Route 3

Route 3 - Making Informed Decisions and Steering Clear of Warning Signs

By now you've selected a destination, identified your Assistance Crew, and learned about the programs and products that may make your journey less bumpy. This section of the website will provide information and tips for steering clear of the pitfalls, potholes, and roadblocks so you can make informed decisions as you navigate the course. 

Accessing the “Super Highway”

Where to Find Internet Access

At this point on your journey toward disaster recovery, you have probably noticed that most of the information useful to you is accessed primarily through the internet. It is critical that you stay connected to the Web. If you don’t have a computer and Web access at home, you can still get online! Internet access, WiFi and Hotspots are widely available to the public in several places. Try these out:

  • Public libraries very often offer free computer time. To confirm that your closest library or branch has Internet access, call the library.
  • Your children, grandchildren, nieces or nephews, or other family members or friends with computer skills can give you lessons or help you look things up.
  • Some schools have computer labs that the public can use outside of school hours. Call your local school to find out more. High school students can make great tutors!
  • If you’re a senior, senior service centers sometimes offer computer access or can help connect you to someone who does.
  • Many restaurants, shops, and commercial developments (i.e., Starbucks, Barnes & Noble, Whole Foods, McDonalds, shopping malls, etc) offer free WiFi. If you want to learn how to use computers, look for classes offered through your local adult education center. You can also check with your local library to see if it offers workshops to build your Web skills.

Financial Fitness and the Road to Housing Recovery

As you follow your road map toward your “housing recovery” destination, you’ll likely find that there are specific steps you can take to ensure a smooth journey. Among these are getting your financial house in order, which includes developing a family budget, dealing with credit issues, and developing a savings plan to give you a cushion when disaster strikes. All of these actions are part of the workout required to become “financially fit” so you can be prepared when disaster strikes and take the most direct route to recovery after the storm has passed.

Tune Up with Financial Tips

Natural or manmade disasters — like floods, fires, earthquakes, tornadoes, or hurricanes — can strike without warning and can happen to anyone. Even minor disasters can damage or destroy your property and belongings. Disasters can also make it difficult for you to conduct essential financial transactions.

In addition to planning for your family’s safety and basic needs, such as shelter, food and water, you should be ready to deal with financial challenges, such as how to payfor supplies or temporary housing, if necessary. Being prepared to function financially will give you less to worry about if an unfortunate event happens to you.

If you had only a few moments to evacuate your home — and were away for several days or even weeks — would you have access to cash, banking services, and the personal identification you need to conduct your day-to- day financial life?

The Following Are Some Tips to Help You Be Prepared If a Disaster Strikes:

Sign up for direct deposit — Having your paycheck and other payments transmitted directly into your account will give you better access to those funds by check or ATM. It means you won’t have to deliver the deposit to the bank or rely on mail service, which could be delayed. Ask your employer if this is an option for your paychecks.

Arrange for automatic bill payments — This service enables you to make scheduled payments from your bank account — such as for your phone bill, insurance premiums and loan payments — and avoid late charges or service interruptions. With automatic bill pay, you don’t have to worry about essential bills being paid. In an emergency that can be a real bonus. You generally authorize each company to whom you owe regular payments to make a monthly deduction from your account.

Consider signing up for Internet banking services — This also makes it possible to conduct your banking business without writing checks. Many banks and credit unions offer this as a low-cost or free service.

Review your insurance coverage — Make sure you have enough insurance to cover the cost to replace or repair your home, car and other valuable property. Once you have taken steps to make sure you’re financially prepared for disasters, take time to learn ways to ensure that you stay on course.

Developing a Spending Plan

A budget or spending plan will help you manage your money and keep your family on the safe and most direct path to housing recovery. Managing your personal finances wisely is a critical step in achievingfinancial security. Money management is about choice — choosing how to spend and save your money. Knowing what your income and expenses are every month will enable you to maintain a realistic view of your money and bills so you don’t veer off course.

To create your spending plan, track all of your expenses for one month. Make a budget worksheet by writing down all of your expenses. Be sure to include periodic expenses like car insurance. Once you have filled in all of your budget expenses, compare your expenses with your income.

So Why Is Developing a Spending Plan Such a Big Deal?

  • Because it helps you take control of your financial situation.
  • Because it reduces the anxiety of not knowing whether you have enough money to pay your bills when they are due.
  • Because it gives you a sense of control over money, rather than letting money have control over you.
  • Because it enables you to build an emergency fund to cover you when the clouds start gathering.
  • Because it helps you build assets which will help improve the quality of life for you and your family.

Alert: Becoming Money Smart Interested in becoming Money Smart? If so, you’ll want to check out the educational course called Money Smart provided by Federal Deposit Insurance Corporation (FDIC).

