Overwhelmed ... Credit Cards

[richmond282]

When you are in an impossible situation the psychological benifits really outweight saving money. Yes they paid more, but KNOWING you can tackle your own debt really helps a lot of people. I am another vote for Dave Ramsey. I want to wish you luck in you situation. I know you will find a way to pay them off!!!!

I TOTALLY agree with this. It's a psycological thing. If you are soooo overwhelmed by credit card debt that you are desperate, it is better to pay off your cards with the lowest balance (to heck with the interest rate) just to feel like you are making progress and getting somewhere. And, honestl,y I figured out the difference between paying off the lowest and paying off high IR one time on our cards when we were snowballing. There was no life altering difference. It was only a matter of less than $50.

Is the 'don't take out a loan to pay off the cards' Ramsey too? Because I don't understand that one except if it's his 'debt is bad!' schtick.

The ccs ARE loans. If they won't budge on the interest, and someone can take out one consolidation loan, cut the interest significantly and pay off all the cards at once, that makes logical and financial sense.

I think Suze Orman says this. I don't ever remember DR talking about it at all. But what Suze says is don't take out a SECURED loan to cover UNSECURED debt.

 

[MissManda]

Is the 'don't take out a loan to pay off the cards' Ramsey too? Because I don't understand that one except if it's his 'debt is bad!' schtick.

The ccs ARE loans. If they won't budge on the interest, and someone can take out one consolidation loan, cut the interest significantly and pay off all the cards at once, that makes logical and financial sense.

I agree with this. If the OP's credit is still good, then it doesn't hurt to at least see if she can get a loan to consolidate all of her credit card debit into one.

By doing so, she might get a better interest rate than what is on the cards. Which means she'll be paying more in principal that interest overall.

Also, there will be a fixed time period to pay it back. This way you know that there is a light at the end of the tunnel. You know that each month you are one month closer to having this monkey off your back. Right now she seems really frustrated that she's not making in progress. This could be a nice psychological benefit (just as much as the snowball method of paying off smaller cards first).

She also might be able to save a little money this way each month as well if the monthly loan payments are a little less than what she's paying now. That difference can then be put into a saving account to start building an emergency fund.

I know for me personally, this route would make me feel a lot better and I would feel like I'm accomplishing something instead of spinning my wheels each month.

I wish the OP the best of luck with whatever she decided.

 

[pumpkinmomma]

Do not take a settlement offer. It will wreck your credit, and you have to pay taxes on the settlement amount. Bad idea.

Id start by calling and seeing if you can get lower rates. If you cant, look into a personal loan.

 

[Brer Shay]

I was going to post this morning about just having finished paying off massive CC debt. We had about $42K in debt, primarily accumulated for medicall bills, in 2007. Like OP, we were stretched across multiple cards. Our monthly payments on all of it was about $850. After a year of not using the cards and making minimal progress on the balances, we got a personal loan from our credit union for the full balance. The interest rate was not the lowest, but it kept us on a fixed time frame with reasonable payments. We were only required to make $600 payments, but I kept paying the $850 we were used to and we just made our last payment yesterday. When "extra" money came in, we put it on the balance as well. For me, the psychological of having one total balance and seeing it decrease every month with a defined period to be complete was very helpful. I could see progress happend and know we were going in the right direction.

There are many methods, this is what worked for us. Just pick one strategy, and stay with it. As long as you aren't continuting to accumulate new debt, you will find a way to get out of this. It can be done!

 

[bumbershoot]

Is the 'don't take out a loan to pay off the cards' Ramsey too? Because I don't understand that one except if it's his 'debt is bad!' schtick.

I don't know.

But the idea behind it is that if a person is still in the mode to be *using those CCs*, getting a loan to pay those CCs off is a HORRIBLE idea. Because they'll have the loan they have to pay on, they will wipe out the CC debt, and then they will start using those CCs again. Awful, horrible, BAD idea.

