Digging Out Again

[atlan]

Discharged 11/03

After discharge, I've accumulated the following:

$500 Target Visa ($433 balance)
$2000 CareCredit (Emergency Dental Work) ($1600 balance)
$700 PayPal Line of Credit ($700 balance)
$1000 MasterCard (local bank) ($1000 balance)

... plus I have ...

$50K+ Student Loans :{
(Hubby has about the same)

$1000 Used Car Loan (local credit union) ($200 balance)
$600 Unsecured LOC (local credit union) ($115 balance)

And I just got ...

$250 HSBC (unused, $0 balance)

I'm just about to graduate from my master's program for my 2nd career (BK was following a business collapse stemming from catastrophic illness) ... now I'll be looking for that all-important high five figure income to make all this go away. We've kept our living expenses relatively low, and hubby already has established an income (after completing his master's) -- which helps. But after 5 years of this I am certain that credit is absolutely a trap unless you pay it off every month.

The credit union persuaded me to pay off the car loan and LOC over time, in the hopes of re-establishing my credit. I don't necessarily think that was a bad idea, and they are getting paid off! But aside from the credit union, all the credit cards have been a bad idea. (Nevertheless, I went to the HSBC website and applied today just to see if they would offer me anything at all. They did, and I bit. I'm expecting to keep it at a 0 balance, just to have something that looks good on my credit reports for a change.)

I've made a few mistakes along the way, and I'd like to have a strategy for getting back to a decent credit report once I'm working full time again. (My income has been severely limited since 2002 because I've only been able to work part-time while going back to school.)

With both of us pulling in full time incomes starting next year (if I'm very lucky) I think I can get back into shape. Any tips from the veterans?



Thanks!
*atlan*

[Stilltheone]

First of all, your balances really aren't that huge. Last month, we had a medical emergency and had to max out all of our new cards as well...(Capital One: $1K, Orchard Bank: $650 times 2, and Hooters $500), so I am right in the same boat with you as well.

I have a budget to pay them all off within the next 3 months. I'm taking the card with the highest interest rate and paying that one off first. (Hooters @25%) Even if you make more than the minimums, you'd be surprised how quickly your balance will go down...AS LONG AS YOU DON'T CHARGE IT BACK UP AGAIN.

The reason I filed for bankruptcy in the first place was because I would make a payment and then charge what little my balance had gone down.

Again, I would make the minimums on all of them except one and work really hard at it.

Good luck to you!

[Cali]

You say credit is a trap for you, yet you applied for a new card..why?

If you use CC's you need to pay in full.

You also have to stick to a budget.

[Flamingo]

I am not known on here to sugar coat and I have a 21 year old daughter in college so I know exactly what you are talking about as to expenses, student loans, etc. I've also put two other children through college. You are not that much in debt (I am not counting the student loans cause everyone attending school to some degree has that debt). I am assuming you have the Paypal line of credit cause you shop on eBay and there was really no need to obtain another credit card right now but you are banking on your future income to pay this off which may or may not occur in this economy and lack of jobs for everyone working minimum wage at McDonalds to CEO's and up. If you are both going into the medical profession, you will have it made; however, if not, you just cannot bank on jobs right now and you really need to try not to run up more credit in the hopes it will tide you over until you do.

You've realized there is an issue/problem by posting your circumstances on here asking for advice/help. That right there shows you that you know you could bein trouble but are looking for someone to tell you it will all be OK. It may not be all OK. Take a good hard look at your situation and put it all on the table and see if you really need that HSBC account which is just tempting you to use or you would not have applied for it. Do you really need to use Paypal to purchase off of Ebay or elsewhere...What can you do without to keep the debt down before it rises more before you actually have a job in hand.

Those are the points you need to look at right now and buckle down and keep the ship upright until you have the jobs you hope to get. Otherwise, you will be right back and looking to file again soon as you will start applying for more credit you will run up.

Best of luck to you both.

[atlan]

Good Points, Another Question

Hi Flamingo and everyone,

Flamingo: Don't worry! I am not looking for anyone to tell me it's all going to be OK. (I've got Julian of Norwich for that: "All shall be well, and all shall be well, and all manner of thing shall be well". Isn't that soothing?)

