Overwhelmed ... Credit Cards

[minnie1928]

I have a question as it always comes up....

If you are "overwhelmed" by credit card debt, who gives a rat's behind about a credit score? Sheesh, my credit score was the last thing on my mind.

speaking from personal experience, my previous employer would randomly run credit checks on the employees. A dive in a person's score could indicate an increased risk for theft. One shouldn't disregard the impact a low score could have on someone's employment.

 

[ccgirl]

speaking from personal experience, my previous employer would randomly run credit checks on the employees. A dive in a person's score could indicate an increased risk for theft. One shouldn't disregard the impact a low score could have on someone's employment.

Correct. A poor credit score could have many negative effects. Just because someone is overwhelmed by credit card debt does not mean their credit score is bad, as is the case with the OP.

As you indicated, some employers do credit checks. If you were to need a car loan, a bad credit score could prevent you from that as well.

 

[Marionnette]

Correct. A poor credit score could have many negative effects. Just because someone is overwhelmed by credit card debt does not mean their credit score is bad, as is the case with the OP.

As you indicated, some employers do credit checks. If you were to need a car loan, a bad credit score could prevent you from that as well.

Insurance companies also check credit scores to determine your rates. I guess they figure that someone with a poor score is not only bad with money but they're also a risky driver.

 

[JDUCKY]

I have a question as it always comes up....

If you are "overwhelmed" by credit card debt, who gives a rat's behind about a credit score? Sheesh, my credit score was the last thing on my mind. Fixing it so I wasn't spending half my paycheck that I needed on debt payments was what was on my mind at the time.

If one is that overwhelmed by credit debt, just forget about your "good" credit or the stupid credit score. Fixing the debt and getting rid of the means to increase debt is where you should be putting your attention. Why all the fuss over credit scores when people are stating they are "overwhelmed" with debt. "Overwhelmed" to me is a pretty strong word. I was very overwhelmed. I wanted to pay for the utilities of living and couldn't because of the debt payments. I couldn't have cared less about my credit, I wanted to not put half of my paycheck to payments and buy heating oil or groceries instead.

I canceled all but 2 of my credit cards. It must not have hurt me any because within a week of doing it, I received about 5 credit card and loan offers in the mail daily.

First, it takes anywhere from a couple of weeks to a couple of months for a closed account to show as such on a credit report. And, sometimes it never does. I have an old credit card still showing as open on my credit report when I canceled it last summer. I actually kinda prefer it that way as it helps my AAoA for open accounts as well as overall utilization

Second, just because you cancel all but two cards doesn't mean you'll stop receiving offers. Offers are often unrelated to one's creditworthiness. You'll have to Opt Out in order to stop receiving them (or freeze each individual credit report with all bureaus - Experian, TransUnion, and Equifax...and probably Lexis-Nexis, too)

Opt-out info:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre17.shtm

 

[ccgirl]

First, it takes anywhere from a couple of weeks to a couple of months for a closed account to show as such on a credit report. And, sometimes it never does. I have an old credit card still showing as open on my credit report when I canceled it last summer. I actually kinda prefer it that way as it helps my AAoA for open accounts as well as overall utilization

Second, just because you cancel all but two cards doesn't mean you'll stop receiving offers. Offers are often unrelated to one's creditworthiness. You'll have to Opt Out in order to stop receiving them (or freeze each individual credit report with all bureaus - Experian, TransUnion, and Equifax...and probably Lexis-Nexis, too)

Opt-out info:
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre17.shtm

To add to that, an offer is just that, an offer. It is not guaranteed acceptance.

 

[ilovemk76]

Insurance companies also check credit scores to determine your rates. I guess they figure that someone with a poor score is not only bad with money but they're also a risky driver.

Bold - That is not the reason. A person with a poor credit score it more likely to put in a many small claims than somebody with a good credit rating.

 

[gracie1]

They say that closing accounts effects credit scores but I still have never had that problem.

 

[JDUCKY]

They say that closing accounts effects credit scores but I still have never had that problem.

Closing accounts CAN affect one's score.

1) Closing an account with a balance automatically puts that card over 100% utilization as the balance to credit limit ratio is infinity.

2) Closing an account will not affect AAoA (average age of accounts) for 10 years. But, it can affect the AAoA of open accounts which some lenders take into consideration.

3) Closing an account with a larger credit limit can lower one's score by virtue of making the overall utilization % much higher. It can also lower one's score due to having balances on more than 1/2 of one's credit card accounts (if closing the account would broach that barrier).

