.

Right now, your credit card is subject to the Truth in Lending Act, and it says that you get a 15-day heads up before your credit card company increases your rate. This is problematic for a couple of reasons.

One of them is that if your credit card company has good timing, they can increase your rate just in time for that new rate to apply to your next bill. Since you only had a 15-day heads up and you’re billed every 30 days, you may have already spent money that month that you would not have spent, had you known your credit card rate was about to go through the roof. Too late. You already spent the money. You can stop using the card after THIS billing period, but you’re stuck with this month’s new and improved bottom line.

With the new Credit CARD Act, they have to give you 45 days notice. That means you have the two weeks you had previously, plus an extra full billing period. If you don’t want to pay the new increase, you can simply stop using the card as soon as you find out about the rate increase.

As we mentioned in this series yesterday, your credit card company can only increase the rate for new balances, not old ones. So even if your company does hike up the rate astronomically, that rate isn’t going to apply to your old balance. Your old balance has the old rate locked in, and you have plenty of time to find out about the increase in advance.

Now, this still means you have to pay attention. You know how you get those letters from your credit card company with the small writing that kind of gives you a headache just looking at it? That’s too bad. Read them anyway. Hidden in that long letter is probably information about rate increases or any other nifty little changes in your agreement. The small print is their way of deterring you from finding out about it. Most of us are lazy enough to take one look at all that small print and chuck it in the junk bin.

Bad idea. Even though the new act is going to give you more time to find out about rate increases, you still need to be paying attention to find out. If you get your information via email, open emails from your credit card company instead of deleting them or sending them to the spam bin. Once they’ve sent you a notice, they’ve done their duty. If you weren’t paying attention, that’s not their fault.

The other downside is that your credit limit can be changed without notification. Ever. Your credit card company can reduce your limit from $3,000 to $1,000 without sending you so much as a carrier pigeon. The only thing they can’t do is charge you a fee for any over-limit spending that happens as a result.

Restrictions on Fees

Seems like creditors live on fees. Fees for everything under the sun. You rarely see them coming and you don’t know how to avoid them, and half the time that’s the idea. In the new Credit CARD Act, a lot of those abusive fees are gone the way of the dinosaur; which is a very good thing. I can't tell you how many people come to us for credit repair due to over-the-limit fees they were unaware of, that have now destroyed their credit scores.

Overlimit Fees

There’s nothing more infuriating than this one. You’ve just used your credit card. It went through fine, everyone’s happy. You come home and go to pay your bill and it says you’ve gone over your limit. You have a big, fat fee for overdrafting your account. Also, they’ve increased your rate.

“If the charge was going to send my card over the limit, why didn’t my credit card company just decline the transaction?” you’re thinking, biting down hard on your belt to keep from having an apoplectic fit. The answer is simple, but it’s not pretty: credit card companies have some seriously shady practices. One of them is allowing you to overdraft by a certain small amount – a hundred bucks, say – which they’re pretty sure you’re going to pay back, but which is going to cost you an overdraft fee.

Sure, they could be nice and keep the transaction from going through, but then they wouldn’t get their $40 in overdraft fees. So a lot of credit card companies do this, and they get millions of dollars in fees by doing so.

Under the new Credit CARD Act, you can’t overdraft your credit card unless you specifically elect to allow the creditor to do so. If you would rather have the card declined when you’re out of cash than suffer the overdraft fee, you have that option.

Payment Fees

Some banks will impose fees for making a payment by telephone or online, which seems counterintuitive in an age where mail is practically obsolete. If your payment is due today, the only way to get a payment in without incurring a fee is by mail – but since the mailed payment won’t arrive for three days, you’ll get a late fee. It’s a Catch-22. Pay the bank or pay the credit card company, but either way you’re out a fee.

Under the new act, banks can’t charge you a fee to pay your credit card debt by telephone or online. You can still get dinged for rush payments, though, so it’s always safer to pay as soon as you get your bill.

Same-Day Fees

Sometimes making a payment on the due date is still counted as late. This is a really sneaky one, since most of us think of the due date as the date the bill is due. Silly us. Apparently, the due date is sometimes the day AFTER the bill is due. It’s the too-late mark.

Not anymore. When you make a payment on the day your statement says it’s due, you won’t get a late fee. You’re also safe if your payment is due on a holiday or a Sunday. Since those payments aren’t generally processes until the next day, those payments also used to qualify as “late”. Under the new act, payments made on the due date will always be counted as on time, even if the luck of the draw means that payment won’t be processed until the next day.

