Answer: You mention that your daughter has a 712 score, but she actually has many credit scores that change all the time. Small medical collections can have an outsize impact on those scores or they can have no effect at all. It depends on what credit scoring formula the lender happens to use.
The latest version of the leading credit score, FICO 9, ignores paid collections and treats unpaid medical debt less harshly than other types of collection accounts. The most commonly used version, though, is FICO 8, which ignores only those collections under $100 and doesnt differentiate medical from other collections.
Some lenders still use older versions of the formula that punish people for even small collections.
Some baseless rumors are perfectly harmless. Believing Elvis sightings or trying to duplicate the famed (but failed) Pop Rocks candy-and-soda explosion wont cause irreparable damage. But when falsehoods about credit scores go unchecked, your financial well-being is on the line.
Dont wreck your credit by following advice based on baseless rumors. Lets slam the brakes on the credit score rumor mill and lay these seven myths to rest.
1. Closing an account removes all evidence of its existence from your record. (See also: Cutting up a credit card closes the account.)
Wouldnt it be nice if we could erase our past credit misdemeanors so easily? It would. But you cant.
The credit reporting industry has a long and somewhat unforgiving memory. Like that high school prom picture your mom still insists on displaying on the mantel, it might seem you cant escape your past. So if you close an account in hopes of hiding the fact that you missed payments or defaulted on a loan, understand that the information will remain on your record, in most cases for at least seven years.
2. Your credit score is your FICO score and your FICO score is your credit score.
This is one of those Kleenex/Xerox things in which a brand name becomes so ubiquitous for a product that people use it to refer to all products of the same type — from tissues to copy machines to credit scores — regardless of who makes it.
So lets set the record straight: There are two main companies that provide credit scores:
- FICO, from Fair Isaac Corp., has become the Kleenex of credit scoring for good reason. It is used in more than 90% of all lending decisions.
- VantageScore is the credit rating product that the three major credit bureaus (Equifax, Experian, and TransUnion) created via a joint venture to compete with FICO, although it is still a distant second in overall adoption.
To add a bit more complexity to the issue, you might not know there are multiple versions of your FICO and VantageScore scores. These same companies that generate your credit score also generate customized scores for insurance companies, credit card companies, landlords, and other businesses that have a proven need to know your score. Those are based on a customized version of the credit scoring formula.
What matters most to you is that, directionally, the consumer version of your FICO or VantageScore credit score will tell you where you stand in the eyes of lenders and others.
3. Age and income are factored into your credit score.
Nope. Nor are race, religion, or marital status. But while were on the subject of your schmoopy…
4. When you and your soulmate/significant other merge your financial lives, out pops a joint credit score.
Credit records are based on Social Security numbers. And while your name, tax filing status, address, and Netflix queue might change when you tie the knot, your Social Security number is yours and yours alone for as long as you (and just you) shall live.
When you apply for a loan together (for a mortgage or a credit card), each of your credit scores will be used to determine the terms of the loan and the status of the account will be reported on both of your credit reports. And, no, the lender doesnt care who forgot to put the check in the mail. If the payment is reported late, it will be noted in each of your credit files and factor into each of your individual scores.
5. Checking your score will hurt your score.
Go ahead, check away! You can check your own credit score — whats called a soft credit inquiry in credit circles — as many times as you want without raising eyebrows. Its when other people start checking your score that a hard credit inquiry is generated. Too many of those, and your score can drop.
This happened to Nicki Minaj last November. Her score dropped about 100 points after a media outlet published a leaked police booking photo from 2003 without redacting her Social Security number; neer-do-wells then kept checking her credit report (and, I assume, applied for credit in her name).
To minimize the damage that outside inquiries inflict on your score when youre shopping for a loan for a home or car, limit your comparison shopping to a tight time frame. Try to cluster the lender inquiries within a week or two, which the scoring formula will recognize as a singular event and not a run on the system.
6. Keeping a balance on your credit card is good for your credit score.
Wrong! You do not have to carry revolving debt to help your credit score. However, you do have to use your cards at least occasionally to give your lenders something to report to the credit bureaus. If your cards gather dust for too long the account can go dormant in as little as three months. In this case, no news is, well, no news. Without any activity, the lender might eventually stop reporting the line of credit to the bureaus altogether, which can lower your credit score if you dont have many other active current accounts.
