My Credit Disaster

My Credit History Story:

Here is my credit disaster story from start to finish. First I always had the philosophy to not be in debt and stuck to that for quite a while. I would save up and pay cash for used cars. The only loan I had was a small mortgage on my main house, and was diligently trying to reduce that, paying extra on principle when possible. Then one day I got tired of working behind a computer 12+ hours a day.

Now Major Borrowing Starts:

I had absolutely no credit card bills whatsoever, but I had 90,000 of open credit offers with very low interest rates, zero to one and a half percent. I was remodeling our house at the time and I had opened up a Home Depot credit line with twelve months of zero interest and also NO PAYMENTS for twelve months. I did this to conserve capital so I could pay my help that was painting, putting in flooring and other tasks of home improvements. I had plenty of work coming in and my accounts receivables that were on the books were enough to pay for what I had borrowed. So I had thought, "No problem I can pay this off well before twelve months is up."

Free Interest is not Free If:

I don't know if you know this but the way these credit lines work is that they are keeping track of the interest every month and if you cannot pay the whole borrowed amount by the end of 12 months they put all that interest back into the loan and now you have to pay it off. So its NOT really interest free, unless you can pay the loan off in six or twelve months depending on the plan.

My Plan Starts to go Awry:

So all is going well with the remodeling and no payments for TWELVE MONTHS! Then the unexpected happens. My one big "Accounts Relievable" customers stops sending me payment and my work has slowed down. But I have over 10,000 dollars in receivables available to me. My customer was brokering much of my work and he had been taking vacations and hunting trips on my money thinking that as long as he was fining me work that he could use the money for thirty days and pay me with the next big contract's funds. When that went dry and he hadn't paid me for almost 90 days I cut him off as a broker until he started paying me back. Basically he defaulted on the rest of the money he owed me and ripped me off. Well you guessed it, the Home Depot loan was not going to get paid in time before the interest kicks in.

Credit Card Borrowing Starts:

So as I was saying I had all these Credit Offers coming in from various credit card companies. So I took out a ten thousand dollar cash advance offer with no interest for twelve months and paid off the Home Depot loan. Credit card offers like these are a true "No Interest" Loan for stated term, as long as you make your minimum payment on time and every time. If you screw it up and make one payment late then the HIGH Interest kicks in on your next statement. 

Our New Business Startup

On our 30th wedding anniversary : See Part II

David C. (CreditDisaster.com Staff Member)