Super-Ridiculous Fees, or Subprime Card Fees

This is a simple cap on fees in general, to keep credit card companies from abusing their right to impose fees. You wouldn’t think they’d need to say this, but your non-penalty fees cannot be more than 25% of your initial card limit.

Seriously. You have a $1,000 credit limit. The law now states that your non-penalty fees must be less than $250. This is still a rather large margin for fees, but let’s look on the bright side: it could be worse. We know this because it was worse, and now it’s not.

Ooh, that last one got a little harsh. A lot of couples ARE arguing about finances these days, and it always sucks.

Here’s the thing when you’re in a tough financial situation with someone you care about. You want to make up from your fight by doing something nice for them. So you go out and spend money on a present or a nice dinner out or tickets to a show you know they want to see.

Whereupon they yell at you for spending money unnecessarily and you get to have the fight again. Um, no thank you.

Never fear. We’ll have you calling that budget-inept idiot your snookums again in no time. Except maybe you don’t want to call them that. The more I look at the word, the more creepy it sounds.

Here are five things to do the next time you want to do something sweet for your (insert appropriately sappy nickname here).

#1 Make dinner.

You’re going to have to make dinner anyway, right? So make it a nice one. Pick out a new recipe, spend some time setting the table and lighting candles. Pick some flowers if you’re in an area where they grow wild. If not, make a centerpiece out of the candles instead. Tealights are cheap and pretty, and we’re sure you have knickknacks around. Just make the table look nice. Show that you put some effort in.

If you’re the sort of couple who likes to cook together, do that. If you can sneak home ahead of them and surprise them, do that. Think about what your partner would most like and go for it.

Have a back-up plan. And by “back-up” plan we mean “the number of a cheap takeout place you both like”. If your experiment in nouveau cuisine goes south, you want to still have dinner ready. Trust us, they won’t be mad. Nearly nothing is more adorable than a failed attempt at making the perfect dinner.

#2 Go dancing.

There are free dance lessons everywhere you look. Salsa is always fun, rollicking, and full of other couples looking to teach you new steps and get you into the swing of things. Head over to your local coffeeshop or meeting place and you’ll find fliers and cards advertising free dance lessons and open dance afterward.

Don’t worry about it if you suck. Sucking is part of the experience. Have a drink or two to loosen up and give it everything you’ve got. After a couple of weeks, you won’t suck, and you can help out other new couples.

Plus, the next time you’re invited to a wedding, you’ll be the life of the party. Good dancers are rare in this world, and everybody likes them.

#3 Take Note of the Little Things.

“I really have to get a new bottle opener, I hate this one.”

“I loved this book when I was a kid.”

“It seems like I just can’t find a good chiropractor.”

Little things we say all the time. Pay attention when these happen. Keep a list of them. The next time you want to do something nice, crack out the list and see what they said. Get a new bottle opener and present it with a ribbon. Buy that book she loved when she was a child. Ask around and get him the name of a chiropractor who specifically specializes in what he needs done.

All of these things are either free or incredibly cheap, but that’s not the point. The point is you were paying attention, and took a little time out of your day to make theirs better.

#4 Make One Day of the Week “Your” Day.

Walk up to your partner and say, “Hey, we should start spending one day a week just being together.” Pick a day you can both do that. Never plan anything else on that day.

Create a routine you both enjoy. Maybe you go browsing in used bookstores or head over to the farmer’s market. Maybe you invite friends over for dinner. Maybe you just laze around, watch old movies, and cuddle up with a glass of wine. Whatever you do, make it something you do together.

No matter how simple what you do is, they’ll appreciate that you set aside time to spend with them. Don’t mess around, either: don’t just say you’ll try to spend one day a week together. Nuh-uh. Your schedule’s pretty standard. Pick a day you know you can do. If someone asks you to do something, you’re busy.

#5 Throw Them a Party.

For no reason. Make a cake, put balloons and streamers up, and get a small, totally cheap present that will make them smile. (No. 3, the listening one, is really handy for figuring out a small, cheap present that they’re thrilled about.)

Invite their friends. Have a game night, or sit around all night drinking beer and eating cake.

