topic Re: Repair options in Rebuilding Your Credit

Repair options

slund5499 — Mon, 30 May 2022 17:17:46 GMT

Recently tookout Lending Club Loan to pay off all my open accounts down to zero. Saw Credit scores increase 7 points so far. LC is $7K over 36 Mo. with $252 Mo. payment at 26%. Elected to go this route because CC were $320/Mo. and average 29% (mostly predatory cards).

This leaves my wife CC owed at $3K at $270/Mo. (mostly predatory cards). my scores current EQ 590 TU 620 EX 565 andher scores EQ 624 TU 640 EX 648. Her scores have jumped between 6 and 12 pts dues to my load payoff and her being AU and several accounts.

WOuld it make sense to find another loan (if possible) to payoff her CC's and my LC loan if we could get approved for one at less than 20% over 3 years (conventional bank andCU loans are out of the question. I work and draws temporary disability bringing our pre-tax income in at $115K. We rent and want to get her scores up closer to 700 and substitute my LC payment with one that is between $300 - $450 per month. At this time her CC are $270 and the LC loan is $253 (per month).

Our offers on CRedit Karma, Credit Sesame and WalletHub are higher that 23% and the terms are 5-10 Yrs. That is just too long and the interest alone is nearly doubling the loan amount requested.

We have baddies are will drop starting Feb 23 and progress through Nov 23 and should help our scores jump then. I am curious how the loan(s) will affect Fico's since our current CC utilizations would be around 2-3%, as we planned to keep small balances revolving on a couple cards throughout the year to keep activity alive.

Love to be able to pay off baddies but the falloffs are so close (based onannualcreditreport.com) is just doesn't make sense to work on those until we have the current CC down to nearly zero. Will take inquiry hit if we could find something doable at a lower rate.

Any opinions or thoughts would be helpful.

Re: Repair options

jrwa81 — Mon, 30 May 2022 19:17:33 GMT

Adding even more debt to pay off current debt is never a good idea and is just going to have you going in endless circles. Sure, you'll pay off the credit cards, but then you will be left having to pay off these loans, so what's even the point? A 7-point jump isn't exactly earth shattering and your current loan is only saving you $68 a month from what you were paying on the cards - not very much at all, so I guess I don't really understand the logic behind this. You simply replaced one debt with another with very little savings by doing so. I would avoid taking out any further loans at all costs. You will only end up in an even deeper hole that you'll have to dig yourselves out of. You want to keep your DTI ratio as low as possible. I also wouldn't trust anything that sites like Credit Karma and Credit Sesame recommend. They tend to link up with and push predatory companies to those with less than desirable credit. I would see if there is any way to increase your income with something like a side gig or possibly even selling things to help pay off your credit cards before taking out any more loans. Use the snowball method to pay off your cards. Don't take out another loan.

Re: Repair options

chiefone4u — Mon, 30 May 2022 17:43:39 GMT

@slund5499 wrote:
Recently tookout Lending Club Loan to pay off all my open accounts down to zero. Saw Credit scores increase 7 points so far. LC is $7K over 36 Mo. with $252 Mo. payment at 26%. Elected to go this route because CC were $320/Mo. and average 29% (mostly predatory cards).
This leaves my wife CC owed at $3K at $270/Mo. (mostly predatory cards). my scores current EQ 590 TU 620 EX 565 andher scores EQ 624 TU 640 EX 648. Her scores have jumped between 6 and 12 pts dues to my load payoff and her being AU and several accounts.
WOuld it make sense to find another loan (if possible) to payoff her CC's and my LC loan if we could get approved for one at less than 20% over 3 years (conventional bank andCU loans are out of the question. I work and draws temporary disability bringing our pre-tax income in at $115K. We rent and want to get her scores up closer to 700 and substitute my LC payment with one that is between $300 - $450 per month. At this time her CC are $270 and the LC loan is $253 (per month).
Our offers on CRedit Karma, Credit Sesame and WalletHub are higher that 23% and the terms are 5-10 Yrs. That is just too long and the interest alone is nearly doubling the loan amount requested.

We have baddies are will drop starting Feb 23 and progress through Nov 23 and should help our scores jump then. I am curious how the loan(s) will affect Fico's since our current CC utilizations would be around 2-3%, as we planned to keep small balances revolving on a couple cards throughout the year to keep activity alive.
Love to be able to pay off baddies but the falloffs are so close (based onannualcreditreport.com) is just doesn't make sense to work on those until we have the current CC down to nearly zero. Will take inquiry hit if we could find something doable at a lower rate.

Any opinions or thoughts would be helpful.

Would you clarify your income? I'm not sure if I'm understanding correctly. It looks like you have a job, but currently receiving temporary disability instead of normal income? (Question is meant to help us understand your provable income).

Does your wife have any verifiable income?

If your wife has verifiable income, I would suggest she do a SP credit qualification with PenFed (Pentagon Federal CU) to see what if anything she may qualify for. They offer up to $50,000 in unsecured loans with rates as low as 5.49%, for up to 60 months.

If you have equity in a vehicle you might get a better rate by cashing out its equity to secure the loan that pays off the credit cards. <--- In this situation Debt to Income issues can (possibly) be overcome by having the bank pay off debt directly.

Some financial institutions will use previous years tax return as proof of income to get past the temporary disability (might also require something from treating physician stating expected recovery time).

You'll likely have to either put up some kind of collateral or use a traditional bank/credit union to get better rates than you currently have.