Money Smart will help you enhance your money skills and create positive relationships with financial service companies. The Money Smart course provides information about key topics, including:

  • Banking basics
  • Credit
  • Budgeting
  • Savings
  • Credit cards
  • Loans
  • Homeownership

Money Smart is available as a face-toface training course or as a tool on the Web. To find out if there is a face-toface Money Smart course available in your community, contact your FDIC Community Affairs Specialist by logging onto: http://www.fdic.gov/consumers/ consumer/moneysmart/cao.html. If you prefer to review the Money Smart course online, simply log onto http://www.fdic.gov/consumers/ consumer/moneysmart/index.html. The online course allows you to review all of the topics or you can just focus on the topics that interest you the most.

Priorities — Which Path Will You Choose?

When creating a spending plan, it’s important to consider your needs and wants. Needs are items needed for basic survival, such as food, water, shelter, and clothing. Wants are things desired but not necessary for basic survival. Sometimes budgeting requires tough decisions so you can eliminate spending on wants to free up money for needs. Remember, everyone has different priorities. Budgeting forces you to determine your family’s financial goals and gives you the framework for accomplishing them.

What Payments Should I Make First If I Don’t Have Enough Money to Pay For All My Bills

Ford or Ferrari If you have to make some tough decisions about wants and needs, consider the following questions. Why do you want it? Is it something you really need? Will it help you reach your goal? Could you spend your money in a different way? Is it something you can live without? The answers to these questions might help you figure out what is most important so you can direct your money to your priorities.

Caution:

  • First, pay off your necessary household expenses, such as rent or mortgage, utilities, and food. You need to pay your rent or mortgage to ensure you don’t get evicted or have your property foreclosed. Think about the health and safety of your family when making these types of decisions.
  • Many utilities, such as telephone, electric, and gas companies, have programs to lower your bill if you qualify. If you think you need assistance, call the customer service number shown on your utility bill.

What Should I Do If I Can Pay Off My Monthly Household Expenses, But Am Having Trouble Paying Off My Loans?

  • Pay off the loan with the highest interest rate first to save on interest payments.
  • Talk to your creditor (the bank holding the loan, the credit card company, or another company to whom you owe money). Your creditor may be willing to reduce your payments or change the terms to accommodate your situation. Some creditors might offer extensions (smaller payments over a longer period of time). Some creditors might accept partial payments.
  • Get a debt consolidation loan, but be cautious of this option. If loan fees and interest rates are too high, it may not be the best option for you.
  • Get professional advice. Check out the Resource Guide in Route 4 for information on how to contact a local housing counseling agency that can help you deal with your financial problems. The most reputable organizations charge little or nothing for their services.
  • Be cautious of companies that promise to fix your credit problems right away. Credit repair can be a long process that might take several years. Just remember, “If it sounds too good to be true — it probably is.”

Caution: Wants vs. Needs

If you have to make some tough decisions about wants and needs, consider the following questions.

  • Why do you want it?
  • Is it something you really need?
  • Will it help you reach your goal?
  • Could you spend your money in a different way?
  • The answers to these questions might help you figure out what is most important so you can direct your money to your priorities. 

Credit – A Tool for Bridging the Financial Gap to Housing Recovery

If you have developed a spending plan that includes an emergency fund for dealing with unforeseen expenses, you’re ready to tackle the next step to becoming a well-informed traveler on the road to housing recovery. Maintaining a solid credit history and managing credit responsibly is essential if you need to obtain a loan in order to bridge a financial gap and stay the course to recovery.

Some people don’t like credit and prefer to pay cash for everything; other people abuse credit and borrow more than they can ever repay. Credit is important. A good credit rating makes it easier for you to borrow money because it shows lenders that you have handled past borrowing responsibly. A poor credit rating tells lenders that you either could not or did not repay money that you borrowed in the past, or that you did not repay it on time. This information makes it more difficult for you to convince a lender to risk lending you money.

Having good credit goes beyond making it easy for you to borrow money. Good credit allows you to rent or buy things you want or need. Many employers will check your credit before offering you a job. Loan rates are typically determined based on credit history, so people with good to excellent credit get the lowest interest rates and save money. People with past or current credit problems tend to pay higher rates and fees.

