The biggest mistakes poor people make - Smart Spending Blog - MSN

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Liz Pulliam Weston described money mistakes that poor people make, such as paying too much for rent or a bmortgage/b, confusing needs with wants, making only minimum monthly payments, failing to budget, having no emergency savings, b.../b

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Is your credit score worth $50,000 to you? In other words, would you reduce your credit score from 700 to 500, if you could save fifty grand? For those that have already reached the breaking point with debt this is an easy yes, but many others have never even considered the possibility. They blindly make their monthly payments on a credit card balance that has already grown out of control.
Every unsecured debt can be settled, regardless of what the creditor tells you during collection attempts. This means that it's realistic to expect to pay between 20% - 50% of the final balance to settle with each creditor. This amounts to a huge savings when you consider the time and cost of making minimum payments to each creditor. The downside is that you will usually need to be more than 90 days delinquent on payments for the creditors to consider accepting settlement offers. If you have a solid credit score now the settlement process will seriously damage that score in the first year.

Now to the question at hand, is it worth ruining your credit to get out of debt for less than the full balance? It depends on many factors. First you need to have a realistic estimate on how much you will save. The best way to do this is to budget for about 40% of your total debt balance. You will find that some will settle for less than the standard 40% and others may be slightly higher. Once you have this number you will be able to estimate what you should be setting aside for settlement every month instead of paying the creditors minimums. The savings is yours every month.

Another important aspect to consider is any purchases you plan to make in the near future that require the use of credit. Your credit report will be damaged while your accounts go delinquent and obtaining loans for automobiles or homes will not be possible until all your debts are settled to a zero balance. Keep in mind that having a large amount of debt, even if your current on payments, will very likely still get you denied for those same loans. Even with a 600+ credit score its very difficult to get new loans or credit cards for any purpose in today's economy. The core issue is that today's banks have an extremely limited amount of cash to lend right now, and the only cash they are lending is to extremely solid candidates with perfect credit histories and funds to back up any losses.

It doesn't look like this climate will change anytime soon and for many consumers, their 600+ credit score will do them no good over the next few years. This creates a perfect time to focus on getting the balance to zero instead of just treading water. You may find yourself in a much better situation 3 years from now when the economy is recovering and the banks start lending again. You won't have a perfect credit score yet but you will have no debt at all.

[hardikvagadiya@gmail.com]

i totally agreed b coz people live on rent and waste their money.
if they contact any broker and by paying small installment they can own home.

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