topic Re: Bad or Good Credit? in General Credit Topics

Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 16:05:24 GMT

I have recently applied for a loan and was denied. I want to get my score up but don't understand how it went down. I have never paid late on anything. The following is a list of my debt.

Mortgage $117,898

Auto Loan $ 24,600

Equity Loan $ 10,500

Visa Credit Card $ 4,000

Furniture Card $ 2,700

CitiFinancial $ 2,685

Macy's $ 848

Citi Platinum $ 500

Paypal $ 175

Kay Jewlers $ 147

I have also co-signed for someone for an auto loan of $10,000. One of the reason's why I was denied because this payment put me in debt more than I make. I don't know what to do.

Message Edited by bgonzalez706 on 12-03-2007 08:05 AM

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 15:29:53 GMT

what are your cl's. Need to find your utilization rate and work to bring it down. If the cards are maxed or even half maxed, your score won't go up.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 15:31:13 GMT

unfortunately they are all maxed out except for Macy's and Kay.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 15:35:58 GMT

hi bgonzalez, welcome to the forum. Here you will find a wealth of information to help you get credit healthy.

We can offer opinions/advice, but you need to tell us details of your accounts. The info you've provided thus far, is to incomplete to come up with suggestions.

1. Credit Cards: which one's? Credit limits on each? Relist the balances on each, please.

2. What is contained in your Credit Reports, and which one's? Any lates, bankruptcies, judgements, liens, foreclosure, COLLECTIONS, etc etc etc.

Your question was easy to ask, yet very difficult to answer, as there are so many variables to consider.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 16:03:23 GMT

Equity Loan $10500 maxed out

CitiFinancial $2685

Visa Credit Card $4,000 maxed out

Furniture Card $2700 $4000 limit

Macy's $848 $1100 limit

Citi Card $500 maxed out

Pay pal $175 maxed out

Kay $148 $500 limit

I've never been late & make a payment higher than the minimum

Message Edited by bgonzalez706 on 12-03-2007 08:03 AM

Re: Bad or Good Credit?

George2037 — Mon, 03 Dec 2007 15:47:40 GMT

Once just one of your CL's reach the 80% of it's available credit you get dinged pretty hard, looks like you have 5 of them in that situation. I would pay down the CC's and most definatly find a way to get rid of the CitiFinacial (I got one two years ago and they are the #1 baddy listed by MyFico in the little scale thingy they use, consumer Finace Loans are not a good thing to have).

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 15:55:44 GMT

Later on this month I'll be receiving a $400 bonus from my job. What should I apply it towards so that it could make the biggest difference. Also, I'll be getting about $4000 from tax returns next year. What should I apply that to? Should I work on getting rid of citifinancial first or the other cards?

Re: Bad or Good Credit?

George2037 — Mon, 03 Dec 2007 15:57:36 GMT

MOst definatly Cards first the balances are way to high. Optimum balances are under 1-9%.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 17:01:05 GMT

Closing any of your accounts, will hurt your scores, not help them.

You are in dangerous territory regarding your credit limits. Please stop using them completely. You will have to go to the bank frequently to be sure, but limiting spending on them while paying them down will only help you.

Pay as much as comfortable possible, even if it hurts. You MUST get the utilizations down.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 17:18:57 GMT

Since most of your cards are maxed out, you need to try and pay off the ones with the highest interest rates first.

Re: Bad or Good Credit?

haulingthescoreup — Mon, 03 Dec 2007 18:06:09 GMT

You need to have your CC's owing under 50% just to START with. Here are the goals, and how much you need to reach them:

bgonzalez706 wrote:
Equity Loan $10500 maxed out --installment loan, don't worry about for now
CitiFinancial $2685 --consumer finance loan, don't worry about for now
Visa Credit Card $4,000 maxed out --under $2,000, need $2,000
Furniture Card $2700 $4000 limit --under $2,000, need $2,000
Macy's $848 $1100 limit --under $550, need $550
Citi Card $500 maxed out --under $250, need $250
Pay pal $175 maxed out --under $85, need $90
Kay $148 $500 limit you're good--stay put for now

I've never been late & make a payment higher than the minimum

OK, you are in WAY over your head. I hope to heaven that whoever you co-signed that loan for won't dump it on you. Right now, it looks like you need $4,890 just to get your cards to 50% utilization.

