topic Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI. in General Credit Topics

Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Mon, 31 Oct 2022 03:13:05 GMT

First, will provide financial picture overview

Second, will share what I am thinking about doing

Third, would like your recommendations/steps

First

Credit Score is approx. 840/Fico Score is 862

Last hard pull May 2022
According to Credit Karma credit score is 813 but I find CK always shows lower/isn’t accurate

2 Business Credit Cards (NO LONGER USING, PAYING DOWN BALANCES)

Credit Card 1 =

7500 balance with current APR 20.49% (credit limit 10k)
payment made each month MORE than minimum

Credit Card 2 =

6900 balance with current APR 12.49% (credit limit 10k)
payment made each month MORE than minimum

1 personal Credit Card (NO LONGER USING, PAYING DOWN BALANCE)

5700 balance with current APR 14.99% (credit limit 27k)

Have a few other personal credit cards that are open with zero balance and zero utilization.
Student loan debt =

11,500 balance with current APR 3.75%
- payments made each month on time (expected to be fully paid off in 2025/2026)
- This is a private loan. Not eligible for forgiveness

Auto Loan debt = 11,500 with APR 5.29%.
- Payment made each month on time.
I am self-employed and my business income for 2022 will gross approx. 62-65k
- This is far less than ideal and am looking at ways to bring this up.
DTI is poor BUT credit score is HIGH.
Carrying all of the debt I have and NOT generating more than 65k is where I am stuck. But again my credit score is stellar.

Second

I have the opp. to apply for a business loan (through my business bank) and roll both credit card debt into one loan. If approved APR would be approx 11-13%
1. May not get approved due to DTI
Via Credit Karma I have an offer for an 0% 18 month balance transfer for my personal credit card.
1. I feel I would have a good chance of being approved here.
I have thought if taking my auto loan and re-financing with a credit union to get the APR down.

Third

Please provide steps/recommendations on what I can do to get rid of this debt faster while working on generating more income.
I have been able to stay away from credit card utilization miraculously so I am not charging anything to them. My concern is I may need to do this if income doesn’t arise.
Let me know if you need me to provide more information if this isn’t sufficient enough to get support.
Please do not advise on giving up the business and getting a job or applying for bankrupcy. That is not on the table nor will it support my situation. Thank you in advance.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

GZG — Mon, 31 Oct 2022 03:33:51 GMT

For paying off the debt:

Minimum payments on everything and then every extra dollar goes towards the highest interest debt, which in this case is CC1.

No idea what your odds of a personal loan to consolidate all of that CC debt, I'll let somebody else speak to that.

Can you lower your expenses as opposed to increasing your income?

No eating out. No streaming services. Sell your TV?

Even If increasing income means working weekend morning Walmart shifts or Uber Eats/Doordash, that's still an extra ~$200 a week to throw at your debt.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

Expansion — Mon, 31 Oct 2022 04:08:47 GMT

@JS45 welcome to the forums! I know it takes a lot of courage to share your situation, and I am cheering you on and sending you mega love!

FWIW, I don't think things are necessarily as grim as you may currently fear. Since I started posting here in February, I've been approved for several really good cards and a good loan too, so, if I can do it, you can do it, too.

@FinStar - and other mods - suggestions for this particular situation with the high DTI? and/or, could you tag any wise members, who could specifically advise on the high DTI situation?

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

Expansion — Mon, 31 Oct 2022 04:09:57 GMT

@JS45 - also, in case it's helpful on the business side, here's my thread with my own journey about building business credit: https://ficoforums.myfico.com/t5/Business-Credit/Advice-on-building-business-credit-sought/td-p/6496403

There are some specific credit unions and cards in there that might be worth investigating and easier to get approved for than you expect.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

FireMedic1 — Mon, 31 Oct 2022 10:42:30 GMT

@JS45 wrote:
First, will provide financial picture overview
Second, will share what I am thinking about doing
Third, would like your recommendations/steps

First
Credit Score is approx. 840/Fico Score is 862
Credit Card 1 =
7500 balance with current APR 20.49% (credit limit 10k) Credit Limit 10,000 Balance 7500 Util 75%
6900 balance with current APR 12.49% (credit limit 10k) Credit Limit 10,000 Balance 6900 Util 69%
5700 balance with current APR 14.99% (credit limit 27k) Credit Limit 27,000 Balance 5700 Util 21%

I am self-employed and my business income for 2022 will gross approx. 62-65k
Carrying all of the debt I have and NOT generating more than 65k is where I am stuck. But again my credit score is stellar.
Third
Please provide steps/recommendations on what I can do to get rid of this debt faster while working on generating more income.
Please do not advise on giving up the business and getting a job or applying for bankrupcy. That is not on the table nor will it support my situation. Thank you in advance.

