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@Zimmerman wrote:This is my first post but I'm a long time reader and fan of this site. I've been inspired by other members and similar posts but mostly I've come to the conclusion that I will need help in accomplishing my goals. I've been delusional and generally care free with my credit decisions. The more in debt I became the less I payed attention to the hole I was digging. This has been going on for at least 6 years now. My lowest point was a high interest car title loan with OneMain Financial. There's a number of excuses I could make but only I'm to blame. I've tried several times to change course but it seems I lack the dedication to stick with it. My goal is to pay off all my debt and increase my credit scores in the process. I'm hoping that creating this post and sharing my experience publically will give me the purpose to accomplish this goal. I tend to get obsessive about things, and this has surely contributed to my current situation, but I've also found it can be a great asset if I focus myself towards more productive activities.
The good news is I do have a stable job that pays almost $80,000 year and I have good payment history on all my accounts.
My Fico scores listed below (from myFICO).
Equifax - 628
Transunion - 640
Experian - 670
I'll start with the changes I've already made.
- I've learned to hate debt.
- I've started meditating daily which I'm hoping will help with the long term dedication.
- I've opened a second bank account and plan to use a debit card for all purchases until I'm out of debt. I'll use one for all my automatic and fixed monthly payments which total $3,400 (loans, cards, rent, insurance, utilities). This leaves $1,000 - $1,200 going into my second account for the rest of my monthly expenses.
Here's my current situation:
Cards
Chase Sapphire
23.99% APR - $7,019.30 - 88% Utilization
Cap-One Platinum MC
20.80% APR - $5,618.48 - 98% Utilization
Citi AA Platinum
22.49% - $4,136.50 - 98% Utilization
Cap-One Platinum MC
20.99% APR - $826.27 - 83% Utilization
Target Card
22.90% APR - $54.60 - 7% Utilization
Chase Slate
23.99% APR - $1,000.00 Limit - 0% Utilization
BBVA NBA
26.24% APR - $2,000.00 Limit - 0% Utilization
Lowes Card
26.99% APR - $300.00 Limit - 0% Utilization
Home Depot Card
26.99% APR - $500.00 Limit - 0% Utilization
Totals $17,655.15 Balances - 75% Utilization
Installment Loans
OneMain Financial Loan
27.78% APR - $6,843.23 - 3 months old
Prosper Loan
16.73% APR - $3,045.67 - 18 months old
Lending Club Loan
14.31% APR - $2,200.14 - 16 months old
Totals $12,089.04 (loans) + $17,655.14 (cards) = $29,744.19 (total debt)
Here's my plan.
I'll have $3,000 next week that I plan to use on the credit cards. First get everthing under 90% utilization then attack by APR.
In September I'll be able to take a $3,000 401k loan to further pay down the credit cards.
I'm hoping by October/November my utilization will be under 50% and my scores will improve enough to take an additonal loan from Prosper or Lending Club to pay off the OneMain Financial Loan and a good portion of the credit cards.
I'd like to move most of my high interest debt to lower interest installment loans. At that point I'll continue using cash/debit until I pay off the installment loans.
Is this a sound plan?
Thanks in advance. Cheers,
I think it's a very sound plan, with one exception (for me, anyway):
I don't love the idea of borrowing against your 401k. $3k doesn't really do much and *if* this all goes south at some point, you've messed with your 401k for nothing. I also hate 401k loans because should you leave your job, they become payable in full. Could be a potentially stressful situation on top of everything else should that ever happen.
I'm curious about the breakdown of the $3400 fixed monthly expenses and the $1000-$1200 "other expenses" items. Something tells me there might be some things to cut in here.
Are you upside down on the one main car title loan? If you have any equity whatsoever, I would sell the car, ditch that loan, and buy a cheap car ASAP.
@Anonymous wrote:
SouthJ is the king of CUs. He knows a ton about them. Glad you two are chatting. He's a good go-to guy for anything actually.
Thank you
I am not worthy
I do realize the 401k loan is risky should I leave the employer. From what I understand I would be charged a 10% penalty and have to pay tax on the outstanding loan amount? That seems about the same as paying 1 year of interest if I don't take the loan. I also see myself staying at my current employer for quite a while. I have incredible job security.
