Is there something less sever than DMP or Bankrupcy that I can do??

[marty56]

Hopefully then they will blacklist her so she is forced to go to a CU that wont play the games the so called big boys do.  As long as she is straight with them, they will be with her.

[newstart2010]

Well, the other sad fact is that she has been blacklisted from her two most fave banks as well.  NFCU and USAA.  Its a bad situation.  Hopefully she will come here at some point and get some help with stuff.  I know its helped me a ton!! 

[MattH]

---

@smallfry wrote:
bogfrog no matter how you decide to handle this situation try to remember one thing. The 15K you have already paid has no bearing on your decision.

---

+1 absolutely true.  Economists and pyschologists call this the "sunk cost fallacy."  Decisions should only take into account future costs and benefits, but on the emotional level we find it extremely difficult to be rational about money we have already spent.

[tb2424]

Check this out. August 2008 our CC debt was 32260 total and at least a month behind on every one. We were paying 1400 a month total with about 95-98% going to interest. Finally bit the bullet and called credit counseling agency even though I had heard negative things about them from so-called financial gurus. Enrolled in plan to pay cards off in 5 years. New total monthly payment for all cards was 715 a month. 18 months later total debt is 23602 and TU is 643, EQ is 652, which is surprising to me. I expected it to be much lower after hearing the guru's. Payments cut in half, total debt down by almost a third in 18 months. I would not hesitate to suggest going this route.

[marty56]

If you have extra mone, you can also pay the CCCs even while the DMP company is.  I did that towards the end of the program.  As you near the end, it is doubly important to track the actual balances since the last thing you want after finishing the program is a late payment.  Remember the DMP company doesn't know the exact balances.

[Anonymous]

---

@tb2424 wrote:
Check this out. August 2008 our CC debt was 32260 total and at least a month behind on every one. We were paying 1400 a month total with about 95-98% going to interest. Finally bit the bullet and called credit counseling agency even though I had heard negative things about them from so-called financial gurus. Enrolled in plan to pay cards off in 5 years. New total monthly payment for all cards was 715 a month. 18 months later total debt is 23602 and TU is 643, EQ is 652, which is surprising to me. I expected it to be much lower after hearing the guru's. Payments cut in half, total debt down by almost a third in 18 months. I would not hesitate to suggest going this route.

---

I decided not to go with DMP, simply because I think I will be able to get better interest rates over time managing on my own.  (After the 22nd, I'll start knocking off those high rate balances thanks to the new law, and my average rate should drop to near 6% within a year or so.)

But as for the Gurus, and even some of the people that post here.  Half the time, I think these people are nothing but shills for the credit card companies.  When Citi rate-jacked me to 30%, and I looked for advice on closing my cards, many people said doing so would give a huge hit to my scores.  Well, it's been 6 months since I closed my 1st citi card, 3 months since I closed my 2nd, both report as closed on my credit reports, both have ~15k balances, and my FICO scores WENT UP.  

Of course, I've been paying everything down aggressively, but this garbage that you should bend over and take 30% rate jacks because it will hurt your FICO scores is pure BS plain and simple.  If it were true, then all that would mean is that FICO scores are a BS metric. Taking a 30% rate jack is the exact opposite of being either sane or responsible.

[Jazzzy]

---

@Anonymous wrote:

---

@tb2424 wrote:
Check this out. August 2008 our CC debt was 32260 total and at least a month behind on every one. We were paying 1400 a month total with about 95-98% going to interest. Finally bit the bullet and called credit counseling agency even though I had heard negative things about them from so-called financial gurus. Enrolled in plan to pay cards off in 5 years. New total monthly payment for all cards was 715 a month. 18 months later total debt is 23602 and TU is 643, EQ is 652, which is surprising to me. I expected it to be much lower after hearing the guru's. Payments cut in half, total debt down by almost a third in 18 months. I would not hesitate to suggest going this route.

---

I decided not to go with DMP, simply because I think I will be able to get better interest rates over time managing on my own.  (After the 22nd, I'll start knocking off those high rate balances thanks to the new law, and my average rate should drop to near 6% within a year or so.)

But as for the Gurus, and even some of the people that post here.  Half the time, I think these people are nothing but shills for the credit card companies.  When Citi rate-jacked me to 30%, and I looked for advice on closing my cards, many people said doing so would give a huge hit to my scores.  Well, it's been 6 months since I closed my 1st citi card, 3 months since I closed my 2nd, both report as closed on my credit reports, both have ~15k balances, and my FICO scores WENT UP.  