So use your cards, even if its just to pay for bubble gum at the gas station. Then pay off those balances ASAP.
7. Actively doing stuff to improve your credit score will help boost it.
People often do more harm than good when they start doing things they think will improve their score — moves like closing old accounts (which affects your credit history and lowers your available credit), applying for new lines of credit (which can ding your score if you try to get new cards willy-nilly), or transferring balances (which can push you closer to the credit limit on a low-limit card).
If you have a good credit score already (one that is 760 or higher), the biggest mistake you can make is to fiddle with stuff in an attempt to make it even better. Those extra 10 or 20 or even 50 points are not going get you better loan terms. But trying to go for the gold might cost you 10 points that can make all the difference in the world.
So if your credit score is already good to excellent, keep doing what youre doing — pay your bills on time, use credit responsibly — and your credit score will age like a fine wine and improve gradually over time.
If your score isnt exactly brag-worthy, there are no quick fixes (and dont pay anyone who says there are) except for maybe one. The one thing you can and should do right away is to check your credit report for errors. (Pull your free credit reports from annualcreditreport.com.) If there are errors or inaccuracies, work to get those removed from your files and your score will improve very quickly.
After that, time really does heal all wounds, and this is particularly true when it comes to credit scores. Once youve reformed and become a model borrower, your recent credit-related behavior will start to outweigh your past youthful indiscretions until eventually you and any lenders youre courting can have a good laugh about that time back in the day. In the meantime, here are nine legitimate ways to improve your credit score and get on the path of stellar credit.
GREENVILLE, SC, June 23, 2015 /PRNewswire/ — The founders of ValleyAutoLoan.com, a top car loan company, are pleased to announce that they are now offering auto refinance loans to applicants who have filed bankruptcy, have low credit scores, or other financial issues.
In addition, noted a spokesperson for Valley Auto Loans, the company has also just launched refinancing loans.
Even though the country is beginning to rebound from the recession of 2008, the founders of Valley Auto Loans understand that many people are still struggling financially. They realize how difficult it can be to refinance an auto loan with bad credit, and how stressful it is to be turned down by other financial institutions.
Because they want to help out as many people as possible who are currently struggling with their finances, they decided to offer the new bad credit auto financing option.
As the spokesperson explained, Valley Auto Loans now offers people the ability to apply for their car refinance loan right on the companys easy to navigate website. The friendly and experienced team is ready and willing to provide auto financing for bad credit with no application fee and no obligation. In addition to helping people get a great rate and possibly even skip a payment in the process, they can also answer any questions that drivers may have about how to refinance a car loan with bad credit.
In many cases, refinancing a car or truck has many of the same advantages of refinancing a home mortgage. People can lower their interest rates and monthly payments and can extend the term of the loan. This process can free up much-needed cash and help the persons monthly budget stretch even further.
July 5th, 2015 in
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The Cabinet Committee on Economic Affairs (CCEA) last week approved Housing for All by 2022, a scheme promoting affordable housing for the poor in urban areas. The scheme provides an interest subvention of 6.5 per cent on housing loans to the economically weaker sections (EWS) and low-income groups (LIGs). The scheme is more comprehensive and addresses the shortcomings in the earlier schemes, say industry players.
Contours of the scheme
First, the Centre will provide a grant of #8377;1 lakh per beneficiary under the slum rehabilitation programme.
Next, central assistance of #8377;1.5 lakh per house for the EWS category will be provided under both affordable housing and beneficiary-led individual house construction.
Also,, credit-linked interest subsidy of 6.5 per cent on housing loans taken up to a tenure of 15 years will be provided to the EWS and LIG categories. The subsidy will be paid upfront, on NPV (net present value) basis of #8377;2.3 lakh per beneficiary.
Under the new scheme, #8377;2.3 lakh will be deducted from the loan amount and the balance will be serviced by the customers at the contracted or unsubsidised rate, explains Sudhin Choksey, Managing Director of Gruh Finance.