 

[2disneyboys]

OP - Good Luck on the road to financial freedom. It's a long road & it's hard, but with determination, you can and will make it. There are several financial guru's out there that following thier "plan" can help you reach this financial freedom. I would suggest not touching your 401k. The potential for that situation to go bad is just not worth it. Perhaps stop contributions but don't pull it out except as a last case choice. I would also not use home equity to pay off credit cards. you've got to make sure at the end of the day you have somewhere for you & your children to live.

Sometimes, its a simple as just making weeking payments to whichever balance you are going to attack first. My DH & I set up our budget. While we were in paydown mode, at the end of the budget week (dh is paid weekly, I am paid bi-weekly), if there was xtra in any of our budget categories, that extra was sent to the balance we were paying on. some weeks that was just $5.00 (but we paid the $5 anyways!) other weeks it might be $100.00 keep in mind, these were extra payments. we had our categories - groceries - entertainment(anything like field trips, movies, etc) - gas - these were the 3 categories that would on occassion have "extra" .. as in we budgeted $100 and only spent $65 or something. Anything extra, regardless of how small, was paid to the attack balance at the end of the budget week. We used coupons, took advantage of fueling up on certian days when the station discounted the gas, rented movies from netflix instead of going out etc.. anything to have extra money to apply to the "balance" we were attacking at the time. one month, in addition to the budgeted payment for the credit card, we were able to make 3 extra payments of about $90 each simply by just watching the spending in these 3 categories.. that really motivated us to try to do even more extra the next month..it was really really awesome and empowering to realise that WE could get ourselves out of the mess we have gotten ourselves into. Since then, we use our credit card very sparelying..and anything put on it is paid off on the next paycheck (we don't even wait for the due dates!) We recoginized that we did not like having a bill hang over our head and after making sarafices to eleminiate this extra bill, we dont' want to go back there. we are well on our way to a 9 month emergency fund and then we will start paying extra on our house, which is currently our only debt.

Good Luck OP - check out all the guru's. take the parts from each of them that work for you. the important part is the "doing". Every tiny step in the right direction adds up!

 

[timmac]

Another thing you can do, and this is only if you do take the IRA loan, is to call your credit card companies and negotiate a lower payoff amount. If you owe for example $5000.00 negotiate to pay $3500.00 right away. Some companies might go for it, others might not. You might also have to agree to close the card though.

Not sure I like this advice. Not only does that show in your credit report as settled (which is definitely derogatory relative to a "paid in full" balance), but you may find yourself with a tax form for the difference for the forgiveness of debt.... then you owe the IRS some percentage on that.

 

[sorul82?]

Insurance companies also check credit scores to determine your rates. I guess they figure that someone with a poor score is not only bad with money but they're also a risky driver.

Bold - That is not the reason. A person with a poor credit score it more likely to put in a many small claims than somebody with a good credit rating.

You are both correct. Risky in that they may stage an accident. And yes, submitting small claims. In addition, the number crunchers found a connection between house fires and foreclosures.

 

[crazyme5kids]

Not sure I like this advice. Not only does that show in your credit report as settled (which is definitely derogatory relative to a "paid in full" balance), but you may find yourself with a tax form for the difference for the forgiveness of debt.... then you owe the IRS some percentage on that.

Ah, I see. Then if, and only if, the OP was able to take a loan against her IRA then it would be best to just pay the cards off in full. Good advice timmac, that didn't occur to me.

 

[disfan07]

speaking from personal experience, my previous employer would randomly run credit checks on the employees. A dive in a person's score could indicate an increased risk for theft. One shouldn't disregard the impact a low score could have on someone's employment.

Correct. If you have a job that requires a security clearance of any kind, they run credit checks every few years and a hit on your credit can cost you your job.

 

[WildGrits]

I can only speak from my own experience but,

Fours years ago I went to the CCCS of NY for help with my bills. I had to car payments and 5 credit cards which totaled just over 30K. My phone was ringing off the hook and we could not make our payments. So you can assume our credit scores were crap.

Of course the CCCS was not able to help with out car notes but they where a huge help with our credit cards. Our monthly payment was just shy of $800.

Today I sit here totally debt free. January was my last payment to the CCCS of NY which is now called ClearPoint. It took awhile but I have truly learned my lesson and will not make the same mistakes again.

Not knowing the the OP full situation, I can say that they is no harm in making an appointment with the CCCS and hearing what they have to say and what they can offer you. I do know that your bills had to actually be late before they could help. And once you start a DMP, you cannot get credit anywhere until you are paid off.