American Family Debt Is Dropping

[Penny Pincher]

Read in the newspaper today that the debt of the average American family has dropped for the first time in decade. The bad news is that this is because so many Americans are declaring bankruptcy and walking away from debts.

There has to be a better way!

[coach2wealth]

It turns out this drop was 90% write-offs and very little actual pay down. I seriously doubt Americans have learned their lesson.

[am_vanquish]

It turns out this drop was 90% write-offs and very little actual pay down. I seriously doubt Americans have learned their lesson.

Agreed. I also seriously doubt that the lenders have learned their lesson either.

[BlackDiamond]

Agreed. I also seriously doubt that the lenders have learned their lesson either.

I don't know about that. I have a friend who has always relied on credit for everything and had horrible credit. A bankrupcy, delinquencies etc. (I've seen his credit reports because I am trying to help him budget better and come up with plans for him to get out of the hole he's in).

Anyway, one of the things he was doing was applying for a loan. Then paying it off with a new loan. Then getting another loan for that loan etc. etc. When he'd get in a real jam, he'd withdraw his 401K. * shakes head *

Last week, with a credit score in the mid 600's, he was turned down for a Kay Jewelers card. He was trying to get one to rebuild his credit and better his utilization portion of his credit score. Kay cards are generally pretty easy to get. He was able to BT one of his old cards onto a Discover card however they wouldn't even approve him for a BT of the whole card, they gave him a limit of about $2000. But at least he got $1700 of the debt to a lower interest rate. It's a baby step but a start for him.

But the point is, he was never turned down for anything before. Now he seeing that he can't rely on this credit stuff forever.

Of course, he was able to get approved for a mortgage last year. So I suppose the mortgage people haven't learned. But the credit card people sure seem to have.

[disneysteve]

Last week, with a credit score in the mid 600's, he was turned down for a Kay Jewelers card. He was trying to get one to rebuild his credit

That makes absolutely no sense. As far as I know, Kay Jewelers sells not a single item that would even remotely qualify as a need. So he was going to go blow money on jewelry in an attempt to rebuild his credit? No wonder he is in so much trouble with logic like that.

[BlackDiamond]

That makes absolutely no sense. As far as I know, Kay Jewelers sells not a single item that would even remotely qualify as a need. So he was going to go blow money on jewelry in an attempt to rebuild his credit? No wonder he is in so much trouble with logic like that.

No. He was trying to get approved for an easy line of credit to improve his available credit to debt ratio in the hopes of raising his credit score so that he can approve for a low interest balance transfer. He was not planning to purchase anything there. Just apply online and open the card. It's generally considered an easy approval.

[PaydayLoner]

No. He was trying to get approved for an easy line of credit to improve his available credit to debt ratio in the hopes of raising his credit score so that he can approve for a low interest balance transfer. He was not planning to purchase anything there. Just apply online and open the card. It's generally considered an easy approval.

That's what I figured the plan was, from the sentence: "...better his utilization portion of his credit score." It really does make sense, since store cards are usually easier to get. Good to see that it was a wake-up call to make him realize he can't just expect more credit forever.

[cschin4]

I think many people are learning that stuff isn't the be all and end all of life and that stuff doesn't make them happy.

[red92s]

I think many people are learning that stuff isn't the be all and end all of life and that stuff doesn't make them happy.

Unfortunately most also have very short memories. Once unemployment is below 8% again, rampant consumerism will return as people reward themselves for making it through such a difficult patch.