topic Re: need some advice? in Credit Cards

need some advice?

mgs2010 — Wed, 11 Aug 2010 03:36:58 GMT

I have been considering a number or different things to solve my credit card debt issue....I've considered bankruptcy, consumer credit counseling, settlement, and just sucking it up and paying each card forever until they are paid off.

I'll be turning 23 next month and have just about 40k in credit card debt. Yes, thats right, 40k.....I have no valid reason for any of this debt nor do I have anything to show for it. Just irresponsible spending. I have stayed current on everything. There are no lates on my credit and no collections etc. My score peaked at about 705 back in november of last year and is at 620 right now due to utilization. I got hit with some cld's and account closures due to outstanding debt. No account is in bad standing. Anyways, I make roughly 40k per year and have a car and student loans to pay for which amount to about 800 to 900 a month between the two, plus rent and living expenses. I'm not sure what to do. I can afford the payments for the credit cards (technically...) but have little-to-no breathing room after everythings paid. I really want to avoid bankruptcy and consumer counseling, I dont want to ruin my credit because I know if I somehow pay this off that my score will be really high...utilization and inqs are the only things bad about my credit. Should I call my credit card companies and negotiate a different payment term? smaller minimums, lower interest? I don't want all of my accounts to close or have a bad record. I'd honestly rather file bk than do settlements because if the settlement trashes my credit then why bother paying? I just dont know what to do...I feel the walls closing in on me and I'm a little scared. I've thought about bankruptcy in the past but have been told that I will regret it and to avoid it at all costs....so i just kept paying, and charging

Any advice for a young irresponsible adult looking to make the right decision?

Re: need some advice?

mgs2010 — Wed, 11 Aug 2010 03:42:51 GMT

some details on my balances...

citi cards I owe about 12,600 to and its got a good rate (7.24% and the account is closed because they hiked my interest to 29.99 so i opted out)

chase 6,200 @ 6.25% I closed this one on my own to prevent charging on it

Chase 874.00 @7.24%

Capital One 9200 @17.9% ----this is my oldest account. and the highest interest

discover 4700 @ 12.24

HSBC 4400 @ 15.9%

theres more, but i honestly dont remember them all anymore..only a few more at pretty average rates between 12-15%

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 03:52:47 GMT

I would call each CCC and see what they can do for you. If they can lower your interest or make your payments smaller for a while that might help. I would make sure that it would not be reported negatively on your CR before agreeing to their terms.

You didn't list the balances on each card but, another way would be to continue to make your minimum payments on every card except the one with the lowest balance. Pay more on that until it is paid off. Then take that money and put it on the next higher balance card until that one is paid off. So on until they are paid.

Another way would be to pay the ones with the higher interest rates first.

Utilization counts as 30% of your FICO score. The higher the utilization, the lower your score will be.

None of it will work unless you stop charging on them.

Others may feel differently but, would only file BK as a last resort.

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 04:27:03 GMT

wow ... that high debt ..

IF I am in your position, I will call all the credit card company to close the account and try to make payment arrangement, But I will keep 2 credit card account open (the 2 oldest) and 1 store account open, try to pay off the lowest balance first, and close it. Because you have problem with your spending habbit

Re: need some advice?

laz98 — Wed, 11 Aug 2010 05:05:59 GMT

how much are your minimum monthly payments? is it really expensive where you live? i only ask because we make about the same amount, but my monthly expenses are much higher than yours (you said 800-900), so i was just curious if it was because you spend more than we do, or your minimum monthly payments are just that much higher than ours.

my only real advice is to get control of your spending. stop spending, & just pay down one card at a time, like the others suggested. in our case, we started with the card that had the highest apr, which coincidentally also had the highest balance.

Re: need some advice?

mgs2010 — Wed, 11 Aug 2010 05:19:45 GMT

I live in Ohio, fairly low cost of living here..

my citi card min payment is about 190

capital one is about 220

discover 98

hsbc 90

chase 120

other chase 18

my car is 256

student loans about 500/month starting in november. I have noooo idea what to do. I really don't want to file bankruptcy or miss payments on anything. I think I will just pay minimum payments on all my cards and try to pay off the smallest one first.