I had a guy friend whose girlfriend did this for him. We walked in the door to a fully decorated house. He asked what it was all for, and she said, “No reason, I just felt like throwing you a party.”

I didn’t even like this girl, but I stole her idea. That’s how good it was.

Now go make nice with your snookums.

The credit card companies aren’t the only ones to blame, though. They got away with their tricky little ways for years largely because the general public didn’t know enough about the way their credit cards worked to keep those abuses from happening. So we’re going to go through the major components of the Credit CARD Act for you, to sort out what exactly is going on with your credit cards right now.

Credit CARD Act: Retroactive Rate Increases

The first item on our list is one of the most important. It used to be that your credit card company could raise your rate anytime they felt like it, for whatever reason. You might have seen this clause in your credit card statement. If you’re anything like me, you thought, “Well, that’s complete bull.” Because it is.

In the best of all possible worlds, your rate would only increase if you were a bad payee. If you were good about paying your bills on time and keeping a low balance, then your interest rate would be low, because you were being so good. If you kept missing payments, your interest rate would go up so the company could recoup their losses. Not fun when you can’t find the money to pay the bills this month, but at least a soupcon of logic is in play there.

That’s not how it worked. You could be the most reliable payer in the world, snatching your bill out of the mailman’s hand just so you could race to your checkbook and pay right this second, and if your credit card company felt like increasing your rate from 10% APR to 14%, they could do that. For no reason.

They could also use your bad practices elsewhere to make up a reason. If you had, say, an American Express card that you were excellent about paying on time, but you also had a car loan for which you’d been late on the payments a few times, American Express could use that as a reason to bump up your interest rate.

And it could stay that way forever. You might be able to negotiate a lower rate, but it wasn’t going to happen automatically.

Under the Credit CARD Act, they can’t do that anymore. Your existing balance is safe from increased rates unless you’re more than 60 days delinquent on that account. Even better, if you are so unlucky as to be unable to pay that bill for 60 days and get the increased rate, the damage is reversible. If you make six consecutive payments on time, they have to give you your old rate back.

This section has a small caveat, since while your old balance is safe from increases, your new balance can still get its rate increased if the credit card company feels like it. The plus side is that they have to give you 45 days advance notice, which means that if you don’t want to deal with the increased rate, you can choose not to use that card in the future and simply pay off the old balance.

There are also a few time limits that didn’t used to be standard: they can’t raise your rates during the first year you have the card (unless, of course, you’re delinquent by the aforementioned 60 days), and any promotional rates have to last at least six months.

That’s to avoid promotions like this: 0% APR (small print: for the first twenty seconds you have the card. After that, we’re hiking it up to 24%. Sucker.)

Tune in tomorrow for more on the new Credit CARD Act and why you should care. (You should care because it’s how you’re going to avoid credit messes in the future.)

And if we divorce, I promise to continue paying my share of the credit cards. 

Wait, what? 

When we meet that one perfect person, the one we plan on spending the rest of our lives with, none of us are thinking about who’s going to pay the credit card bills when we divorce. 

Divorce is a fact of life, and a large number of our clients come to us after a marriage has gone south and with it - credit scores. Below is a question we received last week from one of our clients. We should have addressed this a long time ago, because it is a question we see ALL THE TIME. But we didn’t so we are now. 

“My Wife and I divorced last year. Together we had a few credit cards and an auto loan. The divorce decree states that she pay for our Discover payments and the car payments.  

The day before yesterday, I got a call from Discover and they were saying that the payments hadn’t been paid in two months and that if they weren’t caught up, my credit could be damaged too. 

Why should I be responsible if we made an agreement in court that she would take full responsibility for that card? Is there anything that can be done about this? 

Thanks John” 

MyCreditGroup’s Answer: John, you’re going to want to check the laws in your particular state. However, we do deal with this scenario a lot and I can tell you, typically the original contract (the one you signed when married) takes precedence over a newly written divorce decree.

The credit card company’s view is that they don’t care what has happened after the fact. What they do care about is the fact that you signed a contract, married or not, and that’s the contract they’ll use to collect their money. 

I’m sorry, but chances are they can come after you. 

If you are on good terms with your ex-wife, give her a call and see if you can’t work something out. It may not be your debt anymore (per your divorce), but at the end of the day, it’s your credit and your responsibility to protect it.

