This week Gail announces 20 winners of a book on improving credit and reducing debt. The remaining winners will be announced in next week's column.

Dear Friends,

I am overwhelmed by the hundreds of you who wrote in response to the two columns that appeared early this year and dealt with getting control over your debt. A main source for those columns was the book “Deal with Your Debt,” by Liz Pulliam-Westin.

I read every single email. Most were heart-felt pleas for advice on reducing debt and improving a battered credit rating. Many of you got into trouble because of unexpected medical bills. Others blamed a spouse (usually now an [ex]-spouse) who couldn’t control his/her spending. For a number of you, credit problems started in college and compounded at graduation when payments on your student loans kicked in. There were individuals whose dreams of owning her/his own business turned into financial nightmares.

For more on Debt, visit our Debt Management page.

The predominant emotion I sensed in your emails was one of despair. In letter after letter you described how hopeless and trapped you feel by the tremendous debt burden you have amassed. You used words like “struggle” and “stress.” Several individuals expressed frustration that, despite making an earnest attempt to reduce what they owe, they can’t seem to make any progress. Several of you have gone through bankruptcy—some more than once.

Clearly, the debt explosion in our society cuts all ages, affecting people ranging from their twenties to well into their retirement years—civilians and military personnel; men and women; all races and ethnic backgrounds.


I am grateful to the publisher for increasing to 40 the number of books we are able to give away. Half of you will receive “Deal with Your Debt,” and the remaining 20 will receive “Your Credit Score: How to Fix, Improve, and Protect the Three-Digit Number That Shapes Your Financial Future,” also by Pulliam-Westin. Please be patient; the books are being sent directly from the publisher.


Under federal law, every American is now entitled to a free copy of her/his credit report once every 12 months [from each of the three credit reporting companies]. Rather than order all three at the same time, consider spacing out your requests so that they are four months apart. The advantage is if there is a mistake or you’re the victim of identity theft, you might be able to catch it sooner.


There are dozens of websites that sound as if they are offering you a free credit report, but to be sure you won’t get sucked into paying for additional services, I recommend you use this link:
http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm. It will take you to the federal government’s website that explains how to obtain your credit report and includes a link to the absolutely free way to get this. Remember: you are under no obligation to buy anything from these providers!


Please note that this does not entitle you to a free copy of your credit “score.” That is something you have to pay for. Each of the credit agencies has its own formula for arriving at your credit rating. [Click here to read more about a recent agreement reached by the three major agencies to simplify the scoring system.] If you’re dying to know your FICO score, Pulliam-Westin recommends you visit www.myfico.com, where—for $45—you can order all three of your credit reports as well as learn the rating you have been assigned by each credit bureau.

If you feel as if you are drowning in debt, do yourself a favor and read the letter below. Rob is clearly someone who has “been there”—and then some. Despite two bankruptcies he is now debt-free and close to buying his own home. There is hope. You can do it.

Keep the faith,
Gail

Hi Gail,

I am a recovering alcoholic/addict who has somehow managed to put together 7 years of sobriety. I am currently 40 years old, and have just begun the task of rebuilding 20 years of destruction. (I started using at 13.) I filed for my first bankruptcy in my early 20s and my second around 1992.

To say that I was irresponsible with my finances would be an understatement, and for the last 7 years I have felt as if there were no hope of ever getting out of the hole that I dug for myself financially.


Last month the owners of the home I’ve been renting said they intend to sell the property and gave me the opportunity to purchase it. They told me about a local program (Housing Partnerships, Inc.) which will help first time buyers purchase a home. However, the program requires good credit and I figured that based on my past I didn’t have that.

I submitted the application for the program anyway and waited for the inevitable.
When the call came I was caught completely off guard: a lot of the negative things that dragged my credit rating down were gone!

The lady at the program seems to think that I could actually get the loan. I ordered my free annual credit report and was amazed more at what I didn't see than what I saw: for the first time in years I feel a tinge of hope at being able to rebuild my financial life, and to realize the dream of becoming a home owner. Any advice would be greatly appreciated.

Sincerely,
-Rob


Dear Rob,
The whole point of bankruptcy is to give individuals who have mismanaged their finances a chance to start over. That’s not to suggest that the process is easy. It takes courage, determination, and [time] to re-build your credit history. But as you found, eventually the black marks on your record do come off.


