Soon to be debt-free and then that score will start going down again….. but that’s OK with me. Who needs credit when they live debt-free?

I wish I could recall how I learned about this movie, but I heard it was a must-see indie film. Since my interest is in finance, and my family is following the “Total Money Makeover” plan to get out of debt and live life without it, I decided to take a look.

This independent documentary about the credit business knocked my socks off. It was amazing. I found it through the library, but it’s also available for purchase or via Netflix or Amazon video on Demand.

The film hit home in many ways–about how credit cards prey on people (in ways I’d never imagined) and about how people fall victim to various credit ploys. I’m not quite in the “all credit is evil” camp, because I choose to live without it, but certainly this painted some shocking pictures–including of one credit card company that was shredding checks upon receipt and then billing customers interest and late fees because their checks were lost in the mail.

It told the story of a woman who committed suicide after leading a double-life with a spending-addiction and of college students so maxed out on credit cards that they choose to end their lives over a $12,000 credit card balance.

After watching this film, I tracked down my high school civics teacher on Facebook and requested that he show this film to all of his students every year-I hope that he’ll consider if he hasn’t already. The stories of these college students, as told by their parents was heart-wrenching.

There’s a number of great guests on the documentary–from specialists in credit and bankruptcy statistics to Dave Ramsey himself, Jimmy Carter, and that guy from Lifestyles of the Rich and Famous. Debt collectors and agents are also interviewed. All together it was a well-rounded and informative view of the industry. “Maxed Out” was passionate and informative and energetic and earns four stars from me.

If I were to offer any criticism at all, it would be my most common criticism of indie films–that the volume is inconsistent throughout the film, leaving me holding on to the remote for dear life to keep it somewhere between too loud and too quiet.

It makes sense at first glance to pay off your credit cards at 10% with a home equity loan at 6 or 7 percent. Especially if you’re in really deep. And after all, you’ve got all that home equity just sitting there.

First off, does your house look like a piggy bank?

Second, a credit card has a higher interest rate becaues the debt is not secured. That means there’s no collatoral. If you don ‘t pay, they can’t come take something to pay back the debt, like with a home or auto loan. You’re paying the higher rate in exchange for the lender’s higher risk.

If you borrow against your home to pay off un-secured debt, your buying your way out of debt by putting your home at risk. YIKES!

In the event of a real estate collapse like this one, if you lost your job and had to sell your house, the sum of your home equity loan and mortgage balance could end up being worth more than your house can sell for. A term also called being “under water.”

Think about this if you’re being tempted by the lower rates on secured loans right now. Borrowing your way out debt doesn’t work. I heard Dave Ramsey on TV last night say that nobody has ever dug their way out of a deep hole. Makes sense to me. Hard work, cost cutting and serious budgeting is still the way to get out of debt.

Just my $.02 for today.

We’re halfway through our special month on financial litercay. Do you have topics that we should feature? I’ll do the research and the legwork and offer a completely unqualified but “if I were in that position” opinion, followed by my usual disclaimer that for financial advice you should seek out the paid advice of a qualified professional. But I always enjoy the learning experience!

Motley Fool provides excellent communities and message boards, and some affordable financial literacy classes (at least they have, I’m not sure if they’re still available).

I learned about Mint.com from Motley Fool.

They also have excellent tax-planning resources!

The site is free with a free membership but there’s a premium membership as well. I’ve never explored this, as I’ve found everything I’ve needed in their free pages.

My only word of caution is “beware the ads.” Their advertising borders on oppressive. It also frequently has a doomsday or get-rich-quick tone that I tire of. There is email “why the oil boom is coming SOON” and the site is covered with ads. Sometimes it can be hard to tell the content from the ads.

They also have so many Fool-branded affiliate relationships that I can’t always tell what all they’re endorsing, or what is going to get me to sign up for some fund or stock newsletter. I find myself only reading the first 1/2 of all their pages and never the sidebars because of the advertisements.

That said, the message boards are excellent resources, as are their tip articles like “60 seconds to get out of debt.”

If you’re new to personal finance or trying to learn something new–check them out, but beware the ads–here there by dragons.

Seriously though, I got involved in my retirement planning, and household budgeting. We paid off our cars early and “burned the candle at both ends” to pay down our home mortgage (something we’re grateful now as most of our neighbors are upside down in their mortgages).

In my research of personal finance, I’ve studied the PF theories of two “gurus” of personal finance; Dave Ramsey and Suze Orman.

Dave Ramsey’s philosophy is a bit more stringent. He doesn’t believe in debt. He says never take more than a 15 year mortgage, and never, EVER use a credit card. I especially like his book “The Total Money Makeover,” which I downloaded as an ebook from Audible.com.

Suze Orman’s philosophy is a little more relaxed in that student loan debt is “acceptable” debt, and that a credit card used for job search expenses is OK. I found her philosophy and strategy very helpful in my first few years on my own. I especially like her book “Money For the Young, Fabulous and Broke!”

I find my own personal finance philosophy right in-between these two–shunning credit cards, but accepting mortgages and student loan debts. Mr. Ramsey encourages parents to pay for their children’s college, I’m of the opinion that they appreciate it more when they put themselves through.

I encourage you to check out the library or iTunes and their Web sites for some good ideas and information. Dave Ramsey has a daily podcast available for free from iTunes. I especially enjoy the Friday shows where he invites callers to call and scream “I’m Debt Free!” with him on the air when they’ve paid off their last debt.

Happy learning!

This is part 3 of 21 of “21 days of financial literacy” for April, which is Financial Literacy Month.

One thing that has come up during this process is some ugly marks on my credit score. What? Mine? I’ve never paid a bill late, and have never had an item go to collections, but there were four accounts in collection on my credit score.

Thankfully, this has happened before, so I know how to take care of it. In case you haven’t seen this sort of thing, I thought I’d pass on the process for disputing an error in your credit report.

First, you have to see your credit report, and you can get this on the internet. I order mine for free from TransUnion but then I also pay the extra $14.00 for my score from all credit bureaus so I can see what’s going on.

In my case, this is a simple error, which is kind of a pain. I have an extremely common name. My name is Jessica Ward. For a few years, I hyphenated my last name, and for many utilities and things my name was abbreviated to include the first letter of my maiden name as a middle initial, even though my middle initial is something else.

The problem arises because I have a neighbor, about four buildings away from me, with the same name, whose middle name happens to start with the same letter as my maiden name. She also has problem paying her bills. When they can’t reach her, they send the bills to collection, and they get attached to my credit report.

Here’s how you clear up an error like this:

• Determine which bureaus have your information recorded inaccurately. There was 250 point difference in my credit scores between TransUnion and the other bureaus. Since my scores are in the high 700s with the others, I knew that’s where the problem was.
• File a “dispute” following that bureau’s process. There’s an online process for Transunion, but the form didn’t work for me, so I mailed a letter.
• Mail letters certified.
• The bureau has 30 days to provide evidence that you owe the debt, or remove the information from your file.

Here’s the letter that I sent. I’m changing my maiden name initial to X to protect the privacy of my neighbor.

TransUnion Consumer Relations
PO Box 2000
Chester, PA 19022

Sincerely,
Jessica