First of all, get the cards out of your wallet and deep in the back of your sock drawer. Forget Christmas, birthdays, whatever, you need to fix this first. Plan on giving people St. Patrick's Day presents instead. No charging!
Good job never having been behind. I wish I could say the same! Keep that up.
Don't co-sign for anyone ever again. It's wonderful that you have a kind and generous spirit, but you have to take care of yourself first, or you can't help anyone else out.

For the paydown: FICO looks at the utilization (amount owed divided by credit limit) on each revolving account and on your overall revolving credit. So the first thing that you need to do is to get as many cards down to 50% as possible, regardless of interest rate. You almost have that on paper, with the cash in hand and the refund coming next year.

I would put the bonus on the Visa first, the refund on the rest of them, and you need to find another $500 in addition to get all cards under 50%. Pay down the smallest cards first, so that you will have the fewest over 50%. After they are all under 50%, then you can look at paying down the highest interest first, or the smallest balance first, or whatever floats your boat.

If you don't have small children or an elderly relative dependent on your presence, get a part-time job over the holidays. Everyone's hiring. McDonald's isn't glamorous, but it's money, and that's one meal taken care of (yuck!) I work two jobs (65-70 hours a week) to catch up on retirement. I don't have the time or energy to spend money.

The ideal goal is to have 4 of your cards paid in full every month, and the other two under 10%. It's simplest to do that with the higher limit cards. You can let this amount report and then pay them off, but that's on down the road for you. As you can see, minimum plus a little more doesn't get you anywhere. Right now, you are enslaved to your cards, and that's not a happy place to be. Once you have only two cards reporting a minimum amount, and you've paid down or off your loans, then you will be the master of your credit, and your life will be a whole lot less stressed out. Good luck!

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 18:53:51 GMT

I almost feel bad commenting on all of the great advice from all of these high contibutors but one thing everyone has hinted to but not explicitly said is something I think is very important.

In whatever strategy you choose to come up with, MAKE A PLAN. Use Microsoft Excel, I do. Its a good way to keep all of your bills and obligations in mind when trying to drive down balances. I create a sheet for each month and take all of my bills and list the minimum (if not a fixed amount), the due date, how much I plan on paying and once I pay, I list the date I paid and the amount I paid as well as confirmation numbers (if available). When I make this plan, I sum up the amounts I plan on paying and then add in a approximation for food, gas and minor extras (drive these to a minimum) and then make sure that this is all equal to less than your income (what you actually take home).

The last thing you want to do is put a substantial amount towards one of your revolving accounts and 3 days later realize you just gave Macy's half your rent or that you didn't budget in for one the minimum payments on one of the accounts you were going to aggresively attack later.

Re: Bad or Good Credit?

Anonymous — Mon, 03 Dec 2007 21:16:17 GMT

I actually have a spreadsheet and do have a plan to be pretty much debt free in about 2 years. I have a partener whom I divide my expenses with but we're just starting out on this credit thing. I just turned 21 a few days ago & realized how much in the hole I've gotten my self. Thanks to everyone for their great advice. What do I do when I've paid 50% on one card, should I reduce the payment and pay more on another card?

Re: Bad or Good Credit?

haulingthescoreup — Mon, 03 Dec 2007 23:18:26 GMT

When you're first getting everything down to 50%, I would go with the $400 on the Visa first, like I said, and then divide up the tax refund, paying the smallest, then the next smallest, and so on to get the maximum number of cards paid down. So that would be PayPal, Citi, and Macy's, then I think I would get the Visa down to 50%, and then the rest on the furniture card, and keep working on that last one.

