Help Low Fico Score!!

[tifnglen]

Ok i just checked my fico score and it is 568 . I knew I did not have excellent credit but didnt know it was that bad. I have a lot of debt. HEre it goes: 4150 CC (they closed my account due to nonpayment. I had just got out of school and was having trouble making ends meat for a few months and got way behind) 21000 in student loans (never late) and 4300 left on my car (never been late) I also have a jcpenney card that i barely use. What is the best way to raise my score? I dont know if i EVER want another cc.

[disneysteve]

The best way is probably to repay your debts and wait for time to gradually lessen the effects of past mistakes. That non-payment is probably what is really dragging you down. I don't know how much you earn, but assuming you make an average income, you really don't owe all that much. Good luck.

[tifnglen]

wow i cant believe you would say that i dont owe that much. To me it is so overwelming. I also put $100 a month in savings(50 roth 50 money market) Would it be a good idea to just put that towards debt? i am young (22) so should i just hold off on funding my roth for now? and i only make 13/hr so i think i am below average on the income

[disneysteve]

Originally Posted by tifnglen

wow i cant believe you would say that i dont owe that much. To me it is so overwelming.

As I said, it depends on what you earn. In 1994, I was less than 1 year out of med school. My wife and I earned about 85K total. I owed 102K in student loans and we had just bought our house with a 114K mortgage, so total debt of $216,000, more than 2-1/2 times our income. You're currently making about 27K and owe $29,450, so just a little more than your annual income. That's why it doesn't seem that bad to me. It's all relative.

[vsjhoc]

Paying your bills on time is the single most important factor is improving and maintaining credit. So keep up the good work on the student loan and car loan!

[nanamom]

The best way is to keep paying things off, every month on time. If for some reason you run into trouble again, let them know. Keep saving as well. It will pay off in the long run.

[disneysteve]

Originally Posted by tifnglen

I also put $100 a month in savings(50 roth 50 money market) Would it be a good idea to just put that towards debt? i am young (22) so should i just hold off on funding my roth for now? and i only make 13/hr so i think i am below average on the income

I would not stop the savings. The money you invest in your Roth now will grow dramatically by the time you are ready for retirement. There is no replacement for an early start.

The money going into your money market, I assume, serves as your emergency fund, also a necessity. If you don't have an EF and some large expense arises, you are stuck whipping out the credit card again and falling deeper into debt, something you absolutely want to avoid.

Continue that savings, but everything else should be going to erase that credit card and car debt. Hopefully, you are living a pretty barebones lifestyle so that any available money goes toward debt repayment. Once the CC and car are paid off, you can boost your savings rate, put money away each month toward your next car, a larger EF and increase your retirement savings (since $600/year is well below the max you can contribute to your Roth). I don't know what type of work you do, but hopefully it is something where you can expect your income to rise as the years go on.

It sounds like you're on the right track. Just keep it up and you'll do fine.

[sakigt]

Also, pay down that credit card asap. Credit to balance ratio is a big part of your score. If you owe nearly the max limit on your CC it looks bad.

Why are you concerned about your credit score anyways? The only reason you need it to be at a good rate is if youre asking for a loan, which you shouldnt be doing now anyways.

Just be patient and use this number as motivation to pay everything down and on time

[tifnglen]

Hey It has been 1 year since i started this thread! I am no making 36k a year, I owe 1895.5 on my car. 16k in student loans and 700 in cc debt (which I am hopefully paying on my next check!!)

[disneysteve]

Originally Posted by tifnglen

Hey It has been 1 year since i started this thread! I am no making 36k a year, I owe 1895.5 on my car. 16k in student loans and 700 in cc debt (which I am hopefully paying on my next check!!)

That's great. In one year, you've repaid $11,855 worth of debt, about 1/3 of your income. Fantastic!

Have you checked your credit score again? It would be really interesting to see what has happened to it.

[tifnglen]

oh and my credit score is around 670 now!

[disneysteve]

Originally Posted by tifnglen

oh and my credit score is around 670 now!

Even better news! Persistence and living below your means really pays off.

[tifnglen]

Yes and I have a roomate. I really want to live alone but this saves a lot of money. We get along great and I will be getting my own once I have more in my savings.

[jIM_Ohio]

I would do the following (at the same time)

1) make extra payments on the cc. get it paid off send the $50 from money market to this cc. Get the problem card paid off efficiently.
2) make Roth contributions ($50/month for now)
3) make payments on the car
4) make payments on student loan

once CC are paid off, send that money to Roth. Maximize this when possible (5k per year).

At the point where cc is paid off credit score should have improved to low 600's is my guess.

I would then get a cc to use for just gas purchases. Then pay it off every month. Within 3 years of cc being paid off AND use of the gas credit card, the score should move up to high 600's or even 700's. Maybe add groceries to monthly cc bill too.

My score is betwen 720 and 780. I barely use credit now, just enough to prove I use consumer credit. I charge my gas, and get a 1% rebate towards my mortgage. Charge $2500 in gas, get a $50 mortgage rebate. That way if I need more credit, I can get it, and my mortgage balance slowly decreases.

[Caoineag]

Awesome, sounds like you really buckled down over the past year!

[maat55]

I just read this thread for the first time, what a change, congrats on your debt reduction. I wish I knew half what you know at your age about money. Keep it up and you will do extremely well in life.

[tifnglen]

Originally Posted by jIM_Ohio

I would do the following (at the same time)

1) make extra payments on the cc. get it paid off send the $50 from money market to this cc. Get the problem card paid off efficiently.

Yes I plan to pay this off this month. I have been working OT time at work to get this thing paid off.
2) make Roth contributions ($50/month for now)

After I have the problem CC paid I do plan to increase my roth. Thanks for the advice

3) make payments on the car
This is an installment so I make the monthly payment.

4) make payments on student loan

This is a monthly payment as well

once CC are paid off, send that money to Roth. Maximize this when possible (5k per year).

Ok I will do that. (I thought it was 4k?)

At the point where cc is paid off credit score should have improved to low 600's is my guess.

I would then get a cc to use for just gas purchases. Then pay it off every month. Within 3 years of cc being paid off AND use of the gas credit card, the score should move up to high 600's or even 700's. Maybe add groceries to monthly cc bill too.

My score is betwen 720 and 780. I barely use credit now, just enough to prove I use consumer credit. I charge my gas, and get a 1% rebate towards my mortgage. Charge $2500 in gas, get a $50 mortgage rebate. That way if I need more credit, I can get it, and my mortgage balance slowly decreases.

I may get a cc again. This time I will be more carefull!

[jIM_Ohio]

Originally Posted by tifnglen

I may get a cc again. This time I will be more carefull!

Roth max is 4k for 2007 and 5k for 2008. 1k catch up if over age 50 is in addition to numbers just posted.

I would hold off for two years to get new credit. Prove to yourself you can live without it. Don't tell yourself this, do it.