It has been a while since I wrote my last rant. But this morning, I have a good one that I wanted to share with you. I find it very unfortunate because I usually like going to Future Shop. In fact, going to Future Shop feels like I was 10 and going to Toy ‘R’ Us (now I have to hide my joy when I enter with my kids ;-0 ). So here’s my Future Shop Rant Story:

It all started yesterday morning while I was comfortably installed in front of my computer for my blogging day. My wife comes to see me and says that the washing machine just died. Sad story, it was part of my life for a good 10 years. However, what is really sad is that I have to buy another one. This wasn’t the greatest news of all.

So after dinner, I go to Future Shop to buy another one. They had a great promotion on the Samsung (paying taxes, delivery, taking my old scrap for free, $200 gift card and they are offering to pay in 36 payments without interest… I’m in heaven).

So I first have to hear a 5 minutes babbling about how great the extended warranty is a scam…I mean valuable (did you know that it takes 9 to 10 hours at $50/hour to change de rubber on your frontal washing machine?… RIGHT!).

So I tell her “no thx”, she tells me “are you sure?” and I stand up and say “no” and replies with her eyes wide open “REALLY??”, and I answer “REALLY” and she end-ups with “so you are going to walk away with your  brand new washing machine without extended warranty?” and I reply a dry “yup”. End of the lengthy and useless conversation. So I was already a bit annoyed but I was happy to have a new set to be delivered quickly. Then, we moved to the customer service center since I didn’t have a Future Shop credit card (for the 36 payments option).

I had to spend a good 25 minutes in front of a lovely lady hanging on a phone to know if my card was approved or not. I was asking for a *huge* amount of $2,000, just enough to cover my expense. Well guess what? I got declined at Future Shop!

I was quite upset because:

#1 I had to waste 5 minutes arguing that I didn’t want the extended warranty.

#2 I had to wait 25 minutes watching a stupid movie preview in loop on the tv waiting for my credit card approval.

#3 I got declined at Future Shop for a stupid and small credit card; this is very insulting.

#4 When I returned to pay my washing machine (with my own Mastercard Platinum!), the girl made a mistake on the bill and was charging me $80 more.

I asked her to credit my card right away but she had to see her boss first… another 10 minutes waiting to get the approval from the sales director…

I had been annoyed by Future Shop the last time I’ve ordered a iPod Touch for one of our contest (over at The Dividend Guy Blog) because they made me call twice to confirm my order (and each time you have to wait a good 10 minutes on the line). But now, I have not only wasted almost an hour of my time, but I got declined for a stupid commercial credit card. It was a very insulting feeling (especially since I make more than enough to pay those stupid appliances). The worst part is that I couldn’t even know why I got declined. I supposed it’s because I wasn’t sure about my Social Insurance Number but getting my credit bureau nonetheless should have been more than sufficient to get an approval.

Anyway, I hope I’ll get my washing machine and dryer in a good order… if not, I’ll start to stink in the upcoming days!

Just last week, Mike had this post about watch out rate shoppers. He mentioned how he hated it when rate shoppers called him “just for a rate”. What ends up happening at the end of the day though, is that rate shoppers get lousy service. But this is a typical pattern for those who only want to get free service, or just the cheapest price. Businesses hate them. The savvy ones learn to NOT compete on price but on other factors. The not so savvy ones get caught up in a wave of downward spiraling price competition that just drives the business to the ground.

In my space, credit card issuers have fallen for the low cost (in their case, teaser rates) game to attract new customers. They gave out deals that were really not profitable for themselves. Consumers were savvy enough to taken advantage of them. But when the sub-prime crisis blew up everything, credit card issuers began to cut back and hurt lots of innocent folks in the process.

In this post, I would to highlight some incredible deals card issuers were offering, how they were taken advantage of, and how they are hurting every one as they realize their folly.