But I know I have to take steps to make sure things don't get out of hand, and I do appreciate your "tough love" approach, so rest assured, your advice is well taken. Hubby has a job already, which is secure and pays well, and at present his health is excellent. (Believe me, I know that nothing, including that, is assured.)

I'm currently interviewing, and trying to get full time work, but if I don't get full time work, I'll be working my tail off at multiple part time jobs as soon as I'm done with school (I already do, just not as many hours as I will be able to in a few months).

Cali: I got the HSBC card to see if I could get it. Maybe not the brainiest move, I know, but I was curious, since I was turned down for a card a couple of months ago. I also got it so that I could keep one account at a 0 balance, because so many of the accounts I've got are maxed out and I know it looks better when you've got at least one that's at 0. I'm on track to pay off the credit union car loan and unsecured line of credit in a couple of months, at which point I will start paying off the rest one by one. I know some people advise paying off your highest interest rate items first, but I like the method of paying off the lowest balances first to achieve some immediate satisfaction and free up cash flow to make higher payments on the rest. (The credit union accounts are my highest monthly payments.)

Stilltheone: Sorry to hear about your medical emergency. You might want to look into CareCredit -- they were a lifesaver when I needed dental work after I broke a tooth last year. It's interest free if you pay it off within a year; the interest rate is high after that. Kind of a gamble, I know! But there I was, with a painful, broken tooth, and a dentist who wouldn't let me make payments any other way. (Thanks to hubby's job, I have insurance now.)

I'm curious, to all of you, if you've paid off or are paying off all of your credit cards, what method did you use to come up with your budget for paying them off?



*atlan*

[Flamingo]

I'm curious, to all of you, if you've paid off or are paying off all of your credit cards, what method did you use to come up with your budget for paying them off?

The best way to pay off credit cards is to stop using them and stop unnecessary spending in any area possible. Go after the first card that has the highest balance and the highest interest and pay all you can on that card each month until you get it down. Pay minimum (or more if you can) payments on the other smaller balance cards. You cannot use the cards while you are doing this - otherwise, you are just making the hole bigger you are trying to dig out of of. If you and your hubby are really serious about doing that, hand those cards over to a trusted friend if you do not want to close them out to get them out of your possession. That way there will be no temptation to get that new pair of shoes or that Starbucks latte. Remember, you and your hubby are the only ones who can do that - control your credit and money - do not let them control you. When you think of it that way, it is much easier when you view your situation and how those cards control your life.

[atlan]

Again, Good Advice

Hi Flamingo,

Thanks again. That is great advice also.

I wonder what you think about this: One credit-cleanup method I read about is similar to the one you suggest, except that instead of paying off the highest interest/highest balance account first, you pay the lowest balance off first (by making the highest payment you can to it, while paying the minimum payments on the rest). Then you add the next account's minimum payment to the amount you've been paying, and pay that total each month to the next account down the list, and so on. At first you might free up only $50 or $100 a month to apply to payments, but it snowballs after that, and eventually, after adding all the payments up, you can pay a lot every month to get rid of that last account. So even though the last account may have the highest balance, it gets whittled down quickly once you do get to it. And in theory, you don't "feel" the loss of the extra payments, because the total amount you're paying doesn't actually go up, it just gets reallocated to the next account on the list.

It does require budgeting, though, and sticking to the budget -- not getting excited about having "extra" money around, and not using any of the cards, ever again. I plan to start on it when I'm done with school in a few months, whether I get a full time job or not. The trick is to be disciplined about it, and that, as you may have guessed already, is not my strong suit.

Anyway, all advice is appreciated!



*atlan*

[atlan]

Planning for Payoff

So, I made a spreadsheet to figure out when, if I follow the payoff program I mentioned previously, I'll have all my credit cards paid off. It's sobering to say the least -- it will be about a year (final account paid off 08/31/09). And that's if I am really disciplined and don't run up any more credit bills.

The good news is, by following the program, each one would be paid off in succession pretty quickly, after a few months' roll-up to get the larger payments going (by paying off the credit union loans to free up the extra $100 a month). For each of the lower-limit credit cards, I've established a $50 a month base level payment; for the higher-limit accounts, it's $100. After paying off each account, I'll add that account's payment to the next one's each month (along with anything "extra" that comes in due to being employed, if I get lucky in that arena).

What do you think?



*atlan*