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My friend has terrible credit due to defaulted student loans, unpaid medical debt, unpaid taxes, and recently was told his credit score was 511 from a bank when opening a checking account.
What are the steps he should take? I was thinking... he needs to rehabilitate his student loans so he can get on an income based repayment plan. Can I get some info on what to expect?
In regards to taxes... unlikely to be able to pay this in full. Can he work out a lower repayment?
Is getting a secured credit card going to be possible/help him at all? I was thinking the Capital One one since the AF is low and I enjoy my history with them.
His life really got off track after being hit by a drunk driver leading to a loss of employment and chronic pain, so please be kind. He is only working part time at a low wage now.
Student Loans:
Your friend should definitely request a income based repayment plan. Based on the information you provided, his payments should be minimal. I started off on an income based program and my payments were $5.00 a month. Once I found a decent job, I went on the rehab program and my payments were $10.00 a month. After 9 months, my loan was transferred to a new lender, all interest and penalties were removed and it went from $40,000 to a little under $20,000. I now pay $300.00 a month.
Taxes:
How old are the taxes? I'm surprised his tax refunds are being garnished for the debt. Need more information.
Secured Card:
A secured card is definitely a good idea. Just make sure the one he chooses reports to all 3 credit bureaus. Capital One is a good choice. I have 1 Cap1 secured card myself.
His Life:
I'm sorry to hear about the accident and your friends pain. There's no judgment here. I've been there. When I found this forum, my score was below 500. Now, it's 631 and climbing. Wish when happiness and good luck for me. It will get better with persistence and hard work.
Conswalla
First needs to settle or bring all accounts up to date.
Most collectors, OCs will be good at megotiating to get a lower payment. It's for their benefit as they will start getting something vs currently they aren't getting anything.
After that:
I found this post very well written:
Although it's for BK but most things still apply.