Abuse of gas credit cards – Gas stations (or rather the oil companies) have always made use of gas credit cards to instill customer loyalty. If you go to any gas station, you will find brochures offering their both their gas cards and gas credit cards. Typically, most gas rewards cards pay anywhere from 3% to 5% rebates when you make gasoline purchases at their gas stations. So for example, a Shell Mastercard allows you to earn 5% rebates at shell stations.

Soon, credit card issuers began to offer their own version of their gas credit cards. Rather than allowing card holders to earn rebates at one particular station, they structured their cards to allow cardholders to earn rebates on gasoline purchases at ANY gas station. To make their cards more attractive, they allowed card holders to earn unlimited rebates.

This is when the trouble started. Those who cut coupons will understand the concept of coupon stacking. In credit card land, credit card stacking involves combining various reward cards to maximize the rewards that you can earn. Well, many business owners, salespeople (who drove a lot for their sales meeting) started getting credit cards that paid rebates on gasoline purchases. But more importantly, many of them used them exclusively for gas. This became a no win proposition for credit card issuers. At best, credit card issuers make 1.5% to 3% from merchants who accept credit cards. But when most cards do not charge annual fees, customer pay in full every month and you are paying 5% rebates on gasoline purchases, credit card issuers will lose money on these cards.

So what do they do? Well, they simply put caps on the amount that a card holder can charge before they stop earning rebates on gasoline.

0% Balance Transfer Abuse – When interest rates got to rock bottom in 2002, the era of easy money was to continue for the rest of the decade (at least till now). Credit card issuers also joined in the fun by offering the classic bait and switch tactic. They started offering 0% APR if you transfer your balance from another credit card over. Their rational was simple. Once a customer signed up, credit card issuers figured that they were more likely to stick around. Well, that did not turn out to be the case. Consumers began looking at the 0% offer as another method of financing. Here was what they did.

? Consumers used 0% deals in place of a home equity line of credit

? Consumer arbitraged 0% deals by borrowing at 0% and putting it in a high yield savings account

? Consumers used these 0% deals to finance large purchases

The 0% balance transfer credit card segment became so competitive that soon, every credit card company was giving away these deals for 12 months and waiving the balance transfer fee. But rather than stick to the card that they originally got, consumers simply jumped to the next 0% balance transfer deal when their introductory 0% period expired. They simply got a new card. Soon, credit card issuers realized that these deals were unprofitable for them because consumers did not stick around. They began to reintroduce balance transfer fees and reduced the length of introductory periods for 0% APR from 12 months to 6 months.

Soon, credit card issuers were fighting back. For example, there have lots of complaints that Chase has increased the minimum payment on their cards from 2% to 5%. Moves like that where your payment doubles can be crippling for folks who do not have room in their budget for emergencies.

Issuers heavily promoting student credit cards – But consumers have not just taken advantage of credit card issuers. Credit card issuers have also way heavily promoted their student credit cards at campuses. It is one thing to promote credit cards, but another to actually pay colleges for every card that is signed up, or pay (sponsor) clubs for promoting their cards at their booth! The majority of students don’t really know about money management.

Let’s think through this for the moment. If you are a new immigrant, or do not have a credit history, there is just no way that credit cards are going to issue you a regular unsecured credit card. More likely, you may have to start off with a secured credit card. But this rule does not seem to apply to college students who (mostly) have no history and very little income! Why are credit card issuers willing to issue cards to students who have no credit history? I guess they want to get them as customers when they are young and hopefully become customers for life? (not too sure if this is really sound?).

For this one, the latest credit card bill of rights has imposed limits on the amount of credit they can extend to college students.

Give credit lines too easily, now reducing Credit Lines – During the boom years of 2003 to 2007, credit card issuers were giving excessive credit lines to many folks. Then, when the financial crisis hit in 2008, all of a sudden, they began reducing credit lines across the board. While there are folks that should not have credit lines issued to them at all, the sudden disappearance of credit has a lot of collateral damage. It is one thing to tell someone in advance that you will be cutting their credit lines. But when you cut their lines close to their present balance, or even below their balance and charge an over-the-limit fee, that borders on being unethical.