It’s great to hear that you have learned from your mistakes and are on your way toward a more secure future. Congratulations on beating your addiction and best of luck in your new home!

-Gail

Gail,

I am an identical twin. My brother and I share the same middle initial, same last name, same birthday, same mother’s maiden name, etc.. and… our Social Security numbers are identical except for one digit. My twin has had a messy divorce, child support, judgments, and a terrible credit history. I, on the other hand, have a very good credit history.

About a year ago I was contacted by a collection agency regarding a long overdue credit card amount. The account wasn’t mine and upon checking my credit history I found that a number of things relating to my brother show up on my credit history. I started the process of getting my account cleaned up but I got discouraged and stopped. However, I know that this needs to be addressed.

-Dan

Dear Dan,

Yikes! You’re right: you need to be especially vigilant about monitoring what’s in your credit file and correcting any errors caused when creditors mistakenly mixed you up with your brother. You should definitely take advantage of the ability to get a free copy of your credit report every 12 months.

Be sure to check all three credit-reporting agencies, as I can personally tell you that their records are not identical. One can indicate you have a clean history, while another includes negative remarks.

-Gail

Hi Gail,

At present, there are essentially 3 families living in one house: my wife and I with our 8-year-old daughter; my other daughter and her fiancé; and my son and his fiancé.

My wife and I went through bankruptcy about 9 years ago after I was out of work for an extended period of time. Since then, we've done pretty well learning to live off of just what we make. We rarely use credit cards but because the cost of living is so high in Northern, VA, we are one of those with a zero down interest-only loan.

My daughter and her fiancé are living with us so they can clear away all their debt and save some money for the down payment on a home. Of course this has added to our burden.
The person I'm most worried about is my 25-year old son who, with his finance, has managed to
rack up over $40-thousand in debt. He needs to clear up his debt in order to finish college and get on with his life.

Sincerely,
-Bob

Dear Bob,

I get that you love your kids and want to help them. But by continuing to bail them out financially, you are allowing them to avoid facing the consequences of their actions. I have two words of advice: tough love.

Set a deadline for your kids to move out—like three months—[and stick to it]. They’re way too old to still have mom and dad supporting them.

Do you and your wife expect to move in with your kids when you’re old and can’t support yourselves because you were unable to save for retirement? Stop making excuses for your adult children!

-Gail

Hi Gail,

My 72-year-old wife and I find ourselves severely threatened financially. We've had some reverses and expenses which have literally wiped us out. We couldn't raise $10,000 to save our lives.
In fact, we're running up credit card debt--something we've never done before without the CASH to pay it off in full sitting in the bank. And selling off our assets. First to go is our very small RV of 1996/97 vintage which I expect will sell for less than we own on it.

Thank you very much,
Cal
-Calvin

Dear Gail-
I am 67-years-old, still working, and living in an apartment because, based on my past credit history, I will never be able to purchase a home or condo. I was a stay-at-home spouse for 25 years and then went through a divorce. After that I obtained a retail job at minimum pay and supported myself the best I could. but the end result was credit card bills past due and charged off, etc.

I earn $48,000 annually plus $13,000 in Social Security but because of my poor credit history I am unable to get a home loan. I have been re-paying a bad car loan on a car I surrendered to the dealer. That will be paid off in 2 months. I am also paying the loan on my existing car. That has a balance of $8,000. I have finally worked myself up the ladder professionally to a decent wage but I don't have a clue on how to start rebuilding my credit. Any help would be greatly appreciated.
-Marge

Dear Gail,
My wife & I are now 62/64 years old & are wanting to buy a house, our last house. For 36 of the 42 years we have been married we have owned at least one home (for many years we owned two) and enjoyed a very, very good credit. Then in 1998 a bad business venture broke us personally. We wound up with lots of credit card debt & finally were forced to file Chapter 7 bankruptcy.

We were able to keep our home, which had no equity. A year later we sold it had to start over at ages 55/57. We both now have stable jobs with the state of Georgia & our health is pretty good. We have rented for the last 6 years. We have no credit accounts, no debt other than a car we bought last year, as we have learned a hard lesson. We had to accept an 11% interest rate for the car loan, as we knew we were not in a position to negotiate.

