I have a question regarding debt consolidation loans. Speaking here about my wife's credit, she has 6-7 cards which are mostly maxed out. 97-100% usage. Her credit score would be great if these were paid down. Currently her Fico 8 is at 593 Experian / 629 Equifax / 624 Transunion. No missed payments. I've seen her score in the low 700's when the cards were paid off.
my question is: How can she qualify for a consolidation loan. Seems like a catch 22. Either, she doesn't pre qualify or she has to pay off debt in order to raise her score to qualify. Any advice on the best options? Should we just debt snowball and forget about consolidating. Thanks for any advice or options I haven't thought of.
Last App: May 9, 2022 | Last HP: May 9, 2022 | Gardening since: May 9, 2022 | Last updated: May 15, 2022
importantly, come up with a budget to get all the cards below 87%. the threshold for "maxed out" is 88.9%. I would start by avalanche with the highest apr first. then pay minimum + enough to keep it there and move on to the next. once all the cards report below that threshold, start with the pre-qualification sites like discover, sofi, marcus, prosper, local credit union, etc. they will give you an estimated apr and term with a soft pull of her credit. at that point the decision can be made if a loan is worth it.
also, what is your credit utilization like? are there any zero balance cards where you can add her as an authorized user to pad her utilization?
Thank you for the response. I am actually making enough payments this month to get them at or below 87% for starters. I read this on another thread. Can you explain why 87%? I see you said threshold is 88.9%. Is the 1.9% difference just a cushion for interest? I do have zero balance cards that I can add her onto. That's a great thought.
@Arcreactors wrote:I have a question regarding debt consolidation loans. Speaking here about my wife's credit, she has 6-7 cards which are mostly maxed out. 97-100% usage. Her credit score would be great if these were paid down. Currently her Fico 8 is at 593 Experian / 629 Equifax / 624 Transunion. No missed payments. I've seen her score in the low 700's when the cards were paid off.
my question is: How can she qualify for a consolidation loan. Seems like a catch 22. Either, she doesn't pre qualify or she has to pay off debt in order to raise her score to qualify. Any advice on the best options? Should we just debt snowball and forget about consolidating. Thanks for any advice or options I haven't thought of.
Yes. For now any debt consolidation loan she could get would be digging the hole deeper. Yes just snowball and forget about consolidating.
yes, 87% for a slight cushion.
at the end of 2018, I was at 30k of 36k available in revolving debt with a blended interest rate of 18%. my score was in the low 700s with no derogatories. I acquired a personal loan at about 11% for 36 months. I spent 2019 making over the required payments on the loan. during those 12 months I was able to grow the credit limits on all my cards. in the beginning of 2020 I was able to take advantage of a 0% promo on one my cards and payoff the loan by moving the remaining balance. total interest and fees paid was about $2300. if I had gone with the snowball method I easily would have paid 2-3x that in interest.
if you have significant debt I do not suggest a snowball.