Since the OP hasn't used any of the cards in at least a year, it's not as bad for her. ONly she can look into the corners of her heart and mind to know what SHE would do.

If we had taken out one big loan to pay things off, before we really got it (and once we got it we didn't WANT to do such a thing!), it would have been disastrous, because my husband was still in his version of poverty mode (the less he has the more he wants...same with food; diets do NOT work with him and the shame his mom used to throw on him when he would gain weight didn't work either). We only had one CC, but he would have seen it "empty" and would have wanted to fill it back up again. Disaster. Once he got it, once WE got it, we didn't want to do that. We WANTED to do things in order, without what we felt was cheating by taking out another loan. (plus, no one would have given us that loan...just before we got hit by the clue stick, he got a car loan with a 25% interest rate, and that's the ONLY car loan we could find)

But how much more money did that family end up paying out by not paying down the highest interest accounts first?

What's more beneficial to a family needing money? Saving more of it or just feeling good they paid off a small card with little interest on it?

I'll take saving money any day!

Those other methods *weren't working*.

People who are GOOD with money want to hate Ramsey. But they aren't the people he's trying to help! My brother has never even HEARD of Ramsey. The methods he and Orman and others use were just sort of innately inborn in my brother. He, as a college junior, taught his then-girlfriend (now wife of nearly 20 years) how to deal with money, and got her out of the huge CC debt she had as a college senior. He just *knew* these things. Ramsey does nothing for him. And that's fine; my brother doesn't need him!

I watched my brother in his excellence, I watched my stepdad have a great financial life, and I still didn't get it. I messed up (stupid sole proprietor business I had at a very young age as a very naive young 20 something) over and over (and he still thinks I'm messing up, just not as badly as before). I couldn't get it, I didn't hear it. Same with hubby (though his past problems were caused by a very short term relationship and marriage to a spender who racked up 20K in CC bills in less than a year, then disappeared). As a couple we would spend to zero every month. Once DH convinced me to try for a CC again, despite our best intentions, we wound up with a balance on it (not a big one, but I was so desperate that even the $800 on it made me ill). We weren't listening to anyone.

Then I finally heard Ramsey's message, and he helped. If it hadn't been for him, and the Dis'ers I "heard" talking about him day after day, we wouldn't be where we are today.

$10, $100, $1000 in *potential* interest saved DID NOT MATTER, because it wasn't happening without his message.


Plus, you can change it up if you want to. He's an idea. If you want to follow it strictly, go for it. If you want to change it, as long as it works, as long as you DO IT, do it. On livinglikenooneelse.com you see people modifying things quite often. As long as they are doing it, it doesn't matter.


There are those of us who will get stuck and *not do a thing*, if we overthink things. If you aren't one of us, TRY to have empathy, TRY to understand that we exist. And to follow a plan where we might end up paying 92,000 instead of 90,000 is still an AWESOME plan, because we weren't doing it before!

We had a 5+ year loan on a USED car with 25% interest. Can you understand what a BAD place we were in at that time? (side note: we didn't have anywhere near 90K in debt like that....we had some medical bills we'd been igonring, some other stuff, the CC at $800, the car loan, and we had *just* financed DVC, which was the second to last thing that pushed us over the edge of *getting it*) I didn't get a clue until 2 years into that car loan. Once I realized what was happening (I had to take the actual paying of it over from DH because he found the "grace period" and was taking advantage of it, never realizing that they were charging interest the whole time, never even looking at interest vs principal) I had it paid off inside of 1 year. So, 3 years instead of 5+. 2 years of paying that interest, of paying 10 days after the due date, can you IMAGINE the interest we were paying?

At that point, just to find a plan and do it, regardless of if it was a perfect plan, was the win for us.


That's what people who are already good with money just refuse to get. I hope they get it someday.

 

[Rienchen]

Do you have 0% interest card offers in the States? We have credit cards here in the UK, where the interest rate is 0% for the first 6 months, so you could transfer the balance from one of your cards and not pay that one off for 6 months(while you aren't being charged interest)
That way you have more money to pay off the other cards.

