Oprah Debt Diet Show, Part II

[Chicago526]

And that was exactly the situation for decades until banking was deregulated. Read "The Two-Income Family Trap" and you'll get a pretty good history of when and how this happened and what resulted.

I just read that book, very enlightening!

Of course, her habits may actually be a response to what she sees on the job. "I won't ever let that happen to me" kind of attitude. If she is surrounded by poverty and deprivation all day, she may feel she needs to go home to wealth and plenty and stuff.

I could see that, I could even understand it a bit, just not to the tune of $170,000!!!!

BTW, I thought I remember something about how that included their mortgage. Can any confirm if the debt listed includes their mortgage? Because if it does, there aren't nearly as bad off as it would seem.

 

[dvcgirl]

I just read that book, very enlightening!



I could see that, I could even understand it a bit, just not to the tune of $170,000!!!!

BTW, I thought I remember something about how that included their mortgage. Can any confirm if the debt listed includes their mortgage? Because if it does, there aren't nearly as bad off as it would seem.

No, there's no way that 170K number included the mortgage. They stated that they've only been in the house for a year or so...and it's a 300K house. Do they strike you as the kind of people who have about 200K+ to put down? Unless they got a fat inheritence, or hit the lottery, I can't imagine that they did that. They strike me more as the "interest only" loan type.....

The second couple did have a number given that included the mortgage, and it was 210K.

 

[Chicago526]

No, there's no way that 170K number included the mortgage. They stated that they've only been in the house for a year or so...and it's a 300K house. Do they strike you as the kind of people who have about 200K+ to put down? Unless they got a fat inheritence, or hit the lottery, I can't imagine that they did that. They strike me more as the "interest only" loan type.....

The second couple did have a number given that included the mortgage, and it was 210K.

Hmmm, interesting if it doesn't include the mortgage, usually when financial advisors tell you to add up your debt, they tell you to include the mortgage (like the second couple did). I searched Oprah.com and it didn't say what the $170,000 included. Maybe it included the two cars they returned? If each car was $35,000, that's $70,000 right there.

 

[MyGoofy26]

I agree. Even after folks file bankruptcy, usually within a few months they start getting credit card offers again. The system is seriously flawed thanks to the deregulation of the banking industry.

Yep. I hang out on creditboards a lot and there are a lot of people who are coming off of BK and a lot of posts there about who will approve post-BK and there are quite a number of lenders ready to offer (at very high rates). Which it's good, for those that have truly turned things around and learned from their mistake, but I also read a statistic that most people who file due to poor spending habits will file twice because they haven't quite figured out how to change. It's just a matter of knowing who those lenders are and someone post-BK or with extremely low credit scores can get SOMEONE to back them with plastic.

 

[MyGoofy26]

And when the credit card companies lend them money and they don't pay, the company writes it off as a bad debt. The result: you and I pay!

This should be illegal. I'd like to see much, much more stringent banking rules. I think it'd lead to an increase in personal responsibility and a general lowering of prices for everyone.

I agree - but instead of just holding the people responsible (which they should, don't get me wrong) there need to be rules for the CC companies - there are too many that (as in my previous post) will offer credit to just about anyone, regardless of their history. If they're offering credit lines to someone with a frighteningly low FICO, a long list of maxed out accounts, and recent history of chargeoffs and collections they don't deserve to write it off when it all goes bad!

This is completely unrelated to the topic of Oprah's show, but on topic a far as the "you and I pay" comment. Like I mentioned, I spend a lot of time at CreditBoards and there is this "scam" running from junk debt buyers. I'm not sure of all the legal details (some of the members have found parts of the tax code that are being violated, I don't know those off the top of my head) since I haven't read all of the info posted since it didn't pertain to me. . . but it is interesting. There are collection agencies that are buying up old debt (past statute of limitations) or uncollectable debt and then reporting it to the IRS as a loss. They're sending 1099's for forgiveness of debt for the entire amount of the original debt plus all their "fees" tacked on.

