Credit Card Advice

[Skooby]

If I may, I have a few questions to ask for the forum.

First, I will be 30 years old come this July 5th and my income is approximately $30,000 a year.

My first question is about the FICO score. One of my credit cards online has a section that shows your score, and it said my FICO score was 690. Is this good, bad or average?

If it's not too much trouble I would like to give a breakdown of my five credit cards and my savings and ask for the forum for it's opinion on what to do in order to get the balances down.

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Total Credit Card Debt: $18,678



Here is a breakdown of my assets/savings. TSP stands for Thrift Savings Plan, which is like the governments 401k. I was with the government for four years but I am no longer with them. But I do plan on getting back if I have a chance. I have had the Share Certificate for a few years now, and I originally put $2,000 in to start.

Savings Account - $3,282

Checking Account - $8,779

Share Certificate Account - $2,515 with a 3.640 fix%

TSP Account - $19,965.50 (with 20% taken off a withdrawal - Approx $15,000).

Total Saving/Assets: $30,576

I was thinking about withdrawing all of my Share Certificate and using that to pay off almost all of my two credit cards that has the lowest balance. Would this be the right approach? Since I can't contribute to my TSP because I am no longer with the government, should I withdraw that money or transfer it to a IRA? I would not get a penalty if I transfer it to a traditional IRA. I've even thought about going to the extreme and withdrawing my TSP and using that and all of my savings/checking to pay off all of my credit card debt. If I do that I would be left with about $10, 900 left over. I don't know if this would be a good idea or not.

Thanks for any help.

[meaghanchan]

Your FICO score of 690 is, I believe, somewhat, but not too much, lower than average. You really want to stay above 700 to not be considered a credit risk.

I generally agree with your plan of using the share certificate and the checking and savings accounts and paying it on the debt, though I would leave at least $500 in checking as a buffer (just in case something happens; paycheck doesn't come in in time, direct deposit screws up, etc) and $1000 in savings for emergencies. Do not withdraw your TSP money; leave it in there, or roll it over to an IRA.

If you follow this advice, you will have approximately $13,000 to pay on your credit cards.

Make a list of the cards in order of how you want to pay them down. This can either be from highest interest to lowest interest or from lowest balance to highest balance.

from highest to lowest interest:
Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Using this method, you would totally pay off Cards 2, 5, and 4, and pay about $7,000 to Card 1.

From lowest to highest balance:

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Following that plan, you would totally pay off completely all your cards but card 1, on which you would only be able to pay off about $3,000, and have $6000 left. Pay the most on it you can afford every month, and it'll be gone soon, although you could also try to do a balance transfer to get a lower rate.

[disneysteve]

My first question is about the FICO score. One of my credit cards online has a section that shows your score, and it said my FICO score was 690. Is this good, bad or average?

I don't have time to address your 2nd question right now, but to answer this one, the tiers for FICO scores are:
760-850
700-759
660-699
620-659
580-619
500-579

So 690 puts you in the 3rd tier but very close to the 2nd. Pay down a little debt and you'll probably bump up to 2nd tier. That might qualify you for better rates on your debt. You could call your CCs and request lower rates based on your improved credit score. Or maybe get a new card with a lower rate and transfer your balances.

I'll get back later and give my input on your savings and payoff.

[disneysteve]

I'm not quite sure what a Share certificate is, but it is only paying 3.64% interest and your worst credit card is costing you over 8 times that much. Take that $2,515 and pay off #2. That will leave you $783. Take that and another $97 from your checking account (which I'm guessing is earning no interest) and pay off #5 which has the next highest interest rate.

What to do from there will depend on your monthly living expenses. Even when you are in debt, I believe you need to maintain an emergency fund. I'm estimating that a 3-month EF for you would be in the range of $6,000 but you can figure out your actual expenses. I would keep that much in a high yield account. Also, keep whatever you need in your checking accout to cover your monthly bills. Whatever remains should go to pay off #4, 1 and 3 in that order (highest to lowest rates).

Don't cash out your TSP! The penalty is huge and so not worth it. Rolling it to an IRA is fine.

Finally, and hopefully you've already done this, but figure out how a 29 year old ended up so deeply in debt. From now on, you need to live strictly below your means, paying off debt and saving for the future.