The collateral damage in this case fell on folks with great credit!.

Give teaser rates, not increase their rates! – Many folks who have gotten low interest credit cards have seen their rates increase for no reason. Very often, rates have shot up to over 20%. This has the effect of doubling or even tripling minimum payments for card holders!

Moral of the story

Any relationship has to be 2-way – Any business relationship (or any relationship for that matter) has to be a win win for both parties for it to be sustainable. In all the previous examples, the relationship was lop sided. In many ways, you cannot blame consumers for taking advantage of deals being offered by credit card companies. Going forward, perhaps more credit cards will charge annual fees, or rewards will be cut back more. But I would not worry too much as a consumer. The credit card industry is still pretty competitive. There are still many good reward cards and programs around. Just remember when something is too good to be true, it usually is and does not last forever.

Just remember that when a business relationship is too one sided in your favor, eventually, it will come back to hurt you.

You have already seen 24 and 36 payments without any interest when buying furniture. Even better, you can pay next year and you don’t have to pay any interest. We now have the similar type of marketing with cars with 0% over 5 years (I bought my Mazda Tribute with a 0.4% interest rate over 6 years!). And now, I just saw a shocking mortgage offer: fixed term 5 years fro 2.99% on new condos.

To put everybody in perspective, in Canada, the best deal around for a 5 years fixed rate mortgage is 3.85% as of late April. You would probably not even be able to get it from your bank but from a mortgage broker. So if the best deal possible on a fixed mortgage is 3.85%, how come they can offer 2.99%???? And the answer is….

A powerful marketing system!

The mortgage business is changing drastically in Canada due to the very low rate, poor economy and the rise of cost of funds for banks. For the very first time, it seems that some banks saw what is coming and realized that a blue suit and a red tie was not enough to sell mortgages anymore. The business has changed; it’s not an oligopoly anymore as more and more new players are working in the same industry. What happens when an oligopoly breaks? Each company needs a solid marketing plan to take advantage of this new open market.

But this doesn’t tell how they can offer 2.99% on new properties?

They are simply playing with the numbers:

Choice #1: The bank is willing to drop to 3.85% for those mortgages in order to still make money. It makes a deal with the contractor that he pays back the difference on a 5 year term mortgage at 2.99% and 3.85%. The contractor takes it from his profit and sells his condos much faster.

Choice #2: We have the same situation with the bank. The difference is that the contractor slightly increases his price in order to cover most of the gap between 2.99% and 3.85%. So the client end-up financing a higher mortgage rate without knowing… This is exactly as he does when he buys furniture at 0% for 24 or 36 months. The interest rate lies within the product! When the contractor asks 212K instead of 207K, nobody really notices as it is always harder to compare prices for a new construction. He can always bring some “builder bullshit” such as “the condo was made with higher quality materials” .

This is also why you will see this kind of offering on new construction and not in your branch for a regular purchase.

I think it is a smart way to present things. However, potential buyers must keep in mind that their mortgage rate will go much higher upon renewal. Therefore, they are better off calculating their budget with a 4.5% or 5% interest rate on their mortgage in order to not get caught off guard at renewal.

As I previously said: there are no free lunch in finance!

This is a guest post from a contributor of The Credit Toolbox. This is a blog about understanding, improving and keeping a good credit record. They write an interesting series about how to make money from cash reward credit cards. I am featuring the second part here while the first part and third part are already live on The Credit Toolbox.

2- Use your credit card for your day-to-day spending

Woah! You must be thinking that I am completely crazy. After getting on the back of Dave Ramsey, I am telling you to use your credit card on a daily basis? Maybe I am good for the nut house after all . However, there is a reason why I think your cash reward credit cards should be used everyday; to get more points and cash in your pockets!!

Don’t get me wrong, I am not telling to spend more (there are people spending on their credit cards thinking it’s a great deal because of promotions…), I am telling you to use it. What is the difference? I personally think that you should use your cash reward credit card for every single purchase your make in a day. From your daily coffee to your grocery and gas in your car.

