Dave Ramsey

Dear Dave,

I have some bad marks on my credit report. What’s the best way to handle them?

Patricia

Dear Patricia,

There can be three types of nasty items on your credit report. There are errors, which shouldn’t be there at all. There are old payments that you paid late, and really, these are just a report of history. Then there are debts that have gone bad. This means you didn’t pay them. If these are the types of items you’re talking about, you’ll have to go back and clean them up. This will mean either making payment in full or settling them at a lower, agreed-upon amount.

Probably the biggest headache will be finding exactly who to pay. There’s a good chance some of them have been handed over to collection agencies. If this is the case, they’ll try to charge collection fees, and in some cases even double the amount owed. You’ll have to negotiate with them for a more reasonable settlement amount. So there’s going to be more than just a financial hassle attached to this endeavor.

But still, even if the debts have a date when they were supposed to “fall off” your credit report, I’d still pay them. Collectors will still chase you in an effort to collect even if they’ve fallen off your record. They aren’t supposed to do that, but many do. And it can hit you at exactly the wrong time—like when you try to get a mortgage.

I think this is a good idea, Patricia. Just expect a little work and a few headaches in the process. Getting this stuff out of the way will improve your quality of life, and besides, it’s your debt. It’s your responsibility to pay it, plus it’s the honorable thing to do!

—Dave

Dear Dave,

I finally paid off my old car, and now I’m taking your advice and saving up to pay cash for a newer one in the future. Where should I put the money I plan on saving for the next five years? Would a mutual fund be a good idea?

Kristi

Dear Kristi,

I love that you’re going to save up and pay cash for your next car. But the problem with mutual funds is they go up and down in value. I love mutual funds for long-term investing, and by this I mean a bare minimum of five years. Still, I wouldn’t recommend them as a method of saving for a vehicle purchase.


Dave Ramsey

Dave Ramsey is a personal money management expert, popular national radio personality and the author of three New York Times bestsellers.
 
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