My father, at age 82 had about $17,000 of credit card debt and was making the minimum payments of $425 each month. Meanwhile, he had no cash in the bank for savings. His social security income along with working part time as a courier for my law firm was just enough to get by. We’d meet every Sunday for breakfast at the Big Boy in Walled Lake and the conversation went like this:
“Dad, you need to stop paying the credit cards and save the $425 per month. There is nothing they can do to you and I can make the debt go away if needed. You are just getting by and if your expenses go up, you will not have enough money.” In response, he’d say, “But what about my credit score?”
Given that we’d have the same conversation about 40 times and he did not hear that well, I’d get excited and raise the octave of my voice and say, “What does it matter – you don’t need a credit score, there is no reason to borrow money!” He’d reply, “What if I need to buy a new car!” I’d say, you’re 82 – you won’t need a new car!” After that, he’d agree to stop paying the cards and bring me the bills. Unfortunately, it never happened and the next Sunday we’d have the same conversation! (This happens with our folks when they get up in age).
As things go – five years later, he was no longer able to act as a courier for me – so his part-time job was gone and it was time for him to move into independent living. The result – his income was $500 per month less and his costs were $800 more, leaving him $1,300 short if he continued to pay the cards and $900 short even if he stopped paying. Of course, he’s my Dad so I was fine with helping him out – but the first thing I did was – – take a guess — I stopped paying the credit cards!
A year later, the transmission on his Ford Focus goes and he calls me from the car dealer and announces, “I’m at the Ford Dealer, the trans went on my car, I’m buying a new car.” I said, “Oh yeah, you might have an issue since you haven’t paid a credit card payment in a year.” He said, “I haven’t?” and I said, “No, since I’ve been paying your bills, I stopped paying them.” His response, “Don’t worry, they will sell me a car.” Ten minutes later the salesperson called me and said, “Any chance you will co-sign for him?” My response – (take a guess), was, “Are you crazy?” He replied, “that’s what I thought”.
Fifteen minutes later, the salesperson called back and said, “Ford Credit approved him, he’s driving out of the lot with another (used) Ford Focus.”
A year or so later, my Dad’s driving days came to an end when he ended up in Algonac on a Sunday night and thought he was in West Bloomfield. I called Ford Credit and they picked up the vehicle. They called me a couple of months later and asked if I wanted to settle on the deficiency. I told them politely, “No – he has no money so there is no reason to settle.” The credit card companies called me a couple of times (since I had my Dad’s Power of Attorney – a critically important estate planning item) asking if I would be willing to settle on the credit cards – asking me to make an offer. My reply was a tad more cryptic, “Did you ever see The Godfather? My offer is nothing.” After a couple of exchanges, they stopped calling.
I lost my Dad last year – after a great 91-year run. There are a few items I want to emphasize for you and your parents: (1) He did not need to worry about his credit score – even when he went to buy a car, Ford Credit still financed the car; (2) had I guaranteed the car debt, I would have had to pay the shortfall; (3) none of the credit card companies or Ford Credit ever sued him or called him and hassled him (since I told them to call me with the Power of Attorney); and (4) had he stopped paying the credit cards when I told him, he would have saved nearly $20,000 over those 5 years which we could have used to cover the extra cost of independent living when the time came.
I don’t fret over the $20,000, because I gained a favorite story to tell — and I wouldn’t trade the Sunday morning crazy breakfasts for anything. All I ask is that when you keep hearing how important your credit score is – take it with a major grain of salt and think about my Dad’s story! Have a great week and sign up for two great upcoming seminars – on Debt Elimination and Estate Planning.