[JoyJoy]

[QUOTE=disneysteve;111550]What to do from there will depend on your monthly living expenses. Even when you are in debt, I believe you need to maintain an emergency fund. I'm estimating that a 3-month EF for you would be in the range of $6,000 but you can figure out your actual expenses. I would keep that much in a high yield account. Also, keep whatever you need in your checking accout to cover your monthly bills. Whatever remains should go to pay off #4, 1 and 3 in that order (highest to lowest rates).

Don't cash out your TSP! The penalty is huge and so not worth it. Rolling it to an IRA is fine.

This is very very good advice!! I advise that you read disneysteve's other posts in this forum as his advice is always on target for new posters and old ones like me.

Definitely don't cash out your TSP plan. Rolling it over to an IRA is the way to go. Many departed workers from the post office cashed out and are very sorry that they did.

690 is not a bad credit score; especially with your being way over the 35% debt-to-ratio per card and overall usage! If you pay off your debt like disneysteve suggests, your credit score will be in the 700's shortly. However, I wouldn't try to focus on credit score right now. Just implement your new pay-off debt plan and keep an emergency fund of atleast $1,000.00. If you use Quicken, there is a debt pay-off plan incorporated in their software.

I admire you for wanting help and asking for it. Not everyone starts off with impeccable credit and does all the right things. I'm still learning and I am quite a few years away from 29 years old, that's for sure. I have sons your age LOL. Just make a concerted effort. Pray about everything and it will work out for you.

Good luck!!

[disneysteve]

I wouldn't try to focus on credit score right now.

Thanks for the compliment, JoyJoy.

I agree that credit score isn't what is most important here, and I don't think the OP was focusing on it but rather just curious where he stood. That said, however, I do think it could be important. As I pointed out, if OP can get the score into the next better tier, he might be able to negotiate better rates on his remaining debt.

[th_tan]

I would worry about paying off credit card 1 and 2. Those aprs are hurting you big time, don't try and pay everything off at once unless you have the backing to do so a little cushion left.

[KellyJef]

One of my credit cards online has a section that shows your score......

Can I ask what credit card this is?

[scarygirl]

Whatever you do, when you do this, you need to absolutely unequivalently promise yourself to not use the credit cards that you just paid off. Otherwise, you'll be back where u started. I speak from experience.

Don't, unless you feel you can't control yourself, close the accounts you pay off, it will hurt your credit score.

Do, keep some money in savings from here on out so you won't feel the need to run to your credit cards in emergency.

Do, cut your expenses to a bare minimum so you have extra cash to pay your balance. If you have a gym membership, cancel it. Cable, same thing. Internet, same thing.

You can always go to the library or use one of many uhm, wireless networks that are out there.

Good luck.

If I may, I have a few questions to ask for the forum.

First, I will be 30 years old come this July 5th and my income is approximately $30,000 a year.

My first question is about the FICO score. One of my credit cards online has a section that shows your score, and it said my FICO score was 690. Is this good, bad or average?

If it's not too much trouble I would like to give a breakdown of my five credit cards and my savings and ask for the forum for it's opinion on what to do in order to get the balances down.

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Total Credit Card Debt: $18,678



Here is a breakdown of my assets/savings. TSP stands for Thrift Savings Plan, which is like the governments 401k. I was with the government for four years but I am no longer with them. But I do plan on getting back if I have a chance. I have had the Share Certificate for a few years now, and I originally put $2,000 in to start.

Savings Account - $3,282

Checking Account - $8,779

Share Certificate Account - $2,515 with a 3.640 fix%

TSP Account - $19,965.50 (with 20% taken off a withdrawal - Approx $15,000).

Total Saving/Assets: $30,576

I was thinking about withdrawing all of my Share Certificate and using that to pay off almost all of my two credit cards that has the lowest balance. Would this be the right approach? Since I can't contribute to my TSP because I am no longer with the government, should I withdraw that money or transfer it to a IRA? I would not get a penalty if I transfer it to a traditional IRA. I've even thought about going to the extreme and withdrawing my TSP and using that and all of my savings/checking to pay off all of my credit card debt. If I do that I would be left with about $10, 900 left over. I don't know if this would be a good idea or not.

Thanks for any help.

