Need some advice on my credit situation

Discussion in 'Green Room' started by Punkrulz, Mar 17, 2008.

  1. Punkrulz

    Punkrulz Somewhat eXPerienced

    Messages:
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    Location:
    Woodbury, NJ
    Hey guys,

    I'm revisiting the issue of mine known as credit. It's not that great. I will definitely say that granted, my credit is far better than some people... and my debt is not horrible. Unfortunately having bad credit, or in my case not so good credit is going to be hurting things in the future. I'm trying to tackle this situation once and for all. I'm trying to apply whatever money I can to my credit cards when I can, however it seems that when I attempt to tackle one, somehow the other 2 take a hit and it sets me back two more steps. Here's what I'm working with:

    Card 1: Capital One, $385 Balance, $400 Limit, 29.something% interest.
    Card 2: First Permier, $246 Balance, $250 Limit, 19% interest (I believe)
    Card 3: Ikea, $588 Balance, $300 limit, 29.something% interest.

    I can't confirm the interest rates because I'm doing this online and the online websites don't have that much information... I believe my credit score is in the area of low to mid 500's. I can't confirm that. I don't want to keep running credit reports, because I know the more that are run, the worse my credit appears.

    My friend gave me the idea that if I can somehow get a credit card with $1000 or so balance, that I can transfer my balances to a lower interest rate, and would wind up having to fork out less money. It's a great idea. I know a lot of you guys are going to question whether I'm responsible enough not to use it other than for that purpose, or that it might hurt me further, but to tell you the truth I am responsible enough for that to work.

    The problem though is that I don't know of any credit cards that I have a good shot of getting something like that, that has 0% on balance transfers for what we'll say is 1 year. I could probably somehow score another credit card, but it'll be a real low limit like my others of about $300 I think. I don't want to randomly apply for cards, because again the credit checks will possibly hurt my credit.

    I'm trying to get a 2nd job, and as I said that I've been trying to put all of the money possible on these credit cards... but unfortunately things happen and I haven't been able to knock any others out. Another question, if somehow I can't do this, what credit should I take out first? The low one, or go after the high one? Would I be ok sending the minimum to two cards for awhile, and whatever I can to the other? How do you judge what should be sent to what card?

    Thanks!
     
  2. ray_gillespie

    ray_gillespie Moderator Staff Member Political User

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    I think a bit of careful planning could get you out of this quite quickly, as your debt isn't really that high, you'll just need to stick to your budgets etc. Have you ever looked at www.moneysavingexpert.com - although it's a British website, the principles will be the same and you should fine some excellent advice and tips on choosing a plan to get you out of debt.

    If you can put it all on one card with a 0% balance transfer, even if it's for a small fee, you'll be well on the way. If you can do this, transfer it all over and then set up a standing order into a high interest savings account, working out exactly how much you'll need to save each month to pay it off within a year. Once a year has gone by you'll have the money you need, plus quite a few $$$ from the interest gained in your savings account, which could probably cover the transfer fee retrospectively.

    If you can't get a 0% credit card then make minimum payments on your IKEA and First Premier cards, while paying off as much as possible on the Capital One card. Get that one out of the way as soon as possible, then move onto the IKEA card, then finally the First Premier card.

    Personally, I think you should pay off the highest interest with the lowest balance first as in real terms you will be paying off the most. As far as I know, you pay interest on the card's balance unless you pay it off in full, so you will pay the same interest in a month if you pay of the minimum as if you paid off $100 more than the minimum. This is why you should take out the card with the smallest balance first, but only on one of the high interest cards. Your card with 19% will hit you less hard each month per $ so I would have this as a lesser priority.

    The best advice I can give you is to draw up and budget, including credit card payments, and stick to it rigidly. Sell any spare crap you have, like old CDs, games, magazines etc, and use that to boost what you pay off.

    Good luck, I'm sure you'll sort it out.
     
  3. Punkrulz

    Punkrulz Somewhat eXPerienced

    Messages:
    790
    Location:
    Woodbury, NJ
    Thanks for the great advice Ray, I will check it out. In the mean time, here is a link I am looking at that ask for fair or improving credit to apply.

    http://www.creditcards.com/fair-credit.php

    Should I even try even though the apr on balance transfers begins in June, and the rate is 14%? It's still better than the 2 29% rates I have... unfortunately there's nothing i can do to guarantee a limit that is high enough.
     
  4. j79zlr

    j79zlr Glaanies script monkey Political User

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    Yes credit checks hurt your score. You probably can't get a 0% interest card right now and especially if your score is in the 500's. What you need to do is make minimum payments on 1 & 2, and pay off 3 first. You are over limit which will get you penalties. Then pay off the highest rate cards next, card 1. Then card 2. You probably can't do anything with the Ikea card since it is a store card, pay that off as soon as possible. I would call the other two card companies and see if they will lower your interest rates, those are abominable. The good news is that you only have about $1,200 worth of debt. I would throw every penny at these until they are paid off and most importantly, DO NOT CHARGE WHAT YOU CANNOT AFFORD.
     
  5. Punkrulz

    Punkrulz Somewhat eXPerienced

    Messages:
    790
    Location:
    Woodbury, NJ
    Bah, it just got more tough now... I have people originally saying to pay off Capital one first, then First Premier, and finally Ikea... now j says to go ikea first. Doh!
     
  6. Punkrulz

    Punkrulz Somewhat eXPerienced

    Messages:
    790
    Location:
    Woodbury, NJ
    I got one of the credit card offers in the mail today for 0% balance transfers. While I was declined, they said I am approved for this... should I take it? The percentage is high but I don't know if they will also do balance transfers or not...

    Annual Percentage Rate (APR) for Purchases

    2.9% Fixed FOR 6 MONTHS, thereafter 19.99% variable (Minimum 19.99%) Other Variable APRs

    For Purchases

    Penalty APR: 25.99%

    (Miniumum APR: 19.99%)


    For Cash Advances

    APR: 27.99%

    (Miniumum APR: 27.99%)


    Penalty APR: 29.99%

    (Miniumum APR: 29.99%)

    Variable Rate Information

    The Rates are determined for each billing period by adding a margin to the highest Prime Rate published in The Wall Street Journal during the last calendar month.


    The margins are respectively (in the order that they appear from left to right in the boxes above):


    Purchase - 12.74%

    Penalty Purchase - 18.74%

    Cash Advance - 20.74%

    Penalty Cash Advance - 22.74%

    Grace Period for Purchases

    At least 20 days

    Method of Computing the Balance for Purchases

    Average daily balance including new purchases.

    Annual Fee

    $59

    Minimum Finance Charge

    $1.00

    Cash Advance Fee Finance Charges

    For cash advance transactions of $100 of less: $5. All other cash transactions: The greater of 4% of the cash advance transaction amount, or $15.

    Late Payment Fees

    $39

    Over Limit Fees

    $39

    Foreign Transaction Fee

    3% of the U.S. Dollar amount of transactions made in a foreign currency.
     
  7. Sazar

    Sazar F@H - Is it in you? Staff Member Political User Folding Team

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    You appear to have 2 maxed cards and 1 over-drawn card.

    If you are looking to improve your credit, why would you open another card?
     
  8. Petros

    Petros Thief IV

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    It looks like a pretty good deal considering the circumstances. I work for a credit card company and we have similar interest and fees, but they probably wouldn't give you the promotional rate. As long as you can get a 1200-1300 limit, most companies will let you do BTs, usually with a 2-3% fee.

    There are some cases where they'll tell you what offer you've got, then you apply and they don't give it to you. Save your paperwork, remember who you talked to about it, get employee IDs. They may require you to fax them later as proof. If they didn't give it to you because they couldn't approve you for it, you're just out of luck though. But saving paperwork helps! And make sure the person you talk to knows that you want to use the card

    I agree with j79zlr, because being overlimit is a nasty place to be because it hurts your credit score AND costs you fees; pay more to the higher interest cards first while making minimum payment on the others, starting with the one over its limit. Also, get your balances below 60% of your max if you can, because card issuers don't like to see that you're at your limit on everything.
     
