Credit

[Brandwin]

Re: Credit

What about if it's around 7k in debt and they are all through collection agencies now. I don't have a good credit card.

[CM1847]

Re: Credit

So, I've got some Best Buy, Circuit City, Wal-Mart card debt that I intend to pay off within the next couple months. Am I to understand that by paying these off I can actually be hurting my credit in the short term? Am I to also understand that it's better to just simply make sure that you make payments on time and regardless of the amount you owe you'll have a good credit history?

No, you are always best to pay off your debts. If you have a collection out(debt that you didn't pay so the borrowing company sent the debt to a collection agency) on debts that are a few years old you will probably drop your credit score by paying off these debts(which doesn't make any sense, but it's the way it works). It's almost always still better to pay them off, the drop will be temporary and hte long-term benefits outweigh the short term drop.

If you have normal debt(ie a maxed out credit card or two, or three...) then making the monthly payments is absolutely the way to go. The best way to improve your credit is to owe somebody a lot of money but pay them their required minimum every month(preferably if you have a 0% financing deal through somebody, I don't keep a balance on cards unless I have 0%). My earlier advice was intended for the OP who sounded like they had debt that was more than a couple of years old and they probably have been sent to collection agencies.

[jdros13]

Re: Credit

What about if it's around 7k in debt and they are all through collection agencies now. I don't have a good credit card.

1. You need to get rid of the debt. My impression is that the debt relief services will hurt you in the long run. I am not an expert though.

2. You will need to open up some type of credit and use it responsibly. It will probably mean paying for the right to have a high interest credit card. Sucks, but that is the fastest way to build up better credit. You might not even be able to get one of those until the debt is paid down, based on your current score.

If you want good interest rates on car purchases, mortgages, etc it will take a couple of years to restore your score...but as someone else said this stuff will start falling off your credit report and within a few years you will have good credit again. Every day you wait on it though, the longer it will take.

[fistofrage]

Re: Credit

What about if it's around 7k in debt and they are all through collection agencies now. I don't have a good credit card.

If they are in collection, see what they will take and try to get rid of it ASAP. In the meantime, apply for a credit card with a $1000 balance and purchase your normal groceries on it and pay it off every month.

[jdros13]

Re: Credit

No, you are always best to pay off your debts. If you have a collection out(debt that you didn't pay so the borrowing company sent the debt to a collection agency) on debts that are a few years old you will probably drop your credit score by paying off these debts(which doesn't make any sense, but it's the way it works). It's almost always still better to pay them off, the drop will be temporary and hte long-term benefits outweigh the short term drop.

If you have normal debt(ie a maxed out credit card or two, or three...) then making the monthly payments is absolutely the way to go. The best way to improve your credit is to owe somebody a lot of money but pay them their required minimum every month(preferably if you have a 0% financing deal through somebody, I don't keep a balance on cards unless I have 0%). My earlier advice was intended for the OP who sounded like they had debt that was more than a couple of years old and they probably have been sent to collection agencies.

Making the minimum payments never hurts your score (as is said above), but will never allow you to get out of debt. If you have 3000 on a credit card, pay what you can and stop spending on frivolities until you get it paid off...in other words prepare to really tighten the purse strings. If you bought a 360 and a bunch of games for $1000 at best buy, do you really want to wind up paying $3000+ for that stuff after you pay all the interest on that 20-25% best buy credit card....I'm guessing the answer is no.

If you are in collections (which is what happened to me, I wasn't even making the minimum payments), then you need to work out a payment plan with the collection agency. As someone else said they will often settle for less than the total owed, but that will take negotiation. Ignoring it and hoping it goes away doesn't work.

Many companies are also doing credit checks on prospective employees now (you will know if that is the case, because you have to consent to it). So it could also affect your future earning potential. Do what you can to fix it ASAP.

[NoleFan]

Re: Credit

Luckily, I don't think my new employer did a credit check but I do what to get that stuff paid off before any future employers get any bright ideas.

[ESPNdeportes]

Re: Credit

I use equifax.com

Just FYI, Equifax is one of the three major credit bureaus, along with Transunion and Experian. You should check those every year at the website I listed above. Its free, and you can see exactly what is on your report, but you gotta pay to see the actual score. But you do want to keep an eye on all three.

[CM1847]

Re: Credit

Making the minimum payments never hurts your score (as is said above), but will never allow you to get out of debt. If you have 3000 on a credit card, pay what you can and stop spending on frivolities until you get it paid off...in other words prepare to really tighten the purse strings. If you bought a 360 and a bunch of games for $1000 at best buy, do you really want to wind up paying $3000+ for that stuff after you pay all the interest on that 20-25% best buy credit card....I'm guessing the answer is no.

You're absolutely right, minimum payments should only be used if you have a low rate on a major loan such as a car or a house or if you get a 0% financing deal(even then I always go by the "pay as much as I can afford" rule). Keeping dept and paying it is the best way to raise your credit which was the point I was making, but you are right that it is a completely different situation if you are trying to get out of debt.