[Skooby]

Finally, and hopefully you've already done this, but figure out how a 29 year old ended up so deeply in debt. From now on, you need to live strictly below your means, paying off debt and saving for the future.

Some of it was my fault but I also helped out family. They always needed this and that and I was always helping out. Not any more though...they are all grown, they gotta get their own job. I've already stopped helping out so more, cuz it's just hurting my finance's more.

Can I ask what credit card this is?

Providian Visa.

Whatever you do, when you do this, you need to absolutely unequivalently promise yourself to not use the credit cards that you just paid off. Otherwise, you'll be back where u started. I speak from experience.

Don't, unless you feel you can't control yourself, close the accounts you pay off, it will hurt your credit score.

I eat out quite a bit, well, I should say I use too. I would always use my creditcards to pay. That's gonna stop also.

I didn't know closing creditcard accounts would hurt a credit score. Why is that?


Thanks everyone for all the responses. This really helped. I think i'm gonna take disneysteve's approach on this.

[Skooby]

[QUOTE=JoyJoy;111555]

690 is not a bad credit score; especially with your being way over the 35% debt-to-ratio per card and overall usage! If you pay off your debt like disneysteve suggests, your credit score will be in the 700's shortly. However, I wouldn't try to focus on credit score right now. Just implement your new pay-off debt plan and keep an emergency fund of atleast $1,000.00.

I didn't know about that 35% debt-to-ratio per card. But you said, my focus right now is just to pay off the debt. But that's good news, if 690 is not a bad score and i'm in so much credit card debt. Can't wait to see what it'll be when I get out it.

I'm about to start working loads of overtime at the office, they've been offering but I never took advantage.

[disneysteve]

I didn't know closing creditcard accounts would hurt a credit score. Why is that?

Two reasons:

1. The average age of your accounts affects your score. If you cancel a card you've had for a while, the average age drops which lowers your score.

2. Your utilization ratio affects your score. It is best to have available credit that you aren't using. If you pay off a balance, your ratio goes down. But if you then close that card, your ratio goes back up.

[vsjhoc]

Two reasons:

1. The average age of your accounts affects your score. If you cancel a card you've had for a while, the average age drops which lowers your score.

2. Your utilization ratio affects your score. It is best to have available credit that you aren't using. If you pay off a balance, your ratio goes down. But if you then close that card, your ratio goes back up.

Third reason:

The total length of your credit history is another factor in your score. What year did you get your first credit card? If you close the oldest account, you are shortening the period of your history and this *may* drop your score.

[anonymous_saver]

Your FICO score of 690 is, I believe, somewhat, but not too much, lower than average. You really want to stay above 700 to not be considered a credit risk.

I generally agree with your plan of using the share certificate and the checking and savings accounts and paying it on the debt, though I would leave at least $500 in checking as a buffer (just in case something happens; paycheck doesn't come in in time, direct deposit screws up, etc) and $1000 in savings for emergencies. Do not withdraw your TSP money; leave it in there, or roll it over to an IRA.

If you follow this advice, you will have approximately $13,000 to pay on your credit cards.

Make a list of the cards in order of how you want to pay them down. This can either be from highest interest to lowest interest or from lowest balance to highest balance.

from highest to lowest interest:
Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Using this method, you would totally pay off Cards 2, 5, and 4, and pay about $7,000 to Card 1.

From lowest to highest balance:

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Following that plan, you would totally pay off completely all your cards but card 1, on which you would only be able to pay off about $3,000, and have $6000 left. Pay the most on it you can afford every month, and it'll be gone soon, although you could also try to do a balance transfer to get a lower rate.

I agree with paying the highest interest to the lowest interest "plan". However, I have some questions first. Is your savings account with a high interest place like Emigrant, HSBC, or ING. You should really switch over to one of these accounts. You can easily be earning over 5% on your savings. I would keep 1-3 months of an emergency fund in there (but no more until you pay off your debt). I would get rid of the share certifiates as you can make much more money on them with one of the above accounts. Also, keep enough to pay your bills (plus a bit of a cushion) in your checking account. But take the rest of it out to pay off some of this debt. Keeping over $8,000 in your checking account is actually hurting you quite a bit financially. So, I'll assume that you can free up somewhere around $10,000 from your checking account, share certicates, and savings account. This will quickly pay off card 2, 4, & 5 (plus pay off some of card 1)!!! Once you do this use the monthly payments that you used to pay on these and pay agressively towards card 1. Once card 1 is paid off put this payment towards the last card. This should acually be fairly fast for you. I wouldn't worry AT ALL about taking money from your TSP or other retirement savings accounts. You are actually fairly close to paying off all this debt!

