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Monthly Archives: August 2018

Consumer Credit VS Capital Credit

Consumer credit on one hand, is easy to get. Fill out a few online forms and unless you have some real financial problems you’ll receive your very own, personalized, plastic credit card along with all the accompanying literature (lots of fine print) within days.

With consumer credit in hand you can buy anything from gas at the pump, to beer at the ballpark, or a college education (student loans sound familiar to anyone?). A consumer credit card company wants you to buy all kinds of things on credit (often at ridiculously high interest rates – formerly called usury), to pay later, while piling up a mountain of debt that will allow the lending institution to make you work for the rest of your days in order to pay off your debt to them.

In Contrast – Capital Credit…
On the other hand, capital credit allows you to purchase wealth producing capital assets (i.e. land, machinery, buildings, corporate stock), to pay back the loan at a reasonable rate until you own the asset outright, and are reaping the full financial benefits of owning wealth producing capital. Done right, the loan is paid back out of FUTURE EARNINGS (i.e. dividends) instead of the borrower’s own pocket.

Capital credit however, is much harder to get (try buying a house sometime) than consumer credit. Generally speaking, borrowers must be able to prove they don’t need the money (meaning they have ample collateral with which to back the loan) before the lending institution agrees to anything. The result is that most wealth producing capital assets that yield lucrative dividends to their owners are accessible ONLY to a small percentage of people – the 1{9198332639182e13dab42b9ea1f4c116af819992db0fa97f6ccd85a5ba1453c0} to 5{9198332639182e13dab42b9ea1f4c116af819992db0fa97f6ccd85a5ba1453c0} who can prove they don’t need the money.

Almost everyone else is effectively left out in the cold when it comes to accessing capital credit and owning wealth producing capital assets. This is the basic reason for the wealth gap that’s transformed America’s democracy into a 21st century American oligarchy.

Enter Kelso and Adler
Enter a gent named Louis O Kelso, who back in 1958 published a book entitled “The Capitalist Manifesto,” in which he (and co-author Mortimer Adler) suggested that every American citizen should have access to capital credit with which to purchase wealth producing capital assets at reasonable interest rates and in the process actively participate in (instead of being left out of) America’s highly productive free market economy.

Such a strategy according to Kelso and Adler, would democratize a free market economy. Such a strategy would maintain the private ownership essence of the free market while preventing the monopolistic tendencies that have historically undermined political democracy in laissez faire capitalist economies. In other words, it would save the free market from its own historical tendencies to self destruct.

By democratizing the free market (while creating lots of demand via a second “investment income” for every citizen*) and systematically reducing the malignant wealth gap, Kelso and Adler predicted an economic expansion even larger than the one that followed in the wake of Abraham Lincoln’s Homestead act of 1863 which gave every American citizen 160 acres of land (one kind of wealth producing capital asset), if they were willing to take care of it. But where land is finite, business opportunities and corporations (as well as the economic possibilities) are infinite.

Oligarchs Successfully Marginalized Kelso/Adler
The oligarchs however have successfully kept a lid on Kelso and Adler’s revolutionary ideas and to this day most of the public actually thinks there are ONLY 2 choices when it comes to economics. There is the historically right leaning, free market, laissez- faire capitalist approach of the Republicans. And there is the historically left leaning, labor union favoring approach of the Democrats.

Importance of a Credit Report

The simplest way to find out about your credit history is to order a copy online. You want a website that provides you with information from the three major credit bureaus;Experian, TransUnion and Equifax. These bureaus analyze your financial decision making; both past and present, and put that information into a report. A good website to use that provides this information is creditchecktotal.com. It only costs $1 to check and can provide you with invaluable information compiled into a credit report. Your report will not only provide your current credit score, but also your entire credit history.

A credit report acts as your credit references. A positive credit history tells potential lenders that you manage your finances well, i.e. borrow money and pay it back in a timely manner. A negative credit history tells lenders you have a difficult time managing your finances and instead are in debt, often not repaying them as agreed.

Credit reports help you by providing you with your personal financial history. This may include attempts at fraud made by others at your expense or errors made by varying lenders. The report can also provide you with information on good or bad decisions you may have made in the past. By staying up-to-date with your financial history, you can ensure you are making good choices, have the ability to detect if someone is committing identity theft and ensure there are no errors.

In addition, a credit report can explain why you were not approved for a certain loan or line of credit. Even though you had a great or excellent credit score, you still had a negative item or charge back on your credit report, so the financial lender refused to approve you.

You can also see how fast your credit score can be transformed. If you go ahead and start repairing your credit, you can watch how fast negative items can be removed and how fast you will gain points putting your score from bad or below 600 to above 700.