So basically, an original creditor sells this debt for pennies (and if really old fractions of pennies) on the dollar to the CA and then taking a loss of the remaining amount on their taxes (being payed by the taxpayers essentially) So the CA turns around and 1099's the debtor for the full amount which means they too are taking a loss for the FULL amount of the debt plus fees, NOT the amount they paid. So they can buy a $5000 debt for $150 or less, and then when tax time rolls around they can write off the entire thing as a loss for something that cost the company $150? Basically we taxpayers are paying twice for someone's bad debt because of this scam.

 

[dizcrazy]

Well, that is just insane! There are so many holes in our current tax system! Sometimes I feel that only the upper lower and middle classes are the ones paying taxes. A notion that was supported by my uncle, a multi-millionaire, who told me last weekend that when you have the bucks, you can spend the bucks to keep your taxes down.

I did feel somewhat vindicated when I watched Jean Chatzsky sort thru the Bradleys' bills FOR HOURS. For years, I have looked at people with the fancy cars, gorgeous houses (I do love the Bradleys' house!) or taking the $$$ Grand Floridian concierge vacations and wondered what I was doing wrong? Both DH and I work and make a good living, and yet . . . nice enough house, used cars, moderate resort vacations.

Too many people in this country are living WAY over their means an things will get tougher for them as interest rates climb.

 

[MyGoofy26]

Well, that is just insane! There are so many holes in our current tax system! Sometimes I feel that only the upper lower and middle classes are the ones paying taxes.

Isn't it crazy?! It's one of those things that's so unbelievable that I've gotten sucked in, curious as to how it turns out since a LOT of people (at least those who realize they're getting scammed) have been turning this into their congressmen, state attorney general, BBB, etc.

What really turns your stomach is that most of the time this company is turning a profit on these accounts and STILL collecting the loss. Using my previous example, if they bought that $5000 debt for $150 and make a deal wth the debtor to accept $500, they walk away with a $350 profit AND get to write off $4500. That's what has happened to a lot of the people on creditboards.

 

[nowellsl]

These families have a golden opportunity to get help from some experts in their fields! To cheat and lie to someone who's trying to help you is crazy! Don't they realize they are only hurting themselves? If these families don't get with the plan quick I think Oprah should pick some new families that are really ready to change!

 

[MAGICinMYHEART]

The following quote is from Oprah's Website speaking of FICO Scores, Glinda states that 723 is median. I was surprised by this, I thought 723 would be considered a rather high score So what would you think a good score would be?

Does everyone here know their FICO Score?

Step One: Calculate debt and get your credit score
Glinda helps the couple look up Mark's credit score, a three-digit number that lenders use to determine credit risk. Marnie and Mark are disappointed to find out that Mark's score is 540. The median score is 723. "That means there's a lot of work for us to do," Glinda says.

 

[disneysteve]

The following quote is from Oprah's Website speaking of FICO Scores, Glinda states that 723 is median. I was surprised by this, I thought 723 would be considered a rather high score

I wasn't surprised that theirs was so low. Myfico.com does report 723 as the median. Most people have good credit. Remember, being in debt doesn't equal a low score as long as you are keeping up with the payments and aren't over-extended. So what is a high score? Over 760 is the top tier. Personally, ours are over 800.

 

[Toby'sFriend]

723 is a pretty good score, it isn't the highest tier, but it is good.
If you've ever had a statistics class, remember that a Median score isn't the same as an average score. The "average" credit score in the Nation tends to run around 680 I think.

Intersting enough - if you go to moneycentral on the internet, they have a map of credit scores by state. It is quite striking to see how uniform the geographic areas are in their scores --- southern states are much lower than Midwest states, etc.

I went to Oprah's website and read over the section on the Bradley Family yesterday. They spend $100 eating out and only use disposable plates and utensils because "Lisa doesn't like to cook or do dishes."

I'm sorry, this family is just

 

[disneysteve]

The "average" credit score in the Nation tends to run around 680 I think.

Moneycentral reports an average of 678.

 

[nowellsl]

My DD21 has a score of 720. She only has 2 CC - doesn't carry a balance and her history is only about 1 year old. I don't think it's hard to maintain a good score as long as you pay on time and keep your utilization low. The negatives (60/90 day late payments, chargeoffs etc.) are what bring your score way down. My score is over 800 and the only negative on my record is that I don't have enough different kinds of credit - car loan, mortgage etc. I think the biggest credit score booster is to always pay on time!

