Friday, January 2, 1998
The Sob Story
By Karen Rhodes ([email protected])
We had been forced to sell our "dream" house in 1988. Debts from my mother's hospitalization, nursing home confinement, and funeral in 1980; medical problems for me and our younger daughter; unemployment on the part of both my husband and myself; and other tragedies had caught up with and overwhelmed us. We were convinced -- because of the level of the debt and because my husband's VA eligibility was still tied up in that house -- that we'd never be able to buy another house. So we rented, but in 1992 we had to leave the rented house we were in.
The rentals we saw, however, were dismal and pricey -- $650 a month for a shotgun house on a dinky lot. My husband decided to check the status of his VA eligibility -- it wasn't enough. But in reading the instructions on the form, I discovered that on the basis of the active duty time I had served the year before as a member of the reserve forces, I qualified for a VA loan!
We set out to buy a house. Our credit was a mess. The mortgage broker said that the way to turn that situation around was to write a detailed letter to the credit reporting company with documentation describing exactly why we were in the pickle we were in.
This is how you do it. You lay out the facts. A little purple prose doesn't hurt. Don't be afraid to make it a sob story; just make it an accurate sob story. The opening hook of my letter was my mother's death in 1980, which I labeled "the opening salvo in the Decade From Hell." Do, however, stick to the facts, because they can be verified. And to assist in that verification process, provide documentation for each fact, sending copies rather than the originals; label each document, and refer to each one specifically as you state each fact related to each document.
You also need to demonstrate in the letter the steps you have taken to correct the situation. If you contact your creditors directly to make arrangements, as I did, make notes of the dates and times you talked to a company representative, and get that person's name. State the facts of the arrangement you have made. Stick to the arrangement. Put all of that in your letter.
Make it clear how all of these events affected you; relate them to each other and to your overall situation. For instance, my car's transmission broke down while I was on active duty. We had to shell out for it and get it fixed immediately, because I had to be able to get to my duty post. That had an impact on our debt level. The district command didn't get my pay started until three or four months after I began my active duty, and we had to take out a loan to make our house payments and buy groceries. That had an effect on the overall situation. Paint a picture of how one event on top of another put you deeper and deeper in the hole -- one step forward, two steps back. Let your frustration show.
Lay it on thick. (But again, stick to the facts!)
Finally, once the smoke clears and you begin to get back on your feet, here's a tip for getting a credit card paid down faster: As has been pointed out here on the Fool, don't ever send just the minimum payment. You may have to tighten your belt till it chokes you, but send twice the minimum payment plus the interest amount for that month. That'll get it down a good deal quicker.
Then put yourself on a cash basis, even for Christmas. Start a Christmas club or some other savings instrument next month. Save the credit card only for emergencies, or use it for little things you can pay off each month.
The credit card companies will hate you for it but you'll reclaim your budget.
[For more tips on how to be a card-carrying Fool, check out our new Debt Area.]