The idea behind paying everything with your credit card is that you would have paid for food, gas and other daily spending anyway. However, if you pay with cash or with your debit card, you don’t get any points or rewards back.

Where is the catch?

The catch is that you have to pay your credit card bill completely by the end of each month. You should never leave an unpaid balance on your credit card as you are paying an awful lot of interest charges on it. As you can see, this technique is not for people who have already a balance on their credit cards or have problem managing their credit cards. This is a technique for people who are in control of their personal finance.

Here’s a real example:

Let say that we only consider only a few spending for this example:

- $500 per month for grocery

- $250 per month for gas

- $100 per month for your phone and cell phone bills

- $150 per month for restaurants

This gives a total of spending of $1,000 per month that you already pay anyway,right?

Well if you use the Discover® More(SM) Card – Wildlife Collection cash reward credit card, you will get $312 at the end of the year (it gives 5% on spending such as gasoline and restaurant (and other spending categories) and 1% on everything else). As you can see, you can save money on your day to day spending. It’s like having a free rebate on what you are already buying anyway

Over a year of spending, I was able to get $400 in cash reward and my wife got almost the same. In order to get this free money, we simply used our cash reward credit card on every single purchase we made and pay off our credit car bill at the end of the month. Money was accumulating in our bank account and we never withdraw from it to make sure we have enough money to pay off your cash reward credit card at the end of the month.

So you must not use the cash reward credit card to finance unexpected events or goods you can’t pay at the end of the month. Remember step #1; you choose your cash reward credit card based on its program not on a low interest rate option. Therefore, the cash reward credit card must be paid at the end of the month… all the time!

Here are a few examples of great cash reward and points credit cards:

Here is the complete 6 Easy Steps to Make Money From Cash Reward Credit Cards of Point Rewards Credit Cards (links will be updated as article goes live).

1- Select a card with cash rewards or a good point system that suits your needs

2- Use your credit card for your day-to-day spending

3- Keep another credit card for emergency

4- Do not withdraw money from your bank account anymore

5- Pay it completely at the end of the month

6- Enjoy rewards from your credit card

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image source: flickr

Meredith Whitney has sounded the alarm on Wall Street about the next phase in the credit crisis and the news isn’t good for consumers. Whitney, a prominent banking analyst and Wall Street veteran recently left her post as the Managing Director of Oppenheimer & Co. to start her own firm, Meredith Whitney LLC, and she believes that the next shoe to drop in the ongoing credit saga will be credit cards.

Whitney estimates that roughly $5 trillion (yes, that’s trillion with a “t”) in available credit lines currently outstanding but that only $800 billion has been drawn upon that total available credit, even with the recession well into its second year. These credit lines are revolving though, and believe it or not, most of the outstanding credit is paid off and drawn down repeatedly, month over month. Credit cards, while much maligned, serve a critical role ineveryday commerce in the U.S. that is now being threatened.

Back in August of 2008, Whitney estimated that roughly $2 trillion dollars of available credit on credit cards would be “expunged” or squeezed out by the end of 2010. After observing draw downs by card issuers of nearly $500 billion in the fourth quarter of 2008 alone, Whitney is now revising her estimates to over $2 trillion in credit card line reductions in 2009 and an additional $2.7 trillion reduction in 2010. That’s a grand total of $4.7 trillion in total credit card lines being eliminated from the system entirely by year’s end in 2010 for a total contraction of nearly 60% in available credit, severely threatening any hope of near-term economic recovery.

Some experts contend that recalibrating the credit markets by getting rid of all of this credit is long overdue. Undeniably, card issuers have been over zealous in their estimates of credit-worthiness in the past 20 years. FICO scores, so heavily relied upon by lenders and card issuers, have turned out to be fairly unreliable in predicting the credit worthiness of consumers. With unemployment running well below 6% and the economy running at full steam, credit lines were extended with lax underwriting standards and far too much confidence. The simple fact is that giant credit lines were being extended to people who didn’t need them, couldn’t afford them, and had no business having them in the first place.