Pay Off Credit Card Debt Quickly

• Collect Your Information – Gather your last pay stub and all your latest credit card statements. Write down the name of the creditor, balance, interest rate, due date, and the minimum payment for each card. Then add up all the minimum payments for each account. Based on your disposable income after you pay your mortgage, utilities, and other necessities; do you have enough money left over each month to make the minimum credit card payments? Also, write down how much interest you are paying monthly and annually. This is the amount of money that is being wasted.

• Make a Plan – Once you have a basic budget that includes your income and debts, you can then decide if you want to consolidate your debt, start to reduce your debt by paying off the cards with the highest interest rates first, or start by paying off the cards with the lowest balances first. Choose a plan you can stick to, no one knows your financial situation better than you do.

• Consolidate Your Debt – Turn your revolving debt into a term loan. If you close your credit cards after consolidating them, you will no longer have the ability to add to your debt. Also, part of your payments will be reducing the principal balance of your debt, unlike minimum credit card payments that are usually just paying the interest on the outstanding balance. Therefore, you will be paying down your debt and the consolidation loan should be paid off within a certain number of years. If you are financially capable, it would benefit you to make more than the minimum payment, thereby reducing the principal balance on the debt faster. If you decide to consolidate your credit card debt, take the time to thoroughly compare your options and shop for an interest rate that is lower than your credit card interest rates. Also, set up an automatic payment arrangement for your consolidation loan. This will prevent you from falling behind in the payment and potentially facing penalties and/or a higher interest rate.

• Debt Settlement – This is the program that is an alternative to bankruptcy. When you go through your finances, if you find out that your monthly payments exceed your financial ability, you will need to seek alternative options, such as: working with a financial institution to consolidation your credit, discuss your options with a bankruptcy attorney, or talk to the credit card companies directly to reduce the principal balances owed on your debt.

• Stop Charging – Once you make your plan to pay off your debt, you will need to be committed to stop charging on your credit cards and creating new debt until your finances are under control. Your plan will not work unless you reduce your spending.

Dealing With a Debt Collector

1. Familiarize yourself with the Fair Credit Reporting Act – Google it if necessary and print out. You have rights. Yes, a debt collector has every right to collect on a debt you legitimately owe, but there are rules and restrictions – formally known as the Fair Debt Collection Practices Act (FDCPA) – that govern how they can go about their business. Under any circumstances to you have to tolerate abusive behavior. It’s not legal. The Fair Debt Collection Practices Act prohibits this kind of conduct. The Fair Debt Collection Practices Act (FDCPA) was created for the sole purpose of protecting consumers from debt collector harassment by prohibiting certain debt collector behavior. If a debt collector exhibits such behavior, be sure to document the behavior. Keep a log of all harassment. Your next move is to file a complaint with the Federal Trade Commission. You may request forms from the Federal Trade Commission, or you can write a letter yourself. Send it to 6th and Pennsylvania Ave. NW, Washington, DC 20580, or visit them online. Be sure to include in your complaint the collection agency’s name and address, the name of the original creditor, the dates and times of all communications, the names of any witnesses, and copies of any other material (written communications, tapes of conversations, your debt collector harassment log, etc.)

2. Negotiate a Settlement On Your Terms, Not Theirs – Go over your income and expenses with a fine-tooth comb, figure out what you can afford, and only agree to pay a realistic amount. Payment plans are not always necessary and usually by the time your debt reaches third party collectors, it’s at last end before being written off. If you agree to a payment plan, you will likely pay more over time. Avoid this if you can. If you do agree to a payment plan, make sure you fully understand the total amount you will pay.

3. Zombie Debts Still Exist – A Zombie debt is an old debt that just won’t die. To piggyback off of Number 2, Collection accounts get resold all the time, and it’s not uncommon for someone to get a call about a debt that’s outside the statue of limitations or no longer owed. The latter is illegal, but the former may not be: The statue of limitations applies to how long a collector has to sue you over a debt, but, in many cases, they can still try to get you to pay. Do not pay it right away. Get the collector to validate the debt before even acknowledging that it exists. People unknowingly restart the clock on old debts by paying part or even agreeing over the phone that it’s yours. The key to defend yourself against Zombie Debts is to do your due diligence. Look at your credit reports to see if the debt is latched on. Dispute the debt, with the credit bureaus. Get all details necessary to fight it. That’s how you get it off your credit report.

4. Beware of Scammers – Always get the debt collector to identify themselves with their name, company, street address, telephone number and if your state licenses debt collectors, a professional license number,” according to the Consumer Financial Protection Bureau (CFPB), which has more tips for spotting a debt-collection scam on its website. By law, you are entitled to verification.

5. Do Not Fall For The “Just Pay Something” Trap – Once you pay anything, especially giving payment over the phone. You are back to restarting the clock as debt gets bumped right up on your credit report based on how least or more often you pay. Always ask the collector to send you something in writing. Debt collectors must investigate a debt so long as you file a dispute in writing within 30 days of their initial contact – and they’re to cease contact until they verify (again in writing) that you owe the amount in question.