A coworker asked me an interesting question: if he were to receive an inheritance equal in amount to the outstanding balance on his mortgage, should he use it to pay off his mortgage? My advice was no, unless he has a mortgage with a high interest rate, which surprised him.
The second wave of the credit crisis is hitting the U.S. banking system, affecting even well managed and conservatively financed banks, even credit unions whose membership is made largely of federal employees. The first wave, of course, was made of institutions, like Countrywide Financial and Bear Sterns, who were caught up in the subprime lending fiasco where money was loaned irresponsibly to people who were unlikely to pay back the loans in a tough economy. In the second wave, banks who did not engage in subprime lending are being hit, and hit hard. You’ll want to take a close look at your bank and double check that your deposits are properly insured by the federal government.
It’s become a major industry to steal people’s identities. By impersonating you, these thieves use it to obtain credit (destroying your credit in the meantime) and to empty your bank accounts. What can you do to stop them?
It’s not clear who’s worse, the people filling out credit card applications after stealing your identity or the credit card companies themselves. At least there is some chance the identity thieves will go to jail after taking over your credit, while the credit card companies enrich themselves legally with hidden fees and exorbitant interest rates. My wife and I signed up for American Express Blue Cash, thinking that we’d be making 5% back on some of our purchases, and intially we did, but not for long.
In a previous post, I discussed how a credit score is calculated. What happens when your credit score is too low? A few years ago I helped a friend rebuild her credit score from the bottom. In college, she had a serious medical problem that wasn’t covered by health insurance, and went to the hospital associated with her college. She couldn’t pay, and the college, her college, sent the collection agencies to work her over and destroyed her credit. Being the type of person who felt bad about jaywalking, my friend went into a panic, thinking she could never escape. Seeing this happen, I couldn’t let my friend be treated this way, so I helped her work out a plan:
