FICO Score: What to pay down first?

[Anonymous]

All the info was great! Thanks! Only thing is I should’ve read this earlier. I ended up paying an account in collections at full price and now it shows as “paid in full”. Is there any chance I can get them to take off the account from the report after I’ve paid it?

[dynamicvb]

Thanks for the great post. When I was young, I had several mentors come in and out of my life and they always aid pay your self first. Of course being young and stupid I did not listen. I just wanted to live. I wanted to keep up with the Jones. I had to have a huge house. I had to have a new car every couple of years, Hell, the minimum payment is only 35 bucks we can afford it. This behavior eventually led to my BK because of a job loss. When you are young its easy to feel invincible, but as you get older, you realize no one is.

I burned through my retirement and my severance in 2009 because I like a lot of people was now older and there were not a lot of jobs. I work in technology where older is not an advantage but something a lot of people look down on as you can't be as good as these younger guys.

Anyway, while going through my BK payments. I got a better job that paid more money. I started sticking to a savings plan and pulling it out of my check. I started paying myself first finally. I was stingy with it. I still don't have anyone's name on the account except mine, even though its cause multiple fights with the wife. When it went over a month. I felt a little safer. When it went over 2 months. I felt even better. When it passed three, I started to relax. But even then I kept putting any extra money I had into the account. I know I could live at least 6 months without any income and I would still be okay. That is the best feeling in the world and I can't believe I denied myself that feeling for so many years just to project an image. The image never mattered anyway. No one was even looking. Even the wife came around when I showed her the balance, now she is on board and helps me stick extra in there

I did spend 2/3's of it to buy a house recently with down payment and closing costs. It does hurt to know that I don't have a six-month cushion any longer, but it I will have again as soon as possible. I'm starting to work on the side again with the main purpose of rebuilding that fund. I got used to the security. real security and I now miss it. Having a decent emergency fund is more important than having a 100K in available credit since its real and if you do have to spend it, then you are not further down the rabbit hole like you will be with the CC bills.

Thanks for reminding me I still need to pay myself first, even if I have to wait to improve some things at the house.

[19eighty5]

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@dynamicvb wrote:

Thanks for the great post. When I was young, I had several mentors come in and out of my life and they always aid pay your self first. Of course being young and stupid I did not listen. I just wanted to live. I wanted to keep up with the Jones. I had to have a huge house. I had to have a new car every couple of years, Hell, the minimum payment is only 35 bucks we can afford it. This behavior eventually led to my BK because of a job loss. When you are young its easy to feel invincible, but as you get older, you realize no one is.

I burned through my retirement and my severance in 2009 because I like a lot of people was now older and there were not a lot of jobs. I work in technology where older is not an advantage but something a lot of people look down on as you can't be as good as these younger guys.

Anyway, while going through my BK payments. I got a better job that paid more money. I started sticking to a savings plan and pulling it out of my check. I started paying myself first finally. I was stingy with it. I still don't have anyone's name on the account except mine, even though its cause multiple fights with the wife. When it went over a month. I felt a little safer. When it went over 2 months. I felt even better. When it passed three, I started to relax. But even then I kept putting any extra money I had into the account. I know I could live at least 6 months without any income and I would still be okay. That is the best feeling in the world and I can't believe I denied myself that feeling for so many years just to project an image. The image never mattered anyway. No one was even looking. Even the wife came around when I showed her the balance, now she is on board and helps me stick extra in there

I did spend 2/3's of it to buy a house recently with down payment and closing costs. It does hurt to know that I don't have a six-month cushion any longer, but it I will have again as soon as possible. I'm starting to work on the side again with the main purpose of rebuilding that fund. I got used to the security. real security and I now miss it. Having a decent emergency fund is more important than having a 100K in available credit since its real and if you do have to spend it, then you are not further down the rabbit hole like you will be with the CC bills.

Thanks for reminding me I still need to pay myself first, even if I have to wait to improve some things at the house.

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Thank you for sharing your story as this is a important lesson and reminder for all of us!

[AZEsq]

Reign: I can promise you this, the advice will work, but it looks like your main issue is not necessarily cutting spending (although it could be as you haven't posted your expenses), but actually bringing in more income. It sounds like your creditors are doing what's called "balance chasing," which basically means that you've kept your accounts at such a high utilization for so long that they are justifiably concerned about your risk of default. This means, every time you make a payment, they'll lower your utilization a bit, to keep you from ever charging your previous high balance. This will go on until 1) You have a better record of paying the card off and utilizing it responsibly; or 2) you pay it off and they close it. If you're here looking for ways to increase your score and this cashflow issue is temporary, I can recommend hardship letters, requesting that your interest rate be temporarily (for a specific period) lowered. This can, however, have the effect of having your account cancelled or reduced when it's paid off. Only your past credit behaviors will tell the story. I highly recommend that you take a hard look at your finances and spending behaviors because no one can give you one-size-fits-all advice to "fix" your credit as we don't know the financial patterns that your creditors are looking at. Know this, the type of  credit that you apply for, the pattern and frequency with which you pay your balance, and the places at which you use your credit (think grocery or dollar stores vs. luxury boutiques) all give your creditors a picture of your financial health and liquidity and inform the credit decisions that they make.

I HIGHLY recommend that you use a detailed budgeting software to see if you're living within your means and, if not, if that is even possible. Your responses make it sound like it may not be. If it's temporary, I suggest hardship letters to your creditors. That may give them the incentive to stop balance chasing you, but you will have to stop using the cards! So, if you're not in a financial position to do that, you need to evaluate your spending OR find additional sources of income. 