In the sections that follow, we’ll discuss how to get your credit status on track so you can use credit as a powerful tool as you travel along the road to housing recovery: Exploring your credit report Understanding your credit report Identifying any efforts on your credit report Rebuilding you credit record The truth about credit repair How credit scores can affect your road to housing recovery:

  • Exploring your credit report
  • Understanding your credit report
  • Identifying any efforts on your credit report
  • Rebuilding you credit record
  • The truth about credit repair
  • How credit scores can affect your road to housing recovery

Alert: Money Saving Tips

  • Debt - Can you eliminate any debts by paying them off in full? Can you refinance any of your debts at a lower interest rate to reduce your monthly payments?
  • Entertainment - Can you rent movies or attend matinees instead of going to evening showings of current movies? Consider visiting the library for movies, magazines and other reading materials.
  • Food - Can you reduce the number of meals eaten at restaurants?
  • Housing- Can you save money by moving to a less expensive apartment? Do you have extra space available in you house to rent out?
  • Transportation - Can you organize a car pool or use public transportation? Can you refinance your car loan for a better rate and a lower monthly payment?

Exploring Your Credit Report

Do you wonder whether you have good credit? You can find out by reviewing your credit report. Your credit report is an electronic record of your credit activities. These activities range from borrowing to buy a car or a home to applying for a loan or credit card. That’s right — every time you apply for a credit card or other loan; an inquiry is documented on your credit report.

A law was passed recently that requires each of the three major credit reporting agencies (Experian, Equifax, and TransUnion) to provide you with a free copy of your credit report, at your request, once a year.

Order Your Free Credit Report!

You can order your free credit report by logging onto the official website (www. annualcreditreport.com), calling a toll-free number 877-322-8228, or submitting your request in writing. To request your report in writing, follow the instructions on the website listed above and complete the Annual Credit Report Request Form. Don’t be fooled by websites with similar names that want to charge you for your credit report! 

Understanding Your Credit Report

There are four major types of information included in your credit report:

1. Identifying information — This includes your name, phone number, address, Social Security number and date of birth. It may also include a list of your current and previous employers and your previous addresses.

2. Credit history — Your credit history is a summary of your credit transactions. This is the core of the credit report. It includes your payment history, including any late payments to banks, credit card companies, retailers, and other lenders. Other lenders include mortgage and auto-finance companies. These items remain on your credit report for seven years.

3. Public records — If you owe a creditor or tax agency a debt and do not pay it, expect to have a public lien against you. For example, a person who owes property taxes but does not pay them is likely to have a lien filed against him or her by the local property tax board. Public records include any filings of personal bankruptcy or court judgments against you. Bankruptcies remain on your credit report for seven to 10 years.

4. Inquiries — An inquiry is an item on your credit report that shows that a business has previously requested a copy of your report. There are two types of inquiries: hard and soft. A hard inquiry remains on your credit report, while a soft inquiry does not. Applying frequently for credit will run up the number of hard inquiries on your credit report. Some prospective lenders may interpret that as a sign of your desperation for credit.

A credit report also shows any current credit you have, including amounts owed, amounts available (such as on a credit card or other form of revolving credit), and payment amounts on installment loans.

What Type of Information Is Not on My Credit Report?

The following items are not on your credit report:

Deposit information or income — Deposits that you have in banks, credit unions, or other financial institutions are assets, not debt, so they do not appear on your credit report.

Credit score — Your credit score is generated based in part on the contents of your credit report. However, the score is not a part of the credit report. The credit bureaus will sell your credit score for a low price, however. We will discuss credit scores a little later.

Race, gender, ethnicity or national origin — The Equal Credit Opportunity Act bans the use of this information in order to avoid any discrimination in lending practices.

Business debts — If a business debt is guaranteed by you personally, it may show up on your personal credit report. If it is only guaranteed by a company, it won’t. Sample Credit Report More Helpful Information in Your Credit Report

Identify Any Errors on Your Credit Report

You should review your credit report from all three major credit bureaus at least once each year. Check for errors or omissions in any and all of the three reports. Differences may exist between the information they show and what you know about your credit history. If you find an error or something left out, contact the credit bureau directly. You can use the form letter that follows to alert the credit bureaus of errors on your credit report and ask that they be corrected.

Sample Dispute Letter

Date

Your Name, Your Address

Your City, State, Zip Code

Email address

Complaint Department

Name of Credit Reporting Agency Address

City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. I’ve [highlighted or circled] the items I dispute on the attached copy of the report I received.

This item [identify item or items disputed by name of source, such as name of creditor or tax court, and identify type of item, such as credit account, judgment, etc.] is inaccurate or incomplete because [describe what is inaccurate or incomplete and why]. I am requesting that the item be deleted [or request another specific change] to correct the information.

Enclosed are copies of [use this sentence if applicable and describe any enclosed documentation, such as payment records or court documents] supporting my position. Please reinvestigate [this matter or these matters] and [delete or correct] the disputed item[s] as soon as possible.

Sincerely,

Your name

Enclosures: [List what you are enclosing]