Defunked credit, but not attitude! Hi from FL!

[Simplicity-]

Well first let me start off by saying, hi everyone!

Well I recently found this forum by doing a google search. The reasoning behind this step is fixing my past mistakes, and getting help to avoid them in the future, as well as learning more about investing.

My background, I am a 27 Y/O residing in central, FL. Work currently for a financial institute. I grew up in a low income house, all I knew growing up was work to death, and live off of credit. Never did I have anyone in my life to advise me on credit, investing, budgeting, planning, or really anything about money. I knew it was spendable, and that was it. I turned 18, bought my first car, and got credit cards. Why? Because it's what I knew. 2 years later that car was gone (sold) and I had credit card debt. Got engaged at a young age to a female that came from the same up bringing as I had. Saturated in 2 car loan payments, 6+ credit cards maxed at the ripe age of 22.

Fast forward 3 years to 2009.

No longer engaged, all debt was in my name, 3 credit cards to collections, 1 car sold, and jobless. Rock bottom for my life as I see it. Everything defaults, and is gone. Nothing to show for my hard work, well except for a terrible credit report and no hope.

Fast forward another 2 years to present day 2011.

Still repaying off old debts. Found a great girl that came from a much different up bringing and who is helping me get out of this hole I have dug. Still a long way to go, but I am plugging away. Paying off the backed debts I created for myself, and trying to build my future all over again. This time the right way.

I work for a large financial institution to remain anonymous. I am working hard, but instead of playing harder like before, i'm playing smarter.

Advice I am looking for. Sound low risk investments to start, I have a 401k taking the full 6% my company matchs, looking at doing an IRA in the near future. What are some other low risk investment options to look at?

Thanks for the patience of my story, but most importantly thanks in advance for any advice I receive,

-Brandon

[clintdavis]

Hi Brandon,

Thanks for sharing with us. I have to tell you, before investing ANYthing in retirement, I would work and sacrifice to pay off all of that debt. i realize that you will be missing out on your company match, but what you need is to jump-start your financial plan by throwing every bit of extra money you can at these debts. How much would you be able to start pumping into retirement and investment accounts if you were debt free?

Dump your debt, then build your wealth.

Thanks again for sharing!

[Simplicity-]

I have 6k in a MM and about 2400 in a personal savings right now, the 401K has been set up for over a year now through my work. My debts are miniscule now, below 1000, and will be paid off this month, thats why I was starting to look at the oppurtunities out there.

I do appreciate the advice though, and that was my main focal point. The savings and MM I have were started for extra money in the event of an emergency since I had nothing to fall back on, and over time since I have curved my spending habits, and money habits 180 degrees for the better they have grown to what they are.

[bjl584]

Can you post more detail? Income? Monthly expenses?

You may want to build up your EF a bit more (depending on your expenses) before doing anything else.

[Simplicity-]

EF? Sorry not quite up to date on all the terms out there just yet.

Monthly expenses are $900 after debt is paid off this month. Income is $2,000.

[Simplicity-]

Also where should I start to look at going about rebuilding my credit.

Right now Me and my Girlfriend have an apartment, but in the future would like to look at buying a house. Which is the main reason I am looking at a low risk investment options. Would like something that would leave the money Liquid, I also though about a CD, but the CD rates are so low that in my eyes it would not make much sense. Especially since I am trying to by a house in the next few years hopefully.

-Brandon

[bjl584]

Also where should I start to look at going about rebuilding my credit.

Right now Me and my Girlfriend have an apartment, but in the future would like to look at buying a house. Which is the main reason I am looking at a low risk investment options. Would like something that would leave the money Liquid, I also though about a CD, but the CD rates are so low that in my eyes it would not make much sense. Especially since I am trying to by a house in the next few years hopefully.

-Brandon

EF = Emergency Fund.

Sounds like you already have a pretty good plan. If you are saving for a house then by all means keep your money liquid (cash accounts, or a CD ladder.) Just make sure to have at least 20% down payment and at least 6 months worth of expenses saved up in an EF when you buy your home.

[Simplicity-]

Ok so essentially the EF is what I already have in motion with my present savings accounts.

The house is down the road engagement and marriage is definately before purchase of a house. She has her own plans in place, and together we are working with each other on building our future.

Just excited to after the first 9 years of my Adult financial life, as well as this defaulted debt, minus living expenses i will be debt free. So now I am looking at more investing ideas, as well as rebuilding my credit.

