Help out a newbie

[Anonymous]

Well I finally turned from a lurker to member, and I need some help figuring out the best way to handle a problem. I always was a cash only person until 2 years ago when I bought my home. Never had a credit card, only had a Cap1 dental loan(paid w/out any problems). Had scores in the upper 700s' with everyone. Now I've got a Shell ($700), Cap1 M/C($750)and Cap1 Visa($3000). Usually keep util pretty low or PIF but some family health problems have me at about  75% util now. Problem is I have 2 big,dead trees(bad weather has me worried they're going to fall) and a roof that needs some work. Should I get a small personal loan to pay off the cards and really bump up my scores so I can get into a HEL at a good rate, or take the loan to do repairs and and throw all I can at the cards? Everyone has such great ideas and experience here that I know I'll get some answers. Thanks everyone! Sorry for rambling

[Peach8321]

Hmm, not sure why you haven't gotten answers yet (perhaps move this to the CC thread?).

Right now, you are looking at $4,450 on CC and some housework issues (to sum up).

I would suggest pulling your scores from here and see what they are - so we can give the best advice (ie, if they are like 620 that's one thing and if they are 720, its another).

I would suggest doing a budget for yourself and start putting money into a "House" fund - they will always need work so you will always need money for them.

Second, I would shop around to see how much everything will cost to do - two trees could be $1000 and a roof could be $5,000-$10,000 - either way, it's more than the cards but it's still a big difference and worth finding out WHAT you need before doing anything else.

Third, I would suggest taking the amount needed to a bank or CU and asking what rate they are offering for that amount, WITHOUT pulling scores (take in the scores you just pulled here, as I suggest earlier) - they should be able to give you a good estimate based off of your information.  If the rate is super high (>15%) then keep shopping.

Either way, you are asking if you can take out a loan - my advice is to save the best you can, and while getting the work estimates, see if they will give you a real time estimate on how long you have left - especially for the roof.

Pay the most you can on the CC while saving and if you need to, take out a loan for the house - not the cards - and pay off both as fast as you can.  Then save so this question doesn't come up again.

Good luck!

[LIGHTNIN]

IMHO, I don't think taking out a loan for cc's is a good idea, because what happens is the person max's out the cc'c again.

This happens when a person doesn't have an emergency fund to dip into.

I understand how medical bills can throw your budget upside down.DH and I both have chronic health problems.

You can do this, just take baby steps.

The problem is you have more money going out then is coming in, so you need to turn that around.

Expenses......Look at your bills, see which ones you can lower or do without even just for alittle while.

Cell phones look for around cheaper plan or call your current provider to see if they will help.Same for cable tv or do without for awhile.

Home and car insurance see if you can lower those expenses.

Income.....See if you can work more hours or overtime. Maybe a 2nd job,part time. It doesn't have to be forever, just until you can get on your feet.

Or  you decide to keep the 2nd job and save that money into an emergency fund.

Google "frugal living" you may find some saving tips there. Good Luck to you.

[RobertEG]

From both a financial and FICO perspective, I can see benefit to using a lower-rate installment loan to reduce CC debt.

From a financial point of view, if, and only if, you take the entire amount of the loan and apply it to your CC debt, then your total debt does not increase.

Your monthly interest would be less.  The chance of reduction of your CL on the high balance CC would also be a factor.   So, if you have the will power to apply the loan only to the other unpaid debt, I dont see a downside.

From a FICO perspective, the downside would be a new inquiry to get the loan, and the addition of a new TL to your CR, which would lower your average age of accounts.

Both of those are FICO factors of relatively low weight, and in the case of the new inquiry, short duration.  Using the funds to reduce revolving % utiil would probably have a more postive overall impact than the new inq and reduction of AAoA.  % util of the new installment loan will have very lttle FICO impact.

There appears to be benefit to this tactic.