Getting Started... PLEASE HELP!!

[Tons_of_Debt]

Let me first say that most everything I've done to improve my credit in the recent past has been as a direct result of what I've read on these boards, and I cannot THANK YOU enough!!!

I'm going to give a little history and then my questions for you guys will be at the end. Please excuse me if I ramble...

I'm sorry to say that due to excessive partying in College, I racked up a host of credit card and student loan debt. Roughly $26,000 in student loan debt (2 loans with citibank) and roughly $11,300 in credit card debt (3 cards: 2600; 1800; 900). I'm just now getting my head out of the clouds to realize that my credit has TANKED. I have an Equifax FICO of 471! :-(

I had three of the credit cards reduced to roughly 6% interest each with payment programs ending as follows:

$2600 - Ends in June 2013
$1800 - Ends in June 2009
$ 900 - Ends in June 2009

Due to terrible payment history, these three cards have been closed for some time and are all over their limit.

Additionally, I'm an AU on one of my mom's accounts, which has a $6000 balance on a $7000 limit. After having recently acquired a new job which pays significantly more than I was making previously, I should be able to eliminate the smaller cards within a years time, while concurrently cutting the larger card in half. I figure I'll be stuck with the student loans for at least 7 years given the shear magnitude of the loans. :-(

Recently my car was totaled in a freak storm and while it wasn't worth that much, it was paid off and I did have full coverage. I've used part of the payoff to close a Cap1 card which was at $2100. I've put the rest in savings. Thankfully, my new job is less than 2 miles from my current residence, and able to ride a bicycle to and from work, saving me a car payment, insurance, and GAS!!! I plan to use the savings to pay down as much of my debt as I can.

I've obtained a Bank of America secured card with a $300 limit. From what I understand, I should make purchases of no more than $30 a month and pay between the time that I receive the statement and the due date, so as to allow it to satisfactorily affect my credit rating by appearing as usage while avoiding any interest. I'm transferring 10% of my net paycheck every paycheck into a savings account. I've signed up for TrueCredit credit reports and myFICO Score Watch.

So... my questions:

1. What should my priority be in terms of paying off cards? I was going to go smaller to larger, reducing them as quickly as possible to a zero balance, though I'm still fuzzy on how closed cards affect utilization. I've read conflicting posts on here and hope someone can point me in the right direction.

2. Should I have my mom remove me as an AU? It's my understanding that FICO 08 hasn't kicked in yet and so this is still affecting my credit, but given that there is a gap between the balance and the limit (the only card where this is the case besides the secured card), I think this is positively affecting my utilization.

3. Should I increase the BofA card? I'm not sure if this money wouldn't be better spent paying down my current debt.

4. Same question for my Savings. I worry that I'm stocking money away in a 3% Savings account while elsewhere I'm being charged double that for maintaining a balance. I want to have money in case something drastic happens, but would this be better spent getting me out of debt quicker?

5. Do I really need both TrueCredit and myFICO? Don't get me wrong, I *love* having them, but would I be better off only having one (if so, which one) and putting that money towards my debt?

6. Anything else you can think of to pinch a penny; reduce my debt; or improve my credit would be greatly appreciated! Again, I cannot tell you how much you guys have helped me! You've given me insight into a subject I knew/know absolutely NOTHING about!!! THANK YOU!!! :-)

Message Edited by Tons_of_Debt on 08-01-2008 03:24 PM

Message Edited by Tons_of_Debt on 08-03-2008 12:42 PM

[Tons_of_Debt]

One quick question...

Should I obtain all three FICO scores? I think the Equifax score is sufficient to know I have terrible credit and I really don't see the benefit of spending that money to confirm what I already know.

In fact, the only benefit I do see is that in a year I'll be able to (hopefully) show how much I've improved...

One more thing. I have a collection on my CR. I sent a PFD yesterday and I'm hoping to here something back within 10 business days! :-)

Message Edited by Tons_of_Debt on 08-02-2008 11:14 AM

[Anonymous]

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@Tons_of_Debt wrote:
One quick question...

Should I obtain all three FICO scores? I think the Equifax score is sufficient to know I have terrible credit and I really don't see the benefit of spending that money to confirm what I already know.

In fact, the only benefit I do see is that in a year I'll be able to (hopefully) show how much I've improved...

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If you have ScoreWatch and TrueCredit, you can see when to actually pull your FICOs (at least, that's what hubby and I do). Pulling FICOs all the time gets VERY expensive.

Once you see some positives being added to your CRs (which, again, you can see via TC), such as CCs reporting, balances going down, derog accounts falling off/being deleted, THEN you can pull'em!