I know it's not ideal to get more cards but maybe it would help?

 

[cornflake]

I don't know.

But the idea behind it is that if a person is still in the mode to be *using those CCs*, getting a loan to pay those CCs off is a HORRIBLE idea. Because they'll have the loan they have to pay on, they will wipe out the CC debt, and then they will start using those CCs again. Awful, horrible, BAD idea.

Since the OP hasn't used any of the cards in at least a year, it's not as bad for her. ONly she can look into the corners of her heart and mind to know what SHE would do.

If we had taken out one big loan to pay things off, before we really got it (and once we got it we didn't WANT to do such a thing!), it would have been disastrous, because my husband was still in his version of poverty mode (the less he has the more he wants...same with food; diets do NOT work with him and the shame his mom used to throw on him when he would gain weight didn't work either). We only had one CC, but he would have seen it "empty" and would have wanted to fill it back up again. Disaster. Once he got it, once WE got it, we didn't want to do that. We WANTED to do things in order, without what we felt was cheating by taking out another loan. (plus, no one would have given us that loan...just before we got hit by the clue stick, he got a car loan with a 25% interest rate, and that's the ONLY car loan we could find)



Those other methods *weren't working*.

People who are GOOD with money want to hate Ramsey. But they aren't the people he's trying to help! My brother has never even HEARD of Ramsey. The methods he and Orman and others use were just sort of innately inborn in my brother. He, as a college junior, taught his then-girlfriend (now wife of nearly 20 years) how to deal with money, and got her out of the huge CC debt she had as a college senior. He just *knew* these things. Ramsey does nothing for him. And that's fine; my brother doesn't need him!

I watched my brother in his excellence, I watched my stepdad have a great financial life, and I still didn't get it. I messed up (stupid sole proprietor business I had at a very young age as a very naive young 20 something) over and over (and he still thinks I'm messing up, just not as badly as before). I couldn't get it, I didn't hear it. Same with hubby (though his past problems were caused by a very short term relationship and marriage to a spender who racked up 20K in CC bills in less than a year, then disappeared). As a couple we would spend to zero every month. Once DH convinced me to try for a CC again, despite our best intentions, we wound up with a balance on it (not a big one, but I was so desperate that even the $800 on it made me ill). We weren't listening to anyone.

Then I finally heard Ramsey's message, and he helped. If it hadn't been for him, and the Dis'ers I "heard" talking about him day after day, we wouldn't be where we are today.

$10, $100, $1000 in *potential* interest saved DID NOT MATTER, because it wasn't happening without his message.


Plus, you can change it up if you want to. He's an idea. If you want to follow it strictly, go for it. If you want to change it, as long as it works, as long as you DO IT, do it. On livinglikenooneelse.com you see people modifying things quite often. As long as they are doing it, it doesn't matter.


There are those of us who will get stuck and *not do a thing*, if we overthink things. If you aren't one of us, TRY to have empathy, TRY to understand that we exist. And to follow a plan where we might end up paying 92,000 instead of 90,000 is still an AWESOME plan, because we weren't doing it before!

We had a 5+ year loan on a USED car with 25% interest. Can you understand what a BAD place we were in at that time? (side note: we didn't have anywhere near 90K in debt like that....we had some medical bills we'd been igonring, some other stuff, the CC at $800, the car loan, and we had *just* financed DVC, which was the second to last thing that pushed us over the edge of *getting it*) I didn't get a clue until 2 years into that car loan. Once I realized what was happening (I had to take the actual paying of it over from DH because he found the "grace period" and was taking advantage of it, never realizing that they were charging interest the whole time, never even looking at interest vs principal) I had it paid off inside of 1 year. So, 3 years instead of 5+. 2 years of paying that interest, of paying 10 days after the due date, can you IMAGINE the interest we were paying?

At that point, just to find a plan and do it, regardless of if it was a perfect plan, was the win for us.


That's what people who are already good with money just refuse to get. I hope they get it someday.

There are two things here, I think.

One, the psychological 'snowball' thing. Yes, that costs in interest but I can see the benefit for people who need the psychological boost because they're in deep.

However, that, I don't think, applies to just everything.

When you say stuff like even once you 'got it' that you wouldn't just have maxxed out the ccs again, you wouldn't have WANTED to take out a consolidation loan at a lower rate to pay them off, and it'd have been 'cheating'?

That's not psychological, that's just bad financial sense and illogic and that's where people have a problem with him - that he has these blanket pronouncements that don't actually make sense in a TON of situations.

This kind of thing isn't the difference between $2000 on a $90,000 loan, it can add up to huge amounts, and to success and failure for someone.

For someone to feel it'd be 'cheating' to take a loan that can save them thousands of dollars and years of time in payoff is ridiculous to me, and not because I 'get it' in some way that someone else doesn't.

If someone owed $20,000 on ccs and paid $1000 a month at 29%, they'll end up paying nearly $8000 just in interest alone, and it'll take 28 months to pay it off. If it was a consolidation loan at 9% interest, it could be paid off 6 months sooner, and with a total of $1700 interest paid.

If you go the Dave Ramsey route, what could you do if you put that $6500 difference over two years into savings or another bill or bought a used car and got rid of a car note or etc.

In addition, psychologically, the excess cards can be closed and someone can limit their ability to run debt back up, if they would have - and having the single, controlled bill, can help psychologically too.

I just... his thing is all 'I'm exceedingly wealthy and thus need no credit thus credit = bad, and btw, use these companies I get wealth from if you get stuck without credit and....' is not just simplified, it rubs some people as worse.

It's not just the snowball vs. not, or 'getting it' vs. not, there are ways in which it's actively bad advice and not to the tune of piddly pennies, imo. That said, if it worked for you, great. But it's not that people don't 'get it' that they don't appreciate him, really.

As for the Orman don't take out secured to back up unsecured - totally!

 

[marie1203]

Even if he doesn't "care" about them, using his methods still HELPS them. My husband's credit score skyrocketed after using Ramsey's methods for just a year. It's been astonishing. Doesn't matter one little bit if DR cares about them; the credit companies don't ask one's *intentions* when coming up with the scores....

I never said his methods didn't help people. Maybe because I never had an issues with managing money and I understand how important your credit score is as some one who use to hire people and used their credit scores as part of the process I dislike DR thinking about credit. I was giving OP another option to DR since she clearly seem to care about her credit score. Another poster in the thread posted some links about DR plan and I agree with her as I see flaws. DR IMO goes too far to get rid of the credits cards since that impacts your credit OP seem she didn't want her credit touch.

 

[tinan]

I think you really have to decide what is right for you. CCCS does have the potential to harm your credit report, but it depends on how they report it. You do have to pretty much cut up your credit cards and not to charge on them. They will give you a plan which will include the time frame in which you will pay off your debt, what your monthly payments will be and how they can negotiate with your creditors. In our instance, we did choose this route and I understand not everyone agrees with this route, but for us, it was our best choice with what debt we had, our income and our lives. In our case, we have about 1 1/2 years left to pay on a 4 year plan and we have looked at our credit score recently. It is in the 700s and all of our creditors list us as paying as agreed. Prior to going to CCCS we also were paying our bills but were overwhelmed and the interest rates were killing us. We contacted the creditors to see about lowering our rates and they absolutely refused for us. Those same creditors that refused to budge for us we are now at 6% and lower on all of them. So while this is not necessarily the best choice, it was the best choice that we had. We are also still tweaking our budget and tried getting a refinance on our home to lower our payment and we were still planning on paying the extra on it to pay it down sooner.

 

[mrsklamc]

Listening to DR's program can also help a lot- it helps keep you motivated to hear people every day who are/were in a lot worse situation than you are, making progress, every day.

I gotta say though, one person earlier said "less" cable channels- NO cable channels! Cable is not a need!

 

[mrodgers]

Listening to DR's program can also help a lot- it helps keep you motivated to hear people every day who are/were in a lot worse situation than you are, making progress, every day.

I gotta say though, one person earlier said "less" cable channels- NO cable channels! Cable is not a need!

I don't know about listening because he is no longer on TV and I don't sit in front of my computer listening to stuff on the internet, but I did frequent the non-affiliated forum for a while. It wasn't motivating at all, more like depressing. If I read 1 more time about how someone paid off another $80k in credit card debt in 16 months.....

Dave Ramsey is great if you have a large income. If you are just struggling to pay your bills and that is where the debt comes from (gas to get to work, food for your children, etc.) it just doesn't work. It is real easy for people sitting on easy street with their big paychecks to say, "get another job, cut stuff out," etc, but when getting a 2nd job for half of what it would cost in child care or not having stuff to cut out, it just doesn't work.

I did it by the dreaded home equity loan [gasp!] Yes I did. I still have debt, but now the debt is but a very very small fraction in payment than what was devouring us. Now instead of wondering how to pay the $600 oil bill for heat, there is $1000 sitting in the bank account for future heating oil deliveries. Instead of the kids going to the doctor's office and paying a $100+ doctor bill, then wondering how to get gas on Tuesday to get to work, there is a couple hundred dollars sitting in the bank account for medical expenses. Instead of 3 months going by and trying to figure out how to pay the $300 insurance bill when it comes, a years worth of insurance bills are sitting in the bank account.

All the while, I am making payments on the home equity loan. By the end of this year, I'll be established enough in everything else that I will start dumping extra money onto the HEL. If not for that, I would be putting heating oil, car insurance, doctor bills, ect onto a credit card rather than having the money in the bank along with paying the debt payment.

 

[bumbershoot]

When you say stuff like even once you 'got it' that you wouldn't just have maxxed out the ccs again, you wouldn't have WANTED to take out a consolidation loan at a lower rate to pay them off, and it'd have been 'cheating'?

That's not psychological, that's just bad financial sense and illogic and that's where people have a problem with him - that he has these blanket pronouncements that don't actually make sense in a TON of situations.

This kind of thing isn't the difference between $2000 on a $90,000 loan, it can add up to huge amounts, and to success and failure for someone.

For someone to feel it'd be 'cheating' to take a loan that can save them thousands of dollars and years of time in payoff is ridiculous to me, and not because I 'get it' in some way that someone else doesn't.

You left out the pretty big part, for our situation, that we simply could not have gotten a loan from anyone. It's all included in our experience, which is why I gave all the information from our experience.

I also said that for the OP, since she hasn't used them in at least a year, it might be different, "less bad", for her. She might actually be able to do it, to just pay off the CCs and not mess herself up again.

If it's the choice between doing it and not doing it, I go for whatever gets you to do it. And if it had been my husband looking around for solutions to our problems, he would have gotten 100% stuck by looking at the detractors, and knowing that he might not be doing the absolute BEST that he could be doing, and he would just have gotten us into a worse situation. DR isn't perfect, but he's not BAD.

I don't know about listening because he is no longer on TV and I don't sit in front of my computer listening to stuff on the internet, but I did frequent the non-affiliated forum for a while. It wasn't motivating at all, more like depressing. If I read 1 more time about how someone paid off another $80k in credit card debt in 16 months.....

Dave Ramsey is great if you have a large income. If you are just struggling to pay your bills and that is where the debt comes from (gas to get to work, food for your children, etc.) it just doesn't work. It is real easy for people sitting on easy street with their big paychecks to say, "get another job, cut stuff out," etc, but when getting a 2nd job for half of what it would cost in child care or not having stuff to cut out, it just doesn't work.

Did you ever participate? Give all of your info to the helpful people there and have them go through it with a fine toothed comb? They might have helped to "find" money.

