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Rebuilding after a Rough Year

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Valued Member

Rebuilding after a Rough Year

I had a rough 2018 that kicked my butt financially. I started a new business in 2017, but I decided to close it  in 2018 when a client packed up and left the country owing me $8,000 and a deal with a partner went bad. I was sued over it and was ordered to personally pay a $15,000 judgment. Oh, and I got a $5,000 tax bill from the IRS. Finally, by May 2018 my house was in foreclosure. So in May, with less than $1,000 in the bank I closed the business, found a job and started over. In starting over I set these priorities:

 

  1. Keep the house
  2. Satisfy the Judgment
  3. Satisfy the IRS
  4. Stay current on all other credit cards (which were nearly maxed out) and my car payment

So in June I applied for a mortgage modification and got all 3 of my credit reports. My FICO was 626. There were also a bunch of medical collections on the reports so I challenged all of them. Then I set up a payment plan with the IRS to pay off the tax debt over 1 year and started negotiating with the lawyers to settle the payout of the judgment.

 

It hurt like hell, but I ended up paying off the judgment over 3 months. I reluctantly agreed to 3 months because they got aggressive and had already filed a motion to garnish my pay and put a lien on my bank accounts. However, in the settlement I did negotiate a stipulation that, assuming I paid according to the agreement, they would file a motion requesting the judgment be rescinded and they would not report the debt to any agencies. They agreed. So I got a part time job at Best Buy in addition to my day job, and for 3 months I paid the judgment, the IRS, my car payment, and minimum payments on my credit cards, leaving me with less than $500 a month for groceries, gas, car insurance, utilities, etc. I cancelled my cable service (no internet Smiley Sad), and dropped my phone plan to the lowest plan available. I also followed up with letters challenging those medical collection accounts every month. That was a looooooong summer.

 

In late August the mortgage modification was approved and the foreclosure process stopped. Fortunately the first mortgage payment wasn't due until October, after I'd finished paying off the judgment in September. Unfortunately my mortage interest rate shot up to 5.125% (ouch!). My FICO was 620.

 

In October I got back to normal with my bills, and committed to financial stability. I learned a valuable lession from paying $5,000 a month toward that judgment: I could get out of my other debt faster. My credit utilization was at 85%, so I started making additional payments of $700-$900 a month toward the credit cards. Also in a stroke of luck, my mortgage was sold to a new company, so I now have an active mortgage with a clean payment history, even though the closed one will still dog me for years. By December I had knocked almost $3,000 off of my credit card debt and all but 1 collection on Equifax had been removed from all my credit reports. By mid-December my FICO was up to 675.

 

I set some modest, but important goals for myself in 2019. I want to get my FICO over 700 and credit utilization under 10% by the end of the year. So I started this year with a debt consolidation loan so now I can pay off a chunk of that debt over 3 years at 12% interest instead of 25% credit card interest. That got my credit utilization down to 40%. I also got approved for a Chase Freedom card and transfered over $4000 to pay off at 0% interest over 15 months.

 

Now its March and I see that the last collection account has been removed from my Equifax report. My credit utilization is down to 32% Smiley Mad but I'll have it under 30% by the end of this month. In May I make my last payment to the IRS. I'm breathing a lot easier now, but I need to keep working to build up a cushion. So my plan is:

 

  • Pay off the debt transferred to Chase by June 2020
  • Pay off the debt consolidation loan by January 2021 (1 year early)
  • Credit Utilization under 10% by January 2020
  • Get my Mortgage FICO in the "Good" range and refinance

 


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Starting Score: 619
Current Score: 668
Goal Score: 700


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5 REPLIES 5
Moderator

Re: Rebuilding after a Rough Year

You have done quite well, grats to all the hard work... Your mortgage rate isnt bad at all, my rate on my first house purchase in the 80s was 14%. Smiley Wink

"If there's a lack of money in your life, understand that feeling worried, envious, jealous, disappointed, discouraged, doubtful or fearful about money can never bring more money to you, because those feelings come from a lack of gratitude for the money you have."

"Reactions are powerful creators because they contain every element needed to manifest—they're a combination of thought, belief, and feeling in action. Positive reactions create more positive things, and negative reactions create more negative things. If you can respond to negative situations calmly and lightly, instead of with emotional turbulence, what happens next in your life will be so much better."

- Rhonda Byrne

Message 2 of 6
Established Contributor

Re: Rebuilding after a Rough Year

With all you had to deal with, I think you have done an outstanding job of getting yourself back into a more manageable place.
You set out a plan and stuck to it, very well done, you should be proud of your accomplishments.





~~ Former Royal Navy Submariner - Proud to have served ~~
Message 3 of 6
Valued Member

Re: Rebuilding after a Rough Year

Thanks for the feedback. I just discovered these forums. There’s lots of good info here.

:
:

Starting Score: 619
Current Score: 668
Goal Score: 700


Take the myFICO Fitness Challenge
Message 4 of 6
Frequent Contributor

Re: Rebuilding after a Rough Year

You have accomplished alot in a short amount of time keep up the good work.

Message 5 of 6
Regular Contributor

Re: Rebuilding after a Rough Year

Great success story and congratulations on your recovery! Its amazing how much money can be saved by, "tightening the belt."

 

After our own rebound, we re-activated satellite TV service. Now I pay the bill without consideration, but I hark fondly back to those days when all we had was broadcast TV and the $9 / month Netflix charge, and life was just fine.

Aug 2019: EQ 713, EX 698, TU 708 (Mar 2017: 550's)

AAoA: 8.6 years, Gardening Goal: Spring 2020
Message 6 of 6
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