So, will the new scheme succeed where the earlier schemes failed? Industry players feel that the new scheme addresses some of theearlier issues under interest subsidy for housing the urban poor (ISHUP) and the Rajiv Rinn Yojana. For one, the new scheme brings in more uniformity in calculation of interest subsidy.
Under Rajiv Rinn, NHB and HUDCO were appointed nodal agencies and all banks and housing finance companies were supposed to claim their subsidy through them. But each had to formulate their own workings depending on the loan amount, says Sudhin Choksey.
Two, the scheme raised the income ceilings for both EWS and LIG categories. Earlier, urban poor with an annual income of up to #8377;1 lakh was defined as EWS and up to #8377;2 lakh was categorised as LIG. The income ceilings have been increased now to #8377;3 lakh for EWS and #8377;6 lakh for LIG, which brings more people under the ambit and makes it more viable for lenders and developers to cater to this segment. ISHUP scheme became non-viable because only the very poor qualified for the interest subsidy. So lenders were not willing to extend loans to this section. Developers were also reluctant to construct for such low income households, adds Choksey.
Players feel that the challenge lies in the title of the land. There is lot of suppressed demand but the challenge for HFCs is the title of the land. Many people who have taken up space in the cities do not actually own the piece of land they are occupying.
So the government has to legalise their space by providing clear title. Then it becomes easier to fund them, says Srinivas Acharya, Managing Director of Sundaram BNP Paribas Home Finance.
In large-scale urban housing, the government has to provide single-window clearance, he adds.
There are other issues too that need to be ironed out.
In the past, lack of coordination between the Centre and the States has hindered the progress of such welfare schemes. While housing for all is a national agenda, land is a State issue and needs proper coordination between the Centre and the States.
Each State will have to enter into an MoU with the Centre and identify which land can be put up for development, says Choksey.
For HFCs, particularly those providing small ticket home loans to low-income group, the new scheme opens up more opportunities.
Gruh Finance is one of the pioneers in the rural housing finance segment, and remains the player with the smallest loan ticket size of about #8377;8 lakh.
July 4th, 2015 in
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| tags: home finance
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For Louisville to improve its ranking on health indicators, the first step is for citizens to quantify and organize their personal health data. Personally, I often find a problem is both easier to ignore and much harder to address when there arent solid metrics associated with it that I can analyze. Regularly collecting accurate health data makes it easier to measure the impact of corrective actions and continually tweak the process; this is how personal health metrics become analytics.
But how to collect and organize this data? Thats the main idea behind new health platforms found in Apple Watch, Fitbit, Jawbone, Android Wear, and other trendy wearables; my company, Interapt, is developing apps for these platforms. The belief is that tracking our bodys daily movement and physical activity helps us set more realistic fitness goals and adjust our daily routine to avoid sedentary lifestyles that shorten our life expectancy.
But measuring this data is one thing; for the data to be useful and impact our health, we have to act on it. And unfortunately, as ridiculous as it might sound, the simple reward of being healthier isnt enough for most of us to consider making changes to our lifestyle; we need incentives beyond feeling better and living longer.
Thats why perhaps the most important step to Louisville becoming a healthier community is for companies to reward its citizens for maintaining a healthier lifestyle, at least one as measured by the technology we use and wear. Essentially were turning personal health data into a new kind of credit score, call it a Wellness Score.
Much like credit scores, individuals will control the privacy of their Wellness Score, depending on whether we deem the incentives worth disclosing it on a case-by-case basis; much like today, where we can refuse to allow banks or individuals to look up our credit score, but as a consequence we might get higher loan rates, or we might not be allowed to lease property. Similarly, our Wellness Score could affect our health insurance rates, or even ultimately affect whether were hired for a position at an elite company.
July 4th, 2015 in
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In the fiscal year that ended 31 March, credit growth of India’s banking industry dropped to an 18-month low. The microfinance industry, in contrast, saw its loan book grow at the fastest pace and for a few it more than doubled. The scenario has not changed for banks in the past few months; year-on-year credit growth is now 9.8%. There are hardly any takers for loans from the corporate sector; the saving grace has been mortgages and retail loans.
