what should i do

[allmyloving]

I have some extra money and want to improve my credit score. I have a car loan, $135/month, debt consolidation loan $150/month, medical bills totaling $1500 and credit card bills totaling $3500.

Paying on which one will have the greatest impact on changing my credit score?

My plan was to make 3 extra payments on my car loan and the debt consolidation loan.

I do need to add I have a bankruptcy from 2008 and a default judgment of about $18,000. I don't pay on this as I am on social disability and cannot be garnished plus there really is no additional money to pay on it. My monthly income is below $2000/month.

Debbie

[greenskeeper]

there are two schools of thought:

1) put the money towards the smallest balance and then roll that payment into the next debt

2) put the money towards the highest interest balance effectively giving you an X% return on your money

[AnotherReader]

I think you have proven that you cannot manage credit and should not obtain any more until you learn how to live within your means and manage your money. After the 2008 bankruptcy, you got yourself in trouble again, with a judgement for $18,000. You consolidated your other debt, and now you have even more.

The things you suggest won't overcome the judgement or the other dings. Write up a budget that gives you extra money to pay off your existing debt and pay cash for everything, even after you pay off the debt. Once you learn to live within your means and demonstrate that for a few years, you may be able to obtain another loan with an improved credit score.

[snafu]

Given the facts outlined, I suggest you hang on to your extra money in a saving account to use as an emergency fund. Any credit granted would be a a horrendous interest rate given the risk presented by your credit history, modest income and uncollectible judgement. You already owe a major sum [$ 3,500] to CCs and medical [$ 1,500] is huge given your income. I don't know your credit to income ratio other than $ 285. that results from your car loan and debt consolidation loan.

The facts say, whatever the cause, you are using credit to subsidize your income. It was not sustainable, it can't work and led b to the bankruptcy in 2008 and it's again drowning you now! Asking for more credit and more debt is about the worst thing to do. I don't know how your basics like rent, utilities, food, auto insurance and operation is managed. Perhaps they are covered by another stream.

[pflyers85]

AnotherReader was spot on saying, "The things you suggest won't overcome the judgement or the other dings."

You need to re-evaluate your financial priorties. Your focus right now needs to be learning how to live on a written budget without credit and eliminating your outstanding debts. Even if you were in a position to secure more credit and loans (which you are not) it would only exacerbate your financial troubles.

If you don't have an emergency savings fund, use the extra money you have to get that funded. No more using a credit card to bail yourself out. If you have an emergency fund in place then use the money to pay off your debts.

[allmyloving]

I think you all, misread my post. I AM not looking for an other loan. The bankruptcy was the result of me losing my job on 2006. I tried to hang on to the house but couldn't sustain it. I tried to short sell the house and had an offer which my first mortgage accepted but the second mortgage wouldn't accept the payout from my mortgage lender. The sale fell through. And the rest of the dominos fell. With the resulting default judgment. I live in Michigan and as you know, the bottom fell out of the real estate market.

I do have an IRA.

My question was what was the best way to use this money to improve my credit score.

Yes, i havent't managed my money well but I was also the victim of a job loss and the real estate market. So Another Reader, I don't need another lecture from you. And I'm looking to improve my credit score NOT get another loan. Maybe you should reread my post.

O h and BTW, you try and live on $2000/month.

[pflyers85]

I think you all, misread my post. I AM not looking for an other loan. The bankruptcy was the result of me losing my job on 2006. I tried to hang on to the house but couldn't sustain it. I tried to short sell the house and had an offer which my first mortgage accepted but the second mortgage wouldn't accept the payout from my mortgage lender. The sale fell through. And the rest of the dominos fell. With the resulting default judgment. I live in Michigan and as you know, the bottom fell out of the real estate market.

I do have an IRA.

My question was what was the best way to use this money to improve my credit score.

Yes, i havent't managed my money well but I was also the victim of a job loss and the real estate market. So Another Reader, I don't need another lecture from you. And I'm looking to improve my credit score NOT get another loan. Maybe you should reread my post.

O h and BTW, you try and live on $2000/month.

If you aren't trying to secure another loan or utilize more credit, why are you concerned about improving your credit score?

The last sentence that I bolded would seem to indicate that you are trying to improve your credit score to acquire more credit as a supplement to your income.

[disneysteve]

Stop worrying about your credit score and focus on getting out of debt. First make sure you have at least a 3-month emergency fund. Then start paying every spare dollar you can to the debt with the highest interest rate.

[AnotherReader]

Check out Mr. Money Mustache. He and his family seem to live quite well on $24k a year. It can be done, you just need to be very frugal.