Welcome @JS45

The scores you provided are from where? Must be Vantage. Your aggregate util % is 54%. Start paying down the highest util accounts and get the 2 high util accounts all below 48% first step. Then below 28%, then land around 6%. The one at 21% is ok for now. Your dont want to talk about getting a job to help pay this debt or generate more income. But the business is stale. You can make $400+ a month donating plasma and saving a life for couple hrs a week. If the business cant for now increase your income. Where else can you make more if we dont say PT job? Maybe pull a MyFICO 3B pull and see what your real scores are. 862 couldnt be FICO with the util posted. Report back.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

SouthJamaica — Mon, 31 Oct 2022 13:59:28 GMT

@JS45 wrote:
First, will provide financial picture overview
Second, will share what I am thinking about doing
Third, would like your recommendations/steps

First
Credit Score is approx. 840/Fico Score is 862
Last hard pull May 2022
According to Credit Karma credit score is 813 but I find CK always shows lower/isn’t accurate
2 Business Credit Cards (NO LONGER USING, PAYING DOWN BALANCES)
Credit Card 1 =
7500 balance with current APR 20.49% (credit limit 10k)
payment made each month MORE than minimum
Credit Card 2 =
6900 balance with current APR 12.49% (credit limit 10k)
payment made each month MORE than minimum
1 personal Credit Card (NO LONGER USING, PAYING DOWN BALANCE)
5700 balance with current APR 14.99% (credit limit 27k)
Have a few other personal credit cards that are open with zero balance and zero utilization.
Student loan debt =
11,500 balance with current APR 3.75%
payments made each month on time (expected to be fully paid off in 2025/2026)
This is a private loan. Not eligible for forgiveness
Auto Loan debt = 11,500 with APR 5.29%.
Payment made each month on time.
I am self-employed and my business income for 2022 will gross approx. 62-65k
This is far less than ideal and am looking at ways to bring this up.
DTI is poor BUT credit score is HIGH.
Carrying all of the debt I have and NOT generating more than 65k is where I am stuck. But again my credit score is stellar.

Second
I have the opp. to apply for a business loan (through my business bank) and roll both credit card debt into one loan. If approved APR would be approx 11-13%
May not get approved due to DTI
Via Credit Karma I have an offer for an 0% 18 month balance transfer for my personal credit card.
I feel I would have a good chance of being approved here.
I have thought if taking my auto loan and re-financing with a credit union to get the APR down.

Third
Please provide steps/recommendations on what I can do to get rid of this debt faster while working on generating more income.
I have been able to stay away from credit card utilization miraculously so I am not charging anything to them. My concern is I may need to do this if income doesn’t arise.
Let me know if you need me to provide more information if this isn’t sufficient enough to get support.
Please do not advise on giving up the business and getting a job or applying for bankrupcy. That is not on the table nor will it support my situation. Thank you in advance.

My suggestion would be to join a credit union which has a good low interest, non-rewards platinum card with no balance transfer fee and no cash advance fee, apply for such a card, and use that card to get rid of your personal credit card balance. Such a card can be helpful in managing your personal finances over the long term, which could mean taking less income from the business during this period, which would mean more of your business revenue being available to pay off the business credit cards. My preference would be not to saddle yourself with an installment loan over what is a temporary situation.

As to paying down the business cards, I would concentrate on paying down the 20.49% card. The other one has reasonable interest.

I think you're doing a great job of managing your situation, and asking intelligent questions. It's especially great that you've been able to stop using the cards for now.

And welcome to the forum

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

SlideOrInsert — Tue, 01 Nov 2022 17:02:44 GMT

I probably would not make auto refinance a focus.

the quick sample of auto refinance rates I looked at were in the 4-5% apr range, so even if you do refinance you're saving just a few dollars a month in interest for the probably 2 or so years you have left.

	limit	apr	balance	int $ /mo
student		3.75	11500	36
auto		5.29	11500	51
nfcu auto refi		4.50	11500	43

what is your budget for the payments on revolving accounts?

this makes the most impact. if you are just making the estimated min pmts, then ~60% of your payment is going towards only interest.

	limit	apr	balance	int $ /mo	min pmt
business 1	10000	20.49	7500	128	-165
business 2	10000	12.49	6900	72	-152
personal 1	27000	14.99	5700	71	-125
TOTAL	47000	16.18	20100	271	-442

what I would do depends on whether or not the business debt reflects on your personal credit report.

if it does not reflect on your personal report, then I would probably just use the avalanche payment method and start with personal 1, then business 1, then 2. do not take on personal debt to refinance the business debt, treat them separately.

if the business debt does reflect on your personal report, then I would treat it as one. does personal 1 offer balance transfers at all? you reference other accounts with zero balance, what are their limits and do they offer balance transfers? if yes, I would try and transfer out the $5700, then transfer back the total $20100 at 0% or some lowish apr. "nper" below is the number of months required for payoff at the pmt amount.

nper	apr	balance	int $ /mo	pmt
69	16.18	20100	271	-450
46	1.99	20100	33	-450
45	0.00	20100	0	-450
29	0.00	20100	0	-700

short of that, seek out a personal loan. start with the ones that offer you a rate with a soft pull and no fees (discover, marcus, etc). probably would only make sense with a rate below 16.18% blended interest rate from above. some quick math below with estimated payments:

nper	apr	balance	int $ /mo	pmt
36	16.00	20100	268	-707
36	15.00	20100	251	-697
36	14.00	20100	235	-687
36	13.00	20100	754	-677
36	12.00	20100	201	-668
36	11.00	20100	184	-658
36	10.00	20100	168	-649