At aroundRs.12 trillion, the mortgage market in India is a little less than 10% of the size of its economy even as the overall bank credit market is about 50% of the nation’s gross domestic product or GDP. Indeed, the mortgage market has been growing at a fairly robust pace over the past decade but it is still small compared with other nations. For instance, the Chinese mortgage market is about 20% of its GDP; for the UK and the US, it has been 88% and 81%, respectively, while in Denmark, it is more than the GDP.
It is difficult to pinpoint the exact market share of various entities in the mortgage market as both banks and housing finance companies jostle for space there. Among banks,State Bank of IndiaandICICI Bank Ltdhave the largest market shares, followed byAxis Bank Ltd. India’s oldest mortgage firmHousing Development Finance Corp. Ltd(HDFC) has the largest market share among home finance companies. Other relatively large mortgage financiers areLIC Housing Finance Ltd,Dewan Housing Finance LtdandIndiabulls Housing Finance Ltd.
Home loans are the safest bet for Indian bankers, as they are backed by securities and the amount of loan is always less than the value of the property. In case of a default, the property can always be seized and sold to recover the money. Also, most banks and non-banks finance the first home purchase of salaried individuals; income verification for such home buyers is not difficult and affordability can be judged transparently. Typically, around 40% of monthly income is used to service the loan in the form of equated monthly instalments. However, within the home loan market, the increasing popularity of loans against property or LAP is causing some discomfort. A few analysts say that LAP is a ticking time bomb.
LAP is the equivalent of home-equity loans internationally.Santanu Chakrabarti, an analyst withICICI Securities Ltdwho tracks non-banking financial companies, says LAP is a growth-driving profitable product for most new companies in the mortgage market. Even the large and established players, according to him, have significant presence in this market, but the non-bank entities are the major players. For a few of them, LAP could be more than 50% of their total mortgage book. Those non-banks who want the refinance facility of National Housing Bank (NHB), the home loan regulator, the exposure to LAP cannot cross 25% of the loan book. Some of the non-banks have stopped taking NHB refinance as they want more LAP in their books.
To be sure, LAP is a secured loan. It takes a residential or a commercial property as collateral; self-employed individuals and professionals are LAP customers. Such loans are typically taken to support business in the form of expansion, diversification, consolidation or even meeting working capital needs. It is also taken for personal use like weddings, education, medical exigencies, repayment of previous loans and debt consolidation. According to rating agency Crisil Ltd, about 75% LAP customers are self-employed individuals doing business, 15% are salaried and the rest self-employed professionals.
The average LAP ticket size is higher than a home loan; its tenure is also shorter than the home loan, with the average being four to five years against 10-11 years for home loans. Typically, the interest rate for LAP is always 4-5 percentage points higher than the home loan rate. Similarly, the loan-instalment-to-income ratio is also higher for LAP–at least 50% against 40% for home loans. Finally, the loan-to-value ratio for LAP is lower–around 60% against 80% for home loans. In other words, a home buyer can get aRs.80 lakh loan to buy aRs.1 crore property but for LAP, aRs.1 crore worth of property will fetch a loan ofRs.60 lakh.
There is nothing illegal about LAP but most credit appraisers are wary of its inherent credit risk. There are reasons for that. A customer willing to borrow at a high rate is most likely to be facing financial stress. Lenders also do not have any control over the end use of the money. LAP is essentially a cash out of primary residential and/or commercial property, often the core asset of a small and medium entrepreneur (SME)–a segment which is under huge stress primarily due to cash flow issues in business following the delay in payments across the supply chain in both manufacturing and servicing sectors.
A few banks and housing finance companies have already been hit by frauds in the LAP segment. One such company, based in Maharashtra, has sacked its entire top brass which was overseeing the LAP business.
The biggest risk factor is the fact that some of the LAP customers have been using it as a loan in perpetuity. Riding on the rise in housing prices, they are taking fresh LAP to pay off the existing lender. It’s simple arithmetic. For aRs.1 crore property, a borrower can raiseRs.60 lakh today and a few months down the line, when the property price goes up toRs.1.1 crore, they can raiseRs.66 lakh and pay off the first lender. The cycle can go on till the property prices crash. If indeed that happens, most loans will be close to the actual value of the property and in case of defaults, exit will not be easy for the lenders.
