Credit card debt and poor credit score... need help

Hi everyone,

So I have had some issues with credit card debt and I currently owe about 15k to various lenders and I am getting a bit in over my head. I have a credit score of 580 and I own a home (which is where most of the expense went to, and getting a new car after an accident). I am working with the companies to get my payments structured but I am looking to consolidate my debt. I was interested in opening a HELOC but dont know if I will get accepted. I am planning on having my partner move in with me this summer and I will be able to split the bills and pay off my debts, but in the mean time I am not sure of what to do. Does anyone know what options I might have in the mean time?

There are a lot of options out there, but it depends on what's bogging down your credit score. If it's a simple matter of your utilization being sky high, then it sounds like you've already got your partner moving in to give you some wiggle room to pay off your debts. If you've got derogatory incidents on your credit report, you can send letters to dispute it or, say it's something that was delinquent but paid for since, you can write a letter asking they rescind that derogatory information. It's pretty rare and it can be a tedious process, so hiring a "credit repair" service can be a worthwhile investment if you've got several blemishes on your credit report.

Is there some immediate need for your credit score to get bumped? Unfortunately, repairing one's credit can be quite a long journey. In the meantime, keep your hard credit checks to an absolute minimum (they're only a temporary hit, but a hit nonetheless) and avoid opening new reporting accounts so that your average account age can grow a bit. But, again, utilization and derogatory information are typically going to be your main culprits to tackle.

Thanks, its a mix of both. There have been some months where I haven't paid due to the lack of funds so it is more than utilization. I understand that getting my score back on track is going to take a while, I just dont want my creditors to sell my debt to collections and then have a lien put on my house or have my stuff taken from my check. I figured if there was a way to consolidate and pay one bill a month over a fixed term, then it would become easier to pay in the long run. I will look into credit repair services as well. Once my partner moves in, the savings in what I can split with my bills should be plenty to pay off the debt then, but thats not until July at the earliest. At this point, if something were to happen to me, my house, or car, Idk what I would do financially.

Creditors can't put a lien on your house if you are claiming homestead, which you should be as it lowers your taxes. You actually want to stay away from all these consolidation type offers because nine times out of ten they are shady scammers and the interest you pay to them will wreck you even further. Not to mention they may not pay off your debts. Be extremely careful with that stuff. You can, however negotiate directly with your credit card companies in terms of setting up lower payments that you can afford to pay or paying off in a settlement lump sum but less than you actually owe.

Sign up with a company like creditkarma, it's free to track your scores and they break down for you nicely how and where and what steps to take to improve your scores. You can also sign up directly with the three reporting companies and get same result. You don't need to pay them either. You can sign up for free accounts. Once you see what's hurting you, start working on that. Late payments hurt you a lot. So does carrying a lot of maxed out debt. Perversely, getting more credit and not using it, as in keeping your debt to available credit ration high actually improves your scores.

As for buying a new car, honestly, they'll lend no matter what you credit is. Just go to a reputable dealership and not to the no credit/bad credit sharks. It's an easy loan to get because it's already secured and if you don't pay, they'll just repo the car and that's that. Good credit simply means that you can negotiate lower rates, bad credit means you'll pay out more interest, but in a pinch you'll just have to suck it up and do it. Keep in mind also that you can actually refinance that later if your situation and credit change.

I have been talking with my CC companies in order to lower my month payments.. I can and will pay them the newly agreed amount each month and they are aware of my financial situation. Your post gives a few more questions though.. if I continue to make smaller payments each month will this improve my credit in time? and how do I get them to settle the debt for a lower amount? do I just ask? I have one CC in collections as of last week and I am trying to keep my other ones from going there as well..

I have been talking with my CC companies in order to lower my month payments.. I can and will pay them the newly agreed amount each month and they are aware of my financial situation. Your post gives a few more questions though.. if I continue to make smaller payments each month will this improve my credit in time? and how do I get them to settle the debt for a lower amount? do I just ask? I have one CC in collections as of last week and I am trying to keep my other ones from going there as well..

Yes, on time payments will eventually raise your score. As for lump sum settlement, you simply make an offer to them and let them get back to you. Go lower than what you can pay because you want to give yourself room to negotiate if they come back with a higher counter. It's a negotiation. Paying off and closing out some of this will also increase your credit score. Start with the CC in collections first.

Also, while $15,000 seems like a workable amount for a lot of us (and, fortunately, myself included at this point), having worked in credit card collections, I've seem the damage a $15,000 balance at 26% - 32% interest can do. Not saying it should be your go-to, but if, once your partner starts splitting expenses with you, you find yourself not comfortably making progress, I would seriously consider your options as far as settlements go. If you didn't already have a house, I probably wouldn't even suggest it, but you've got arguably the biggest financial goal requiring decent credit already out of the way. There's honestly not too much sense in existing penniless for the next however many years (potentially just as long as it would take for a settlement to not get reported anymore) for the sake of your credit.

