Is paying off child support arrears & student loan with a personal loan a good idea?

[Anonymous]

Hi there,

First time ever inquiring about this stuff. Any help is greatly appreciated, and if advice turns out true and helpful, I'm happy to tip if you have a tip jar available (maybe btc address?).

Background: 

• There's roughy $22k in child support arrears and $10k in Department of Education loans (that go back to 2010)
• I've paid off all collections, and am currently hovering around 30% in credit/debt utilization, with about $13k in credit
• Average age of credit is around 2 years
• I have a small car loan of < $10k, but the interest is at 11%, and I'd like to lower it, which I don't think will be a problem
• According to Credit Karma, I'm hovering around a 630 credit score between TransUnion and Equifax (I realize that's relatively irrelevent, but just to give you an idea)
• Income is not a problem in terms of my goals (see below). Only credit profile/score 

Four questions:

1. If I were to get a personal loan to the tune of $32k, and pay off both child support arrears and Department of Education loans, would that increase my score/profile so I can quickly either
   • a) buy a house ($4-500k) or
   • b) a nicer motorhome (maybe $75-125k)
2. Will the "missed payments" on the child support and student loans come off my report? Would I now have a clean profile?  
3. How quickly will my score rise after I get the loan (if it comes up at all)?
4. How long do you think it will take to be approved for a loan for the thing I want (keeping in mind debt to income should not be an issue)?
5. If it does not help my credit profile to get a personal loan to pay them off, since both accounts are quite old (8 years or so), is it possible it's better to leave them be, and merely attempt to get the loan for what I want anyway? 

I realize that, with a personal loan of that amount, the score would dip in the begining, but my hope is, after a year of paying the loan (let's say a 5 year loan at 10%),  the score would rise quickly allowing me to get a loan for the thing I want. Idealy, I'd like to make the purchase within a year of getting the personal loan. Or is that just wishful thinking, and it would take a while longer?

Again, thank you in advance. Your help is greatly appreciated!

With Love,

Aggie <3

[Anonymous]

* 5 questions

I'm not finding a way to edit the post lol

[dynamicvb]

Do you have lates, etc.. on the student loan? If so, it would be better to rehab it so you get the baddies gone. The interest now is likley better than anything you would get with a personal loan so you would wind up paying more for the money. I have no idea on the other items

[Anonymous]

OK - What I know about child support is this.....

1.  It varies by state and if you have a current obligation

2.  In my state (Nebraska) once the arrears was paid - it reported as a positive credit line with no lates - just marked as paid as agreed - but note that our child had aged out - so once the arrears were paid there was no longer a current obligation.

3.  In some cases (YMMV) child support is not affecting your score and sometimes never reported.   

4.  Sometimes you need to contact your child support payment center or enforcement center to get them to stop/correct the reporting.

In our case we did receive a score jump once the child support was paid.   I simply called and said all arrears are paid in full and there is no longer an obligation can you correct the reporting and they changed it.   Others have had a more difficult time - and some have had a really hard time if they still pay.

Also - get your real FICO scores to know where you really stand.  

[Anonymous]

They are from 2010, and don't have any payments on them. They weren't "closed" until 2017 though, but don't seem to be reported in collections (at least according to Credit Karma). They show up as negatove accounts on Credit Karma.

I understand what you're saying by paying less in interest, but if I rehabed it, then that would take a lot longer to get them off the report. I'd really like to get my loan for either a house or Motorhome within a year of the personal loan, which I think I could get by January. With the personal loan, I know how much I'd be paying for 5 years, and the budgeting would be much easier actually. But if the personal loan would prevent me from getting the RV or home loan, then maybe I shouldn't do it?

I'd like to move as quickly as possible on one or ther other. That's my real quandry. Thank you for your response!

[Anonymous]

OK - What I know about child support is this.....

1.  It varies by state and if you have a current obligation

- Yes, I live in California, and there is still an obligation in place. So the loan would be paying arrears, and I'd continue having to pay whatever the court ordered, which I've been doing for 4 years roughly.

2.  In my state (Nebraska) once the arrears was paid - it reported as a positive credit line with no lates - just marked as paid as agreed - but note that our child had aged out - so once the arrears were paid there was no longer a current obligation.

- There is still a court order in place

3.  In some cases (YMMV) child support is not affecting your score and sometimes never reported.   

- Yes, but unfortunately, they will not remove the reporting requirement, which means it will be affecting my credit for at least the next 8 years, hopefully not negatively

4.  Sometimes you need to contact your child support payment center or enforcement center to get them to stop/correct the reporting.