Tamal Bandyopadhyay, consulting editor atMint, is adviser to Bandhan Financial Services Pvt. Ltd, India’s newest bank in the making.He is also the author ofSahara: The Untold StoryandA Bank for the Buck.Email your comments to email@example.com.
The writer’s Twitter handle is@tamalbandyo
This blog first appeared in www.livemint.com
July 2nd, 2015 in
Personal Finance Topics
| tags: home finance
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Are you or someone you know struggling with credit card debt? Have questions you want to ask a credit counselor?
Times business and consumer reporter Vicki Ikeogu would like to know. Ikeogu is working on a story about credit card debt and is seeking reader submitted questions to ask two experts.
Questions should be not be tied to a specific situation. Examples can range from what to ask a credit counselor to how to help children struggling with debt. First and last names will be used in print.
If you would be interested in helping out, please contact Vicki Ikeogu by email firstname.lastname@example.org or call her at 259-3662.
July 1st, 2015 in
Personal Finance Topics
| tags: credit card debt
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When you need to borrow money to cover an expense, you might consider either a credit card or personal loan. Deciding which is better depends on your situation. Credit cards are ideal for short-term balances that you can pay off each month, while personal loans are for medium- or long-term debt.
Compare best personal loans
Difference between credit cards, personal loans
Credit cards are one of the most expensive forms of financing, with interest rates in the double digits. On your credit card’s payment due date, you’re obligated to make a minimum monthly payment — generally around 1% to 3% of the balance — but you’ll need to pay it off in full to avoid accruing interest. Interest is calculated based on the average daily balance during the month, not the ending balance.
Credit card debt is revolving debt. You have a limit on how much debt you can have on the card; the amount of credit you have available from month to month depends on how much you spend and how much you repay.
As a general rule, credit cards are unsecured, which means they aren’t backed by collateral. Personal loans may be either secured by an asset or unsecured, but unsecured loans come with higher interest rates.
Personal loans, whether secured or unsecured, often have lower interest rates than credit cards, especially if you have good credit. Unlike with credit cards, a personal loan gives you a lump sum, and you make equal payments over a specified time period until the loan is paid off — usually two to five years. Your loan payments will include principal and interest.
When you should use a credit card
Because of their high interest rates, credit cards are best reserved for short-term financing. Use a credit card only for purchases that you’ll be able to pay off by the due date, like daily expenses or monthly bills.
You could use cash or your debit card for these same purchases, but credit cards have benefits outside of free short-term financing. Many cards come with cash or travel rewards — typically ranging from 1% to 2% of what you spend — as well as certain perks you won’t get with cash or debit.
All that said, there’s an exception to the rule of paying off your balance in full each month. If you get a 0% interest credit card, you can take your time paying off purchases. Still, you should have a plan to pay off the entire balance before the introductory 0% APR period ends, because you could get hit with interest on your remaining balance, as well as retroactive interest on your initial balance.
When you should use a personal loan
Personal loans are best used for longer-term financing. This could include things like expenses for adopting a child, starting a small business or consolidating credit card debt. Since personal loans typically have better interest rates than credit cards, they’re a better option if you aren’t able to pay off your balance in full monthly.
If you’re considering using a personal loan to consolidate credit card debt, first assess how long it will take you to pay off the debt. Consolidating credit card debt with a personal loan typically makes sense only if it will take you more than six months to pay off. Otherwise, the amount of interest you’ll save will be negligible at best for the amount of effort to obtain a loan.
Compare top personal loan lenders
The bottom line
Credit cards and personal loans differ in type of debt, interest rate and payment amount. If you’re planning on paying off your balance in full each month, a credit card is the best choice. If you need two to five years (or less) to pay off your balance, a personal loan is likely the way to go.
See here for additional information on personal loans.
Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @Erin_Lindsay17.
Image via iStock.
June 30th, 2015 in
Personal Finance Topics
| tags: credit card debt
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FARMINGTON HILLS, Mich., June 11, 2015 /PRNewswire-USNewswire/ — If youre struggling with credit card debt, knowing where to turn for help can be confusing. The key to success is making an informed decision.