Re: need some advice?

laz98 — Wed, 11 Aug 2010 05:22:48 GMT

just keep doing what you are doing, staying on top of your payments. don't miss anything, because it might start a snowball of death. we were once very near your position, about 30k of debt. i thought we would never, ever get out of that. now we have less than 10k, which is still a lot, but the interest is no longer out of control, & our scores are much better. so it seems like a neverending hill, but i promise, you CAN get to the top

Re: need some advice?

mgs2010 — Wed, 11 Aug 2010 05:32:52 GMT

This sure will be the ultimate test for myself. I feel like such an idiot! my major in college is FAMILY FINANCIAL MANAGEMENT! I can't even take my own advice! Well, at least I have no negatives and no missed payments....there is definitely light at the end of the tunnel...once my util is down then my scores will definitely be excellent..I just pulled my experian report and it has 43 accounts in good standings, most of them closed and paid car loans, credit cards, student loans....so I think my mix of credit is good...my debt is just out of control. Thanks for all the advice...I'll keep posting my results and am going to do everything I can to fight it out to the end. I already cut up my credit cards so the balances can't go anywhere but down.

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 05:43:16 GMT

@mgs2010 wrote:
I live in Ohio, fairly low cost of living here..

my citi card min payment is about 190
capital one is about 220
discover 98
hsbc 90
chase 120
other chase 18
my car is 256
student loans about 500/month starting in november. I have noooo idea what to do. I really don't want to file bankruptcy or miss payments on anything. I think I will just pay minimum payments on all my cards and try to pay off the smallest one first.

Kudos to you not missing any payments, with debt like that it is hard. At my highest I had about 9k in cc debt which is lower the most in 2010.

Keep making those payments, but do keep in mind, watch for statements be it online or paper statements. In those statements could be a rate increase, that will kill you! To be honest, your payment history is excellent and you must have had great credit at one point with high limits like that.

I would suggest closing all cards except for one, your longest card that is still open. If one of your credit card companies soft you and see the high balance and debt they could raise your apr. making your 190 citi card payment about 360 bucks! Will you lose those cards? Yes, but you will keep the rate where it is right now and your AAoA for a good while, and you will see it being paid down. To me that is better then having a card open you cannot use anyway! When your credit score goes up when you get those closed balances paid off, just open credit when you need it.

You sound like me. You got in trouble with the swipe, and now you have to pay it off, and live at the same time. It takes time, and you can do it without hurting your history. But then again, this is the only time I would recommend you closing a card, because if those rates increase, you will cry foreal!

You can certainly do what you like, just advice from the myFICO family, and keep us posted here, especially your plans. I am sure we would all like to see you make it out, and not have a scratch on your report!

Re: need some advice?

laz98 — Wed, 11 Aug 2010 05:44:11 GMT

don't feel bad! my gf's parents are accountants & are totally behind on all of their bills....i'm like WTF!!! it's kind of funny, in their case, but it just goes to show that none of us are immune to ignoring our own advice! sometimes it's hard to practice what we preach.

Re: need some advice?

mgs2010 — Wed, 11 Aug 2010 05:56:07 GMT

Thats for sure! I think I need to learn a lesson and either sink or swim. As for the advice about closing credit cards...I've actually started that with the exact thought in mind about avoiding an apr increase before it can happen! I closed my citicard, and both chase accounts because those three have THE lowest APRs and I owe them each quite a bit. I just called Cap1 and they wouldn't reduce my interest rate at all....capital one is going to be the card I keep because I've had them since the day I turned 18...longest history. I really don't want to close my discover card...but all the rest can go. I have them cut up for right now. Anyone have a backdoor number for capital one to talk to an account manager so I can try to convince them to lower my apr by a few points?

Re: need some advice?

MarineVietVet — Wed, 11 Aug 2010 06:04:07 GMT

@mgs2010 wrote:
Thats for sure! I think I need to learn a lesson and either sink or swim. As for the advice about closing credit cards...I've actually started that with the exact thought in mind about avoiding an apr increase before it can happen! I closed my citicard, and both chase accounts because those three have THE lowest APRs and I owe them each quite a bit. I just called Cap1 and they wouldn't reduce my interest rate at all....capital one is going to be the card I keep because I've had them since the day I turned 18...longest history. I really don't want to close my discover card...but all the rest can go. I have them cut up for right now. Anyone have a backdoor number for capital one to talk to an account manager so I can try to convince them to lower my apr by a few points?

Here is a list of Backdoor Numbers for many different companies. Hopefully you'll find one for Cap 1 that works for you.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772

You can do the same thing with hard work

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 06:12:06 GMT

@mgs2010 wrote:
Thats for sure! I think I need to learn a lesson and either sink or swim. As for the advice about closing credit cards...I've actually started that with the exact thought in mind about avoiding an apr increase before it can happen! I closed my citicard, and both chase accounts because those three have THE lowest APRs and I owe them each quite a bit. I just called Cap1 and they wouldn't reduce my interest rate at all....capital one is going to be the card I keep because I've had them since the day I turned 18...longest history. I really don't want to close my discover card...but all the rest can go. I have them cut up for right now. Anyone have a backdoor number for capital one to talk to an account manager so I can try to convince them to lower my apr by a few points?

