Money Watch 8: Debt and refinancing

INDIANAPOLIS (WISH) - Getting out of debt is a top priority for most of us. In fact, of the thousands who signed up to join us in our Money Watch 8 Challenge, 60 Days to Change, 40% said managing debt is at the top of their financial wish list.

That's why debt is taking center stage for Week 2 of the challenge.

Peter Dunn, the financial expert behind 60 Days to Change says credit problems stay on your credit report for seven years and you can never "repair" your credit, only improve your habits.

Single mom Nadia pulled her credit report. And, it was an eye opening experience. She had a bunch of 30 day late payments showing on her credit report.

"Well, those accounts were opened mainly when I was 18 and I was at Ball State and I didn't have any money," said Nadia.

"You can never fix the wrongs, unless you have a reasonable dispute and there are only a couple of things that are disputable. None of the things that you want to be disputable, are disputable," said Dunn.

For Nadia, there were some early mistakes, including buying a car in 2005 for $15,000, while owing $10,000 on her previous vehicle. She took out a 72-month loan.

"After signing my name on the dotted line, it took awhile, six months to a year later, I read the sales slip and it said that I had financed my car for $36,000. So now I'm making a payment of $600 a month for a basic Ford Explorer. I don't even have leather seats or a sun roof," said Nadia.

Dunn says you should log on to Annual Credit Report.com once a year, and get your credit report from each of the three credit rating companies. Peter also recommends leaving your older credit card accounts open. He said all account balances should be below 35% of the available credit. Anything above that starts to hurt your credit score.

"This is a first for me," said Amy.

Stay at home mom Amy has never looked at her credit report before. Peter said it's in good shape. But, he recommends she and her husband consider refinancing their mortgage.

"You've got a 6% loan. Not bad. There could be a time literally in the next 60 days, where it could make sense for you and Brent to consider refinancing," said Dunn.

Dunn said conditions are favorable for most people to consider refinancing now. If you can cut the interest rate .5%, it's worth considering. If you can save 1% he says it's almost always worth it, as long as you don't plan to sell your house in the next 3-5 years.

For almost empty-nesters Merita and Joe, getting a grip on household finances is at the core of getting them back on track.

"Finding out things about our selves and finding out about credit scores. I mean it doesn't bother me whatsoever about what my credit score is," said Joe.

"I think if I made more money it would be simpler," said Nadia.

But, Dunn said making more money doesn't necessarily solve the core problem.

"So basically, we just have to make sure, all the discipline is there before we say, give me more money," said Dunn.

Nadia said, "So you're doubting me?"

"I'm not doubting you, I'm not doubting you. I'm just saying, I'm simply saying, we have to fix your habits," said Dunn.

"We want to put more into our savings. Where right now I think we're just making ends meet to pay our bills and what we have right now. Where we're not putting a lot into our savings and that is our ultimate goal," said Amy.

Nadia said, "Now I know exactly what I need to work on and get out of the way and keep moving forward."

"I'm glad that we did it. As they say better late than never. And I guess I'm going to be one of those old dogs that can learn a new trick," said Merita.

It's important to note pulling your credit report doesn't count against you. When you get your credit report, it won't include your credit score. That costs extra. But, Dunn says you don't need it. The credit report itself is enough.