Hello all! I am new here, and while I know some about credit (I worked for CRE for a while) I am no expert. Which is why I am here to get advice. We have recently started following the Dave Ramsey plan for paying off debt (we have about 62k in debt right now, not all of which is showing on our reports). I want to pay off our debt, but I also want to build up our credit scores. I know this goes against the DR plan, and I've actually been kicked off a DR facebook group for even mentioning that I might do this. I love DR's teaching for the most part, but I think that to many who follow DR do not have a realistic understanding of how important good credit is in our society. Or that having great credit does not mean you're in a ton of debt either. I dunno, I just think that there has to be a way to earn an excellent credit score without being in debt.
With that said, I was wondering if anyone had any suggestions for me. Here's my general plan and a bit about our situation. As I said I'm not an expert so I'm coming here for advice. Anything I can do to help our scores I will try!
We owe $62k in debt, about $50k of which is on my credit report. My score is in the low 500's, and when we try to pull up my husband's score we get no data. Although I do know we have some debts in his name, and have included them in our calculations. None of our debt is acruing intrest. Everything except our car (which is leased) is either charged off or in collections. None of the creditors have our current phone numbers or address. We do not make monthly payments on any debts aside from our car. Anyway, my plan is to pay off our debts through the snowball method. This works well for us since we do not have to worry about intrest on the larger debts and paying off a little at a time keeps us motivated to trudge through the debts. If we follow our plan we will be finished and debt free in 1 year. This is without negotiating with the creditors, which we plan to do and hope will allow us to become debt free sooner. While we work on our snowball I would like to get 2 secured credit cards each, so that we can start to build credit. We will keep the balance below 30% at all times and repay them down to 5% each month. We bank with Wells Fargo, so I'm thinking we will go with 1 Wells Fargo card each and then look elsewhere for the others. Eventually I would like for us each to open an unsecured 3rd card, but I think this won't be an option until we pay down some of the debt and make payments on the secured cards first.
Once we are otherwise debt free I would also like to be able to take out a small auto lononce our credit is better. I would like to put 50% down on the loan and pay double the payment each month until paid off. That should help build our credit as well, correct? Our ultimate goal is to buy a house (again with 50% down). But we are find renting for right now until our credit and savings are ready for that big step. My biggest goal is to get our scores in the 700's by this time next year.
Thank you for taking the time to read this, and for any help provided! Please remember I'm somewhat of a newbie. I can tell that there is a LOT of info on this site and I'm excited to start learning and making some changes to the way we do things. Hubby lets me have the reigns on this, so even though his credit is being done at the same time I'm the one crunching numbers. 
ttt
@Anonymous wrote:Hello all! I am new here, and while I know some about credit (I worked for CRE for a while) I am no expert. Which is why I am here to get advice. We have recently started following the Dave Ramsey plan for paying off debt (we have about 62k in debt right now, not all of which is showing on our reports). I want to pay off our debt, but I also want to build up our credit scores. I know this goes against the DR plan, and I've actually been kicked off a DR facebook group for even mentioning that I might do this. I love DR's teaching for the most part, but I think that to many who follow DR do not have a realistic understanding of how important good credit is in our society. Or that having great credit does not mean you're in a ton of debt either. I dunno, I just think that there has to be a way to earn an excellent credit score without being in debt.
With that said, I was wondering if anyone had any suggestions for me. Here's my general plan and a bit about our situation. As I said I'm not an expert so I'm coming here for advice. Anything I can do to help our scores I will try!
We owe $62k in debt, about $50k of which is on my credit report. My score is in the low 500's, and when we try to pull up my husband's score we get no data. Although I do know we have some debts in his name, and have included them in our calculations. None of our debt is acruing intrest. Everything except our car (which is leased) is either charged off or in collections. None of the creditors have our current phone numbers or address. We do not make monthly payments on any debts aside from our car. Anyway, my plan is to pay off our debts through the snowball method. This works well for us since we do not have to worry about intrest on the larger debts and paying off a little at a time keeps us motivated to trudge through the debts. If we follow our plan we will be finished and debt free in 1 year. This is without negotiating with the creditors, which we plan to do and hope will allow us to become debt free sooner. While we work on our snowball I would like to get 2 secured credit cards each, so that we can start to build credit. We will keep the balance below 30% at all times and repay them down to 5% each month. We bank with Wells Fargo, so I'm thinking we will go with 1 Wells Fargo card each and then look elsewhere for the others. Eventually I would like for us each to open an unsecured 3rd card, but I think this won't be an option until we pay down some of the debt and make payments on the secured cards first.
Once we are otherwise debt free I would also like to be able to take out a small auto lononce our credit is better. I would like to put 50% down on the loan and pay double the payment each month until paid off. That should help build our credit as well, correct? Our ultimate goal is to buy a house (again with 50% down). But we are find renting for right now until our credit and savings are ready for that big step. My biggest goal is to get our scores in the 700's by this time next year.
Thank you for taking the time to read this, and for any help provided! Please remember I'm somewhat of a newbie. I can tell that there is a LOT of info on this site and I'm excited to start learning and making some changes to the way we do things. Hubby lets me have the reigns on this, so even though his credit is being done at the same time I'm the one crunching numbers.
Seems like a sensible plan. Try getting a Capital One secured card for each of you. Also do not be concerned with "keeping the balance below 30% at all times". Thats completely unecessary. The general rule is to not "CARRY A BALANCE" of more than 30% from one month to the next - meaning pay your balance down BEFORE the statement closes.
Another point - once you get everything paid off, don't get an auto loan "just because". A much better strategy is to get a small share secured loan from a CU such as SDFCU. You can do a $500 secured loan for 36 months at 3.99%. Payments are $14 and change. You make three payments right away, then set it up to auto pay from the freed up savings account funds. You get just as much FICO score power from a $500 secured loan that you get from a $40K auto loan, but it doesn't put much of a dent in your DTI when you apply for a mortgage.
Thanks so much for the advice! I will definitely keep that in mind. The secured loan sounds like a great option! If we don't need a vehicle there's no point in going into debt for another one just to raise our scores.
sounds like ur in the wrong state of mind. we all though we could pay off 50k in CC's. But DR talks about being debt free. But only if u think u can be. It took me 5 years of wasting my life trying to pay of 40k, and still filing BK. Im on a clearer path now, took the 15k a year and saved it and opened a RothIRA and banked the rest. Also after rebuilding i have as much in limits now as i then had debt just 2 years ago with >5%UT.So maybe just talk to conselors or something asap.
@Anonymous wrote:Thanks so much for the advice! I will definitely keep that in mind.
Exactly!