Also, you mentioned Discover said it had been 60 days since the last payment. I suggest you go to http://www.annualcreditreport.com/ and check your credit. There’s a good chance you already have late pays showing.

#1 Closing Old Credit Cards

When you finally pay off that credit card, it seems like the smart thing to do is just chop it into tiny pieces, call up the company, and close it down completely. No temptation, no consequences. You are finally free of the credit card! It has no power over you. You are no longer being drawn to the Dark Side.

Sorry, Luke. Turns out your credit rating isn’t going to get rewarded if you remove the temptation. It’s only going to reward you if you get tempted and deny said temptation. Be strong.

A credit report with old accounts looks good on your report. The aged accounts give you points, just for having had a credit line open that long. Go bury them in the backyard if you want to make using them hard on yourself, but don’t close them out with the company.

#2 Using Up All Your Available Credit

You have a credit card with $3,000 available credit. That means you can spend $3,000. Because that’s what’s AVAILABLE. Right?

‘Fraid not. Credit card companies are sneaky like that. Truth is, your balance-to-limit radio is going to have a big effect on your credit. You want your balance (the amount you spend) to be only 20% of your limit (the amount that’s available). That means that $3,000 credit card should only have $600 on it if you want to keep your credit shiny clean.

If you really need that credit to get through the day, call up your credit company and find out what day of the month they report your balance to the credit bureaus. If you pay your bill just before that day, the amount reported to the credit bureau will be as low as possible.

#3 Applying for Too Much Credit

When you’re hurting for cash, your impulse may be to fill out as many credit card applications as possible in hopes that one will come through. This is actually a good way to make sure NONE of them come through, since lots of inquiries damages your credit report and makes those credit card companies less likely to give you credit.

Allow there to be 6 months between every applications. Let your old cards get older (see our advice on #1) and don’t get new stuff. Credit card companies are watching.

Yeah, it’s creepy. But it’s true.

#4 Not Paying Late Fees

When you’re late or over the limit, credit card companies charge you a fee. We’ve all gotten these, and they suck. The problem isn’t the fee, though. The problem is when you only send your regular payment, and don’t include the fee.

The fee will roll over and it will be considered 30 days late. Not only will that get you another fee, it’ll show up on your credit report. It’s a vicious, vicious cycle, and it’s sneaky too. Out-sneak your credit company and enclose the imposed fee with your payment.

#5 Moving

We’re not saying you shouldn’t move. But seriously, you would not believe how many times a day we see angry people whose companies didn’t forward their bills in time. They got late fees, they got dinged credit reports, and they’re pissed.

They should be pissed. It’s a lousy policy on the part of the credit companies. If they wanted to get good customer service points, they’d be all over sending your bill to the right place.

Unfortunately, they’re more in the business of collecting late fees. They don’t care that you’re upset. You have to be in charge of your own bills.

You know what date your bills are due. Set up online bill pay, write the due dates in big letters on your calendar, do whatever you have to do, but don’t rely on the postal service to get your bills to you on time.

Seriously, the postal service? That’s dangerous even if you’re not moving. Join us in the 21st Century. Set up an alert on your computer or have your email calendar remind you. Use your cell phone. Make it happen.

You know when your favorite TV show is on, right? We’re going to go out on a limb here and say that keeping your credit score high is slightly more important than what happened on Lost this week. What happens on Lost isn’t going to make any sense, anyway. There’s no reason your credit report should be the same. 

Kids these days. With their iPods and their Xboxes and their cellphone texting. Overdeveloped fingers and underdeveloped social skills. You disobedient rugrats, get offa my lawn!

Annnnnnd apparently I’m an old man waving a cane from my porch rocking chair. But it’s true that kids have gotten highly dependent on their technology, and they may not take it well when you have to cut down on luxuries like cable and cell phone allowances.

See it as an opportunity. Through no fault of your own, your kids have to do without technology. This means they could spend time doing other things. Like . . . gasp! spending time with their families.

That’s you, by the way. Ever wish your kids spent more time with you? Well, now they have nothing shinier and more brightly colored distracting them. Take advantage.

One of the best things about family outings is that they’re cheap. The idea is to spend time together, not to spend money. Here’s 5 Things you can do with your kids on the cheap. Who knows, they might even have so much fun they won’t complain about the fact that they can’t bring their handhelds.

Well, no. That’s a little too optimistic. But they might forget to complain for awhile. You know, while they’re having fun.

