Question for Post BK people

[kr43002]

As I am nearing my discharge, and I start my rebuild I really do fear one big thing, falling into the same trap.

I was terrible with managing my finances. If I had a dollar I would spend it. If I had a dollar available on credit, I would spend it. Every single month my UTIL was always 90-100%, which is why I don't want to go anywhere near an unsecured card. I had cards that I had no need for, but I got them because, OOH another line of credit, Ill go buy something. At the time it didn't really matter I made enough to pay all my credit in full, but like I said if I had a dollar I would spend the dollar. But that doesn't really change the fact that there will be preditory lendors who would LOVE to have that 6 years of unescapable debt.

I will be the first to admit, I can't be trusted with credit. Unfortunatley I live in the US, where credit is almost mandatory. 

So in brief, how have you kept your use of credit in line? Is there any tips that can lead to responsible credit use? I am almost wanting to setup a monthly subscription to my next card and then cut it up and throw it away. 

[anniea4001]

I am no sure anyone can help you with that other than yourself.

Self control, discipline and accountability are the only things that will keep you out of trouble.

Maybe some financial education and budgeting will help you. 

I have been budgeting since I started working and I think that is something that has kept me in check.

I pay all obligations first, then set aside some savings and last give myself an allowance for whatever I want whether that is a pair of shoes or home stuff.

That is one thing I leaned from one of my bosses when I started working at a young age. 

If you have trouble controlling your credit card usage, don't carry your cards with you, leave them home.

When you feel tempted to buy something outside your budget, ask yourself if you really need it and if you can afford it. 

I went a long while without buying anything that was not necessary until I had 6 months of expenses saved up for emergencies. Now, I am more flexible with things, but still within my budget. 

[DebtStinks]

@kr43002 it seems like you have 2 options:

1) Don't get credit card(s) ever again. No need to worry if you go this route as you can still obtain things like a mortgage WITHOUT credit post-BK using your utility payments, cell phone payments, car insurance payments, etc as your "credit history." An FHA loan can be obtained just 2 years post-BK if you don't get ANY credit after filing and all your accounts are closed. Otherwise, you'd need to meet "normal" post-BK establishment guidelines as far as your credit rebuild goes.

or 

2) Get 1 credit card only and make it a secured credit card with a $100-200 limit or something VERY small where the temptation is not there to charge a large amount. Tell the creditor you do NOT want your card to go unsecured.

Best of luck in your decision!

[Anonymous]

Honestly, you sound like the perfect candidate for a Dave Ramsey plan. He has a program that bucks the credit trend and will keep you out of debt for life of you follow it. I won't go in to great detail here on it, you can just Google Dave Ramsey and it will come up. Life is possible without credit cards if you feel you can't be trusted with them. Don't feel bad, lots of people can't. 

I have turned into more of an Asksebby kind of guy since my bankruptcy and I pay off all my credit cards every month and don't carry a balance. This requires a lot of disipline though. At that point credit cards become more of an active discount on all items using the cash back rewards I get. Just never EVER, pay interest. 

[Horseshoez]

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@kr43002 wrote:

I will be the first to admit, I can't be trusted with credit. Unfortunatley I live in the US, where credit is almost mandatory. 

---

To that comment I'll say, "Yeah, kinda-sorta-maybe, but no."  Why?  Consider the following:

• Prior to filing for Chapter 13 in 2015 I'd gone over 18 months without a credit card (my old cards had been closed and I didn't apply for any new ones).
• Once in the Chapter 13 I wasn't allowed to apply for a credit card, and even if I had, it would have been denied.  Said another way, I went nearly 7 years without a single credit card.
• So, what did I lose out on and what were my challenges during that period of time:
  • Rewards!  Many credit cards pay at least 1% (some much more) in cash back rewards; during those 7 years I probably missed out on at least $1,000 in rewards.
  • I was on a road trip and my car ate its alternator; the only shop anywhere near by with one in stock wanted $700 for it; more than I had in my checking account at the time.  That took some creative financing to get the car paid for.
  • I was on a business trip to San Francisco and opted to take the following weekend to visit family, I was unable to rent a car with my debit card, and needed to spend several hours on a bus to get to them.

Long story short, you can do pretty much anything you need to do (except rent a car at a major airport) with a debit card.

[DoogieBall]

I got a secured card about 18 months post BK that was used primarily as my EZ-Pass payment.  Used it as a supplimentary form of id when I would write checks. (Remember those? Lol.)

Used debit card and cash for everything including online purchases and made sure I always had enough in the bank to pay the entire CL on the credit card.  As @Horseshoez said, I also lost out on rewards but I was more concerned about the habit building aspect of responsibility dealing with CCs.  It wasn't until 5 years later that I got my 2nd credit card.

