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Credit Counselors' Confessions: How We Got Ourselves Out of Debt

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Confessions of a credit councilor
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Helping their clients deal with financial struggles is the daily business of credit counselors, but many of them are all too familiar with the view from the other side of the table -- a vista that features seemingly unconquerable mountains of credit card debt, student loans, medical debt, or back taxes. For some counselors, dealing with their own money problems was what led them to their jobs in the first place. Others experienced financial crises while already working as credit counselors.

Regardless of what led them into their own fiscal crises -- accidents, health issues or just bad decisions -- each believes that their personal struggles increase their ability to empathize with their clients. For privacy, we're protecting their identities. But it's not their names that are important -- it's their stories, and the lessons they learned the hard way: Learn to live within your means, pay off your debt, and save, save, save for the emergencies everyone faces.

From Living in His Car to Owning a Home

"At the age of 17, due to an alcohol addiction, I dropped out of college, quit my job, was kicked out of my living arrangement, and moved into the "Crown Victoria Inn" -- aka the backseat of my Ford Crown Victoria. From the ages of 17 to 21 I made not one, but several very bad personal and financial decisions, and then I enlisted in the Wisconsin Army National Guard in hopes that it would turn my life around. It did! But the choices I made during those earlier years greatly impacted my future success. I had trouble finding gainful employment, finding housing, and obtaining any new forms of credit. In fact, it wasn't until this past year that my wife and I were able to obtain a mortgage. When I started working here in 2010 my credit score was a 569 and by March 2013 my score had risen to a 680."
-- R., a credit counselor with Financial Information & Service Center, a Goodwill program

Learning the Wrong Lessons From Dad's Illness

"When I was 16, my father was hospitalized and I had to pay the household bills. Credit cards were the biggest help and a future burden. Eventually he went back to work and started paying down the debt. It was a tough job for a young person, and I didn't do it well, but I did what I could to keep things afloat. Unfortunately, I didn't learn what I needed to. What I did learn was how to leverage good credit to supplement my income once I started to work. I took out credit cards, charged them to the limits, and even with a low, young person's income, I acquired a good amount of debt. A few years later, a friend was working for a consumer credit counseling service and suggested I get help. Not only did I go on a debt management plan, but I was referred to a credit union and refinanced my subprime auto loan from a 25% to a 6% interest rate. After I got out of debt, I applied to work at the credit counseling agency."
-- T., a credit counselor with Consumer Credit Counseling Services

Two Marriages, Two Different Wrong Ways to Deal with Finances

"It took a hard lesson for me to practice what I preach on a daily basis. When I was married, I didn't have to worry about money. I was a stay-at-home mom and anything I wanted I went out and bought. We had a big house, nice cars, and took regular vacations. When I divorced, that was the first time I had to manage my own bills, and I wasn't very good at it. I was getting a nice monthly check from my ex-husband and I went back to work, yet I didn't change my spending behavior.

I didn't really start to worry about money until four years ago when I got married again. But then I thought together we would be good financially and be OK. Wrong. Soon after we married, he lost his job. He wanted to start his own business, which I funded, and because of his chronic medical condition, I paid for his medications. I was no longer getting alimony and needed to sell the house. I took money from my retirement to make the mortgage payments. It finally sold, but at that point I owed $30,000 in credit card debt and $10,000 in federal taxes. I was broke for the first time in my life and I guess that's what it took to finally make changes.

I dumped the husband, sold everything I had, and moved into a one-bedroom apartment. I enrolled in a debt management plan and am working with the IRS to settle the tax debt. I have two years left before I am completely debt-free, but I have never been happier. I have gotten over having to have 'stuff.' I guess for some people they have to lose everything in order to find out what is really important in life."
-- A., a credit counselor with Apprisen

The Spending Trap

"From 2000 to 2008, I racked up about $15,000 in credit card debt, took out a risky adjustable-rate mortgage, rolled negative equity from one new car into the next (twice!), and used part of my student loan payouts for nonessential expenses. In 2005, I spoke to a credit counselor who recommended a debt management program, but I declined, not wanting to give up the credit cards.

Three years later, I was laid off from a high-paying union job and was forced to liquidate my 401(k) to give myself a 'fresh start,' as I had not made much progress on my debt, and had no emergency savings and no job prospects. After three weeks on unemployment and a brief stint at a temp agency, I responded to an employment ad for ClearPoint Credit Counseling Solutions. After being hired and going through credit counseling training, I realized just how many mistakes I had made over the previous decade."
-- S., a credit counselor with ClearPoint Credit Counseling Solutions

A Little Bad Luck and a Little Bad Judgment

"About a year ago, I was financially fine. My car was paid off; my parents were letting me live in their second home, so my only bills were utilities and my phone. I was a recent college grad working part-time at a bank. But then my car was totaled when it got hit by someone running a stop sign. My insurance check was only $5,500, so I wiped out almost all of my savings, put $12,000 down on a car and borrowed another $5,500 from the dealership. But my insurance company wouldn't pay my medical bills, and the driver's insurance company said I would have to sue them for the money. I had thousands of dollars in medical bills, a new car payment, and needed a crown on one tooth. I took out a loan through the bank where I worked, but two months later my hours were cut.