Card issuers have responded by pulling back significantly — for the vast majority of cardholders, slashing credit lines dramatically across the board. The problem, however, is that many of the most creditworthy borrowers are also having their credit lines slashed or even eliminated entirely. In this economic environment, limiting credit lines for “at-risk” borrowers will continue to rise and should be expected in a healthy lending environment. But cutting the credit lines of the most creditworthy customers who do have the means to borrow and do have the means to repay is a looming threat to the economic recovery that has to be dealt with to stave off the deepening recession.

As Whitney accurately describes it, the credit card has evolved into a “cash-flow management tool” for the American consumer over the past few decades. About half of all consumers are “revolvers” who don’t pay off their card balances in full, carrying a balance over from one month to the next, and 90% of all credit card holders in the U.S. revolve a balance at least once a year.

Whitney describes unused credit card balances as “what-if reserve” funds that U.S. consumers have come to rely upon considerably. “What if” I lose my job or “what if” my car needs a new transmission? Consumers have relied heavily on their unused credit lines as emergency reserve funds and many have leaned on them as one of the only remaining sources of liquidity. The truth is that contrary to popular belief most consumers in the U.S. haven’t maxed out their credit cards. In fact, at the end of 2008, the percentage of total credit being utilized was a mere 17% at the end of 2008. But overall, credit utilization is now spiking (due in part to sharply reduced available credit) and the economic environment has forced many credit card issuers, fearing rising defaults, into shutting down credit lines en masse.

The fact is that card issuers are making the problem much worse by cutting credit lines on people who have the ability to pay their bills. Whitney is worried about an even deeper downturn in our badly weakened economy brought on by cutting off the most creditworthy customers, badly worsening the already severe decline. “If credit is taken away from what otherwise is an able borrower, that borrower’s financial position weakens considerably. With two-thirds of the U.S. economy dependent upon consumer spending, we should tread carefully…”

What can average consumers do to protect themselves from this particular crisis? As credit availability continues to get wrung out of the system, the average consumer must do everything possible to maintain existing credit card accounts by keeping their accounts active and, above, all, in good standing. Cardholders have to avoid giving their card issuers any reason at all to shutter or significantly alter their accounts. While that certainly doesn’t guarantee that you won’t be affected, it is one of the only things that creditworthy consumers can do to limit the fallout and avoid being victimized by the crisis.

We gotta go

I was 19 and I had been living with my girlfriend (who is my wife today) for 2 years in my parents basement. It’s never easy to have two couple living in the same house, especially when one of them is growing up as adults and start affirming themselves.

I have always had a good relationship with my parents and I still have a really good one. However, during that specific period, let just say that my parent’s basement wasn’t the best place to live for us anymore. So we decided to move in Montreal so we can have our own place called home.

We didn’t have much money and I remember my dad saying:” What are you going to do? Max out your credit card and eat Kraft Dinner?” He didn’t want me to leave so he tried to scare me. Even though I knew he was right, I had to leave for several reasons and I decided to look for an apartment.

Credit cards are not to be used as an emergency fund

The only way I could pay my bills and eat was to withdraw money from my credit card on a monthly basis. Back then, I had 5 credit cards and I was flipping balance from one card to another so I can save a few bucks in interest and charges here and there. This is where I learn that withdrawing money from your credit card at a ATM machine triggers interest charges on the very same day!

We were not making enough to pay for everything and each month, we had to take more money out of our credit cards. After a while, those pieces of plastic started to be quite heavy in my wallet. We had to find a solution.

Work harder and use the snowball effect

The only way I could get around this situation was by working more in order to earn extra money. I decided to work 35 hours a week while I was doing my bachelor degree. I used to wake up a 2AM, go work, sleep from noon till 3PM and go at school at night.

I used all my extra money to pay off my credit cards. I attacked that highest interest credit card first in order to wave as much fees as fast as possible. Once the first credit card was paid off, I took that payment and add it to the second one. This is why we call it the snowball effect; as you pay your debts, your payment on the next one is getting bigger and bigger.

