BigSoccer Personal Finance and Credit Repair advice...

[Ian Lozada]

As a mortgage broker, I find every day that people haven't got the foggiest clue of what makes their credit good or bad, let alone how to figure out how to get out of a bad situation.

Anyone with any questions about fixing your credit, debt reduction or setting yourself up to buy a home/refinance one, feel free to ask away.

[otterulz]

I took out a Patrick Ewing biography back in the 7th grade (9 years ago) from the Queens public library. I never returned. In fact, it might still be somewhere in my house. I ignored the bills. Do I have bad credit?

[Ian Lozada]

I took out a Patrick Ewing biography back in the 7th grade (9 years ago) from the Queens public library. I never returned. In fact, it might still be somewhere in my house. I ignored the bills. Do I have bad credit?

Depends on whether Ewing guaranteed you'd return the book. If he did, you're in luck. No one ever counts on a Ewing guarantee.

[fiddlestick]

How much over the minimum payment must one pay to get a friggin' credit card bill to decrease (assuming there aren't any purchases or finance charges on the account)?

[otterulz]

Man, you could've just said no. That hurt.

[Ian Lozada]

How much over the minimum payment must one pay to get a friggin' credit card bill to decrease (assuming there aren't any purchases or finance charges on the account)?

Generally, your credit card minimum payment is figured out at roughly 2% (assuming you're not behind). The downside is that they're stringing you out over 44 years on average.

What I'd do is I'd take a look at what my APR is, multiply it by my balance and divide by 12: that'll get you your interest for the year, roughly (may be higher, as many credit card companies no longer compound daily, but 3 or 4 times a day). You'll have to pay over that amount in order for it to start going down.

***

Remember this: Every dollar you pay in principal to knock down your debt you should consider as getting a return of 19.8% or whatever your APR is. That's a lot better than the 0.5% your savings account is getting you.

What I recommend is this... (actual work here)

1) Take your bills and list them in order of your balances.
2) Throw what ever you can at the one with the smallest balance. Do not pay over the minimum on any other bills, but slot it over to your targeted bill.
3) Repeat until that bill is paid off. Now take what you were paying the paid off bill, and add it to the amount you're paying the next one up the list.

You'll start to build a nice snowball, and soon, you're paying off things pretty consistently.

[Ian Lozada]

Man, you could've just said no. That hurt.

Remember, kids: Nobody wins with Patrick Ewing... unless you dance at the Gold Club.

[TheSlipperyOne]

What I recommend is this... (actual work here)

1) Take your bills and list them in order of your balances.
2) Throw what ever you can at the one with the smallest balance. Do not pay over the minimum on any other bills, but slot it over to your targeted bill.
3) Repeat until that bill is paid off. Now take what you were paying the paid off bill, and add it to the amount you're paying the next one up the list.

You'll start to build a nice snowball, and soon, you're paying off things pretty consistently.

Oooh. That's a good one. Thanks.

[Ian Lozada]

Oooh. That's a good one. Thanks.

I do recommend having a grand in the hole for emergencies, however. Otherwise, one car repair sends you right back to the credit cards.

[nicodemus]

1) Take your bills and list them in order of your balances.
2) Throw what ever you can at the one with the smallest balance. Do not pay over the minimum on any other bills, but slot it over to your targeted bill.
3) Repeat until that bill is paid off. Now take what you were paying the paid off bill, and add it to the amount you're paying the next one up the list.

You'll start to build a nice snowball, and soon, you're paying off things pretty consistently.

That's what the personal finance instructor in college said. I've found that it works.

[LifeOfBrian]

Good thread. Thanks, Ian.

[Bill Schmidt]

Thanks for taking the time to share some knowledge, Ian. This is such a huge problem for Americans. I find a lot of companies try to take advantage of the fact that their customers may not be pouring over every bill or stay on top of the company's billing process.

[Pathogen]

I suggest marrying a tight-ass. I haven't had a late payment or rolled over a credit card balance in eight years.

If you can't do that, then learn to say "no" to yourself. In all honesty, you really don't need "it", whatever "it" is.

Limit the number of credit cards you have. There's no need to have one for every department store on the planet. Besides, it's way too difficult to keep track of every card and their balances. I have two. To be honest, I'm not sure why.