24	16.00	20100	268	-984
24	15.00	20100	251	-975
24	14.00	20100	235	-965
24	13.00	20100	754	-956
24	12.00	20100	201	-946
24	11.00	20100	184	-937
24	10.00	20100	168	-928

I would not bother with a "new" personal balance transfer credit card, with HIGH DTI and self employment I can't imagine an approval with a large enough starting limit (10000+) to make an impact. if you are approved for only a few thousand, it would probably be better just to go with a personal loan and make overpayments.

you need to increase income and payments AND lower your interest.

so the "strategy" should be to make payments of $700-1000 per month if you want to clean this up in 2-3 years.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Tue, 01 Nov 2022 01:24:06 GMT

Thank you @Expansion @I appreciate your kindness and support!

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Tue, 01 Nov 2022 01:25:42 GMT

Thank you for your support and cheering me on. I appreciate it.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Tue, 01 Nov 2022 01:28:17 GMT

Thank you. I'm going to take all this in and report back.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

pizzadude — Wed, 02 Nov 2022 14:59:13 GMT

@JS45 wrote:
First, will provide financial picture overview
Second, will share what I am thinking about doing
Third, would like your recommendations/steps

First
Credit Score is approx. 840/Fico Score is 862

Can you clarify this, what FICO score did you pull and from where ? I don't know that it would be possible to have an upper 800s FICO with two of your revolving accounts ~70% utilization.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

SouthJamaica — Thu, 03 Nov 2022 15:31:33 GMT

@pizzadude wrote:
@JS45 wrote:
First, will provide financial picture overview
Second, will share what I am thinking about doing
Third, would like your recommendations/steps

First
Credit Score is approx. 840/Fico Score is 862
Can you clarify this, what FICO score did you pull and from where ? I don't know that it would be possible to have an upper 800s FICO with two of your revolving accounts ~70% utilization.

The way I read it, the high utilization accounts were business cards, not personal cards, so they most likely do not affect OP's FICO scores.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

pizzadude — Thu, 03 Nov 2022 22:07:37 GMT

@SouthJamaica wrote:
@pizzadude wrote:
@JS45 wrote:
First, will provide financial picture overview
Second, will share what I am thinking about doing
Third, would like your recommendations/steps

First
Credit Score is approx. 840/Fico Score is 862
Can you clarify this, what FICO score did you pull and from where ? I don't know that it would be possible to have an upper 800s FICO with two of your revolving accounts ~70% utilization.
The way I read it, the high utilization accounts were business cards, not personal cards, so they most likely do not affect OP's FICO scores.

Fair point ! Unless of course they're Cap1 biz cards....

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Fri, 04 Nov 2022 02:54:06 GMT

@SouthJamaica @pizzadude the 2 CCs that equal to about 17k in debt are business credit cards. The 5k is personal.

the 840 is my credit score.

when I log into one of my bank accounts where I also have my personal credit card it shows me a fico score on behalf of Experian of 862. Should I be looking somewhere else?

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Fri, 04 Nov 2022 02:56:21 GMT

I got 862 fico via experian. Is this incorrect?

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Fri, 04 Nov 2022 02:57:55 GMT

@FireMedic1 862 fico via experian. How do I find vantage and what is the difference? Thx

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Fri, 04 Nov 2022 03:00:58 GMT

@SouthJamaica I've been thinking on the business debt consolidation loan. It would lower apr of both biz ccs but then I'm stuck in the loan with no other option.

what I think you're saying is pay minimum payment for biz Cc with lower apr, pay more than minimum on biz Cc with higher apr and apply for balance transfer card for personal Cc debt. You suggest credit union. Is this correct?

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

JS45 — Fri, 04 Nov 2022 03:04:10 GMT

@SlideOrInsert I've managed to make more than minimum payments each month on all 3 credit cards yet with income getting tighter mag not be able to.

when applying for a personal cc I'm pretty sure they do not look at my business debt. I will double check.

as for auto refi I was looking at credit unions although that was a few months ago so they could have gone up.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

SouthJamaica — Fri, 04 Nov 2022 03:07:37 GMT

@JS45 wrote:
I got 862 fico via experian. Is this incorrect?

No, that's an excellent source.

Re: Seeking Strategic Steps for Debt Reduction with a HIGH DTI.

SouthJamaica — Fri, 04 Nov 2022 03:08:26 GMT

@JS45 wrote:
@SouthJamaica I've been thinking on the business debt consolidation loan. It would lower apr of both biz ccs but then I'm stuck in the loan with no other option.

what I think you're saying is pay minimum payment for biz Cc with lower apr, pay more than minimum on biz Cc with higher apr and apply for balance transfer card for personal Cc debt. You suggest credit union. Is this correct?

Yes.