First, do whatever you can to get rid of all of the debt you have, if you have a few maxed out cards and have been paying them monthly then you are stuck with nothing left to do but keep paying them until they are gone, but at least your credit score will go up. If you have collections out you can start bargining with them to pay off a fraction of the amount and have it resolved on your credit report, but the damage has already been done to your credit score and paying them off will actually lower your score in the short-term, but is the best way to go long-term.

[NoleFan]

Re: Credit

Well, I'm not in as bad a situation as I thought. Yeah, I've got some credit card debt but it hasn't been remotely close to going to collections. I've, unfortunately, been late a time or two but collections it has not been in.

Still plan on paying it off completely in a few months. Then, I'll get that HDTV that I've been wanting and that should carry atleast a year with no interest.

[CM1847]

Re: Credit

Then, I'll get that HDTV that I've been wanting and that should career atleast a year with no interest.

Be careful with the no interest for a year deals, if you don't have them completely paid off within a year they will slap a years worth of interest on your bill as soon as you go 12 months without fully paying it off. No interest deals are great, I always look for them when making a major appliance purchase, but it is completely pointless if you don't have the bill completely paid off within that no interest time frame. Even the no intrest, no payment deals work the same way.

I thankfully had someone tell me that a while ago, I've known a lot of people who get bit by it, some have been really close to paying off the whole bill, but instead of a final $100 bill arriving on the 12th month they get a $2000 bill with all of the interest thrown on, it's a crappy situation to end up in.

You may have known this already, but I wanted to throw it out there just in case

[grismosw]

Re: Credit

Be careful with the no interest for a year deals, if you don't have them completely paid off within a year they will slap a years worth of interest on your bill as soon as you go 12 months without fully paying it off. No interest deals are great, I always look for them when making a major appliance purchase, but it is completely pointless if you don't have the bill completely paid off within that no interest time frame. Even the no intrest, no payment deals work the same way.

I thankfully had someone tell me that a while ago, I've know a lot of people who get bit by it, some have been really close to paying off the whole bill, but instead of a final $100 bill arriving on the 12th month they get a $2000 bill with all of the interest thrown on, it's a crappy situation to end up in.

You may have known this already, but I wanted to throw it out there just in case

Also, if your payment is a minute late you get the interest billed to you. If you go the 12 month, no interest route...it's best to pay the bill around that 11 month.

We bought all new furniture for our new house, over $7000 with no interest and no payments for 18 months. We've basically taken $6500+ and put it into a CD that expires 45 days before the balance is due, the interest we are gaining on the CD is going towards the furniture.

[NoleFan]

Re: Credit

Yeah, calculating payments to have it paid off in 11 months was my plan all along.

Thanks for the heads up!!!

[jaskerr]

Re: Credit

For those of you with multiple credit cards (in collections or in good standing) and are trying to get those paid off here's what you do.

Take the card with the lowest balance and pay the most that you can afford toward it. Meanwhile, make just the minimum payments to the other cards. Once the lowest balance card is payed off, take all the money from that payment and start on the next lowest card. Continue with this until they're all payed off.

If you have cards with high interest rate call the company and see if they'll lower your interest rate, (real credit cards, not the Best Buy, Circuit City ones...they won't ever lower your interest rate). If you've been making payments on time, then more than likely they will lower it. If not, then make your payments on time for 6 months, then call them again. Some will lower it after 6 months of on-time payment, some after 12 months, so YMMV.

Once you get to the point where your stuff is payed off, close out your store credit cards, and keep at least one, preferably two regular cards out of: Visa, MC, AmEx, Discover; that way you're covered if you go somewhere that accepts one, but not the other. Keep your balance low so that you could pay it off within two months. That way you'll continue to build good credit.

Try not to ever deal with debt consolidation companys, it'll only harm your credit now, and take you longer to build it back up in the future. Doing it on your own is the best way to do it.

You need to get a serious budget together and stick to it. Put as much into paying your stuff off, but also start an emergency savings fund and try to build it up to 1,000. Once it's there, divert the money you were paying into that back into your credit payments. If you have to dip into it (when does GTA IV come out? ), then get it back to a grand as quick as you can without missing your credit payments.

We got a lot of this stuff from Total Money Makeover by Dave Ramsey. Check it out at the library (don't actually pay for it, you're trying to pay your debt off, not add to it by buying debt reduction books!) and take what you need from it. If you actually stuck to everything he says, you're a better person than we are and you'll get out of debt the quickest, but if you at least get some ideas on where to start then it's worth it in the long run.

[ehh]

Re: Credit

Credit reports are f'n stupid. I never looked at one and never will.

[CM1847]

Re: Credit

Credit reports are f'n stupid. I never looked at one and never will.

Yes, because it's so hard to take 10 minutes to get a free one online once a year and make sure no one has taken out credit cards in your name or there isn't a mistake about one of your accounts....it's much easier to wait until you apply for a loan or a credit card and get denied because of something like that.