Pay attention to your available credit. If you consistently pay your monthly minimum, OR don't bother to carry a balance like myself, you'll find the credit card companies bumping up your available credit line. This is the kind of thing that can hurt you when you go to buy a house, car, or even rent or lease. Remember, just because you're not using the total line available, doesn't mean it won't impact your rating.

Pay attention to your fees. These companies are getting downright devious in their approach to applying fees. And the last thing they want is for you to be informed. Again, this is another good reason to limit your accounts.

That's it off the top of my head.

[FearM9]

On CC's you don't plan on using...should you just go ahead and cancel it even if it does have a balance or do you pay off the balance first and then cancel it?

[Ian Lozada]

I suggest marrying a tight-ass. I haven't had a late payment or rolled over a credit card balance in eight years.


This worked for me. I was a credit wreck before I got married.

[Levante]

Pay attention to your available credit. If you consistently pay your monthly minimum, OR don't bother to carry a balance like myself, you'll find the credit card companies bumping up your available credit line. This is the kind of thing that can hurt you when you go to buy a house, car, or even rent or lease. Remember, just because you're not using the total line available, doesn't mean it won't impact your rating.




You have to call the Bastards yourself because this will definitely hurt you. This happened to me............ so I called, you won't lower my APR when I ask for it but you raise my limit without my authorization?



Ian,

Great thread................. So how do I get them to lower my APR? I spoke to a manager and said that he couldn't do it because I was late for a payment a year ago. I asked him when they could do it and they said six months.

BTW, I even threatened to switch credit cards.

There has to be another way.......... why can companies refinance for you and you can't?

[nicodemus]

Seems like my credit limit gets raised every other month. Hmmmmm.

[Ian Lozada]

On CC's you don't plan on using...should you just go ahead and cancel it even if it does have a balance or do you pay off the balance first and then cancel it?

I know this will sound weird, here's how credit cards (aka revolving debt) impact your score:

1) If you're applying for credit cards left and right, that's a problem. The bureaus think it looks like you're going under and you're grasping at straws. As a result, if you are transferring a balance on a card, then you're looking at a temporary slide on your ratings. However, inquiries (credit applications) make up only 5% of your score.

2) 30% of your rating, according to my last Experian seminar, is based on the ratio of revolving debt balances you're carrying to the amount of your credit limits. If you're using up more than 50% of your credit limit, it starts to impact your scores.

As a result, the answer is, in most cases, keep the cards open. I stick 'em in the fireproof safe box in my house under lock and key. Keeps me from using them unless I absolutely need to. I only carry one emergency card and use my debit cards for everything else.

***

Some people have also found that for non-emergencies (we're talking plumbing, car repair, etc.), imposing a 24 hour cooling off period on purchases over $100 makes a difference.

In addition, I like an idea I got from the investment world... When you're buying a major item (or a stock), make yourself give a 5 minute talk to the mirror (or your spouse, if applicable) to explain why it's necessary (or a good investment). If you haven't thought it through enough to justify it that much, go back to the drawing board until you can convince yourself (or your spouse) better.

[Ian Lozada]

This happened to me............ so I called, you won't lower my APR when I ask for it but you raise my limit without my authorization?

Because they want you to spend more, silly.


So how do I get them to lower my APR? I spoke to a manager and said that he couldn't do it because I was late for a payment a year ago. I asked him when they could do it and they said six months.

BTW, I even threatened to switch credit cards.

There has to be another way.......... why can companies refinance for you and you can't?

This is, unfortunately, standard operating procedure. Your best bet would be to switch.

One of the big nasties out there is that if you come in late on a payment, many companies will immediately jack up your rate to their default rate, usually 24.9% or something to that effect. Often, this is just for being late enough for the late payment charge to kick in, not the 30 days late which triggers a report to the bureaus.

Regarding late payments-- the worst type of late payment is a mortgage late. Going 30 days out on that makes a bigger dent than any other type of late, and can affect future mortgage interest rates if you refi or buy a new place.

[TheSlipperyOne]

A basic question that most people don't know the answer to. How do you get a negative credit rating to rise? Is it just being on-time with your payments or are there other things that can help?