[Hector]

dont worry about building credit too much. They key is not to make mistakes. Just keep using your credit cards [make sure that your credit utilization ratio is not crossing one third] and make sure to pay them in full every month and your credit will be excellent when it would be time to get mortgage.

[Simplicity-]

I currently have 0 credit available to me. My focal point over the 1.5 years was clearly get out of debt.

I have been in talks with a banker at my job and i am going to set up a un-secured card through them. I heard department store cards, i.e. Macys, Dilliards, etc. help as well.

I feel rejuvinated, and the fact I know now what I do, I am extremely excited about my future.

I guess I don't need a investment plan just yet, seems to be the general outlook. My MM and SAV rates are terrible but the best in the market offered right now from any bank for the amount that I do have.

I have heard that it has adverse affects if you pay a card in full monthly, true or false?

Banks loan to people they feel will reap the best profit, but not be a liability. Am I correct with that statement?

I would only make purchases that I can afford to pay in full at time of purchase, but would it be smarter to make a minimum payment followed by a payoff the following month? I understand I would get dinged with an interest charge for the one month, but I'm just trying to take the best steps possible to turning my credit around. Right now I sit at a low 500 beacon. God-aweful I know, but its the hand I dealt myself, so now I must strive to further correct it.

Thanks again for all advice so far, and in the future.

-Brandon

[JoshuaHeckathorn]

I currently have 0 credit available to me. My focal point over the 1.5 years was clearly get out of debt.

I have been in talks with a banker at my job and i am going to set up a un-secured card through them. I heard department store cards, i.e. Macys, Dilliards, etc. help as well.

I feel rejuvinated, and the fact I know now what I do, I am extremely excited about my future.

I guess I don't need a investment plan just yet, seems to be the general outlook. My MM and SAV rates are terrible but the best in the market offered right now from any bank for the amount that I do have.

I have heard that it has adverse affects if you pay a card in full monthly, true or false?

Banks loan to people they feel will reap the best profit, but not be a liability. Am I correct with that statement?

I would only make purchases that I can afford to pay in full at time of purchase, but would it be smarter to make a minimum payment followed by a payoff the following month? I understand I would get dinged with an interest charge for the one month, but I'm just trying to take the best steps possible to turning my credit around. Right now I sit at a low 500 beacon. God-aweful I know, but its the hand I dealt myself, so now I must strive to further correct it.

Thanks again for all advice so far, and in the future.

-Brandon

That's great if you can get a unsecured card through your banker friend, especially if it offers a rewards program and no annual fee. I would steer clear of retail cards at this point, as they generally have very low credit limits and poor terms. Get your new unsecured credit card and start using that for now.

Also, what you heard about carrying a balance here and there is one of the biggest credit myths out there. Leaving balances on your credit card and letting the bank make some extra money off of you will in NO way improve your credit scores and make you look like a better borrower. That's totally false. Always pay your credit cards in full and on time. Make sure you keep an eye on your credit utilization too, since that accounts for a large chunk of your FICO scores in addition to your payment history.

[Simplicity-]

Thanks for the advice, I meant to say secured credit card, and then in 6-12 months the possibility of it turning into an un-secured card.

I will stay away from the department store cards then, and use the secured card for now, I get free identify theft protection with monthly updates that I view religously as I am living a totally different lifestyle now, and trying to utilize everything that I can.

[Hector]

Thanks for the advice, I meant to say secured credit card, and then in 6-12 months the possibility of it turning into an un-secured card.

I will stay away from the department store cards then, and use the secured card for now, I get free identify theft protection with monthly updates that I view religously as I am living a totally different lifestyle now, and trying to utilize everything that I can.

one unsecured credit card should be good for now. after a while your score will improve and you will start getting credit card offers. At that time, get a credit card that you prefer. I personally prefer cards with cash back and no annual fees.

[Simplicity-]

TY sir, I will look around for a good card to get started with, and go from there.

[JoshuaHeckathorn]

Thanks for the advice, I meant to say secured credit card, and then in 6-12 months the possibility of it turning into an un-secured card.

I will stay away from the department store cards then, and use the secured card for now, I get free identify theft protection with monthly updates that I view religously as I am living a totally different lifestyle now, and trying to utilize everything that I can.

OK- that makes more sense since you said your credit scores are in the low 500s. I was surprised when you said that your banker friend could help you get an unsecured credit card. Anyway, make sure the secured card you choose reports to all the 3 credit bureaus before signing up. Some don't, and some do. You just want to make sure that your positive payment history is being reported so you can upgrade to a better unsecured credit card as soon as possible.