 

[MAGICinMYHEART]

Intersting enough - if you go to moneycentral on the internet, they have a map of credit scores by state. It is quite striking to see how uniform the geographic areas are in their scores --- southern states are much lower than Midwest states, etc.

Loved the facts that are on the site:

Average Debt for Score Less than 660: $6,661.00

Average Debt for Score Greater than 720: $15,015.00

Average Number of Open Credit Cards for Score Less than 660: 1.20

Average Number of Open Credit Cards for Score Greater than 720: 4.90

I guess having a higher score sometimes means they give you better chance of being in more DEBT.

 

[MyGoofy26]

Age is also huge as far as score. Someone can have a spotless report but won't hit 800 or higher because of age. . . Most that I've read is that you need 20+ years of positive credit history.

Age is one of the things holding me down. My oldest tradeline is 9 years, but my average age (because I maxed out, panicked, paid off, then cancelled my CCs before I knew better) is only 3 years. I just pulled a report last night and that was one of the main things holding my score down. I had to laugh though that one of my negatives was only having about $1500 available credit (the description of why basically lumping me into a group of people with significantly higher credit limits, just maxed out except for $1500 ), but turn around and one of my big positives (my utilization) is that my average is that I owe $30 on each account.

 

[jonestavern]

I have heard Suzie Orman & others say that you can be 'penalized' for carrying too little debt--I should restate that to say paying off your cc as soon as billed.
remember, cc companies are looking to make $$ off of us & that is best done if we carry balances over from month to month, yet pay those monthly bits in a timely fashion-does anyone know if that means all cc companies?
I feel a vent coming on:It really irks me, insurance comapnies & banks..
there, feeling a little better
I have to say I am addicted to this Debt Diet series!
DH is dumbfounded at the hair dressing bill & the indulgence of the other family's children


Jean

 

[mickeyfan2]

Loved the facts that are on the site:

Average Debt for Score Less than 660: $6,661.00

Average Debt for Score Greater than 720: $15,015.00

Average Number of Open Credit Cards for Score Less than 660: 1.20

Average Number of Open Credit Cards for Score Greater than 720: 4.90

I guess having a higher score sometimes means they give you better chance of being in more DEBT.

Interesting!!!

 

[nowellsl]

Age is also huge as far as score. Someone can have a spotless report but won't hit 800 or higher because of age. . . Most that I've read is that you need 20+ years of positive credit history.

That probably does have a big impact - especially if it's a long history with no late payments. My oldest account is 30 years old (got a cc in high school) never late.

 

[disneysteve]

Average Debt for Score Less than 660: $6,661.00
Average Debt for Score Greater than 720: $15,015.00

Average Number of Open Credit Cards for Score Less than 660: 1.20
Average Number of Open Credit Cards for Score Greater than 720: 4.90

I guess having a higher score sometimes means they give you better chance of being in more DEBT

These facts are deceiving. Remember that when you pull a credit report, it is a snapshot of what is happening at that moment. It doesn't reflect if someone pays their balance in full each month. So they may not actually be in debt. Our total credit card charges last year were nearly 40K, but we pay our bills in full every month, so we aren't in debt, but depending on when in the month you pulled our reports, it could certainly look like we were.

 

[MyGoofy26]

I have heard Suzie Orman & others say that you can be 'penalized' for carrying too little debt--I should restate that to say paying off your cc as soon as billed.Jean

For the CCs, yes - but FICO doesn't really know either way if you're paying off in full before the CC reports to the CRAs. There comes a point where too much available credit is seen as a bad thing because lenders may see a potential risk that you *could* get seriously in debt. I think the only way to "combat" this, is to not PIF before the reporting date every time so that your reports show a positive payment history. If you're consistently PIF before the CC updates the info to the CRA it'll look like you never charge a penny on the accounts. New lenders (even old lenders doing an account review) want to see that you're capable of handling that much available credit.