cancel
Showing results for 
Search instead for 
Did you mean: 

No More Delusion - My Journey to Debt Freedom

Highlighted
Member

No More Delusion - My Journey to Debt Freedom

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,

 

 

 

Message 1 of 30
29 REPLIES 29
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom

I think you have an awesome plan.

 

The only thing I would add to it personally is to make sure you are always paying > double the minimum payment on all the cards.  Paying only the MP is associated with risk (in an issuer's eyes).  Because you have so many cards that are at ultra high utilization, you are at risk of AA (Adverse Action) on these, notoably something called "balance chasing" --wherein the issuer keeps lowering your credit limit as you pay down the debt.  You need to establish with each card that every month you are paying substantially more than you have to.  That reduces your risk profile and therefore reduces the probability of AA.

 

This is what I have been told -- I have never been BC'd myself.

 

I say all this because your current plan may call for paying the MP if a card is not the highest APR, and that may put you at greater risk of balance chasing.

 

I'd also tweak your plan so that it involves paying all cards to under 88.9% rather than 90%.  It's fine to think of your milestones as 90%, 70%, 50%, etc.  But due to the weird way FICO does rounding of percents, you should subtract 1.1% from each of those and thus aim for 88.9, 68.9%, etc.

Message 2 of 30
Highlighted
Valued Contributor

Re: No More Delusion - My Journey to Debt Freedom

Those interest rates are killers.  Hopefully as your utilization goes down your credit score will go up quickly so you could qualify for zero percent transfer offers.  Good luck.

More cards than I can mention in a signature.
Message 3 of 30
Highlighted
Valued Contributor

Re: No More Delusion - My Journey to Debt Freedom

I know! The first card would be 1500+ a month in intrest!! 😲

Message 4 of 30
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom


@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.

 

Good

 

In September I'll be able to take a $3,000 401k loan to further pay down the credit cards.

 

Good

 

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.

 

Make sure you're not jumping from the frying pan into the fire. If you can't get a loan on good terms, don't get the loan. I would suggest trying a credit union instead.

 

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. 

 

Sounds like a plan but be wary of taking on too many new installment loans; if you can get by without them.... get by without them.

 

Is this a sound plan?

 

Yes. Congratulations on getting to this point.

 

Thanks in advance. Cheers,

 

 

 


 


Total revolving limits 653000 (575000 reporting)

Message 5 of 30
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom


@CreditGuyInDixie wrote:

I think you have an awesome plan.

 

The only thing I would add to it personally is to make sure you are always paying > double the minimum payment on all the cards.  Paying only the MP is associated with risk (in an issuer's eyes).  Because you have so many cards that are at ultra high utilization, you are at risk of AA (Adverse Action) on these, notoably something called "balance chasing" --wherein the issuer keeps lowering your credit limit as you pay down the debt.  You need to establish with each card that every month you are paying substantially more than you have to.  That reduces your risk profile and therefore reduces the probability of AA.

 

This is what I have been told -- I have never been BC'd myself.

 

I say all this because your current plan may call for paying the MP if a card is not the highest APR, and that may put you at greater risk of balance chasing.

 

I'd also tweak your plan so that it involves paying all cards to under 88.9% rather than 90%.  It's fine to think of your milestones as 90%, 70%, 50%, etc.  But due to the weird way FICO does rounding of percents, you should subtract 1.1% from each of those and thus aim for 88.9, 68.9%, etc.


+1


Total revolving limits 653000 (575000 reporting)

Message 6 of 30
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom


@Gregory1776 wrote:

I know! The first card would be 1500+ a month in intrest!! 😲


Hi Gregory.  The interest rates you see are annual interest rates, not monthly.  Thus the 24% interest rate you see on the first card turns into about 2% monthly (a bit over $140).

Message 7 of 30
Highlighted
Member

Re: No More Delusion - My Journey to Debt Freedom

Thanks for the advice. I'll revise my initial plan to pay my card balances down to 88% instead of 90% utilization.

 

Would it be better to get them all below 68.9% before attacking one individual account?

 

I wish more cc companies allowed you to setup automatic payments at specific amounts. I do this with Capital One since it's easy to automate but generally I just pay the minimum payments on the rest of the cards.

 

I've taken installment loans in the past with the intent of paying down my debt and realize this is a slippery sloap. The difference this time around is that I'm determined to only use cash/debit and not touch the credit cards until I'm 100% out of debt. 

 

I'll check on the credit union but as I understand it Prosper is great for second loans due to their internal scoring system. Would I need to join a credit union prior to applying for a loan? Does this consist of opening a checking account with them? Any recomendations? 

 

 

Message 8 of 30
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom


@Zimmerman wrote:

Thanks for the advice. I'll revise my initial plan to pay my card balances down to 88% instead of 90% utilization.

 

Would it be better to get them all below 68.9% before attacking one individual account?

 

I wish more cc companies allowed you to setup automatic payments at specific amounts. I do this with Capital One since it's easy to automate but generally I just pay the minimum payments on the rest of the cards.

 

I've taken installment loans in the past with the intent of paying down my debt and realize this is a slippery sloap. The difference this time around is that I'm determined to only use cash/debit and not touch the credit cards until I'm 100% out of debt. 

 

I'll check on the credit union but as I understand it Prosper is great for second loans due to their internal scoring system. Would I need to join a credit union prior to applying for a loan? Does this consist of opening a checking account with them? Any recomendations? 

 

 


You need to open a small savings account to become a credit union member, but many people apply for credit immediately after becoming a member.

 

You might want to investigate your local credit unions, or credit unions you can join through your job or other affiliation, or your geographical base, or through close family members who are already members.

 

Some credit unions are more or less open to all (often requiring a nominal donation to a charitable organization). Credit unions I can personally recommend which are more or less open to all are Pentagon FCU, Langley FCU, Alliant CU, and Hanscom FCU.

 

 


Total revolving limits 653000 (575000 reporting)

Message 9 of 30
Highlighted
Super Contributor

Re: No More Delusion - My Journey to Debt Freedom

My comments below in blue.

 


@Zimmerman wrote:

Thanks for the advice. I'll revise my initial plan to pay my card balances down to 88% instead of 90% utilization.

 

Would it be better to get them all below 68.9% before attacking one individual account?

 

Yes.  I think that would be better.  And then continue to pay > double the MP on each (if you can), with excess cash going to the highest APR, as you had originally planned.

 

I wish more cc companies allowed you to setup automatic payments at specific amounts. I do this with Capital One since it's easy to automate but generally I just pay the minimum payments on the rest of the cards.

 

You are thinking (above) of using the CC company to "pull" the money from your checking account.  But it also possible to use the "billpay" feature on your checking account to "push" money from the bank account into the credit card account.  If you do this, you will certainly be able to set this up for a specified amount on a recurring monthly basis.

 

I've taken installment loans in the past with the intent of paying down my debt and realize this is a slippery sloap. The difference this time around is that I'm determined to only use cash/debit and not touch the credit cards until I'm 100% out of debt. 

 

That sounds psychologically very smart.

 

I'll check on the credit union but as I understand it Prosper is great for second loans due to their internal scoring system. Would I need to join a credit union prior to applying for a loan? Does this consist of opening a checking account with them? Any recomendations? 

 

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.

 

 


 

Message 10 of 30
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.