  9. fitz

    fitz Just Floating Along Staff Member Political User Folding Team

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    checking your own credit does not hurt your score.. it is treated differently than a company doing an inquiry for obtaining credit (ie: credit card app, mortgage application). (sourcre: http://www.myfico.com/CreditEducation/CreditInquiries.aspx)

    Some things I would suggest:
    1) Talk to Capital one and whoever issued your Ikea card about lowering your rate. I'm assuming you were late on some payments and are running at the higher default payment rate. Depending on your history and how long ago you made those late payments, they may lower the interest rates.

    2) Talk to IKEA about payment arrangements because you are going to be drowning in over limit fees.

    3) Make at LEAST the minimum payments ON TIME each month.

    My advice here will seem counter intuitive, but I will stand by it:
    4) Assuming points 1, 2, and 3 are taken care of, pay of the lowest balance first.. It will be paid off the fastest leaving one less bill to be paid allowing you to move the money used for that payment to pay off the next card.

    If you are unable to deal with IKEA, I would say work to move that card below the limit and ask them to lower the interest after that.

    edit: now, your balances may be close enough that it may not matter which card you pay off first (depending on what your minimums are and interest rates are). If the balances are the same (or near enough to be the same), no question: pay off the higher interest cards first.
     
    Last edited: Mar 17, 2008
    muzikool likes this.
  10. Sazar

    Sazar F@H - Is it in you? Staff Member Political User Folding Team

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    Fitz, you ALWAYS want to pay the over-drawn card first or transfer the amount to another card.

    You NEVER want to be over-drawn because that just looks terrible.

    He is only a couple of hundred over on the last card, so paying it down should hopefully not hurt that much.

    Punk, my advice to you is for the next few months, just bite the bullet and reduce spending significantly, regardless of how much it hurts. You have to make a tough choice and resolve the debt first and foremost if you don't want to owe ludicrous amount of money to all kinds of credit companies in the future due to a crappy credit history.

    It doesn't matter if your life style changes, this is one of those tough pills you simply have to swallow :)

    As soon as you have been able to get your over drawn card down, pay down the high-interest cards first, make minimum's on the 19% card.

    As others have advised, talk to the creditors and see if you can get your interest rates reduced to make it easier for you.

    Fortunately, you are not that far over, once you start getting 10/20/50k credit card limits and over-draw on that... THEN you'll know what a hassle it can be :)

    The card you are looking at getting, are you going to be able to pay down the charges you are planning on moving to it within 6 months?

    If not, look for a card with a 1 year period, even if it is a slightly higher interest rate.

    As soon as the cards are paid, cut up the higher interest ones and see if the lower interest one can be dropped further. You'll be older by then as well, hopefully :D so it may be easier.

    Good luck :smoker:
     
  11. muzikool

    muzikool Act your wage. Political User

    I completely agree with fitz. If you can stay current with all 3 cards then do that, then find a way to put some extra towards the lowest balance and get it paid-off first -- you mentioned the possibility of a 2nd job, that would be a way to do that.

    You will also find that if you are far behind then the debt might be settled for pennies on the dollar. You might be told "no," but it won't take anything but your time to see if you can pay-off the $385, for instance, with $200. That's a bit more than 50 cents on the dollar, and Capital One might accept it if they look at it from the perspective that you might have trouble paying the full balance. The important thing in this case is that you GET IT IN WRITING that they will accept $200 as the payoff of the debt, and then you keep that letter forever. $200 is just an example and they may even accept less.

    Sazar, I have to disagree with you on paying down the highest interest rate first. By attacking the smallest debt and removing it from the picture you now that have money free from payment on that card to attack the remaining debts. In the long-run you will payoff all three cards quickest by going smallest to largest.
     
  12. Sazar

    Sazar F@H - Is it in you? Staff Member Political User Folding Team

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    My philosophy is simple on this.