Again, that's if it comes down to do-or-die, but really take some time to honestly reflect on your finances and what your quality of life would be having spare cash vs. more quickly achieving a favorable credit score. You can settle directly with credit card companies, but speaking from experience (as someone who set them up), there's a lot of red tape, pushing on your part, and you generally have to willfully let the account get egregiously delinquent before the system will even allow someone like the me of yesteryear to set up a settlement. I'd check if you've got some nearby non-profit debt relief services that can help inform and direct you to third party resources for consideration.

Also, do NOT make partial payments that haven't been negotiated and put into writing. I mean if your conscience dictates it, by all means do so, but the delinquency is still getting reported as though you didn't pay a dime.

Do you have a good relationship with your bank? I know your credit's shot right now, and it'd be a very tough sell, but if you've been on time with your mortgage, they might be willing to extend a personal loan to you. Paying off debt with debt is generally frowned upon, but if you can consolidate your credit card debt and with a better APR, it could help you out.

I know I'm bouncing all over the place here, but just to let you know that pretty much the only way your CC company can lower your monthly payments is to give you a temporarily lower interest rate. This was something I fairly commonly did for customers, and it does help, but it's a very temporary help if your financial situation isn't really set to change at all afterward. Absent that, the only way to lower it is to settle, which typically means closing the account, suspending your interest and having you pay the current outstanding balance over the course of several years (or, as DF mentioned, a discounted lump sum).

Also, while $15,000 seems like a workable amount for a lot of us (and, fortunately, myself included at this point), having worked in credit card collections, I've seem the damage a $15,000 balance at 26% - 32% interest can do. Not saying it should be your go-to, but if, once your partner starts splitting expenses with you, you find yourself not comfortably making progress, I would seriously consider your options as far as settlements go. If you didn't already have a house, I probably wouldn't even suggest it, but you've got arguably the biggest financial goal requiring decent credit already out of the way. There's honestly not too much sense in existing penniless for the next however many years (potentially just as long as it would take for a settlement to not get reported anymore) for the sake of your credit.

 

Again, that's if it comes down to do-or-die, but really take some time to honestly reflect on your finances and what your quality of life would be having spare cash vs. more quickly achieving a favorable credit score. You can settle directly with credit card companies, but speaking from experience (as someone who set them up), there's a lot of red tape, pushing on your part, and you generally have to willfully let the account get egregiously delinquent before the system will even allow someone like the me of yesteryear to set up a settlement. I'd check if you've got some nearby non-profit debt relief services that can help inform and direct you to third party resources for consideration.

 

Also, do NOT make partial payments that haven't been negotiated and put into writing. I mean if your conscience dictates it, by all means do so, but the delinquency is still getting reported as though you didn't pay a dime.

 

Do you have a good relationship with your bank? I know your credit's shot right now, and it'd be a very tough sell, but if you've been on time with your mortgage, they might be willing to extend a personal loan to you. Paying off debt with debt is generally frowned upon, but if you can consolidate your credit card debt and with a better APR, it could help you out.

 

I know I'm bouncing all over the place here, but just to let you know that pretty much the only way your CC company can lower your monthly payments is to give you a temporarily lower interest rate. This was something I fairly commonly did for customers, and it does help, but it's a very temporary help if your financial situation isn't really set to change at all afterward. Absent that, the only way to lower it is to settle, which typically means closing the account, suspending your interest and having you pay the current outstanding balance over the course of several years (or, as DF mentioned, a discounted lump sum).

I understand where you are coming from and I agree with the sentiment. It has been a hard lesson to learn but I can dig myself out, I just need some help with the bills. I do have a good relationship with my bank, I have never been late on a mortgage payment since I bought the house two years ago.

You said you have worked in collections... Discover just put my bill into collections a few days ago and I am yet to hear from the collections agency, I attempted to reach out to no avail. What are my options with them? can I set up a monthly payment fee with them as well? I owed Discover $3500... I am nervous about how much the collections agency is going to want and how much they want me to pay per month. I am not at the point where I can settle with them at this point and want to do this the correct way.

I would pay the minimum on everything - then take the item with the smallest balance and double up and throw everything you can at it to pay it down. I would also consider a side job or a weekend job and to put 100% of that money less expenses (ie, if the job requires you to buy specific clothing) at the credit card. Don't ever just stop paying. And i would get a platonic roommate to split the bills with you for a year rather than moving a girlfriend in if a part time job isn't possible. That way, the relationship can progress more naturally rather than "a bill helper". Debt from poor planning/choices does not make a great foundation.