GreenPath Debt Solutions, a national, non-profit financial counseling and education organization, recently developed an infographic to help consumers understand positives and negatives of three of the most popular debt and least understood solutions: debt settlement, credit counseling / debt management, and bankruptcy. You can view and download the infographic at www.greenpath.org/infographics.
There are so many commercials, blogs, ads and news stories promoting services to eliminate credit card debt, said Jane McNamara, GreenPath president amp; CEO. It can be overwhelming and hard to understand which option is best for you.
People often choose options based on advertisements or advice from family or friends. For example, you may have heard good things about credit counseling, but you have friends that filed for bankruptcy. And those debt relief commercials sound so tempting.
There is no perfect solution to get out of debt — each option has pros and cons. Its easy to get into debt, but much harder to get out, said McNamara. There are no silver bullets.
The GreenPath infographic highlights three paths:
Debt settlement – Attorneys or debt settlement companies may be able to settle debts for less than the full balance. This may be a viable option, if you have a lot of debt that has already been written off by your creditors as uncollectible. It also could be worth considering if you have access to a lump sum to make a large settlement payment. However, if your debt is current or less than 180 days delinquent, withholding debt payments to save for a settlement can seriously damage your credit and can potentially result in legal action. Fees are typically based on the amount settled, and consumers are usually required to pay taxes on the amount forgiven.
Credit counseling / debt management – Counseling is typically offered by a non-profit organization free of charge. Consumers usually receive a budget and action plan, and the counselor may recommend a debt management program. A debt management program is a 3-5 year repayment program that pays debts in full, often with significantly lower interest and creditor fees. Not everyone qualifies, and there is a monthly cost for the program that typically ranges from $10 to $75. Success rates vary by counseling organization, but as many as 50 percent of plan participants fail to stick to their budget. Credit typically improves as debts are paid on time each month.
Bankruptcy – There are two forms for individuals. Chapter 7 bankruptcy wipes away unsecured debts and prevents creditors from suing you. Many people dont qualify for Chapter 7, and it seriously damages your credit. USA Today quoted the average Chapter 7 cost at $1,500. Some opt to file for Chapter 13 bankruptcy, which is a 3-5 year repayment program that also prevents creditors from taking legal action. The cost is about double the price of Chapter 7, but payments can be spread out over the life of the repayment plan. Over time, credit damage may be mitigated as debts are paid on time each month. Unfortunately, most Chapter 13 repayment programs fail before any debts are actually discharged.
There are no easy answers to debt problems, so its important that you research your options carefully. Feel free to view and download the infographic at www.greenpath.org/infographics.
About GreenPath, Inc.
GreenPath is a nationwide, non-profit financial counseling and education organization that assists consumers with credit card debt, housing debt, student loan debt and bankruptcy concerns. Their customized services and attainable solutions have been helping people achieve their financial goals since 1961. For more information, visit www.greenpath.org.
Photo – http://photos.prnewswire.com/prnh/20150611/222484-INFO
Source: PrNewsWire All
Learn Your Options For Eliminating Credit Card Debt
June 29th, 2015 in
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| tags: credit card debt
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When Siddiq Poh, 24, conducts financial literacy classes for the Institute of Technical Education (ITE) students, he shares his personal story of getting in – and out of – credit card debt.
Nobody likes to be told how to save and what to do with their money. People always feel they have control over their money, and always feel they can earn more, says the Singapore Management University (SMU) accountancy major, who is entering his fourth year of studies.
Mr Poh, the immediate past president of the Citi-SMU Financial Literacy Club, found himself in a debt hole several thousand dollars deep when he was 21. He did everything he could to get out of it, including giving tuition and spending weekends delivering McDonalds meals on his motorbike.
Today, he is not only debt-free but making a decent amount of passive income through an e-commerce business set up with his brother.
Growing up, he says, he mixed with people who liked to spend, even when his parents were thrifty. They spend, I also spend, he said. In secondary school, I would eat at McDonalds, watch movies, and as I got older Id start buying shoes and shirts.