[Anonymous]

Thought I'd give an update on my peculiar situation. Bank of America, which bought my HELOC from Countrywide many years ago, notified me in Fall last year that they were selling both the servicing and the debt to other parties (an investment trust for the debt part, some unknow company for the servicing). I became worried wen they disclosed this transfer of 'ownership' would NOT be recorded at the County Records. There were also several confused letters from the new servicer and the new debt holder (who apparently THOUGHT they were also going to be the servicer). Long story short, I didn't want to get involved with what looked to be a future mess transaction so I paid off the approx  $17,000 remaining on my HELOC- thus taking that tax hit for 2018. NOW...my credit score has dropped 30-40 points (was 720, now 680) and the only change is 'too few accounts', or, 'no different types of accounts' - I still only have the two credit cards. Since this calendar year I will turn 63, I wanted to keep my 'income' below 85K, since my future medicare premums will be increased if I exceed 85K in 'income' this year. I stopped using my credit cards entirely, but still carry the 15K at 16% on a 25K limit mastercard, and a promo 4% on 19K on a 23K limit Discover, but only till July.BTW- if you think 85K is high, it really only leaves me about $600 a month for foo/utilities etc- I am not a spender, and I don't go out to eat etc.

I can't seem to win- If I take money from my IRA to pay off these cards I'll get slammed with 30+% taxes between California and Feds...and the CC issuers might close the accounts (?) despite my 100% on time payment record. Any advice? Should i make extra payments at alternating two week intervals, in addition to monthly minimum- just to show financial viability?

Is it worse to use the CC at Walmart than Nordstroms/Saks (or should I intentionally use at Saks just to be on record as a spendy lady)?

Is it better or worse, to not use the cards at all?

I can't seem to figure out this game! I sincerely appreciate any insight offered. BTW- yep- the house still worth in excess of $900K, and I can't refi it- not even for a paint job/dry rot repair it needs ($13K)! I was offered a reverse mortgage for heaven sakes! sheesh- now there's a rip off like I've never seen before!

I might go to the credit union where I have 4 deposit accounts and borrow against some MM funds on deposit just to show 'different account'- but it gripes me to pay for any score boost.

HEEELLLPPPPPP please!

[AZEsq]

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@Anonymous wrote:

Thought I'd give an update on my peculiar situation. Bank of America, which bought my HELOC from Countrywide many years ago, notified me in Fall last year that they were selling both the servicing and the debt to other parties (an investment trust for the debt part, some unknow company for the servicing). I became worried wen they disclosed this transfer of 'ownership' would NOT be recorded at the County Records. There were also several confused letters from the new servicer and the new debt holder (who apparently THOUGHT they were also going to be the servicer). Long story short, I didn't want to get involved with what looked to be a future mess transaction so I paid off the approx  $17,000 remaining on my HELOC- thus taking that tax hit for 2018. NOW...my credit score has dropped 30-40 points (was 720, now 680) and the only change is 'too few accounts', or, 'no different types of accounts' - I still only have the two credit cards. Since this calendar year I will turn 63, I wanted to keep my 'income' below 85K, since my future medicare premums will be increased if I exceed 85K in 'income' this year. I stopped using my credit cards entirely, but still carry the 15K at 16% on a 25K limit mastercard, and a promo 4% on 19K on a 23K limit Discover, but only till July.BTW- if you think 85K is high, it really only leaves me about $600 a month for foo/utilities etc- I am not a spender, and I don't go out to eat etc.

I can't seem to win- If I take money from my IRA to pay off these cards I'll get slammed with 30+% taxes between California and Feds...and the CC issuers might close the accounts (?) despite my 100% on time payment record. Any advice? Should i make extra payments at alternating two week intervals, in addition to monthly minimum- just to show financial viability?

Is it worse to use the CC at Walmart than Nordstroms/Saks (or should I intentionally use at Saks just to be on record as a spendy lady)?

Is it better or worse, to not use the cards at all?

I can't seem to figure out this game! I sincerely appreciate any insight offered. BTW- yep- the house still worth in excess of $900K, and I can't refi it- not even for a paint job/dry rot repair it needs ($13K)! I was offered a reverse mortgage for heaven sakes! sheesh- now there's a rip off like I've never seen before!

I might go to the credit union where I have 4 deposit accounts and borrow against some MM funds on deposit just to show 'different account'- but it gripes me to pay for any score boost.

HEEELLLPPPPPP please!

---

So, you'll get a lot of really good advice here. I'm a frequent lurker, but your score hits tend to go away after a month or two. What may keep your score down, however, is the credit card balances. I understand your concern about getting the HELOC released against your property, but having done several transactions like this, I assure you that title would have figured it out. Given that you're not actually interested in selling, however, I agree that getting the release recorded may have been a bit of a nightmare.

That said, I'm not sure why you want to take out a mortgage on the property? Is it that you want another HELOC to do repairs? Is it to have liquid assets to expand your business/live on? If so, I would really consult a financial planner (fee-based, one off) for a better strategy. You're drawing down your SEP-IRA at an alarming rate (per your prior post) and it sounds like you're either retired/semi-retired/or in a period of prolonged drought for your business. I think you have MUCH bigger fish to fry than the house and I would seek professional advice.

You're right that the reverse mortgage is a scam, but if you're trying to preserve the house for an inheritance without the means to maintain it in the interim, you may want to look at an inter vivos transfer or transfer to a trust. Again, please seek professional help! 

[Anonymous]

Thanks so much you have a really open my eyes and i will keep you updated on my progress