a fairly complicated question about paying off cards and credit scoring

[sl]

A Goodwill Letter is a letter you write to the creditor explaining the situation as to why you were late asbasically asking for foregiveness and removing the late from your credit report. I have had luck with three GW letters I wrote.

[fused]

I will get to work on this and have a plan posted shortly. If you didn't have 3 of your 4 accounts closed, the plan would be very easy to offer up. Lenders hate seeing closed accounts with balances, especially ones with high util. The good news is you have more than enough cash on hand (8K) and monthly payments of 3K to bring this debt down an improve your scores...over 700 here you come!

Message Edited by fused111 on 09-01-2007 12:53 PM

[cjs]

Wonder if you have had time to put the plan together. My biggest q is whether I should be working to bring down the home equity line, since it is closest to topped out, or whether securred loans count differently than credit cards.

[PayYouNever]

have you ever heard of the Law of 72? It's an investment term regarding how fast a value will double that has simple interest involved. So with your 29.95 APRs, the loan balance will double in a little over two years, so you have to pay twice as much the monthly minimum (at least) to make a serious dent in those two cards.

Also, do all that you humanly can to get the APRs reduced from 29.95%, write GW (goodwill) letters, write to the company president explain your situation and that you've been paying on time for over a year and see what happens. It's extraordinarily hard to deplete a debt that's at such a high rate. I was in a similar situation with my AMEX Delta card, I was late on two payments and then over-the-limit. It took me six months of paying early and extra to get them to consider reducing the interest rate by roughly half. After that happened, I still continued to pay early and at the higher monthly amount because I was used to doing so, and it's made the debt disappear faster.

[cjs]

Thanks for responding. Unfortunately it is a lot more complicated than that. I am not trying to pay off balances - I am trying to up my credit score so I can refinance and bundle all this stuff into a new mortgate (I have a lot of equity in my home and a fairly high loan rate).

I have tried to get the rate reduced on those two cards. Since the accounts already are closed, they refused to do so, trying to get me to get a home equity loan through them. I should add that I got into difficulty with these two cards when one with a different company was bought out by the other. They looked at the combined balance, reduced my credit limit on both so that I immediately owed a lot of money which I could not pay and it went downhill from there.

So my question continues to be given that I am paying a lot of money out every month where should I put it to up my credit score so that I can approach a lender for a new mortgage.

Message Edited by cjs on 09-12-2007 02:50 PM

[fused]

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cjs wrote:

Wonder if you have had time to put the plan together. My biggest q is whether I should be working to bring down the home equity line, since it is closest to topped out, or whether securred loans count differently than credit cards.

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You disappeared and I didn't save the spreadsheet. I will redo it and PM it to you!

[PayYouNever]

You wouldn't have copies that you could post of the GW letters that you wrote, would you?

[cjs]

I did it by telephone. If you think that doing it in writing would make a difference I will procede with that strategy.

[PayYouNever]

If the same financing company holds the two credit cards is asking you for the home equity loan, you might want to see if all that debt can be combine into one loan with a lower APR. Or you could make sure that the home equity loans gives you enough to pay down those cards to 10%, which will help raise your score for the refi.

[Anonymous]

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cjs wrote:

As soon as possible. My hope was to get the fico to 700, but I need to do it before Jan. when I will no longer be working as many part time jobs (in addition to my full time one) in order to pay this off.

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Honestly, at your scores you might already qualify for a straight conforming approval.  Most lenders run through what is called DU, (Desktop Underwriter) and get a decision.  I

Fannie mae approves mortgages at "levels." based on credit.

"Normal" is best credit, and is Approve/Eligible.  EA1, or "Level 1" is slightly worse credit or overall profile, EA2 worse yet, EA3 is the "lowest" level and highest rates.

It's not just FICO score.  Fannie doesn't just look at FICO, I have seen a 603 get an Approve/Eligible and a 660 go EA2.  They also look at:

Overall payment history

Debt-to-income ratio

Assets like savings, checking, 401k, cash-value life ins.

f you get an Approve/Eligible in Fannie Mae's automated underwriting, you either get the loan, or you don't.  If you get an Approve/Eligible at a 654/686/686 FICO you get the same rate as a 700 FICO with an Approve/Eligible, in most (99%) cases.  Now, if it goes "EA1" that's a "Level 1" which is a step down and a somewhat higher rate.  Have you applied anywhere?

What would your loan amount be vs. your home value?  What about income and assets?  Do you have cash in the bank (I assume not much with all that debt) or a 401k retirement account?

I say definitely keep working on those FICO's...but you might already be able to get a refi done.  In fact paying off all those revolving balances with that refi would do wonders in and of itself for those FICO's.

If you have more questions, send me a PM!

Message Edited by Joe77 on 09-12-2007 03:36 PM