Re: Repair options

slund5499 — Mon, 30 May 2022 17:56:19 GMT

Makes sense. Taking out anadditional just to pay off the CC is unwise unless we continue to opt out and close our CC's. I know about the snowball pay cycle application. Frankly, this makes more sense now than before the LC loan. we were just trying to see if getting a new loan to pay down her CC and the LC loan makes sense (But would not be viable unless we could get a real good rate and the same or less in the length of loan).

Was a Pen Fed member for over 5 years before they close my savings account out due to inactivity. Also, was a NFCU member. Neither CU could offer a loan to consolidate. Now after goingback to school, getting my degree I landed a decent income job. Now, we want to moveforward to clean up our CC debt, Lower of Utilization and just make a loan payment to covereverything, if possible and productive.

Re: Repair options

kilroy8 — Mon, 30 May 2022 18:04:53 GMT

Your interest rates are too expensive for you to borrow money, you have to get that paid off as a priority. The amount of interest you are paying lowers your quality of life from what it could be, as I am sure you can tell.

So, no new debt and accelerate payoff of the debt that you have as much as possible. That would be my advice.

Keep your credit as clean as you can in the meantime.

Re: Repair options

slund5499 — Mon, 30 May 2022 18:14:33 GMT

I am now working, after going back to school to earn my degree. Making decent income. My wife went on disability from her job. So we moved back to Oregon so I could start my new job. We wanted to pay off our CC a few years back, but with her income (then) and my full time school, we had to rely on CC's most of the time to get us through. So far, conventinal loans have been shot down from CU's and that is why we decided to try LC.

Granted, I only saved $70 or so a month and have only seen a 7 point jump in scores which is better than nothing. The loan will impact FICO's differently than open CC's. I started closing my CC out and will keep 2 open (Bank of America and Merrick Bank). BofA is our current oldest account with the lowest APR and Merrick is an open $2K CL for emergencies).

She owes around $2.7K on her CC. In theory, we could take the extra money saved from the loan and snowball her payments, which is a viable option.

Over next 14 months (beginning inFeb 23), our baddies from OC and CO will start dropping off (confirmed myannualcreditreport.com reports). I think the loan will help with credit mix and keep our CC utilization below 4%. Our DTI ratio will still be at 9% until the loan payments bring it down. Anticipating on paying down the loan faster to save on interest.

Just wanted opions and thoughts.

Re: Repair options

chiefone4u — Tue, 31 May 2022 00:34:30 GMT

Be careful and read the fine print on those loans from places that offer sub prime loans... it seems a lot of these loans have the interest baked into them; meaning even if you pay it off early, you end up paying the same amount of interest as if it went full term.

Re: Repair options

slund5499 — Tue, 31 May 2022 01:40:53 GMT

I did check the load docs and website. There is no prepayment penalty for early loan payoff at Lending Club.

Re: Repair options

Murph5065 — Tue, 31 May 2022 10:42:48 GMT

I am kind of in the same boat as you with scores in mid 600's i have applied through LC also but after a week still have not heard anything from them. May i ask how long it took to get your approval through them? I am thinking about canceling it.

Re: Repair options

slund5499 — Tue, 31 May 2022 11:11:53 GMT

After applying, 1 day to complete verification process. 1 day to get funded. 1 day to hit bank account.

Re: Repair options

Murph5065 — Tue, 31 May 2022 11:19:02 GMT

Thank you for reply.

Re: Repair options

joltdude — Tue, 31 May 2022 16:43:12 GMT

You said Navy closed your account due to inactivity, (and not due to not paying them) and that they currently could not offer you a loan.. Don't dismiss them entirely.. Might need to make some payments and up your score but dont write them off entirely as an option, just have to wait a bit...

-J

Re: Repair options

chiefone4u — Mon, 06 Jun 2022 16:48:02 GMT

@slund5499 wrote:
I am now working, after going back to school to earn my degree. Making decent income. My wife went on disability from her job. So we moved back to Oregon so I could start my new job. We wanted to pay off our CC a few years back, but with her income (then) and my full time school, we had to rely on CC's most of the time to get us through. So far, conventinal loans have been shot down from CU's and that is why we decided to try LC.
Granted, I only saved $70 or so a month and have only seen a 7 point jump in scores which is better than nothing. The loan will impact FICO's differently than open CC's. I started closing my CC out and will keep 2 open (Bank of America and Merrick Bank). BofA is our current oldest account with the lowest APR and Merrick is an open $2K CL for emergencies).
She owes around $2.7K on her CC. In theory, we could take the extra money saved from the loan and snowball her payments, which is a viable option.
Over next 14 months (beginning inFeb 23), our baddies from OC and CO will start dropping off (confirmed myannualcreditreport.com reports). I think the loan will help with credit mix and keep our CC utilization below 4%. Our DTI ratio will still be at 9% until the loan payments bring it down. Anticipating on paying down the loan faster to save on interest.

Just wanted opions and thoughts.

I missed the bolded part of your response @slund5499 when responding awhile back.

I suggest putting the cards in you safe/sock drawer/freezer instead of closing the accounts.

While closing the accounts ensures you don't spend on them again, a little will power and out-of-sight-out-of-mind will help your scores more.

As you close the accounts you've paid off, you are reducing your available credit and in turn increasing your aggregate utilization.

If you feel the temptation to spend will be to great for you, close the accounts as you've planned... finances before FICO is your smartest move in this situation.

Re: Repair options

slund5499 — Tue, 07 Jun 2022 03:23:51 GMT

I closed 2 smaller accounts to see theimpact on my scores. Strangely, EX +/- 0, EQ +2, TU +2. The remaining accounts expect BofA are paid off and in safe. BofA is used and paid in full weekly to earn 3% on gas rewards.

So far, almost a month and have not given into temptation to used paid off accounts. Out of site out of mind.