    The over-drawn card is not only incurring high-interest, it is also incurring additional charges in terms of late fees and what not. You eliminate a whole level of additional payments by tackling this additional expense which can be applied towards the other cards as needed.

    If there were no late charges, I would advise like you, but seeing as he is significantly over-drawn (in terms of percentages) I have no choice but to advise paying that down.
     
  13. fitz

    fitz Just Floating Along Staff Member Political User Folding Team

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    I completely agree..
    I thought that's what I said? :p maybe I should clarify :)

    I did say work with IKEA to work on a payment arrangement and remove the over limit fees.. and if they won't work with you, pay that down first till it is below the limit. :)

    I also mentioned in my edit, the difference in balance between the cards is small enough that it becomes insignificant.. in which case, my advice was to pay the higher interest rate cards off first (after talking to each of them about a rate reduction). It is also VERY important, and thus mentioning again and again, that you make at least the minimum payments ON TIME to all the other cards lest your interest rate jump back up again.
     
  14. tdinc

    tdinc █▄█ ▀█▄ █ Political User

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    The only way to avoid a debt snowball is that you should pay off the smallest debt first to create the greatest momentum in your debt snowball. then apply what you were paying to the remanding cards. to build your credit back up you need to get rid of the high rate cards. burn them cut them. go to your bank or credit union. they usually offer free credit help. and get you back on track.

    bad credit lasts 7 years on your record. before you get back to 0.
     
  15. Petros

    Petros Thief IV

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    Almost forgot--ask all your card companies if you can get any fees reversed any recent fees billed to the account. Most companies can get you at least one, maybe two a year if you haven't had any reversed.
     
  16. Punkrulz

    Punkrulz Somewhat eXPerienced

    Messages:
    790
    Location:
    Woodbury, NJ
    I've attempted to contact all three companies in working with them. None of the companies were willing to work with me, unfortunately. I am willing to try calling again, but basically they all told me that it was money that I have racked up and they refuse to work with me. I was trying to get them to remove the money from the interest itself, and they all said no. 2 of the 3 suggested a debt consolidation program if I'm having trouble. I've already looked into that avenue, with negative results.
     
  17. j79zlr

    j79zlr Glaanies script monkey Political User

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    2,725
    Location:
    Chicago
    Debt consolidation would be too expensive for debt as small as yours. Mathematically you want to eliminate the highest interest debt first. Just because others think it "seems" better to pay off the smaller debt first doesn't actually make that so. In an overly simplified example:

    $100 to spend
    #1 385 29% $9.30int $15min
    #2 246 19% $3.90int $10min
    #3 588 29% $14.21int $20min
    $27.41 in interest

    If you pay the minimum on #1 & #2 and then pay the rest of your $100 ($75) towards #3, your interest next month is:

    #1 379.40 29% $9.17int
    #2 239.90 19% $3.80int
    #3 527.21 29% $12.74int
    $25.71 in interest


    If you pay the minimum on #1 & #3 and then pay the rest of your $100 ($65) towards #2, your interest next month is:

    #1 379.40 29% $9.17int
    #2 184.90 19% $2.93int
    #3 582.21 29% $14.07int
    $26.17 in interest

    That is overly simplified but it holds true. Always pay the highest interest rate first.
     
    Last edited: Mar 17, 2008
  18. muzikool

    muzikool Act your wage. Political User

    I agree paying the highest interest first ONLY until you are current with all the cards. At that point it makes the most sense to attack the smallest debt first. Pretty soon you won't be paying any interest on that card because there will be no balance and you will feel really good having one down and only two to go. There is an emotional component at work here as well, so making one fewer payment each month will encourage you to continue on until you have eliminated the final two.
     
  19. j79zlr

    j79zlr Glaanies script monkey Political User

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    Reducing the amount on the highest interest card reduces the total interest. Period.
     
  20. Sazar

    Sazar F@H - Is it in you? Staff Member Political User Folding Team

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    Exactly my point.

    You have to factor in the total amount of extra money being wasted, essentially, in extra late fees and the like.