By the time he was in national service, Mr Poh was drawing S$1,200 working in the police force, including allowances. He had two off-days a week. I would spend on clothes, outings, movies, cafe-hopping. I would go to cafes and spend on food, with each meal costing S$25 to S$30, he recalls.
When he turned 19, his sister gave him a supplementary credit card. That card became his downfall, he says. Every month, he would spend a few hundred dollars on the card. At the end of the month, he would pay only the minimum sum of S$50-80 or a little beyond that. What was unpaid – around S$100-200 each month – began to compound at 2 per cent a month. I would forget about what was unpaid in the previous months because I didnt check the bank statements often – I was in self-denial – and would often estimate the amount that I use per month, he recalls.
He also bought a S$9,000 motorbike on a hire-purchase scheme, paying S$270 every month. For his 21st birthday, he threw a big bash for 40 of his friends that cost around S$2,000: S$700 for the venue, S$600 for a photo booth, and S$700 for food and drinks.
By then, in January 2012, the amount he owed on his card had snowballed to S$3,600.
His older sister, who had not looked at the previous statements, then found out how much he owed. She started scolding me. I asked her if she was willing to pay, she wasnt, and she took my credit card away. I felt quite bad because I couldnt control myself. She was nice to give me a supplementary card and I misused it. My parents told me to settle it myself. Thats why I decided to get rid of the debt, he says.
From June 2012, Mr Poh started giving math tuition. I had three students, two secondary school students and one polytechnic student. I charged S$35 an hour for secondary school and S$40 an hour for polytechnic, and taught for two hours each student. I made about S$800 a month there, he says.
He also started doing deliveries for McDonalds. It paid S$5.60 an hour. On good days, you get good tips. You also get an extra S$2 for every delivery on Sunday. So you can get S$11.60 an hour with three deliveries an hour. I could earn S$500 a month from that, he says.
I also imposed full austerity measures on myself. Whatever income I get, I gave it to my sister to clear the debt. She was quite fierce about it, asking me wheres the money. Within a year, in my first year of university, I cleared the debt.
Mr Poh started getting interested in financial literacy in 2013, in a finance class during his second semester in school as a freshman.
A professor was teaching the class how to use a financial calculator, and asked the class to think about how much they needed every month, assuming they wanted to retire.
I thought of S$3,000 a month, a random number, that I would need for 20 years, using a 3 per cent interest rate. As it turned out, for S$3,000 a month for 20 years, you need to have over half a million dollars! Mr Poh says.
At that time, I was quite appalled . . . I had no expectations and never really thought about retirement. That really made me start thinking. So when the e-mail came about free training for trainers of financial literacy I went for it.
At the Citi-SMU Financial Literacy Club, Mr Poh conducted classes for other young people on issues such as savings, budgeting, gambling, loans, housing, as well as investing.
Last year, he had some savings of S$2,000-3,000. He wanted to invest in stocks but he felt the capital was too small. He started a business instead called Rugby amp; Co, initially selling handmade bracelets.
Me and my brother, we always like to wear accessories. So instead of buying them, I thought we might as well sell them. We started last October by selling a leather bracelet for S$29. We bought different parts and assembled it ourselves, and started an online e-commerce store, he says.
Each bracelet took five minutes to make but could be sold for a high margin. After school, at 12 midnight, I would do it before I sleep. The next morning, Ill do delivery through SingPost, he says. Within two months, the business broke even. More than 1,000 bracelets have been sold to date, and the business is bringing in S$2,000-3,000 a month.
We started moving into watches. The Internet is so powerful. We have Alibaba, talked to different manufacturers, they will send a sample, the sample is nice so we went on with it and ordered 100 pieces, he says.
The brothers tapped social media to market their products. Instagram is quite powerful. It enabled me to connect directly with customers. We now have over 8,500 followers. We sell a lot to people living in private estates, he says. I was quite surprised at the response. Initially we were just doing it for fun. But now, as graduation draws near, and a full-time job awaits me, we have to decide whether to continue. We have one more year to decide.
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This article was first published on June 22, 2015.
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June 28th, 2015 in
Personal Finance Topics
| tags: credit card debt
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