Large vs small income is incredibly relative (DH earns an amount that is equal to the yearly *bonus* my sister in law gets, and that's BEFORE she made partner). I've never considered our income to be "large", but money was leaking in so many ways (not just Disney, but other piddly, not even worth it, ways), and finding those holes, realizing we could close them, was amazing for us.

You have a mortgage...that means you make more than we do, or live in a VERY low cost of living area, because we still couldn't afford a home (even if we qualified, which DH thinks we could, but I still say we can't *afford* it). So you're in a better position than we were, and are. But maybe you have more kids or more cars or higher bills than we did, I don't know...

The person from this thread who said they paid off 90K said that they did it on an income they never thought could support that payoff.

 

[Gr8t Fan]

I don't know about listening because he is no longer on TV and I don't sit in front of my computer listening to stuff on the internet, but I did frequent the non-affiliated forum for a while. It wasn't motivating at all, more like depressing. If I read 1 more time about how someone paid off another $80k in credit card debt in 16 months.....

Dave Ramsey is great if you have a large income. If you are just struggling to pay your bills and that is where the debt comes from (gas to get to work, food for your children, etc.) it just doesn't work. It is real easy for people sitting on easy street with their big paychecks to say, "get another job, cut stuff out," etc, but when getting a 2nd job for half of what it would cost in child care or not having stuff to cut out, it just doesn't work.

I did it by the dreaded home equity loan [gasp!] Yes I did. I still have debt, but now the debt is but a very very small fraction in payment than what was devouring us. Now instead of wondering how to pay the $600 oil bill for heat, there is $1000 sitting in the bank account for future heating oil deliveries. Instead of the kids going to the doctor's office and paying a $100+ doctor bill, then wondering how to get gas on Tuesday to get to work, there is a couple hundred dollars sitting in the bank account for medical expenses. Instead of 3 months going by and trying to figure out how to pay the $300 insurance bill when it comes, a years worth of insurance bills are sitting in the bank account.

All the while, I am making payments on the home equity loan. By the end of this year, I'll be established enough in everything else that I will start dumping extra money onto the HEL. If not for that, I would be putting heating oil, car insurance, doctor bills, ect onto a credit card rather than having the money in the bank along with paying the debt payment.

I disagree. I find DR to be incredibly motivating, I love the forums because they keep me motivated, and I don't have (and have never had) a large income. Being around like minded people helps me to stay focused and to spend my $ wisely.

 

[gracie1]

Have you tried getting a loan through your bank? The interest would be cheaper than what your paying. I did this before for like $17k in credit card debt and was able to finance for 5 years and then I paid it off early. This way you are not messing up your credit score

 

[bellarella]

I also said that for the OP, since she hasn't used them in at least a year, it might be different, "less bad", for her. She might actually be able to do it, to just pay off the CCs and not mess herself up again.

If it's the choice between doing it and not doing it, I go for whatever gets you to do it. And if it had been my husband looking around for solutions to our problems, he would have gotten 100% stuck by looking at the detractors, and knowing that he might not be doing the absolute BEST that he could be doing, and he would just have gotten us into a worse situation. DR isn't perfect, but he's not BAD.

I think this is what drives people who don't need DR nuts about the people that push his method. Your posts are insistant that not only is his method not bad, it is good. But then you characterize a non-DR method as "less bad" for someone (as in, the method is bad, but in this particular case it might be less bad).

DR's methods are tailored to a particular type of spender. They are not optimal methods for paying down debt. They are also not universally optimal methods for wealth creation. They do work for some people, and that is great. However, there are plenty of other "not optimal" ways of paying down debt that will work for other people. For some reason, that I have yet to figure out, the DR supporters jump all over these methods and all the reasons they are bad, but then write off similarlly less than optimal methods in the DR program.

