CC settlement, abysmal credit score, low income, but hopeful future. What now?

[Anonymous]

Long story short: Some bad times in the past. Lots of CC debt. But, things are picking up and I'm anticipating a lot more money next year. But that has not happened yet. So, right now I'm scraping by. I just settled with the bank on my worst, highest balance credit card. (I know that will knock my credit score down some, but it hasn't happened yet.)

My current situation is:

* Several months of late payments on one card (that has now been settled and closed). No more late payments from now on!

* Only one open credit card (store card that I rarely use). A few other recently closed CCs. I still owe some on a few of these accounts (that are now closed) but I have always been on time with payments and will continue to be on time.

* Low monthly income. (This will improve hopefully soon, but it is what it is.) Let's say it's about $16,000 a year.

* Credit score of high 500s to lower 500s (depending on which credit reporting service you ask). I assume this will go down when the settlement is reported?

I just want to know what to expect in the future and maybe get some suggestions for cards that would most likely accept me if I apply?  How long should I wait before I start applying? I'm in no desperate rush. I applied for a Walmart card (on a whim) and am pretty sure I got a "no." I don't want to apply to too many others too soon. I have no intention of charging a lot on any card I get and of course I'll pay any charges quickly. I just know they're important to help establish credit.

Thanks for any advice you can give me. These forums are very helpful!

[Anonymous]

Welcome to the board! There is a wealth of knowledge here from people who have been in your shoes, so read as much as you can on these boards to increase your credit knowledge. What’s done is done- you are on a new path now to a better future.

Do you have a budget? As you read more posts from me you will see that I am a big believer in it, and recommend everyone have one, no matter your income or financial situation. It was the only way my DW & I could get a handle on our finances and see where our paycheck was going every two weeks. Before that we had always been living paycheck to paycheck, always with more month than money. I made an Excel spreadsheet and listed every living expense (rent, utilities, car payment, insurance) and obligation (debt). I would be happy to send you my template if interested, just send me a PM.

As I’ve been paying off my debt I’ve also been able to increase our cash flow. By seeing exactly what was left over after paying everyone, we were able to see what was really left over and live within our means. Make a plan to get your debt paid down first before looking for new cards so you can get your scores up higher. Read up on what are the best ways to accomplish this. Go to Discover’s website and see if you prequalify for their secured card. That is probably one of the best cards to get because it can graduate to an unsecured card later.

GL on your journey. It will get better if you stick with a good plan.

[Anonymous]

^^^ every bit of this. FireMedic will likely chime in soon with his synopsis on rebuilding which will help expand on Scooter’s statement and give you details on maxing out your scores. If you read a few others’ posts in this part of the forum which are similar to yours, you’ll probably come across it. Great advice to take to heart from him and Scooter.

[Anonymous]

Thank you both!

I do have a budget of sorts. I know what bills must be paid each month and set aside money for that. I write out a detailed list of grocery items to buy (I have memorized the prices at Aldi! LOL). So I more or less keep my budget in check. It could be more organized, though.

I'll be reading more of the threads here, thanks! And I definitely have my hopes on that Discover secured card!

Edit: I did the prequalification thing with Discover and got a "Not only no, but HELL no!" from them. I think it was because my late payments are sooooo recent. And the settlement hasn't been reported yet. So, I will wait (which is okay), knowing that applying to anything else right now is probably fruitless. 

How many months would be good to wait? Three months? Six? I'm going to be reading the other threads here too for insight. Thanks again.

[Anonymous]

Okay, good news I think? I was reading other threads on here and someone posted a link to Green Dot Platinum. I thought it was a preapproval (they said it wouldn't affect your credit score to apply) so I applied. And got approved. 

I wasn't planning on getting a secured card so soon, but a bird in the hand... should I follow through with this? The reviews for this card don't sound too horrible. (Though looking around at reviews, if I had a shot at OpenSky, I'd prefer it instead.)

[xaximus]

Ideally, you should have 3 credit cards and 1 loan to help maximize your score. If you don't have 3 cards, there's several cards you can get depending on your scores. Capital 1, OpenSky and another 1-2 you can get. A secured card works if you aren't able to get a unsecured CC. Also, if you have late payments - I would definitely try reaching out to each lender for goodwill. They may/may not take them off but it never hurts to try. I would definitely work on getting your debt down as quickly as possible. If you can, pay the complete debt instead of settling as the lenders you may settle with may not be open to giving you another CC for quite some time.

[dynamicvb]

You can add cards, but I would suggest making a plan to pay down those closed cards. Every one of them is 100% utilization right now until they get to zero. This alone will help your score improve. 

It does sound like you need an installment loan to help your mix, but before I would do that or anything else, I would build up your emergency fund( while paying down your balances). Even if you need to find another part-time job, building up a little nest egg so you don't get into trouble needs to be high on your list.

[Anonymous]

xaximus, thanks for your advice. I will be going with the Green Dot card and cooling my jets for several months. 

My plans right now are to wait probably 4-6 months, and either apply to OpenSky or, if things are really looking up, Discover secured. At some point, I'll probably apply for a Wells Fargo secured, because I have an account with them and no bad history. I'm also considering that "self loan" service. It all depends on what my credit score looks like. This is all new territory for me. Should be interesting.

Thank you, I'll look into goodwill for getting the late payments taken off. I didn't know I could ask about that!

I've already settled with the worst debt. There was no way I was able to keep up with it. It was either going to be settlement or bankruptcy. What is frustrating is that things are looking up, but not quite quickly enough. If the lender had been willing to wait longer (and of course they wouldn't, I understand that), I maybe could have paid more or all of the debt. But, it is what it is.

I am up to date on the other debt and should be able to afford to continue to keep up. I have a reasonable expectation (hope) that it will be paid in full within a year.

[Anonymous]

dynamicvb, thanks for your suggestion, and absolutely I have a plan to pay off the closed cards! They're hanging over my head!

While the one big debt regrettably got behind, I worked hard to never let the others get behind. As I wrote in my previous post, I have a reasonable expectation that I'll be able to pay the other closed cards within a year. 

Thankfully, I am making more money, with a promise of yet more in the future. Of course, I can't guarantee that everything will go smoothly, but it's looking pretty good. I've been so foolish with money in the past; this time I'm mostly thinking about CDs and savings accounts! 

I'll use Green Dot for paying for gas and a few other small items a month and then pay them off right away! What can one do with a credit limit of $200 anyway? LOL. I just want it for credit-building purposes. 

[dynamicvb]

So do you have an installment loan open now? If not, then you may want to consider opening up one of the secured savings loans. You can do Self LEnder or most CU's have them too. That way if you open one for a year, you save a little money, 500-1000 with the loan and fix your credit mix with the same money while you are paying down your balances.