If you are not borrowing, are you trying to improve your credit score to rent a better place to live, reduce your insurance costs, or get a better job? Those reasons would make sense.

Why was the default judgement not wiped out by the bankruptcy? Was it not part of the bankruptcy?

[allmyloving]

I am currently living in my mother's condo. She is living in assisted living. I pay her rent($615) each month which includes association fees and property taxes. My hope is to purchase the condo in several years. The condo next to me sold for $42,000.

AnotherReader I believe I wasn't given very good advice by my attorney. Rather I felt so guilty about the bankruptcy and the second mortgage people showed up at the hearing and wanted me to sign a document saying I would pay the second mortgage. My attorney wasn't very clear to me why I shouldn't sign the document. And it wasn't in the bankruptcy documents.

So yes I made all kinds of mistakes along the way.

My mother is not doing well and requires some care every day so I'm going to start helping out with her. Which I already do anyway. It's a long story. She is now paying assisted living for incontinence care, taking her to meals. But they're doing a poor job and it's expensive. I'll take over for that and I won't have pay her so much.

So I got off track.

[sblatner]

I think just pay your bills on time and eventually your credit score will go up!

[disneysteve]

I think just pay your bills on time and eventually your credit score will go up!

Exactly! So many people worry about "fixing" their credit. What fixes your credit it paying your pills on time and not overextending yourself with debt. As you pay your bills every month on time, your credit score will improve. As the amount of debt you have declines, your credit score will improve. As the amount of time that has passed since your bankruptcy increases, your credit score will improve. That's pretty much it.

So as I said, focus on paying down the debt with the highest interest rate. Pay your bills on time. And take care of your mom.

[AnotherReader]

Creditors take advantage of your feelings in this situation. If the default judgement existed at the time of the bankruptcy, it should have been wiped out. Unless this is resolved, the judgement will hang over you.

If the HOA, taxes, and insurance add up to $615, I don't see how you could afford payments on $42,000 on top of that at this point. You are already creating new debt with your existing income. You need to increase your income or decrease your expenses.

How is your mom paying for her care? Does she have savings or a long term care policy? Do you have any siblings that can or will help with her care? If the state Medicaid program is paying, the state will require repayment from her assets when she passes away. Have you looked into this?

You have a difficult road ahead and you need to take steps now to help yourself and your mother. Accumulating cash savings is difficult, because of the outstanding judgement. In your shoes, I would pay off debt with any extra cash and work on getting rid of the judgement.

[snafu]

It seems you've had bad advice compounded by decisions that made the situation worse. In the past you bought a home without having saved the standard 20% downpayment. That decision resulted in both a first and second mortgage which could not be sustained when your job vanished in the horrendous economic collapse. That second mortgage bite you a second time by resulting in an non collectable judgement. We are doing our best to offer suggestions that are in your best [financial] interest but obviously not what you want to hear.

An IRA is a Retirement program/account. It's only function is to provide retirement income. Please don't consider it to be an Emergency fund to be drawn upon because penalties and tax are hideous. You lose the sums meant to grow and help support you as a senior mostly to penalties and tax.

If you are considering buying your mom's condo/rental sometime in the future you need to save 20% for a downpayment to avoid very expensive Mortgage Insurance [PMI}. In some mortgages these charges stay in place for the entire term. It's extra to required regular insurance for the condo. Is there anyway to increase your income to keep housing/condo costs including association fees, municipal tax, utilities and insurance to 28% of income?

Can you look at your details from a lender's viewpoint? Would you loan someone $ 42. K who had a back history of bankruptcy, uncollectible judgement, outstanding CCs $ 3,500., consolidation loan, car loan, medical bills outstanding and modest annual income $ 24,000.? What FICO score would you need?

[Jluke]

1. Keep the past in the past; move forward but embrace a better mindset towards money. I'm sorry you had a series of bad luck that got you in this position.

2. Create a strict budget "on paper" and stick to it. Document every penny spent. think 100 times before making any purchase - stay out of stores; do not order online, make all of your meals, etc.

3. Focus on current debt. Your budget will tell you how much EXTRA you can afford to put towards debt each month.

4. Do not acquire any more debt.

5. Find free ways to have fun.

Example budget

Income: $2000

Expenses (list core expenses)
Rent: $615
Groceries:
Gas:
Auto Loan:
Auto Insurance:
Utilities:

Total Expenses: add up the above expenses

Pre-Savings = Income - Total Expenses (

This will show how much money is left over at the end of the month; 80% or more of this should be used to pay off current debt. the other 20% is for non-routine expenses.

Simply making these payments will help your credit score. Discipline is absolutely necessary so you can dig out of this.

Good luck - keep us updated; and ask more questions if necessary. Everyone is here to help!