Personally, I say, for now, throw the $$ at FIXING your credit before just pulling for the sake of pulling.

[Tons_of_Debt]

Thanks for the help Wonderin!!

Any suggestions on the questions in the main posts?!?! :-)

[Anonymous]

It doesn't matter which one you pay first...you have already reset the DOLA...but start with the smallest I gues..but you need to get them paid off ASAP...the balances are KILLING your UTL...which in turn KILLS your scores...as far as the AU account...it really is not doing you any justice...if you need help far as UTL...you might do better opened up a Crown Jewelers account...but that $7000 CL does help...but not much if your at 86% UTL...The BofA secured card is a good start...I have one with a $500 CL...beofre I knew about their 99/500 secured card...but since you have it already...you can't have both...but maybe you should increase it to $500...it sure will do you good...in 9-12 months...when it graduates to an unsecured card...and you get that money back I believe...maybe you should pay off that debt a little more...so you would be clear...and you definitely don't eant those accounts to go to collections...then you would be hit with the double whammy...

[Tons_of_Debt]

Any additional thoughts... please? :-)

[Anonymous]

Tons_of_Debt wrote:

Let me first say that most everything I've done to improve my credit in the recent past has been as a direct result of what I've read on these boards, and I cannot THANK YOU enough!!!

I'm going to give a little history and then my questions for you guys will be at the end. Please excuse me if I ramble...

I'm sorry to say that due to excessive partying in College, I racked up a host of credit card and student loan debt. Roughly $26,000 in student loan debt (2 loans with citibank) and roughly $11,300 in credit card debt (3 cards: 2600; 1800; 900). I'm just now getting my head out of the clouds to realize that my credit has TANKED. I have an Equifax FICO of 471! :-(

I had three of the credit cards reduced to roughly 6% interest each with payment programs ending as follows:

$2600 - Ends in June 2013
$1800 - Ends in June 2009
$ 900 - Ends in June 2009

Due to terrible payment history, these three cards have been closed for some time and are all over their limit.

Additionally, I'm an AU on one of my mom's accounts, which has a $6000 balance on a $7000 limit. After having recently acquired a new job which pays significantly more than I was making previously, I should be able to eliminate the smaller cards within a years time, while concurrently cutting the larger card in half. I figure I'll be stuck with the student loans for at least 7 years given the shear magnitude of the loans. :-(

Recently my car was totaled in a freak storm and while it wasn't worth that much, it was paid off and I did have full coverage. I've used part of the payoff to close a Cap1 card which was at $2100. I've put the rest in savings. Thankfully, my new job is less than 2 miles from my current residence, and able to ride a bicycle to and from work, saving me a car payment, insurance, and GAS!!! I plan to use the savings to pay down as much of my debt as I can.

I've obtained a Bank of America secured card with a $300 limit. From what I understand, I should make purchases of no more than $30 a month and pay between the time that I receive the statement and the due date, so as to allow it to satisfactorily affect my credit rating by appearing as usage while avoiding any interest. I'm transferring 10% of my net paycheck every paycheck into a savings account. I've signed up for TrueCredit credit reports and myFICO Score Watch.

Keep util between 1-9%. Find out when BoA reports to the CRA and have your balance paid down before that date. It is okay to use the card, just pay it before it reports.

So... my questions:

1. What should my priority be in terms of paying off cards? I was going to go smaller to larger, reducing them as quickly as possible to a zero balance, though I'm still fuzzy on how closed cards affect utilization. I've read conflicting posts on here and hope someone can point me in the right direction.

I wouldn't worry about utilization at this point. I would put all extra money to the lowest card. Once that is paid, put the regular monthly payment on it and the extra money you were putting on it, towards the next highest card. When that one is paid off, do the same.

Interest rates are the same for all 3 cards, so I wouldn't worry too much about interest rates.

Let's say you are paying $30 a month for each card. You have an additional $110 to spend on debt. Pay $30 to the mid and high balance card, and $140 to the low card. Low card gets paid off, add that $140 to the $30 you are paying on the mid balance card, making your monthly payment to that card $170. When it is paid, add that $170 to the other payment of $30, paying $200 a month towards the highest card.

2. Should I have my mom remove me as an AU? It's my understanding that FICO 08 hasn't kicked in yet and so this is still affecting my credit, but given that there is a gap between the balance and the limit (the only card where this is the case besides the secured card), I think this is positively affecting my utilization.

It is hard to tell how this is affecting. Is there anything negative on the account? How old is the account? Look at your FICO report that you purchased, what does it show your total util, this will help you determining what is/isn't being figured into util. This card being near maxed out is likely not helping your util much, but could be helping elsewhere.