That is awesome! I hope everything works out for you. You sound like you are getting a great head start, and I wont lie, 40k is going to take a 'hot minute', but you know that. I applaud you for not missing a payment, only up from there! Congrats on that, and I certainly wish the best of luck to you! Would love to continue to hear about this progress, more so about how much your score increases, so please keep us updated!

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 06:17:10 GMT

Have you looked into ways you could reduce your student loan payments? I'm under the Income Based Repayment Plan and managed to reduce my payments to $220 from $600. Of course your payments will go up as your income goes up, but they will never be more than they were under the standard repayment plan. And if you work in public service, like myself, the loan balance will be forgiven after 10 years if you meet all the criteria.

Re: need some advice?

mgs2010 — Wed, 11 Aug 2010 06:48:05 GMT

Funny that you mention the student loans because I literally JUST finished the online application to consolidate with federal direct loans, and I am going to do the income based repayment! Only problem is that I was in college during the private student loan explosion and got suckered into a couple private loans with sallie mae..Now I am 34k in the hole with them and the min payments are going to be like 350.00..They don't have any such repayment program. The only option I have is interest only for 2 years. Forget that! I'd rather suck it up and pay down the balance rather than make that conglomeration of thieves any more rich than they already are!

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 10:39:05 GMT

Hi mgs,

While you're working through your financial woes - have you considered getting a second job? Consider working your tush off for a season and nail those balances. And I think Dave Ramsey has some excellent usable advise for debt snowballing and getting out of debt. Just don't be afraid to work really really hard. And, as Dave says, eat rice and beans and drive a beater until you get in a financially sound place.

Best wishes to you! Lots of us have been there - you can get out and it will feel darn good! But dig your heels in and push hard.

Re: need some advice?

Anonymous — Wed, 11 Aug 2010 14:34:14 GMT

Hi there you are in a tough spot. Few things, first you are not bankrupt so put that out of your mind. It would be the worst possible move you could make. Second many have suggested you close accounts. From a credit score perspective, again a bad move. I would however cut them up so that it would be much harder to fall into the temtation to use them. Talking with Cccs might be a good idea but just for budgeting help. At this point I would do nothing at all to even think about defaulting. You can work through this but it will take commitment and several years to do. You may in fact still be in a good place in a few years. Pick one card pay all you can over mins and pay minimums on the rest. You cando it. Hang in there. You are young and we ALL have done really done stupid things. Learn from your mistakes but do not try to find an easy way out. That will in the long run hurt you way more than the debt. Good luck

Re: need some advice?

laz98 — Wed, 11 Aug 2010 17:37:49 GMT

i agree, i don't think i would have closed any of the cards. those are all positive tradelines that would have continued with you for many years. yes, they will stay on your reports for 10 years after closure, but you could have kept them beyond that, you know?

Re: need some advice?

mgs2010 — Thu, 12 Aug 2010 03:49:42 GMT

the only ones I closed were Citi (to avoid the rate going to 29.99%) and my two chase cards (6.25% and 7.24%) which I closed mainly to avoid them from rate jacking me in the future...and they already started chasing the balance (credit limit was 10,000, balance was 7,000 and the reduced the limit to 7300) since closing them they have not chased the balance any further. I do plan on keeping my other accounts open, unless they give me some sort of AA then I will opt out and close.

Score alert today shows my score increased to 625, woo hoo! I have a loooooonnnnnnnnnnggggg way to go.

Re: need some advice?

haulingthescoreup — Thu, 12 Aug 2010 04:09:15 GMT

I respectfully disagree with the earlier post about closing all the cards but one. While it might seem that this would prevent debt from reaccumulating, we all know how to get more cards, I'm afraid.

If there are just an annoying number of cards, I can see closing some as you go.

As another poster said, it's critical that you get more income. I didn't have the debt burden that you have, but I had some unexpected tuition increases for one of my kids that I put on a CC that I had to knock down, plus I was waaaay behind in retirement savings. So I got a second job 5 years ago, and I still work 50-60 hours a week. It's really amazing what can be done with extra cash.

This is incredibly tough to do in days when so many people don't even have one job, so I realize that this will be a struggle. But I just don't think that you're going to be able to make significant forward progress without additional income.

Once you get through this (and you can, with a lot of stubbornness and determination!), this will make you that much better of a financial counselor. You'll be able to both empathize and lay down the law to clients that are in the position you're in now.