The only takeaway I could possibly give is looking toward future goals.  Lower interest rates on car or personal loans was one thing I was shooting for.

[kr43002]

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@anniea4001 wrote:

I am no sure anyone can help you with that other than yourself.

Self control, discipline and accountability are the only things that will keep you out of trouble.

Maybe some financial education and budgeting will help you. 

I have been budgeting since I started working and I think that is something that has kept me in check.

I pay all obligations first, then set aside some savings and last give myself an allowance for whatever I want whether that is a pair of shoes or home stuff.

That is one thing I leaned from one of my bosses when I started working at a young age. 

If you have trouble controlling your credit card usage, don't carry your cards with you, leave them home.

When you feel tempted to buy something outside your budget, ask yourself if you really need it and if you can afford it. 

I went a long while without buying anything that was not necessary until I had 6 months of expenses saved up for emergencies. Now, I am more flexible with things, but still within my budget. 

---

I have a budget, I do try and follow it as close to the letter, but then I get to looking at the money in my savings account and splurge. I understand that I am the only one who can keep myself out of trouble, but is there any tricks you have to keeping yourself accountable? Any way you can fight the itch

[kr43002]

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@DebtStinks wrote:

@kr43002 it seems like you have 2 options:

1) Don't get credit card(s) ever again. No need to worry if you go this route as you can still obtain things like a mortgage WITHOUT credit post-BK using your utility payments, cell phone payments, car insurance payments, etc as your "credit history." An FHA loan can be obtained just 2 years post-BK if you don't get ANY credit after filing and all your accounts are closed. Otherwise, you'd need to meet "normal" post-BK establishment guidelines as far as your credit rebuild goes.

or 

2) Get 1 credit card only and make it a secured credit card with a $100-200 limit or something VERY small where the temptation is not there to charge a large amount. Tell the creditor you do NOT want your card to go unsecured.

Best of luck in your decision!

---

I have already embarked on path 2 by getting a self loan. Although Im going to be honest, I feel like that is the wisest thing ive done. It is forcing me to save. But at the end of the day, it still isn't enough to keep me in line. Hopefully manually underwriting will work when I do come time to buy a home. Although im going to stay out of the housing market until after the bubble inevitably pops.

[kr43002]

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@Anonymous wrote:

Honestly, you sound like the perfect candidate for a Dave Ramsey plan. He has a program that bucks the credit trend and will keep you out of debt for life of you follow it. I won't go in to great detail here on it, you can just Google Dave Ramsey and it will come up. Life is possible without credit cards if you feel you can't be trusted with them. Don't feel bad, lots of people can't. 

I have turned into more of an Asksebby kind of guy since my bankruptcy and I pay off all my credit cards every month and don't carry a balance. This requires a lot of disipline though. At that point credit cards become more of an active discount on all items using the cash back rewards I get. Just never EVER, pay interest. 

---

Oh trust me, I have watched him. I wish I could have the discipline of saving like he states. I kinda am on the baby steps if you think about it. although I have kinda forgon half the plan. I got rid of my "flashy" car, and now I have a cheep beater and I have gotten rid of debt. I also have a budet, but the thing is, I don't have the control to follow the savings part of the budget.

[anniea4001]

All the things mentioned above are true.

And a lot of it it's just personal choice.

I personally think it is good to have a credit card with a decent limit for emergencies because even if you have an emergency fund, you might not have access to the funds right away if you keep the money on a separate acccount. I have 3 different savings accounts because you never know so it may take a day or to fo funds to transfer over.

Also in my personal experience, some places may not always accept a debit card (hotels, car rentals, etc) or they may put a big hold on your funds until the rental is over.

And unless you have a hefty amount of cash handy at all times, building credit it's always a good idea.

Let's say you car dies suddenly and you need a new one. I do not know a lot of people who can buy a car outright cash. So if financing is needed, you can save a ton on interest. I still remember my first car loan, the interest was attrocious but I needed a car badly.

Prior to that I had bought a beater in cash but the constant repairs were draining my bank acct anyway.  Add to that being stranded in the street lat at night coming back from work. So.... I still needed a car.

With that being said, if you really feel you cannot be trusted with credit, then you may be better off not getting any at all.

Credit does not have to be an enemy but I strongly believe a lot of people lack better financial education and planning. Myself included. I wish I had learned about credit ealier in life.

I have heard of people going as far as freezing their credit cards (literally) in a block of ice to keep them from using them. Thou that is a bit extreme, what works for one person might not work for another one at all. So you need to develop a plan that works for you.