3. Should I increase the BofA card? I'm not sure if this money wouldn't be better spent paying down my current debt.

BoA will convert you over to an unsecured card after X months, CL equal to your deposit, and return your deposit. Increasing the CL will increase your total available CL(assuming you don't carry a large balance), thus decreasing util.

4. Same question for my Savings. I worry that I'm stocking money away in a 3% Savings account while elsewhere I'm being charged double that for maintaining a balance. I want to have money in case something drastic happens, but would this be better spent getting me out of debt quicker?

I wouldn't advise to not save anything. But, you are paying debt that carries 6% interest and saving money that is paying you 3% interest. I would try to get that debt paid before throwing everything into savings. Do you feel your job is secure? Do you own/rent? If you don't have a vehicle, then no repair worries there.

I'd fix you up a Excel spreadsheet for savings/debt and budgeting. Play with the numbers and see what happens.

Are there any extras that you could do without until you get some debt paid down?

5. Do I really need both TrueCredit and myFICO? Don't get me wrong, I *love* having them, but would I be better off only having one (if so, which one) and putting that money towards my debt?

If you aren't looking to be applying for major credit soon(house, car, CC, etc) then I wouldn't worry about your true FICO scores for now. I would keep the TrueCredit to monitor changes to your report while you are repairing. I would maybe pull all 3 FICO now and then once again when you are finished. Just to compare and feel that sense of accomplishment.

6. Anything else you can think of to pinch a penny; reduce my debt; or improve my credit would be greatly appreciated! Again, I cannot tell you how much you guys have helped me! You've given me insight into a subject I knew/know absolutely NOTHING about!!! THANK YOU!!! :-)

Are the student loans defaulted on, in deferrment/forebeance/repayment? What is the scoop on those?

Who is reporting the CC debt, the OC or CA? Who are you making payments to?

Is there anything else negative on your report?

What is the DOFD on the delinquent debt? Even though payments more than likely reset SOL, once they are charged off/collection status then the CRTP can't be changed.

Have you asked the creditors about reopening the accounts and removing the negative information once you have paid these off and demonstrated good payments?

Message Edited by Tons_of_Debt on 08-01-2008 03:24 PM

Message Edited by Tons_of_Debt on 08-03-2008 12:42 PM

[Anonymous]

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Tons_of_Debt wrote:


One more thing. I have a collection on my CR. I sent a PFD yesterday and I'm hoping to here something back within 10 business days! :-)

Message Edited by Tons_of_Debt on 08-02-2008 11:14 AM

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What kind of collection? What is DOFD, DOLA, and SOL? Have you DV'd?

[Tons_of_Debt]

Thanks so much for the help!

A few points: 

- I will use the BofA but make sure it's at 9% or below before the statement closes and it reports.

1. Definitely an interesting point on the card payments. I had planned just to pay $100 on each (giving $25, $40, and $62 additional on each card), but if I just make the minimum payments on the first two I can certainly have the third one paid off in a few months. I keep hearing "Avoid the min, avoid the min." but your strategy does make sense with an end goal in mind.

2. My mother's card is on my report, and affecting my utilization. I'd be over 100% without it. I'm at 88% with it (for cc debt). Nothing negative on the account, but it's only been open since 06.

3. I will contribute another $200 to the BofA secured (though the application hasn't actually come back yet). I applied Friday night and was told it would take about a week to transfer the money and then another week to get the card. I've read on here that someone has been declined for a secured (don't know how) but given that I already have an unsecured BofA which is overlimit I'm worried that may be the case for me.

4. Currently saving 10% of my net income, with nothing going to 401k. I can get savings to 5% for a short period of time which would greatly increase the amount I can spend on swiping down credit cards.

5. Pulled all 3 FICO scores (523 TU; 472 EQ; 454 EX). I will term the ScoreWatch before the 30 day trial ends and put that $9 towards CC payment.

6. The student loans are in repayment. I haven't missed a payment on any of those since they've been opened. I went on a reduced plan, however, and it's currently showing that I owe more than what the limit is... I owe roughly $26k and it says it should be at $23k. Maybe because they were deferred while I was in school and for the last 18 months or so I've only been paying a little over the interest?

The CC debt is being reported by the OC. I'm making payments to the OC as well.

I have not asked any creditors about reopening the accounts. For two of the accounts, the payment plan was conditional upon me closing the account, so I doubt they'd go for that. :-/

The collection was for a medical bill from June of 06. They report it every month as a bad debt. I never DV'd the thing, just sent the PFD letter which says I dispute it but in good faith am willing to pay if they remove.

[Anonymous]

Since it is medical........read the stickied thread at the top regarding medical and check out whychat hipaa.