We have paid our bills (car payment, rent, utilities) on time. We have not applied for credit anywhere in the last 7 years since the bankruptcy other than the car dealer where we bought our car. We both plan to work for as long as possible unless health prevents. We feel we are not the only senior citizens with problems similar to this. We very much want a home of our own so our child & grandchild can come see us at our own place.

Thanks for your help,
Mack & Joyce

Dear Cal, Marge, Mack, and Joyce,
It probably doesn’t make you feel any better, but you are not alone. The group that has posted the biggest percentage increase in the amount of debt they are carrying consists of Americans over age 65.


Unexpected medical bills are a common trigger. There are government programs that can help you find relief. Don’t be ashamed to reach out to services available to assist senior citizens facing financial distress.
-Gail

Gail,
I am a disabled Veteran who has lost control of my debt because of mistakes and medical bills. I have been working for about 3 years to get things under control and have made little progress. I am sure my FICO Score is in the trash and I need to work toward improving things for the future to be brighter.

-Brian

Hi, Gail-
I have had serious health problems, which at 42 have caused me to be on long-term
disability, Social Security, and Medicare. This has negatively affected my credit score and I need to get a handle on this while dealing with my 7th spinal neurosurgery! Any help would be greatly appreciated!

Regards,
-Kenneth

Dear Gail,
Throughout my adult life (I am 56) I have had impeccable credit. However, two years ago, I fell in the bathroom one morning, caught my foot on the toilet, and had a crushing, spiral fracture of my right tibia and fibula. I was in serious danger of losing my foot and spent 6 months with limited mobility. I couldn’t work. Frankly, I got depressed and didn’t attend to business well. Now I’m paying for it.
My wife sat down last night and worked on our debt reduction plan. But we are pretty clueless as to how to clean up our credit scores. The books you offer could help a lot.
-Jim

Gail-
Because of a lack of instruction and, most importantly, interest in financial matters early on, I am now reaping the consequences of staggering debt at the worst possible time in my life.
My wife has metastatic breast cancer that has spread to her liver and bone. Although quite healthy at present, that may not be the case in the future. She may need more time and attention than my creditors would allow under present circumstances.
I would like to reduce my obligations so I don't have to work 12 hours a day, every day, to make ends meet. I would like to have the monetary wisdom to reduce my debt enough so I can be home when I am needed.
I have managed, with great effort, to raise my FICO score from 593 to 705 over the past 18 months. On paper my income seems to be sufficient to not only meet minimal obligations, but to make a significant dent in my debt load.
Unfortunately, it doesn't. That is a source of major frustration for me.
I want to be there for my wife when/if her condition worsens without incurring the wrath of my creditors. Also, I want my four children to have a greater understanding of money so that they don't fall into the same trap once they reach adulthood.

Many thanks,
-Ian R.

Gail:
About six years ago, my wife sustained a work injury that forced her to
leave her nursing job. Losing the second income was devastating. We sold our
house but barely avoided having the bank foreclose on our mortgage. We couldn't make our
car payments and had to give both cars back. We have downsized as much as possible, but the cost of raising 3 kids plus taking care of 2 grandkids doesn't leave much money at the end of the month.
We still have old credit card debts that we have not been able to pay off. In addition, we now also have significant medical bills incurred when our youngest daughter was born
three years ago.
We know that we need some help in getting our debt paid off and to start on the long road to restoring our credit. I know that we cannot ignore our problems but must deal with them head-on. We can't afford to pay a professional advisor for help. This is why we would most appreciate
receiving one of the books that you are offering.
My mailing address is:
-Ian S.