My monthly cost breakdown is something like this
$3,400 goes into an account to cover my autodrafting payments:
$1560 - mortgage (financed by family member)
$134 - car insurance (wife and I)
$150 - utilities (electric, water, waste)
$80 - Entertainment (Internet, HBO, Netflix)
$135 - Cell Phones (wife and I)
$75 - IRS payment (installment from underestimating last year)
The rest is loan payments and credit card minimum payments.
Whats left over from my paycheck goes into my debit card account that I use for all other expenses.
$1,000 - 1,200 per month goes to:
groceries
restaurants
gas
dry cleaning
alcohol
pet supplies
traveling obligations
At this point you're probably wondering what my wife pays for. I've been covering all of our expenses for the past year while she's starting a business. She hasn't made much in the last year but things are starting to look up. I'm hoping to shift some of my expenses over to her once the business picks up.
The car was given to me by a family member. It would look bad if I sold it too soon. I'm also not sure if it's worth more than the loan. It's nothing fancy. It's an older car with low mileage and it's reliable.
I thought about it some more and I've decided to listen to the advice in this thread. I've opened a savings acount with Truwest Credit Union. I read great reviews and they're a mile from my house. I'll let my scores recover and see what they can do prior to the 401k loan. If I can get a decent APR perhaps I don't need it.
Thanks again for all the replies and advice so far. I can tell already that this thread will keep me honest.
@Zimmerman wrote:I thought about it some more and I've decided to listen to the advice in this thread. I've opened a savings acount with Truwest Credit Union. I read great reviews and they're a mile from my house. I'll let my scores recover and see what they can do prior to the 401k loan. If I can get a decent APR perhaps I don't need it.
Thanks again for all the replies and advice so far. I can tell already that this thread will keep me honest.
Wonderful I'm envious. Looked at their website and they look great.
Very strange. All I did was open a savings account with Truwest Credit Union. I log in this morning and there's a new hard inquiry on Experian for an installment loan from Truwest.. The strange thing is it bumped my score up 4 points to 674. What's that about?
@Zimmerman wrote:Very strange. All I did was open a savings account with Truwest Credit Union. I log in this morning and there's a new hard inquiry on Experian for an installment loan from Truwest.. The strange thing is it bumped my score up 4 points to 674. What's that about?
1. Credit unions often do a hard pull when you become a member; it's got something to do with living up to their responsibilities under the Patriot Act. Don't worry, it will be worth it in the end. Some credit unions will use that same hard pull if you apply for credit within X days. So you might want to inquire about Truwest's policy in that regard. PenFed, e.g., uses the same hard pull if you apply for credit within 90 days.
2. It didn't bump your score. Your MyFICO alerts are often unrelated to the score change noted on the alert. There are certain events, such as a hard inquiry, which trigger MyFICO alerts. If there happens to be any difference between your present score at that particular bureau, and the previous score reported to you from that bureau, the score change is tacked on to the alert. No connection.
@SouthJamaica wrote:
2. It didn't bump your score. Your MyFICO alerts are often unrelated to the score change noted on the alert. There are certain events, such as a hard inquiry, which trigger MyFICO alerts. If there happens to be any difference between your present score at that particular bureau, and the previous score reported to you from that bureau, the score change is tacked on to the alert. No connection.
Still, wouldn't that be great?? I'd be at 850 in no time! And my friends would ask, and I could say "hey, it was easy, in fact it just APPened..." :-)
@Anonymous wrote:
@SouthJamaica wrote:
2. It didn't bump your score. Your MyFICO alerts are often unrelated to the score change noted on the alert. There are certain events, such as a hard inquiry, which trigger MyFICO alerts. If there happens to be any difference between your present score at that particular bureau, and the previous score reported to you from that bureau, the score change is tacked on to the alert. No connection.
Still, wouldn't that be great?? I'd be at 850 in no time! And my friends would ask, and I could say "hey, it was easy, in fact it just APPened..." :-)
Yes it would be great. I would be the king of credit.