#1 Pack a Picnic.

Make it a big, complicated picnic. The more accoutrement involved in getting the picnic together, the more exciting the prospect.

Send the kids around the house for a good blanket to lie on, a Frisbee and a football, a baseball bat and a ball appropriate for their age range. Bring books. If you have younger children, bring ones you can read aloud. Bring a boombox with a good CD in it that you can play low in the background. Bring a book on trees, insects, flowers, or animals if you want to throw a little education into the mix.

Take your picnic to the beach, the park, or even the backyard. Just laying out a picnic is incredibly satisfying. The best part is that the meal itself doesn’t have to be any more expensive than your usual lunch budget. Sandwiches, chips, and fruit are easy and cheap. They’re also hard to screw up if you aren’t the culinary type.

#2 Take Them Out to the Ballgame.

Gone are the days where you had to sell your firstborn for seats to see the home team. The economy sucks – take advantage.

I’ve seen tickets for the Padres at $12, which price also includes a hot dog and a soda. Remember when you used to have to pay $12 for the hot dog and soda alone? Those days are gone. Kick back, put your feet up on the seat in front of you, and teach your kids about the fine art of watching a good game – namely, eat bad food, cheer a lot, and don’t throw up.

You can also do this with your local high school or college game. Trust us; the cheering is the same no matter where you go. And a smaller venue with more people in it is just as exhilarating. Also, they probably won’t kick you out if you say something mean to the ref. They’re used to crazy parents.

#3 Monopolize Their Night.

Monday nights are boring. Competition is exciting. They can make beautiful music together. Crack out the Monopoly board, Trivial Pursuit, Life, Trouble, or any other board game you have sitting around in the closet. Make some snack foods and get some cheap paraphernalia to make it more interesting. Hats are always good.

If you’re really adventurous, try your hand at turning your kids into card sharps. Teach ‘em poker or blackjack and use pennies, nickels and dimes for chips. Playing for real money – even when it’s literally chump change – appeals to kids of all ages. At the end of the night, they’re up two dollars. Wooooow.

Seriously, they’ll love it.

You can also take bets. Not real bets. We’re not trying to turn your kids into the spawn of Vegas here (although if you train ‘em really hard, maybe they can get you out of your debt in their new careers as professional poker players). But fun bets. If they win, you take them for ice cream. If you win, they have to do the dishes.

I used to do this with my girlfriend. We were slightly more avant-garde. I believe I was cured of any betting addictions that may have been lying latent in me when I had to run down a beach in a wedding dress carrying a boom box on my shoulder playing Tiny Dancer by Elton John. That sort of thing is better than any 12-step program.

#4 Kick a Ball.

Or hit one. Or throw one. Or do whatever the hell it is soccer players do with their foreheads. Go play a game, an impromptu playground-style game, at the park. Invite another family you know, or start a pick-up game with other families at the park.

Hint: kickball has never not been fun. Ever, in the history of kickball games. If your kids are too young or uncoordinated to hit a baseball reliably or make a basket, they can still kick the bejeezus out of a bouncy rubber ball, and have a great time doing it. The nature of the game also means they have a pretty good shot of getting to first base, even if they kick it right to someone.

Play Ultimate Frisbee, or football, or Monster Tag. Have your kids teach YOU the games they play on the playground at school. Just get out there and roll in the grass. They call it “fun and games” for a reason.

#5 Take a Hike.

Wherever you are in the United States, there is a pretty trail just begging for you to walk it. Mountains are great: they’re pretty and they’re challenging, so your kids will be focused on getting to the top and not on nagging you about whether they’re there yet. No, you’re not there. The top is when you’re there. Bet you I can beat you.

No kid is going to let you beat them up a mountain. Well, your six-year-old might. But after about the age of ten, there’s no way they’re letting you beat them.

And when you get to the top, you can pass them the water bottle and have a heart-to-heart, just like you wanted. They’ll be too exhausted to run away.

You never know. Having to cut your entertainment budget may be the best thing that ever happened to your relationship with your kids. Get creative. Spend some time with them. And save some money while you’re at it.

A little while ago, while at a visit to my dentist, I noticed he had the R & L on his shoes. I’m thinking to myself “nah, it couldn’t be”. Ok I made that part up; he didn’t actually have it on his shoes–but he should have.

Anyway long story short, I needed a wisdom tooth pulled, so he set me an appointment for an oral surgeon a couple days out.