I agree that you should roll over your TSP account to an IRA, I would try Vanguard as they have the lowest fees. Additionally, do you currently have a 401(k)/403(b) or other retirement account where you work? Do you have any other loans, car, school, or medical? This information could help us give you better suggestions.

[jIM_Ohio]

If I may, I have a few questions to ask for the forum.

First, I will be 30 years old come this July 5th and my income is approximately $30,000 a year.

My first question is about the FICO score. One of my credit cards online has a section that shows your score, and it said my FICO score was 690. Is this good, bad or average?

If it's not too much trouble I would like to give a breakdown of my five credit cards and my savings and ask for the forum for it's opinion on what to do in order to get the balances down.

Card 1: Credit line: $10,000: $8,955 balance/credit debt - Available Credit: $1,045 - 14.24% APR

Card 2: Credit line: $2,000: $1,732 balance/credit debt - Available Credit: $268 - 29.99% APR

Card 3: Credit line: $8,300: $2,831 balance/credit debt - Available Credit: $5,469 - 10.99% APR

Card 4: Credit line: $5,500: $4,280 balance/credit debt - Available Credit: $1,220 - 17% APR

Card 5: Credit line: $5,700: $880 balance/credit debt - Available Credit: $4,820 - 24% APR

Total Credit Card Debt: $18,678



Here is a breakdown of my assets/savings. TSP stands for Thrift Savings Plan, which is like the governments 401k. I was with the government for four years but I am no longer with them. But I do plan on getting back if I have a chance. I have had the Share Certificate for a few years now, and I originally put $2,000 in to start.

Savings Account - $3,282

Checking Account - $8,779

Share Certificate Account - $2,515 with a 3.640 fix%

TSP Account - $19,965.50 (with 20% taken off a withdrawal - Approx $15,000).

Total Saving/Assets: $30,576

I was thinking about withdrawing all of my Share Certificate and using that to pay off almost all of my two credit cards that has the lowest balance. Would this be the right approach? Since I can't contribute to my TSP because I am no longer with the government, should I withdraw that money or transfer it to a IRA? I would not get a penalty if I transfer it to a traditional IRA. I've even thought about going to the extreme and withdrawing my TSP and using that and all of my savings/checking to pay off all of my credit card debt. If I do that I would be left with about $10, 900 left over. I don't know if this would be a good idea or not.

Thanks for any help.

You have received good advice thus far (Pay off highest interest rate). You do not mention the monthly budget or minimum payments on each. Can you afford to pay $1500/month towards the cards? Can you send all 8k in the checking account to pay off the cards?

I would agree that collecting 3.64% while debt is costing you 24% is just not smart.

Once you know your "budget" to pay off cards (let's say is $700), send the minimums to all cards, except the one with highest interest rate, then send all remaining money to the most expensive card (highest rate card).

So if minumums are

card 1 $106 (14%)
card 2 $43 (29%)
card 3 $26 (11.00%)
card 4 $61 (17%)
card 5 $18 (24%)

your monthly minimums are 106+43+26+61+18=254.

Assuming you can find $700/month to pay off the cards
Send the extra (700-254)=446 to card 2. This will take you 4 months to pay off.

The fifth month, send the 446+43 (minimum from card 2) to card 5. The 489 paymkent would pay this card off in two months.

In the 8th month send the 446+43+18 to card 4. This will take 9 months to pay off.

card 1 would take 15 months to pay off.

card 2 would take 3 months to pay off

You need to see that even with such a high payment/budget ($700), it would still take 36 months to pay off. $700 is roughly 1/4 of your gross salary... so this is ambitious for sure.

Do you usually get a tax refund?
Have you looked at why/how you have this much debt?
Do you have a similar plan to get out of this hole?

The most important thing to do when you find yourself in a hole is to STOP DIGGING.