As you can see, I didn’t do any magic or anything special. I concentrated my effort in order to pay my debts as soon as possible and within 12 months, I was debt free.

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Most people are stuck in a catch-22. They want to increase their mortgage in order to finance their renovation and the bank won’t do it unless the property shows a higher value than at the time of the first mortgage. However, in order to increase the property value, you must do the renovation and you won’t get the money first.

Therefore, several people will use their credit cards and will also apply for the “Home Depot pay-in-one-year-no-interest” credit cards. After two months, the renovations are done but their credit score is hurt since they maxed out all their credit cards and they requested new one. Keep in mind that the credit reporting agencies are not aware of your project; they only see an individual maxing out all their revolving credit and requesting for more. This sounds more like somebody that lost his job than someone renovating their kitchen!

So when you go back to the bank requesting more money to pay off your credit cards; this look like you are doing a consolidation instead of creating wealth within your property. Depending on your overall situation, this still may go through, but in all cases, your banker will ask you more questions than usual. If you had the bad luck of missing a payment because you were overloaded with the renovations, then your credit score will drop seriously.

Then what is the solution?

There is an easy solution to this problem and it is to play the system. In order to play it, you must understand it The key is to not start the renovation at all and go see your banker right away. Explain him the project and tell him how much your house should worth after renovations are completed. Ask him to submit the application with your new house value and as the renovation has been done already.

Therefore, the credit department will qualify your application according to your present situation but with the future value of the house. They will most likely approve your request but they are not dumb, they will request for an appraisal of your property as well.

However, your credit decision is usually good up to 6 months in a case of a mortgage. So you can now go and max out all your credit cards and do your renovations knowing that you will get the required amount through your mortgage at the end.

Once the renovations are completed, you ask your banker to request the appraisal, you get the new upgraded value of your property and you get your financing to pay off all your credit cards!

By doing your mortgage request this way, you will save a lot of questions, time and you will make sure you get approved in the first place.

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The purpose of setting up a SM is to get your mortgage tax deductible. In order to achieve the strategy, you need to leave your mortgage as high as possible and flip the non tax deductible debt (i.e. your original mortgage) to a line of credit account that will be used to invest (leverage principles). Therefore, you will need a Home Equity Line of Credit (HELOC).

About a year ago (maybe it’s two, I am not too sure about the time frame), Canadian financial institutions decided to report mortgages and HELOC to the credit bureau agencies such as Equifax or Transunion. It was previously a regular practice to not declare such information in order to protect your clients from competitors.

However, with the financial crimes increasing, banks had no choice but to report any credit activities in their branch. Therefore, we started to see mortgages and HELOC account our credit bureau. In regards to mortgages, there is not much impact on your credit score as long as you pay on time. On the other side, it is a different story for home based lines of credit.

Actually, making your required payment on time is not enough when it comes down to revolving credit (i.e. credit cards and lines of credit). The amount used compared to the amount granted is important also. Since your HELOC is probably your biggest revolving credit, its weight on your debt to available credit ratio is huge.

If you are using more than 80% of your revolving credit, you start to get seriously penalized. For example, I have my whole mortgage on a line of credit that is maxed out since I do the Smith Manoeuvre. I recently checked my Beacon Score and it dropped about 50 points since last time I checked. Nothing had changed in my situation beside the fact that my HELOC is now reported. Fortunately for me, I used to have a Beacon near 800 points. Therefore, it didn’t change much my financial situation.

I thought you may want to check your credit bureau before doing such strategy or even before transferring your mortgage into a HELOC if you had credit issues in the past. Home line of credits are the most flexible and useful type of mortgage. However, that will surely not help your credit score!

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While not yet as common as the frequent flier rewards programs or the cash back rewards programs, there are an increasing number of credit card companies offering rewards in the form of rebates that are applied to the principal of your mortgage, and helps reduce what you owe. If you don’t have a mortgage yet, there are a handful of other cards that allow you to build up your credits by using the card, and then use them towards the purchase of a home.

