Don't worry readers, the Parade Magazine that comes with the Sunday newspaper isn't my normal reading material, but sometimes a story catches my eye. After reading what I was interested in, I turned the page to a story "How to Bounce Back from Bankruptcy" which is choke full of terrible advice.
The first piece of advice was to re-establish a credit history with just one credit card, perhaps a low fee card with a low spending limit. I'm sure the author would think a doctor giving advice to a recovering alcoholic to start drinking again with a low alcohol beer was off his rocker. Well, those who have a bad history with credit shouldn't be touching credit, certainly not from the get go because for some, credit (and spending) is a drug and an addiction. Debtors anonymous is the place to be, not filling out a Mastercard application.
I watched an interesting documentary on credit and the credit industry and it is a fact that one of the number of targets of credit card companies are those who have bankrupted. Yes, a good credit history is helpful. But someone who has found credit has been their downfall should steer clear and rest easy because, a credit history is not going to be of immediate need, and the need is overblown anyways. Yes, you can qualify for even a home mortgage without an extensive credit history. I did so many years ago showing a history of utility bills paid and rent.
Piece of advice number 5 is "View a car loan as the next big step."
While car dealers typically want to see at least a year of good payment history before financing a post-bankruptcy buyer, some dealers aren't picky these days. Initial rates can be as high as 22%, but reliable payers can refinance at better terms later on. Opting for a used car can keep costs down.
Amazing that even finance writers continue to propagate the myth that a car loan is a must. And a car loan at 22%? Is the writer out of his mind? The interest you will pay alone on such a loan can easily pay for my last car purchase. And, regarding that refinance: don't count on it after you take out the credit card that the author reminds you to monitor and keep low limits on!
I know I'm going back to advice I've given over and over again: save, put money in an interest bearing account, save some more, and pay cash for a quality used car. There are plenty of them out there. We plan to buy another used car within the next year.
The last piece of advice (7) is to plan for a mortgage. My advice: save, save, save and stop thinking about taking on more debt until you have plenty of cash in hand. I heard an interesting report from an economist that much of the present crisis could have been avoided if people had put the traditional down payments on their homes. I know it old fashioned, but "grandma's finance" was full of wisdom.
Advice like: get a credit card, take out a car loan (at up to 22%), and buy a home is a great way to . . . . . . . . . . .bounce back from bankruptcy or end up back in bankruptcy?
Along with "Ask Orthonomics" I foresee plenty of installments of "Bad Financial Advice."