I'm guessing that you've gotten rate-jacked by now --are all your APR's huge? There are so many different tactics for which card to go after in this second stage --the smallest first, then roll that payment into the next smallest and so on (the snowball plan); the highest APR first, then next highest (stretches you dollar, but if they're all high, this might be kind of pointless)... You might want to look at which cards will be your keepers --the ones that you want to rehabilitate, and impress the lenders. So maybe the Visa, Citi, and (?) Macy's might be your targets. This part really is more flexible.

But sure, whenever you get something down to that initial 50%, take that money and roll it into the next target. That will make it go even faster. But remember that the first one will creep back up with interest, so make sure that it's holding even or reducing a bit.

I apologize if I sounded harsh on my first post. Your situation scared me, and as my adult kids frequently tell me, when I'm scared, I sound angry! I'm glad you've got someone working on this with you. At age 21, you can turn this around pretty fast if you can hunker down and throw all the money you can find at the problem. Unlike in the government, this tactic works on credit problems!

Re: Bad or Good Credit?

BBYGRL — Tue, 04 Dec 2007 00:49:09 GMT

I found myself in a similar situation last year. The advice posted in this tread is GOLD! It's important that you stop using your cards no matter what. It's the only way you can pay down your balances. After getting my utl down from 60% to 10%-20%, I set personal CLs for each card to maintain my target ult percentage. For example:

Orchard - CL 1,000 my personal limit would be 100 to 200 max.

Cap 1 - CL 10,000 my pl would be 1,000 to 2,00 max.

This helped be tremendously over the last year. A good management plan will lead to better scores over time.

Good luck to you. Please keep us posted on your progress.

Re: Bad or Good Credit?

Anonymous — Tue, 04 Dec 2007 01:13:27 GMT

Ok you answerd your own question. Maxed out credit lines can hurt your scoes as much as acollection EACH TIME. Further, it indicates borrower who is living beyond their means by using credit to replace income. If possible GET THOSE BALANCES DOWN.

Re: Bad or Good Credit?

Anonymous — Tue, 04 Dec 2007 14:14:57 GMT

So should I sell my house so that I can pay everything off quicker? Another thing, when I applied for that loan, it stated that the length of my accounts were not long enough. What is considered a good length of time?

Re: Bad or Good Credit?

Anonymous — Tue, 04 Dec 2007 14:27:35 GMT

bgonzalez706 wrote:
So should I sell my house so that I can pay everything off quicker? Another thing, when I applied for that loan, it stated that the length of my accounts were not long enough. What is considered a good length of time?

Are you in a big hurry to get your score up, or are you just concerned about getting out of debt?

If you do not need to get your score up in a hurry then you need to use your money wisely and pay down the higher interest cards first like I originally said. If you need to get your score up fast then go with HTSU's plan.

I can't answer your other two questions. You are the only one who can decide whether it is worth it to sell your house and lose your potential investment just to pay off credit cards. Most accounts move out of the "new" stage after 12 months, and the longer they are open the better.

Re: Bad or Good Credit?

Anonymous — Tue, 04 Dec 2007 14:34:25 GMT

So in a few months I want to buy a car. Should I make a down payment ($3500 on a $9000 loan) or a smaller down payment and apply the difference to my current debt?

Re: Bad or Good Credit?

Anonymous — Tue, 04 Dec 2007 14:35:27 GMT

With your HELOC maxed out, is there more equity in the house? Would you have trouble making ends meets if you sockdrawered your cards and continued to make payments in order to decrease balances? If the equity is maxed out would it be more affordable to move into an apartment until you get your debt down and attempt to purchase another house?

If the answer to these questions is yes, that may be a feasible idea. Before we go that far, have you looked into part-time or seasonal part-time work during the holidays? You could pu the entireamount earned minus expenses towards your debt as an additional payment and maybe hang on to your investment. With the market the way it is now, you maynot get the value frm your home that you think you should.