Bank of America’s Home Advantage Credit Card offers one of the leading mortgage rewards programs. Using the credit card earns you points; and every 5,000 credit card reward points can be redeemed as a payment towards your mortgage principal.

For people who have not yet purchased a home, you might look into the Citi Home Rebate Platinum Select MasterCard. This card offers a high percentage cash back, in the form of rebates applied to a mortgage, of up to 6% of certain categories of purchases. For example, when you use the Citi Home Rebate Platinum Select MasterCard to pay for utility costs, 6% of those purchases made with the card will be credited to a statement on your account and later used to pay down a mortgage. Once you buy a home, you can continue to apply your rebates to the principal of the mortgage and pay it off faster.

The majority of mortgage amortization schedules look similar in that the first several years of monthly payments tend to be almost all interest payments, with only a small amount of the payment going towards the principal balance of the loan. If you were able to increase the principal payment each month, by double, you could pay off the mortgage in half the amount of time. This is why it’s possible that a small additional payment made on a mortgage regularly will work to reduce the amount you owe significantly.

When your credit card rewards program contributes your earned rebates to the principal of your mortgage, those rebates can actually save several months of payments and several thousand dollars in interest over the course of your mortgage. The Bank of America’s Home Advantage Card website indicates that paying $50 every three months to your mortgage through a credit card rebate program (or on your own) would save you four months on your loan term and over $3,300 in interest.

In order to make any credit card rewards program effective, you would want to use that card to make most of your monthly purchases and as your primary form of payment, while paying your balance off in full at the end of each month. When you pay the card off in full, you avoid interest and finance fees, but still earn the highest level of rewards possible to be applied to your mortgage and help you pay it off faster.

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I recently had to work with the following situation. I received a file for a credit product as usual. When I started working on it, the very first thing I looked at was the client’s credit bureau. It was simply awful. This guy had 5 or 6 credit accounts that were late last year. Most of his late payments happened during the same period. He went on the verge of being sent to collection agencies on many of them. Let just say that things were not as bright as the sun in Jamaica!

So I stop looking at the file right away; there is no way for me to do anything for this guy anyway. The credit department would just laugh at me if I wanted to submit this file. Sometimes, you know that the patient is already dead before you try to save him.

So I when I am about to decline the file, I give a call to the guy and explain him why. Then the story starts:

“Well, you know, I went through a hard time. There was that period of my life where I was completely lost and I totally forget about my credit cards. Things went so bad with my wife that I had to leave the house for a few weeks. Then I used my credit cards to pay for my expenses and I could not keep up forever.

However, now things have settled down. In fact, I’m back with my wife and we solved our problem. My bills are now up to date and I even made a lump sum payment on my mortgage at the end of the year. I’m telling you, I’m back in business.”

I listened carefully to his story as he sounded genuine. Unfortunately, his late payments kicked down his Beacon Score pretty hard. In fact, this was the type of file that is being declined by our banking system without going to a credit analyst. I felt bad as I could not do much for him at that time.

This is at this point that I thought about a solution. In fact, chances were that her wife has an impeccable credit. Therefore, I asked him to apply with his wife as main applicant so we have better chance to get his request approved. He agreed and was quite happy to have an alternative.

Since I did not see his wife’s profile yet, I can’t say if they will be approved or not. However, there is one thing I know; if his wife may forgive him, the bank is impetuous when it comes down to late payments. In fact, this dark period of his existence might have length only 3 months but it will show on his credit bureau for the next ten years. Unfortunately, banks will remain reluctant to grant credit this individual until these issues are washed away.

Therefore, always make sure that you make the minimum payments on all your credit cards, even when you go through rough times!

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“Well, you know, I went through a hard time. There was that period of my life where I was completely lost and I totally forget about my credit cards. Things went so bad with my wife that I had to leave the house for a few weeks. Then I used my credit cards to pay for my expenses and I could not keep up forever.