Once I got a second job, I was working 67 hours a week at two jobs and spending three hours a week at physical therapy. I got rid of my smartphone, got cheaper car insurance, stopped going out, stopped buying things I didn't need, started couponing and only buying things on sale. Then I found a better job as a credit counselor. I still have about a year before I can finally relax, but I have a plan and a time frame. If I would have known what life was going to throw at me, I would have saved more and not bought such an expensive car. But I never gave up, I made sacrifices, and I got help when I needed it."
-- H., a credit counselor at Apprisen

Michele Lerner is a contributing writer for The Motley Fool.


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11 Comments

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Calcables

Very good Idea.... Wish I had this taught to me in school. I have no credit, everything has to be cash, or I do not need it!

July 03 2013 at 1:20 PM Report abuse rate up rate down Reply
chrissf4529

Always a little dubious of "credit card counselors",this article clearly shows they do not have any great insight or wisdom."credit card counseling is a huge business, generally profiting off of the misery of the clients.NOT an altruistic service. If you look at investors or ownership of many of the credit card counseling companies, they are funded or owned by the credit card companies

July 03 2013 at 12:11 PM Report abuse rate up rate down Reply
cslinz62

I must be the only person on this earth that has never been in debt and has lived on minimum wage and didn't receive any welfare help. If I can do it, ANY of YOU can.

July 03 2013 at 11:38 AM Report abuse rate up rate down Reply
fireman91

This article did not list the solutions - only the ways in which these people were forced into debt - medical, job termination, divorce, etc. The only advice was to reduce spending, that does not require a credit counselor, it is common sense. Something our government should consider!
How does a person improve their credit score?
The author would not give away 'free' advice of the credit counselors.

July 03 2013 at 11:17 AM Report abuse rate up rate down Reply
bibilou4u

What about just filing bankruptcy?

July 03 2013 at 10:24 AM Report abuse -2 rate up rate down Reply
2 replies to bibilou4u's comment
cslinz62

Oh sure, that's the I'm stupid when it comes to money way out.

July 03 2013 at 11:36 AM Report abuse +1 rate up rate down Reply
cslinz62

Oh sure that's the easy way out. Bankruptcy just screams idiocy.

July 03 2013 at 11:37 AM Report abuse rate up rate down Reply
alfredschrader

The insider advice to money problems - don't spend it.

July 03 2013 at 8:33 AM Report abuse rate up rate down Reply
Sra

Oh love this article , BTW For single older men seeking younger women , hit me up on AgeLessMingle. C0M Seriously !

July 03 2013 at 5:03 AM Report abuse -2 rate up rate down Reply
jmg62

"A Little Bad Luck and a Little Bad Judgement", indeed - that's what can happen. And all those who now believe that "that'll never happen to me" had best thank their lucky stars and think again! I was a rising one - STAR - that is - slayed everyone in my path. Nicely, I was never conniving or rude - but I was: "At All the Right Places at All the Right Times"! Rose, rose, rose - NOTHING could touch me. I was saving for my own business. But I was kickin' a$$ and had no time for names. Spent hours working at home to succeed. I thought ->"Bye-Bye, Sayonara!" ~~ Soon I thought I'd have my own place of business. Friends asked me to move to Hong Kong I was so right on the money. Then - like you - a truck ran right through a red light at 4:43 AM on my way to work. Life, as I knew it, had come to an end - and no one gave a rat's ass. Oh, I had great bene's so I was covered for a while. Settled with the trucking company. But, medical bills - amazing how they eat up everything - and although I'd not purchased a supped up car or supped up house - didn't have family dependents - but WOW! Did it go FAST! Had and cut even further to basic "everything" - but it all ran out after a time. I was never the same or "whole" again. The lesson that should be taken away from all this - learning the hard way that is - PERSONAL FINANCE AND RESPONSIBILITY SHOULD BE TAUGHT IN SCHOOL! Parent's aren't the best to teach it and usually don't - even with your Piggybank or Birthday money. ("It's none of your kid's business what we do with our money!") They figure they'll have to divulge stuff if they get into "money". After reading, writing, arithmetic, and Social studies (they're important!) there should be PERSONAL ACCOUNTING. Any dimwit can balance a checkbook - but give a student a $1. Set prices for each thing they'll need WITHOUT CREDIT living on their own. Let them go around those places (desks where other students sit representing those utilities, car insurance, rent, mortgage, etc.) and SEE HOW they spend that $1. NO MORE than that! Allow them a year of $1's - for each of 12 months and SEE WHERE they end up. Electricity can be $.07 per month, phone $.05 a month, etc.. and see what they have left if ANYTHING. Factor in taxes(all of them) and step back and take a look. Ages 6-12 can learn a GREAT DEAL. Especially when they grasp for the first time in their lives what "things" cost. Next time they go up to Mommy or Daddy in the store and beg for a toy or some sugary crap cereal they saw while watching some program on cable - they may take the argument ~ "Hon, we just can't afford this today." a lot simpler. Good luck to ya's all! It's too late finding out when you're 25 what you could've known AND UNDERSTOOD when you were 13.

July 03 2013 at 2:33 AM Report abuse rate up rate down Reply
jmg62

"Car to Owning a Home" with a wife,...? How old are you now? When did these bad choices occur? When did you get 2 incomes? Married? Children at all? No family? Friends?

July 03 2013 at 2:03 AM Report abuse rate up rate down Reply