I lost my job just before major surgery and took 2 years to recover before I could return to my previous income level. During that time I incurred considerable CC debt - $25K. I%26#039;m now back at work and I have substantially increased my salary but because of some slow pays and maxed out cards my FICO has dropped 100 points and my interest rates have shot up to 30%! I expect to have enough extra income to pay off the debt in the next 2 - 3 years but I%26#039;d like to get rid of the high interest rate and repair my credit score. Will my new income level help my FICO score and help me get a low-interest card to roll everything over to? I don%26#039;t think I can get an unsecured debt consolidation loan for 25K... or can I?
Credit card debt - payoff options?
Know that your income has NO bearing on your FICO score. The score is only in relation to your credit.
I don%26#039;t think a bank will give you a 25K unsecured loan and even if you found one the interest rate would have to be close to what you%26#039;re paying now to offset that kind of risk. You would have to borrow against equity in a home, car or retirement fund.
Since it seems you are catch in a Catch-22, I believe your only options are to either pay off the debt with the high interest or file for bankruptcy if you have no assets.
It never hurts to call your credit card companies and try to get your rates lowered. Explaining your situation and/or threatening to close your account may help.
Credit card debt - payoff options?
You can visit http://www.cashguru.info and find very useful tips and several articles on debt consolidation. Report It
Credit card debt - payoff options?
Try this:
(1) Contact a debt consolidation company. They don%26#039;t charge fees (the credit companys pay them to collect on debt that would otherwise go uncollected) Many time they%26#039;ll reduce your interest rate to next to nothing. They%26#039;d rather get less money than none at all. I%26#039;ve done this. You can get things paid off WITHOUT a negative hit on your score. You%26#039;re still paying, you%26#039;ve just renegotiated your rates.
Google %26quot;debt consolidation%26quot; and you%26#039;ll have many options.
Biggest problem with credit scores:
There is no formula or time table to increasing scores. There%26#039;s no magic process. It can seem like an ever elusive number that can affect every part of your financial life.
Bottom Line:
Fixing a bad credit score takes time. That%26#039;s the point. A good score shows consistent responsible financial habits over a long period.
Steps:
(1) Don%26#039;t be Scared.
I know I was. Jump in and view your entire report (experian.com - it%26#039;s free!). Check for errors - challenge ANYTHING that looks strange. You can do all this online. It%26#039;s easy.
(2) Don%26#039;t Look for the Quick Fix.
Don%26#039;t open new, lower interest cards that you won%26#039;t use (10% off first purchase, etc.). Every time you apply for a new line of credit they take points from your score.
(3) Pay Them Off.
Consolidate Consolidate Consolidate! Cut up old cards once you consolidate. Biggest pit-fall is to run up old cards that have a 0 balance.
(4) In it for the Long Haul.
Don%26#039;t close out paid-off accounts. Makes your credit look short term. Leave them open with a $0 balance.
(5) No Excuses.
ALWAYS pay your bills on time. MAJOR loss of credit points here! They don%26#039;t care why you%26#039;re late. Even if a creditor will allow you to miss a payment, you%26#039;re still being reported. If they claim they won%26#039;t report you, get it in writing!
(6) Leave Some Room.
Keep balances at not more than 25% of your total avail. balance. %26quot;Maxing out%26quot; is a bad sign for credit analysts.
Negative items stay on your credit for 7-10 years so BE CAREFUL! Every late payment counts, so check your report regularly.
It will take time, but you sound smart. You can do it!
-My-2-Sense
Credit card debt - payoff options?
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