Dear Gail,
My credit card debit is getting out of hand. My husband’s illnesses and inability to work has made the use of credit cards a very bad habit. Now I am really feeling the pressure of the new higher credit card payments. I'm just working to pay the bills. Life shouldn’t be this hard. I just want to become smarter about my finances.
-Mary

Gail-
I have accumulated a significant amount of credit card debt by starting an Internet business that no longer seems worth the effort and I am contemplating using my 401k to pay it off. I know
this is not a good thing to do, but I don't feel I have much choice. I would like to try to make due without using my 401k, but I'm not sure what else to do. I ant to make a more informed decision so that I can permanently solve my credit card debt habit and preserve my retirement for when I'll need it.
Thanks,
-Tracy

Hi, Gail-
I am a teacher and trying to buy my first house, which is really a town home because I cannot afford a house. I have not been good with my money and I am trying to build my credit score. Beside teacher salary being poor, I tend to have champagne taste on a beer budget. I've been doing very good now that I am focused on purchasing this home. I have debt that was due to having a condition that caused seizures and forced me to be off work for a few months in 1999. I wrote, called and did everything I could to explain to my credit card companies, but they didn't care. The late payments & fees for exceeding my limits exceeded the amounts I originally owed. I'm so tired of paying rent that is wasted and living in an apartment. I just want my own place.
Thank you,
-Laura

Ms. Buckner,
The reason I would like to receive information on cleaning up my debt/credit is quite simple: I am to be married soon.

I am 40 years old and this will be my first marriage. When I met my fiancé, my credit was okay- not great but okay. Then my finance had an unexpected and severe illness causing her to be out of work for a year. I got behind on some payments and went through my savings. This, of course, leads to playing 'catch up.' It seems we are always dancing....'one step forward, two steps back.'

We are making progress to build up our savings again and are working toward better credit, but I feel there must be more we can do. We would like to purchase a house this year and anything you can suggest that will help us reach that goal would be greatly appreciated.
Thank you for the opportunity and your consideration.
-Jeff


Gail,
I have struggled w/ my credit for years, building it up, only to have something happen to make it crash. This time it was my divorce. My ex has not paid what he was assigned during the divorce proceedings, nor has he paid his child support in a timely manner. Foolishly, I am told, I did not opt for any alimony. But at the time, I had a great job and thought I would be OK. However, because both my daughters were young, I had to give up my job due to the traveling it entailed.
I finally had to break down and file for bankruptcy before the new laws took effect, since my car that was not paid off was dying and I couldn't maintain it and the payments. Now I've lost my "new" job. Go figure!
-Christine

Dear Gail,
I recently went through divorce and am trying to clean up my financial situation. For the sake of stability for my kids, I agreed to assume all of the debt we had in exchange for being able to keep the house and the commercial property my ex-wife and I owned.
To complicate things, around the same time as the divorce, I took a position with a start-up company and closed my own business. Now my new employer is going through hard times because one of the executives attempted to walk away with everything. I have gone un-paid for three months. I believe the company will get through this, but in the meantime it has been difficult. Thankfully, my family has helped me out quite a bit, but there are limits.
I have cut all my spending to the bone. More than anything I want to make sure I don't have to sell my home so that the 50% of the time my kids are with me they can be in a place that feels safe, stable, familiar and normal. I need to finally get my debt paid off so that it isn't an emotional weight.
Thank you,
-Doug

Gail,
I am recently divorced from a husband who supposedly kept track of everything financially for us. However, as I'm finding out, he was not financially responsible at all. Throw in the fact that I have taken a 25% pay cut at my job of 19 yrs. I'm getting desperate.

I am deep in credit card debt and need to get out!! I want to be a financially responsible person.
Please help me help myself.
-Kathryn

Dear Gail,
I am a credit IDIOT! I recently made the mistake of using one of the “free” online credit services, which gave me a credit score of 530. But they said that was just the score from one agency and wanted me to pay to see the other scores.
I am a service member currently serving overseas in the US Air Force. I have a toddler and a husband who is worse at money matters than I am. I am looking to get out of the service in 2007, at which point I want to take advantage of a VA Loan to buy my first house. Obviously, with a score like this we will never get a decent interest rate!
I feel like I am drowning financially. I have one credit card and, after an erratic start, I recently established on-time payments. Student loan debt is all I have left. I need to know how to improve my credit record and boost my score for the sake of my family.

Please help! Thanks for your time!
-Kimberly

Ms. Buckner,
I am a financial counselor that works for the Navy. I teach classes on personal finance to sailors and their families. I am starting one on credit reports and scores and the book would we a big help.

-Felipe

For more on Debt, visit our Debt Management page.

If you have a question for Gail Buckner and the Your $ Matters column, send them to: yourmoneymatters@gmail.com, along with your name and phone number.