If DR worked for you, that is great. But that doesn't make it the benchmark against which all other methods should be measured. The OP does not have credit score problems. The OP does not have a history of difficulty with credit cards. The OP faced a divorce and made very difficult decisions and picked the consequences that seemed the best ones at the time. This fact scenario does not put her into the heartland of DR's methods. Much of DR is designed to protect people from themselves. It takes a very conservative method and sets up steps that are designed to guard against particular kinds of risks -- ones that the OP's situtation doesn't seem to indicate are relevant.

 

[KTSMOM]

Have you tried getting a loan through your bank? The interest would be cheaper than what your paying. I did this before for like $17k in credit card debt and was able to finance for 5 years and then I paid it off early. This way you are not messing up your credit score

I second contacting your bank or a credit union for a loan. The interest rate would be way cheaper than a CC payment. Also, you only have to make one payment to the bank vs many payments to all the CC companies. Not to mention it will not have a negative effect on your credit rating.

Good luck.

 

[minnie1928]

You mention your 401k. Are you still contributing? If so, perhaps the best move is to temporarily suspend your contributions (or scale them back to employer match) and use those funds towards paying the debt. Another idea, if you get a large tax refund every year then have your withholding rate adjusted to minimize the return. Better for you to have the money than the government.

The simple reality is that you either have to increase your income or reduce your expenses. There was a great thread on here on Painless Budget Stretching tips, it was filled with great ideas on how to easily cut expenses.

As far as paying down the debts and the order to do so, that's entirely up to you. Personal finance is just that...personal. You need to find the technique that works best for you. If that means paying smallest debt first for a sense of accomplishment, then do that. If you are a numbers kind of girl, then go after the highest rate. The important thing to remember is that with either of these approaches, you are making progress towards your goal!

 

[JDUCKY]

I second contacting your bank or a credit union for a loan. The interest rate would be way cheaper than a CC payment. Also, you only have to make one payment to the bank vs many payments to all the CC companies. Not to mention it will not have a negative effect on your credit rating.

Good luck.

Actually, it can....but it depends

As credit cards are paid down, the balances drop and the minimum required payment drops. Over time, that will lower one's debt-to-income ratio. A loan with a fixed payment each month will NOT lower one's debt-to-income ratio until it's completely paid off. NOTE: FICO doesn't take income into consideration but any other creditor in the future (as long as the loan is active) would look at a DTI.

Also, if someone closes their credit cards after paying them off with a loan, that can make a huge hit on their credit score as their mix of types of credit changes, the average age of open accounts drops like a rock (but overall average age of accounts will continue for another 10 years).

But, if one pays off the credit cards with the loan and keeps them open, that *could* increase their credit score as utilization will drop to 0%.

 

[mrodgers]

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.

 

[MarriedToAPrince]

I would be hesitant about asking for a settlement offer. That will go on your credit report as something like "account settled for less than full amount" or something along those lines. I don't know what sort of impact it has on your score, but I'm sure it is probably not good.

Some creditors do have hardship plans. While I was in school, one of my cards let me go on a temporary plan (like for a year), where they lowered my interest rate to 0 and decreased my minimum monthly payment. At the end of the period, everything went back to how it was before (interest rate, etc). I don't know if any of your cards would offer this option to you if you are current - it seems like I had to be at least 1 payment behind to qualify for that program - and at that point, your credit has started taking hits. The upside for you is that you could either target that debt and pay it off -OR- use the extra money freed up to get one of the higher interest cards paid off.

I think one of the best ideas is seeing if you can get a consolidation loan, get a more favorable interest rate, pay off the cards, and keep just one for emergencies (and close the rest, unless you *know* you won't re-charge on them). I know our credit scores suffered to some extent because we closed all of our credit cards when we got in over our heads. We've been pretty successful in paying them off (still working on a couple), but I wouldn't want the temptation - you could very well end up with a consolidation loan AND 5 maxed out cards again - and then be even worse off.

And while I like various aspects of both Dave Ramsey and Suze Orman's philosophies, I really *love* Gail vaz Oxlade.

Good luck.

I love Gail as well. I think she has the best money management ideas.