Credit Score Strategy

[seanf12]

Hi all,

Was hoping I could some advice on my current credit situation.  My ultimate goal is to be eligible for a mortgage within a year, while paying down debt as quick as possible.  Here are the scary details:

$19,500 - CC debt

$51,000 - Personal loans\unsecured lines of credit

$30,000 - Auto loan\lease

$4300 - Loan listed as being in collections with NCB Management- legit

All of my accounts are current.  However, I have had several 30 day lates over the past year or so across both the CCs and loans.   My scores are low - all three MyFico scores are in the low 500s. The bright spot here is our incomes have both dramatically increased over the past three months (which will allow us to throw a decent amount of money towards these debts in a short time frame), and I am currently working on a utilizing the snowball method of repayment.  Question I had was this: Given that my goal is to raise my score as quickly as possible, which of the above debts should I tackle first, or does it even matter?  My initial thought was to pay off the collections as quickly as possible, then attach the CCs and then lastly the loans.  But was hoping to get some advice or thoughts.  Obviously goes without saying that remaining on time with payments is critical.

if I am in t he wrong board for this type of question, let me know and I am happy to move it

Thanks!!

[AllZero]

Finances over FICO.

Are you applying for credit now? If not, see above.

Best to tackle your high interest, high utilization cards first.

If you would care to share the details, the members can come up with a game plan.

[seanf12]

Hi there,

Agreed, I know that tackling finances is priority one and the Fico will fix itself. Just wasn’t sure if it mattered to focus on paying extra towards loans or cards, but I see your point, pay the high interest stuff first. What type of details do you need? Happy to post whatever you need to assist

Thanks again!

[Anonymous]

First off, with the goal of a mortgage on the horizon, get that collection handled. Ask for a pay for delete and see if they’ll do it - usually if they will, you’ll have to pay more than if you just settled it to get it closed out but it’s worth it. Try for PFD but if they won’t, pay it anyway and get it taken care of so it can start aging and reducing its impact on your score.

If you list out your credit cards, balances/minors, and APRs, we can help strategize how to go after them with the biggest potential impact with regard to time.

[AllZero]

Example

Card 1, Balance, Credit Line, APR %

Card 2, Balance, Credit Line, APR %

etc.

Collections

Name of Collection Agency, amount owed, etc.

Any charge offs?

What about severity of delinquencies, any others besides 30 days?

[SouthJamaica]

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@seanf12 wrote:

Hi all,

Was hoping I could some advice on my current credit situation.  My ultimate goal is to be eligible for a mortgage within a year, while paying down debt as quick as possible.  Here are the scary details:

$19,500 - CC debt

$51,000 - Personal loans\unsecured lines of credit

$30,000 - Auto loan\lease

$4300 - Loan listed as being in collections with NCB Management- legit

All of my accounts are current.  However, I have had several 30 day lates over the past year or so across both the CCs and loans.   My scores are low - all three MyFico scores are in the low 500s. The bright spot here is our incomes have both dramatically increased over the past three months (which will allow us to throw a decent amount of money towards these debts in a short time frame), and I am currently working on a utilizing the snowball method of repayment.  Question I had was this: Given that my goal is to raise my score as quickly as possible, which of the above debts should I tackle first, or does it even matter?  My initial thought was to pay off the collections as quickly as possible, then attach the CCs and then lastly the loans.  But was hoping to get some advice or thoughts.  Obviously goes without saying that remaining on time with payments is critical.

if I am in t he wrong board for this type of question, let me know and I am happy to move it

Thanks!!

---

You got it. Your initial thought is correct.

[CA4Closure]

$19,500 - CC debt Set aside $300 a month to pay this off.
$51,000 - Personal loans\unsecured lines of credit You need to get this account down to a respectable level before a mortgage bank will open a mortgage for you. Pay this off by making payments in the $300 a month area.
$30,000 - Auto loan\lease Sell the car and get an affordable car. If it is a leased car, I would try and see if the dealer will take it back early.
$4300 - Loan listed as being in collections with NCB Management- legit Pay this off and ask the creditor if they will remove the derog if you make on time monthly payments. 

You have over $100,000 in debt. You will not get a decent mortgage interest rate with this much debt. It took me three years to get a $600,000 mortgage where I put $250,000 case down on a home but remember I am in California so your mortgage will be way lower. 

[seanf12]

Thanks everyone for responding.  Sounds like tackling the collection first is my best bet, then focus on the CCs.  For those who asked for the ugly details, here you go.  My personal loan balance is higher than I original posted

Card             Limit          Balance          Interest Rate

Mercury       $4000           $4055         24.99%

Walmart       $1500           $1467         24.90%

Credit One    $1500          $1459          21.90%

Cap One        $4000          $4055          24.90%

Macy              $1000          $890            27.24%

Merrick          $1200          $1186          26.22%

Cap One #2        $1300          $1300          14.65%

Caregiver       $800            $591             26.99%

Best Buy         $750            $726            18.99%

Target             $900            $850             25.15%

Milestone       $300            $256             23.90%

Unsecured Loans (with payments and balances)

Ascend           $425           $17,000        14%

Avant              $467           $920              24%

Lending Club $598           $3923            27%

Heritage         $298            $2921           10%

Republic         $260            $3500            27%

Mariner          $249             $11,275         24%

One Main       $425            $16,662         23%

Sec Fin           $130            $1235            27%

WW Fin          $125            $1500            26%

Covington     $100             $570              29%      

[calyx]

There are two main ways a lot of people tackle multiple account debt like this - one is the "snowball" method, where you pay minimums and then throw any extra money at the smallest account until it's paid off, then "snowball" that payment + minimums for the next one, etc and work your way up.  It gives a lot of success because of the psychological impact of the success of those multiple pay offs.

The other way is "avalanche" where you pay the highest APR first.   Mathmatically, it's the way to minimize the interest you pay.  This is the tactic I take, because I hate interest more than I need the psychological 'win'

There is a (free) website I use (and recommend) called undebt.it, where you can list your debts, APRs, minimum payments, budget for paying down debt and it will show you several payment plans, including snowball and avalanche, so you can see how much you will ultimately pay (with interest).  You can also use it to track progress.   Since you have so many accounts, it might give you clarity in figuring out your payoff plan without you having to do much mathing yourself.

I agree with people above - finances over FICO.  But yes, collection first.

[Anonymous]

Looks like you've got $3000 per month in installment loan payments alone, without even looking at your revolvers.  I'd imagine you're looking at around $500+ per month  on those revolvers as well in order to make minimum payments?  I'm not sure if you mentioned it earlier in this thread yet, but does your income allow you to get ahead on this debt?