When is the last time you checked your credit report? The information it contains may matter more than ever in this digital age, and 60 Minutes correspondent Steve Kroft looked into an alarming number of mistakes on the reports that can affect a consumer's entire financial life. Find out how to make credit report disputes to the three major agencies.
Borrow from your 401(k) Do you participate in a 401(k) qualified retirement plan at work? Most 401(k) plans have a feature that lets you borrow up to 50% of the account's value, or $50,000, whichever is smaller. Interest rates are usually a point or two above prime, which makes them cheaper than that found on credit cards. Thus, 401(k) plan loans may be a Foolish option to debt repayment. Not only is the interest typically much lower than that on credit cards for bad credit, the best part is you pay it to yourself. That's right, every dime in interest paid on a 401(k) loan goes directly into the borrower's 401(k) account, not the lender's.
But there are drawbacks. First, the loan and interest will be repaid with after-tax dollars, but the interest will be taxed again when you withdraw money from the 401(k) years later. Additionally, you must repay this loan within five years. If you leave your employment prior to full repayment, the outstanding balance becomes due and payable immediately. If it's not repaid, that amount will be treated as a distribution to you. You'll be taxed on that amount at ordinary rates. And if you're under the age of 59 and one-half years, you will also be assessed an additional 10% excise tax as a penalty for an early withdrawal of retirement funds. Accordingly, ensure any 401(k) loan can be repaid before you leave your job.
Make a few sacrifices, and you will find the extra dollars needed to increase your debt repayments dramatically. Those increased payments will save you hundreds, if not thousands, in interest payments. Plus, you will get out of the hole you've dug for yourself much more quickly. Is it fun? No. But it sure beats living a hand-to-mouth existence, fearing bills each month.
9As a last resort, file bankruptcy What if you decide you can't pay down your debt using any of the methods listed above? What should you do? The absolute last resort is bankruptcy. Within Fooldom, we firmly believe everyone has a moral obligation to repay their debts to the utmost of their ability. There are times, though, when repayment may be impossible. In those cases, bankruptcy may be the only available course of action. Nevertheless, be aware of the significant drawbacks.
"If you believe that there is a mistake, you can go to them and they have an obligation to do a reasonable investigation. They're not doing a reasonable investigation," DeWine said. "They're not doing an investigation at all."
Credit reporting agencies are being accused of stonewalling customers who are desperate to correct errors. DeWine said the problem isn't making mistakes, but a refusal to fix them. 60 Minutes: Credit Report Customer Service About eight million consumers file disputes every year, visiting the credit reporting websites to begin the process, if they can first navigate sales pitches for financial products offered by the companies. Steve Kroft called a customer service number and got a call center in India, where he was not given much help after a 15-minute phone call to a toll-free number. What about that post office box number?
While Chapter 7 relieves you of the responsibility of repaying most creditors, you may have to surrender much of your property to help satisfy the debt. However, different states have different laws that grant you exemptions on certain types of property, such as a certain amount of equity in your home, a low-value vehicle, small amounts of jewelry and other personal property, and tools you use in your trade or business. These exemptions usually aren't huge, but they do mean you won't have to start over with absolutely nothing. Chapter 13, sometimes called the "wage-earner plan," is different. You keep your property but surrender control of your finances to the bankruptcy court. The court approves a repayment plan based on your financial resources that provides for repayment of all or part of your debt over a three-to-five-year period. During that time, your creditors are not allowed to harass you for repayment. You also incur no interest charges on the indebtedness during the repayment period. When all conditions of the court-approved plan have been fulfilled, you emerge debt-free from the bankruptcy.
Borrow from your 401(k) Do you participate in a 401(k) qualified retirement plan at work? Most 401(k) plans have a feature that lets you borrow up to 50% of the account's value, or $50,000, whichever is smaller. Interest rates are usually a point or two above prime, which makes them cheaper than that found on credit cards. Thus, 401(k) plan loans may be a Foolish option to debt repayment. Not only is the interest typically much lower than that on credit cards for bad credit, the best part is you pay it to yourself. That's right, every dime in interest paid on a 401(k) loan goes directly into the borrower's 401(k) account, not the lender's.
But there are drawbacks. First, the loan and interest will be repaid with after-tax dollars, but the interest will be taxed again when you withdraw money from the 401(k) years later. Additionally, you must repay this loan within five years. If you leave your employment prior to full repayment, the outstanding balance becomes due and payable immediately. If it's not repaid, that amount will be treated as a distribution to you. You'll be taxed on that amount at ordinary rates. And if you're under the age of 59 and one-half years, you will also be assessed an additional 10% excise tax as a penalty for an early withdrawal of retirement funds. Accordingly, ensure any 401(k) loan can be repaid before you leave your job.
Make a few sacrifices, and you will find the extra dollars needed to increase your debt repayments dramatically. Those increased payments will save you hundreds, if not thousands, in interest payments. Plus, you will get out of the hole you've dug for yourself much more quickly. Is it fun? No. But it sure beats living a hand-to-mouth existence, fearing bills each month.
9As a last resort, file bankruptcy What if you decide you can't pay down your debt using any of the methods listed above? What should you do? The absolute last resort is bankruptcy. Within Fooldom, we firmly believe everyone has a moral obligation to repay their debts to the utmost of their ability. There are times, though, when repayment may be impossible. In those cases, bankruptcy may be the only available course of action. Nevertheless, be aware of the significant drawbacks.
"If you believe that there is a mistake, you can go to them and they have an obligation to do a reasonable investigation. They're not doing a reasonable investigation," DeWine said. "They're not doing an investigation at all."
Credit reporting agencies are being accused of stonewalling customers who are desperate to correct errors. DeWine said the problem isn't making mistakes, but a refusal to fix them. 60 Minutes: Credit Report Customer Service About eight million consumers file disputes every year, visiting the credit reporting websites to begin the process, if they can first navigate sales pitches for financial products offered by the companies. Steve Kroft called a customer service number and got a call center in India, where he was not given much help after a 15-minute phone call to a toll-free number. What about that post office box number?
While Chapter 7 relieves you of the responsibility of repaying most creditors, you may have to surrender much of your property to help satisfy the debt. However, different states have different laws that grant you exemptions on certain types of property, such as a certain amount of equity in your home, a low-value vehicle, small amounts of jewelry and other personal property, and tools you use in your trade or business. These exemptions usually aren't huge, but they do mean you won't have to start over with absolutely nothing. Chapter 13, sometimes called the "wage-earner plan," is different. You keep your property but surrender control of your finances to the bankruptcy court. The court approves a repayment plan based on your financial resources that provides for repayment of all or part of your debt over a three-to-five-year period. During that time, your creditors are not allowed to harass you for repayment. You also incur no interest charges on the indebtedness during the repayment period. When all conditions of the court-approved plan have been fulfilled, you emerge debt-free from the bankruptcy.
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