I go to surgeon. Tooth gets pulled. I spend the next two days eating Vicodin and yogurt–life is ok.

I go back to the dentist for a follow up. That’s when I hear the words you never; EVER want to hear from a dentist

“Uh oh, you’re not going to like me very much”

Seriously, did you really just say that? Yep, he did.

Turns out genius boy told the surgeon to pull the wrong tooth. He wrote left instead of right.

I still can’t figure out today why I didn’t notice; but I suspect it has to do with my pharmaceutical grade Yoplait.

Oh well, I hear these teeth are worthless anyway. Crying wont change the fact, and I still need the correct tooth pulled—life goes on.

So, I’m back to the surgeon’s, correct tooth is pulled, and the dentist was thrilled to report that he got it right this time–brownie points for you Dr. Chen.

Here’s where I get really pissed.

A week or whatever goes by and I get the bill–and guess what?Yes, I’m being billed for both extractions.

Ok, I can live with the mistake; I have too much stuff going on to cry over something I can’t change, but I’m sure as hell not going to pay for this snapperhead's mistake.

I mean the least he can do is cover the cost of his own stupidity—am I right?

So I send a check for one extraction, and a copy of his bill where I politely wrote next to the second extraction “get a life”.

We fight about this for a month until I finally get a collection letter. Ok, now I’ve a decision to make. Right or wrong, this will go on my credit if I don’t pay it.

Sorry, this one I just can’t swallow. So I respond to the collection agency with my story (yes I know, they don’t care). But seriously, what the hell? Man up and take some responsibility for your lack of attention!

And here we are today; my credit is 68 points lower because I will die before I pay this bill.

So What’s My Point?
What is and what should be are sometimes two different things.

There is right, there is wrong, and there is reality.

In this case, I truly believe I’m right. I also believe that if I feel like going to court, I’m going to win. And now, just because they're being asses about it, I’m going to ask for damages.

Unfortunately, those are both the “should be” parts.

In the meantime, I have bad credit, and that’s the reality part.

Folks, we look at a look at thousands of credit reports every month; and I would say at least 60 percent of the people we talk to have bad credit because of a bill they thought strongly about and refused to pay.

Hey I’m with you, I really am, and I’m a huge supporter of standing up for what’s right. Just understand being right doesn’t always have a happy ending.

The right smart thing to do would have been to pay the bill, then sue his stupid ass.

So my point is this:

You may feel you’re right about a bill, but take into consideration the consequences. If you’re right and want to stick to your guns, you’re the man and I tip my hat to you.

But if your credit is important to you (and it should be) consider every angle of your actions. You may want to preserve your credit and deal with things afterwards.

PS. I strongly urge anybody considering Dr. Christy Chen's office in Escondido.  label your teeth so they work on the right ones.

Okay, that was soft-pedaling. Your credit sucks. It’s seriously in the hole. You have a handful of credit cards that are all maxed out, you can’t pay your mortgage, you have student loan providers who are pissed at you. You also filled out one of those magazine cards that said “Bill me later” and now they’re mad at you about the $11 for an issue of Vanity Fair and sending the hounds of credit collection after you.

It’s bad. It’s really, really bad. And you’re feeling like there’s nothing anyone can do to make it any better.

You’re not alone.

There are thousands of people across this country and on into the next who are feeling the same way you are. Their credit just got out of control, and now it’s broken forever. It will never be okay again. Everyone is feeling this way. Everyone. You are not alone.

This is important to remember when you’re feeling like it was stupid of you to get into this situation. You have to remember that everyone was doing it. It made sense. It seemed to be working out okay for everyone else. You did not get here because you are the only one to fall for a credit promise that didn’t pan out.

You have to really look at it.

Most people, when they’re confronted with a situation they know is bad, get ostrich syndrome. Stick your head in the sand. Don’t look directly at it. If you’re very, very quiet, maybe the bad credit will just go away and bother someone else.

Remember that old adage, “Know thy enemy”? Yeah, it’s time to dust that one off. The only way to get rid of your bad credit is to know why it’s bad. When you know why it’s bad, then you’ll know how you can make it good again.

Here’s what we bet you’re thinking right now: “Whatever. It’s bad, and the only thing I can do is make payments, and I don’t have any money to make payments, and I really don’t want to know exactly how much money I know when I’m dead certain that whatever the total is, I can’t afford it.”

