What steps should I take first?

Anonymous · ‎03-18-2008

I am in the process of getting out of debt and improving credit. While I was in college (98-04), I experienced much financial difficulty and numerous medical bills due to a surgery. Now, I'm trying to fix all that mess. Also, while in college, I made the mistake of closing all my credit cards at the advice of a christian credit counseling agency, so the majority of the credit cards are showing $0 available credit with a balance.

Here's an overview from the reports I pulled yesterday:

Experian = 521

Equifax = 505 (Although, FICO and CCCS of Atlanta states 481 from Equifax on the same day. *confused*)

Transunion = 566

Collections = 7 Accounts (mostly medical bills) that are all paid

Associates/Citi Card = $1482 (current...recently re-opened by Citi due to good payment history)

BB&T CreditCard = $467 (Current, but closed)

Capital One = $300 (Current, but closed)

Capital One Auto Finance = $21,278 (new acct 8/06 with my mom co-signing)

Citibank Student Loans = $13,920

GEMB/JCPenney = $565 (current, but closed)

HSBC Bank = $490 (open, but over-the-limit of $300)

Overall my debt = $38,820

I make about $38,000 a year.

I've recently applied to rent an apartment, but have been told I will need a guarantor with those credit scores. I desperately need to bring my score up. Will paying off those small accounts increase my score much?

Thanks for all your advice!

Anonymous · ‎03-18-2008

I'm not an expert and I'm just myself digging out of a credit nightmare ... what helped me TREMENDOUSLY was to pay down the lowest balances and then use the money I'd pay to them ot pay off the highest interest cards first (while making minimums on everything else). In 18 months, I paid off almost all of my debt and in the next 2 months will have 0 revolving debt and just an auto pmt and student loan pmt on my reports.

I do know that being over the limit is bad and you will keep getting socked with over the limit fees each month you are -- I'd pay that one down AS SOON AS POSSIBLE.

Also things that are negative are the closed accts with balances. All of those are KILLING your utilization calculation (which is a huge part of your FICO score).

Your auto loan seems very high for your income level ... ?? (I"m not judging, just observing).

Many of us have been where you are now -- it IS possible to improve ...

Rules I live by:

1. NEVER BE LATE. EVER. EVER.

2. NEVER be over the limit. You'll get socked with huge fees, only making the problem worse.

3. Set a monthly budget and become a slave to it. Know and understand where your money comes from and where it goes every month. Put off "fluff" purchases until you are in a solid fiscal situation.

4. Pay off low-balance cards first.

5. Do not have cards that are closed reporting a balance.

Those 4 rules have helped me go from 500's to high 600's in 12 months

It is possible -- it takes time, hard work, dedication and understanding your finances

Good luck!

Anonymous · ‎03-18-2008

That's great about increasing your score that much in that time frame...according to Score Watch, my score has increased at least 60 points in the past year, so I'm on the right track just not getting rid of the debt like I planned to.

Yes, I know over the limit fees are killers...those and late fees are what got me in some of the huge mess I'm in. Actually, on this account though...I never get over the limit fees. ?? I'm not sure why, but I'm not calling to complain! =D

Thanks for your advice...I've been trying to decide what course of action I needed to take and think I'll go with paying off the smaller ones first. I regret the day that I closed those accounts...if I had only knew then all that I know now!!

About the car loan...it is a bit higher than I need, but I didn't have any $$ saved up for a car purchase. With my credit, I had to go with Capital One...could only purchase a new auto. I decided to buy a 07 Toyota Camry...in a year or so, I hope I can refinance for a lower interest rate. Toyotas have a history of holding their valuable reasonably well...and when I pay the car off in less than 4 years, it should still be in great condition.

I'm currently enrolled in Crown Financial's Mvelopes, so I have a budget in place...the hard part is always sticking to it.

Thanks!

Message Edited by Polkadots79 on 03-18-2008 09:17 AM

Anonymous · ‎03-19-2008

If I pay down the $3000 credit card debt to say $1500...how do you all think that will affect my score? Also, why does this site show my score as 481 when the other 3 have it at the above mentioned scores??

Anonymous · ‎03-19-2008

Collections = 7 Accounts (mostly medical bills) that are all paid

Associates/Citi Card = $1482 (current...recently re-opened by Citi due to good payment history)

BB&T CreditCard = $467 (Current, but closed)

Capital One = $300 (Current, but closed)

Capital One Auto Finance = $21,278 (new acct 8/06 with my mom co-signing)

Citibank Student Loans = $13,920

GEMB/JCPenney = $565 (current, but closed)

HSBC Bank = $490 (open, but over-the-limit of $300)

As stated Never be late and never be overlimit.

When did you accure these medical year? try to get them GONE

Pay off all closed accounts that have a bal. they could be used against you on UTIL.

Pay as much as you can starting with highest int.rate You do not have to PIF all at one time you will get small point increase at 50% and 30% UTIL for best scores always keep total UTIL under 10%

When you get to FICO scores over 600 620 check out new CCs OR call on CC that have very low amount owed on them and ask for a CLI they will do a ing!

If your mom has a CC that has is a good account (no lat payments) ask her to add you as an AU

AUs are still getting credit But that will be changing.