Of course, I've been paying everything down aggressively, but this garbage that you should bend over and take 30% rate jacks because it will hurt your FICO scores is pure BS plain and simple.  If it were true, then all that would mean is that FICO scores are a BS metric. Taking a 30% rate jack is the exact opposite of being either sane or responsible.

---

I agree. Your closed card should continue to help you for quite some time. While you still carry and pay down a balance, as long as the credit limit is still reporting on the card, both the limit and the balance are calculated in your utilization until the balance reaches zero. This helps with your overall utilization. And, after the card is at zero, although it no longer counts in your utilization, it will report for up to 10 years on your reports. That helps your history and average age of accounts.

I don't believe in keeping cards that are hurting you with high fees or high interest. Credit is supposed to help us...not hurt us. I think you made the right decision.

[GregB]

If you have paid the balance down $15K in 8 months AND you have an effective interest rate of 12%, then you seem to be doing very well. I would think that you would already notice much more of the $2500 per month going to principal.

I assume by your comment in a later post about being RJ to 30% and closing an account that you were able to keep the interest rate on that balance reasonable by closing the account. Did somebody actually suggest keeping that account open and paying 30%?

Are you being careful to pay down the higher rate cards first in order to maximize your principal reduction? Are you keeping track of everything and paying online to make sure that you are not ever late on even one payment.

As you get the balances down and some cards paid to $0, you should start to get some attractive offers. It seems that you are on the right track the way you are going even if it takes longer than you wish. This way you end up with better credit instead of a bunch of closed accounts.

I'm deeper in debt on CC than you although about half of it is business debt so I have a bit more flexible cash flow to pay the payments. Even so, my actual personal income is less than yours. I have found a good solution to reducing some of the stress: I pay a bit more than the minimum very shortly after the statement is generated on each account so that nothing can be late. Then I pay the extra on the accounts as I am able. I wouldn't worry about emergency fund until you have your debt paid down. You do have lots of open accounts where you could charge an emergency. Sounds like you have the problem of separating wants and needs handled already. Congratulations!

[Anonymous]

---

 I assume by your comment in a later post about being RJ to 30% and
closing an account that you were able to keep the interest rate on that
balance reasonable by closing the account. Did somebody actually
suggest keeping that account open and paying 30%?

---

 

Yeah, I got a lot of the "never close accounts", "it will destroy your FICO score", etc BS. Here is the thread.

Check out the 7th response down, written by creditwherecreditisdue, for example.  Turned out that the original Citi FAKO was actually WAY closer to reality than what most people predicted.  I'm VERY glad I did not follow all that advice.

EDIT:  Looking back at that thread, I didn't really mention rate hikes, so maybe I'm being somewhat unfair in criticizing some of the advice.

---

Are you being careful to pay down the higher rate cards first in order
to maximize your principal reduction? Are you keeping track of
everything and paying online to make sure that you are not ever late on
even one payment.

---

Oh yeah.  I got it down to a science.  I've even programmed a full blown simulation in Matlab which is actually quite realistic.  I'm an engineer, so maybe I'm going a little overboard.   There is no way I'll ever be late; I know my old life-of-the-loan promos would go out the window.  I check my all my accounts like twice a week.  I pay the minute statements print, not when they are due.

---

As you get the balances down and some cards paid to $0, you should start to get some attractive offers.

---

Actually, the balance transfer offers are already starting trickle in for the first time in about 3 years.

---

Sounds like you have the problem of separating wants and needs handled already. Congratulations!

---

Thanks.  Working full time and going to grad school helps...  No time to spend money.

Message Edited by bogfrog on 02-15-2010 05:12 PM

[GregB]

I am also an engineer, mechanical by training, computer engineer by occupation. 

I do think most of them are actually right with the conclusion that it is best to not close most accounts. Many posters are vague on the details and not very thorough in their research.

My conclusion is that it has little or no effect immediately but does affect you Average Age of Accounts down the road. I would be much happier today if I hadn't closed a batch of accounts in 1982 giving me 4 more 30+ year old accounts in my average. I should have done more research before merging 3 accounts in 2001 that I opened in 1995. I think the correct information was available in 2001 even if it was mixed in with a bunch of nonsense.

It does seem silly to keep any account open that has a fee unless you really need it for age.