Sound about right?

Here’s a newsflash for you: even if there is no way to make this problem go away completely, there are still probably ways to make it better.

The only way to figure out what those ways are is to get out all of the bills. All of them. Spread them out on the table. And see what the damage is. Look at your agreements. Figure out loopholes. We know it’s rough. We know it really sucks to see how terrible it’s gotten. But it’s the only way to get it better.

Speaking of which.

You can make it better.

This is true. We know it doesn’t feel true, but it is. It will take time, and effort, and energy, and we get that you don’t really feel like you have those things right now. It takes a lot of courage to get all the credit reports out and take a good, hard look at the situation.

There are lots of things you can do without making minimum payments. You can challenge your creditors on errors they’ve made in your account, which may actually help repair your credit. You can increase your card limits – not to spend them, but to make your credit better by increasing your limit to balance ratio. You can open secured credit cards. You can negotiate a lower payment rate. There may be pieces of your agreement that make allowances if you are unemployed.

If you’re really stuck, and you don’t know how to make it better, and you wish someone would just do it for you, that’s also an option. That’s what we do. We know a couple of other really quality companies who can help. There are financial planners and money managers. Almost every one of those people, if you find a good one, can help. They will pay for themselves in the space of a month.

And you won’t have to feel quite so helpless anymore.

If you want to talk about what you can do right now, hit us up for a free consult and we’ll help you sort through everything. Trust us. If you man up and confront the problem head-on, you will feel much better. Before it was this amorphous thing. Now it’s got a shape and a name and you know what to do about it. You’ll know your enemy.

Then you can go out and dispatch the bastard. Doesn’t that sound like fun?

It’s a shame that her math skills seem to be so sadly wanting.

A few weeks ago, we got this link to her latest flip-flop regarding paying off debt. If you haven’t been paying attention to Suze Orman on the topic, you are probably less confused about this than those who have. Those who have been paying attention to us (and that’s very nice of you, since our hair isn’t nearly as pretty is Orman’s) know that we’ve always said the same thing.

Pay off your credit debt. Now. Yesterday. Do it.

Orman’s waxed back and forth on this, and now, in the midst of a financial crisis, she’s decided that the smartest thing you can do is sock away money into a savings fund. Her logic goes that when you’re in serious financial trouble, you’re going to need that emergency fund more than you need good credit.

Sounds fine. Except for the part where you’ll have a hell of a lot more money to put into that savings account if you pay off the credit cards first.

This is the part where we do the math for you.

Let’s say you’ve got a $20,000 balance on your credit card. Your minimum payment is $500. We’re using CNNMoney credit card calculator for this one to calculate what happens APR-wise to that debt as we go along. 

On Suze’s plan, here’s what happens.

You pay your minimum payment of $500 every month. Your credit card company keeps charging you the APR rate. In 30 years and 9 months, you’ll have paid it off. Meanwhile, you set aside $150 every month, instead of putting it toward your credit card, into a savings account.

30 YEARS, okay? that’s the time it’s going to take you to have a kid, watch it grow up, go to college, get married, and have a kid of their OWN. And you will STILL be paying off that credit card.

Not to mention the fact that by the time you pay it off, you’ll have paid $27,466 in interest.

Pay attention to that.

Your credit card was $20,000. Your interest paid was $27,466.

You just paid OVER TWICE THE ORIGINAL DEBT.

Now do it our way. Instead of your minimum payment, pay just an extra $150.

Got that? Instead of $500, pay $650. This is not that extreme.

Guess what happens?

You pay off the credit card in only 3 years and 5 months.

You only pay $6,477 in interest.

Let us compare where you are in 30 years.

In 30 years under Suze’s plan, you have JUST paid off the credit card. You have paid a grand total of $47,466. And you have put $54,000 in a savings account.

In 30 years under our plan, you have paid off the credit card long ago. You have paid a grand total of $26,477. And since from the 3 year, 5 month mark onward, you put $650 in your savings account (because you didn’t have to put it toward a credit card anymore), your savings has $207,350 in it.

Let’s compare again.

Suze’s plan: You spend $47,466. You save $54,000.
Our plan: You spend $26,477. You save $207,350.

Why on earth would you not pay off your credit card sooner?

Tune in for the next post, where we’ll tell you where that $150 is coming from, anyway.

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