By Kevin Blasi

Planning For and Dealing With Adversity
Welcome back to “The Post!” I’ve had a whole extra week to prepare, take notes, think about topics, write drafts and compose the best column you could ever read!  But that’s not what I did.  Instead, I had a whole week to procrastinate and still get my column in last minute. I guess I’m falling into my old college ways.

I’ve met with clients recently as my Credit Repair business is taking off. This week I’ve noticed many folks whose credit scores have been ruined by certain points of their lives in which they experienced tremendous adversity. Certain events and occurrences in your life could completely change your financial future. The effect on your credit could be catastrophic. It takes years to build a solid credit profile but only an instant to bring it crumbling down.

A nasty divorce, a car wreck, a sudden necessary home improvement, a car breakdown, a medical emergency, a job loss...there are many events that create adversity that happen every day.

The first thing I’ve observed that people do in times of adversity is to recoil. You tuck into the proverbial fetal position and protect what is important to you. You stop all spending and donate all your time and energy to the task at hand. You ignore everything that is not vital to solving your problem. It’s a survival instinct that is very useful.
The next problem comes in the aftermath. You slowly realize that in your attempt to deal with your issue, you let everything else go.

That’s ok. You had to do it. I will never blame someone for going late on a credit card to pay for an expensive hospital procedure. Life happens. All we can do is prepare and be able to adjust when necessary.

Banks and credit card companies like to simplify their method of making a lending decision.  They break your life down into a three-digit credit score. Theoretically, this score gives the lender an idea of the likelihood that you will default on a new debt within the next two years.  Unfortunately, this model doesn’t take into account your ex-boyfriend’s gambling habits or your son’s expensive medical condition. That’s why it’s up to you to be prepared for such moments of adversity.

Till Debt Do Us Part

You should meet someone and fall in love. You should share all your secrets. Share your moments and even share your money if you’d like. I will not tell someone not to open joint accounts. That’s a personal decision. I will say this:  keep track of your money. If his money is your money, then you’ve got to know when and how it’s being spent. There should be no excuses and no explanations. You work hard for that money as a family and you should know where it goes.

Call your creditors every month.  Listen to the automated system tell you your balance and payment due. Keep track. You’ll know to ask your lovey what’s going on if your balance seems to change suddenly.

Make sure the payments are being made. You should know that Fair Isaac does not care if your partner takes care of all the bills. If it’s late, you’re both late. You must both be responsible. If you see that the payment is late, talk with your partner and work together to find a solution.  You’ve got 30 days past the due date before they report the payment as late on your credit report. Use this time to solve the issue before it becomes blight on both your credit histories.

The Credit Cushion

You can use credit creatively if you plan ahead. Most people see credit as buying power. Now you can get more stuff! Here’s your tip: Keep your credit card balances at less than 50 per cent of their credit limits. As your balance creeps up above 50 per cent, it begins to hurt your credit more than it helps. The higher you go, the worse it will be. If you max out a card, your credit gets ruined and the card becomes useless to you. On top of that, your creditor will start charging fees to push your balance even higher. Once you get too high with your balance, it can very quickly spiral out of control. Keep it under 50 per cent.
While this method will give you the benefit of a higher credit score, it will also provide you with valuable peace of mind. You know that in an emergency you’ll have that other 50 per cent available to assist you. That other 50 per cent should be kept in a glass case labeled with the words “For Emergency Only.”

You can use that money to pay for a sudden expense. You could also use your balances to cover your monthly expenses while you overcome this obstacle. If you keep all your balances at 50 per cent or less, that should give you a few thousand dollars for a rainy day. The challenge is to trick yourself into thinking that the other 50 per cent doesn’t exist.

These are a few ideas for protecting yourself against rainy days.  I hope you never have to cross this type of adversity, but unfortunately we all will. What matters is that the person comes out on the other side of that adversity. Being smart with your credit can give you a helping hand when you need it most.

Kevin Blasi is a mortgage expert with Universal Funding Partners and a credit specialist with Credit Repair Consultants in Dunmore. You can contact him about Credit Repair or Mortgage Financing at 342-2444.

Email your questions to Kevin Blasi: mortgageguy@scrantonpost.com