-According to them, they can not stopo the reporting

In our case we did receive a score jump once the child support was paid.   I simply called and said all arrears are paid in full and there is no longer an obligation can you correct the reporting and they changed it.  (Great!) Others have had a more difficult time - and some have had a really hard time if they still pay. Meaning that even if I paid the arrears, and became current, it could still affect me negatively?

Also - get your real FICO scores to know where you really stand.  

Plan on doing this in January, once the last collections I just paid comes off the report.

Thank you!

[Anonymous]

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@Anonymous wrote:

OK - What I know about child support is this.....

1.  It varies by state and if you have a current obligation

- Yes, I live in California, and there is still an obligation in place. So the loan would be paying arrears, and I'd continue having to pay whatever the court ordered, which I've been doing for 4 years roughly. I don't know the rules in California - didn't live or practice law there sorry.

2.  In my state (Nebraska) once the arrears was paid - it reported as a positive credit line with no lates - just marked as paid as agreed - but note that our child had aged out - so once the arrears were paid there was no longer a current obligation.

- There is still a court order in place Make sure you keep current on your payments from here on out then....It should report positive at least from here forward.

3.  In some cases (YMMV) child support is not affecting your score and sometimes never reported.   

- Yes, but unfortunately, they will not remove the reporting requirement, which means it will be affecting my credit for at least the next 8 years, hopefully not negatively - It depends on if they are reporting 'late' payments or just an arrearage total. 

4.  Sometimes you need to contact your child support payment center or enforcement center to get them to stop/correct the reporting.

-According to them, they can not stopo the reporting.  If they are still reporting - make sure they are reporting 'paid as agreed' or something similar and hopefully remove any LATES out there if they are reporting as such.  Ours was just reporting a 'total past due'    Also be careful if they are withholding from your paychecks.....sometimes it will report late - but in reality they just need to take the balance out of the next paycheck (I saw someone else that had this issue, ie. you owe 400 a month and they take $200 from each check.  If it's due the 1st you might show a balance due if you get paid and the withholding is on the 2nd and the 16th or something).   

In our case we did receive a score jump once the child support was paid.   I simply called and said all arrears are paid in full and there is no longer an obligation can you correct the reporting and they changed it.  (Great!) Others have had a more difficult time - and some have had a really hard time if they still pay. Meaning that even if I paid the arrears, and became current, it could still affect me negatively?  If they are reporting late or a balance due  it could....you'll have to watch how it reports and exactly what the reports say - not just credit karma -  but a real report.  Before you make a decision -you MIGHT want to see exactly how it looks on your credit reports - maybe get the 3B report from CreditCheckTotal for $1 and cancel within the week just to see. 

Also - get your real FICO scores to know where you really stand.  

Plan on doing this in January, once the last collections I just paid comes off the report.  Maybe do the trial now and then again in January so you have something to compare.

Thank you!

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[Anonymous]

Oh the other thing - is that child support doesn't build credit - IF paid on time and in full consistently - it won't 'help' your score - but get in arrears and it can ding you - A LOT.

[Anonymous]

Oh the other thing - is that child support doesn't build credit - IF paid on time and in full consistently - it won't 'help' your score - but get in arrears and it can ding you - A LOT.

Understood. Thank you!

So, in your experience, I can infer that you would recommend gettng a loan at least to pay off the arrearages in support, and that will help me achieve my goals (a large purchase within the next year)? Maybe this also applies to the Student loans, and maybe not? 

[Anonymous]

Personally - I would get a loan and pay off the arrears (can't tell ya on the student loan).   

Child support arrears can haunt you FOREVER.  My nephew and niece's dad is still paying for arrears (probably about $1000 per month is garnished) because he NEVER paid child support while the kids were little (they are now 24 and 26).  The kids no longer live with their mother - or me (they were placed with me by the state when taken from their mom) and the state keeps the $$ for the support/assistance mom got (and we got through foster care).   He's been paying for about 5 years now - and I don't think there is an end in site with the interest on the arrears. 

For the sake of your kids I would take care of it.  But that is me.   

(My husband had the arrearage in our case -but there is a long story behind the WHY - like that his son didn't live with his mom and was living on his own with his own child by then and even more complicated than that as we were trying to get the $$ to him - not his mother - which was involving the courts)      it worked out for him because we paid it in a lump sum and he was aged out and got the whole lump sum then - not his mom.   But like I said - ours was a complicated issue - not a normal one.