I used to run finance companies & my wife is a studdette in the mortg finance biz so here is the reality 2 cents:
If your credit sucks, paying back your debts will not help you. Period, end of story. Once you have charged off (not paid for some time) credit cards, had a car repo'd, or gone into foreclosure, it is a black mark on your credit file & nothing you do will remove it.....except one.
What is important credit? In this order:
1. Morgtage--don't ever, ever, ever be late. Nothing will cost you more $$ come re-finance time than being late on your mortg.
2. Car loan/installment debt--want to get a good mortg rate if you don't have one? Pay your car loans & installment debt on time. Car leases don't count (except when it comes to scores).
3. Credit card debt--either you pay them or you don't. If you pay them, and are rarely if ever late, your score will reflect that, but it is part of a matrix that also comprises # of cards, available balance, etc. Want to raise your credit score? Get a bunch of credit cards, max them to about 75% of avail balance, pay them off right away, and then carry $100-200 for 6 months to a year b4 paying off. Bingo, instant 20 pts for each card. Don't pay them, or pay them late, and you've screwed yourself over. Credit cards are the WORST type of debt to have.
4. Cable, phone, electric, mobile phone & doctor bills: if you paid them you get no credit. If you didn't, you get dinged slightly for collection items. If you want a cell phone, pay your cell phone bill. If you want cable, pay the bill. If you can't make the payments, you can't afford them & they are luxuries anyway.
5. Taxes. Takes the gov't some time to catch up with you, but getting a morgt with a tax lien is a PITA. Do a deal with the gov't b4 back taxes hit your credit report. They are happy to get small payments, and may make you do a budget with them, but you'll earn some grace period + not have your bank accounts seized.
6. This doesn't affect your credit score, but DO NOT bounce checks to the point that a bank closes your checking account. You will be fucked for at LEAST 5 years & there is absolutely NOTHING you can do about it. They all use the same reporting service, and if any bank closes your account due to NSF activity of any kind, almost no other bank will touch you.
Ok, so you didn't pay your bills, you have shitty credit, but want to become a good citizen again. Now what?
1. Find out what your credit score is. Basically, if your score is above 580 you are probably salvageable. The rest of this list is if you are salvageable. If not (<580), see Starting Over down below.
2. If you have collection items on your bureau (#4 above) don't pay them unless you want to use that service again. It won't help your score. Whether to pay any of these debts that haven't hit your bureau depends on #3. This includes Student Loans. Nobody cares, so why pay it (though they are getting a bit more agressive in collecting).
3. Did you default on a mortgage or auto loan (foreclosure &/or auto loan) or get more than 60-90 days past due? If yes, see Starting Over. If not continue.
4. Credit cards. Ditto advice on #2--if they are current, and you have always been in good standing, keep them happy. If not, if you have gone over 90 days past due & the rest of your credit is crap, might as well stop paying them--your score is screwed anyway, and it will take 3 years to repair the damage + you are paying 18%.
Starting Over. They just changed the BK laws, but it won't affect the people who really, really need it--i.e. those with no real income or resources. Tibbs, sounds like you are starting over in all aspects of life, so here is my advice: File BK (assuming you have <580 score & enough debt that it will take you 3 years to pay it off including the interest)---Chapter 7 is what you need. Completely wipes the slate clean + the day you get your BK discharge you can get better rates on a car (about 11-12%), credit cards (15-20%), or even a house (usually after 1 year, but <9% w/zero down shouldn't be a problem) than before you filed. Then again, if you DO have a decent score, and your debt problem isn't too out of hand, go see Consumer Credit Counseling service--it is the original, and still the best, and is non-profit. However, you are facing a 3 year climb out of debt, and there are no assurances that your score will be any better at the end of the 3 years. Something like 50-60% of CCC's customers end up in BK anyway.
So your options are 3 years of slaving to pay the Man @ 18%+ (assuming credit card debt), or a BK filing which you can do yourself and the slate is clean.
I'm sure some with throw the morality of personal responsibility into the arena--fine, but they aren't wearing your shoes or facing your problems. Do what is right for you.
As to your question of $$--almost nobody is going to touch you unless you have resources (cash or equity in a biz) or a good name (credit score).
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"There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs." John Rogers
Last edited by:
mopdahl: Nov 1, 05 10:33