I am going to generalize this to make it simple.

I have a late mortgage payment, from when I started my business & was struggling.

I have about 65k in equity in my home.

My credit score sucks right now, because I have some late payments, maxed out credit cards, etc.

If I were to sell my home, pay off every bill I have (both cars, cc's, etc)...

will my credit score go up? It should right?

Then, we can go buy another home, without having a myriad of little shitty bills everywhere.

My thought on this is...

I am going to be a dad next year....
If I clean all of this up right now, after a couple months, the new balances should show on my credit report, and my score should raise. I would be debt free (minus a new house payment)

Key to this would be not running up more bills.

What are your thoughts on this ?

Thanks in advance for any help... I need it.

 

Did you take into account the commision and costs you would have to pay when you sell in that 65k? Your credit score should go up, however it will not happen instantly. Sometimes it will take 6 months.

How bad is your credit score? What's the actual number?


Your better idea might be to take out a home equity loan and pay off the cards. That will raise your credit score.

 

This is the smart move. It's gonna take some time to raise that score though...6-12 months probably.

Plus...owning a home is the greatest thing right now...renting will not help your situation one bit, especially with a child on the way.

 

Transaction costs would take out most of your supposed benefit. If you really have that much in equity, the best way to take advantage of it is to refinance. There are many no cost refinancing options available out there. (There's no such thing as free lunch but there's no up front costs, everything is built into the rates)

The first thing to do is to pay off those credit cards. The minimum payments that you are making isn't doing anything for you. Also, after you pay it off with your home equity line of credit, don't use them for a while. Keep them open but just don't use them. Also, keep record of every payment for any bill and make sure you pay them on time. After a year of this your credit score should go up. It updates every month or so.

 

My score is about 525-550, which I know sucks.

What sucks even more.. is that it was about 720 2 years ago.

The problem with a equity loan, or heloc is that my credit score is so low... I don't think that I can get one.

 

You should be able to get one anyway. Just make sure it does not have any pre-payment penalties. Rates will be higher, maybe 9-10% but better than credit cards and interest will be tax deductible.

 

Yeah, if you have a home loan, chances are you can get an equity loan. Look into it before thinking you can't. Also, see what your wife's credit score is. It's a good idea for your wife to establish credit as well. You know, just in case of your death or divorce. I'm watching out for her.

525 means you've been a bad boy and not paying your bills. You must have done some bad spending. The bigger question is, can you still support your mortgage and bills now? Is your business doing better so that you expect to be able to pay these things off? Or is it still suffering and you need to reduce your mortgage?

If you can't support your financial costs, then selling may be the only option.

 

Yes, I was bad and fucked some stuff up.
To answer your other question... I can support my mortgage & bills now... But, I would like to only have one or two (mortgage/heloc) bills, then about 14 different ones.

Anyone know of a good place to apply for an equity loan, based on my credit score.?

 

Problem is, your score is horrible, so the rate on your first mortgage now is probably way lower than if you refinanced. Stick with BigPimps suggestion...bite the bullet, pay the higher fee on a HELOC for now, keep your current mortgage...work on paying your bills on time & then refi in a year or so when the score elevates.

If you have a good relationship with your local bank, I'd start there first...anyone that can work with a 500 score id gonna be sub-prime & charge the hell outta fees...try local first, then look on the net...I know Chase has a sub-prime lender that they refer business to if the scores are too low...I'm guessing most of the larger, more reputable companies do. Try there before going to a broker, etc.

 

But seriously, if you are carrying a balance on your CC, and it sounds like you are, that's the first place to start. You'll find that personal finance is either in a virtuous circle or in a downward spiral. Your credit score is down because of your bills and CC and late payments but you can't get them up because you can't get a good loan because your credit score is bad, etc.

The first step is to pay off the credit cards IN ITS ENTIRETY, ASAP. How to do that is the hard part. If you are carrying a balance, you are probably paying 16-22% interest on that balance. That is insane. Also paying off CC balances help out credit scores A LOT. Also, don't appy for OR close any existing credit cards, department store cards, etc. Don't even look up your credit score or order a credit report. You should have a copy of your most recent one (it's a good idea to get one a year just to check on it). If you don't have one, call up one of the big three and order one. I think they have to give you a free one once a year.

I'd start there before applying for a new HELOC loan. I think you can and should substantially improve your credit score before applying for any loans. Believe me, you'll really be putting yourself in the basement if you takeout a loan with a bad credit score. If you need any more help in the future, you'll be screwed. Better to fix it now and THEN get a credit line.

Lastly, find someone (parents?) who can help temporarily. Ask for a 12 month loan which you will pay back in full, with 6% interest, once you get your credit in order and a new loan to pay it back with. Borrow enough to pay off your credit cards and any outstanding accounts (tax?, etc.) that you owe money to. You want to clear those off. But once again, don't close them out, just leave them open and unused. Also, DON'T go opening new credit cards that have a better deal, etc. Just keep whatever you have now.

If you do this for a while, after 12 months, you should have healed your credit score back to the high 600 level which is good credit. Good luck and remember, your spending habits and your savings habits will dictate how quickly you can come out of this. Make sure you make ALL future payments on time. It takes time to heal bad credit. And as for my credentials, I do have 780 credit, or at least HAD it until I got my big mortgage loan last year. It's now 720 which is still considered good and I haven't checked in a while.

 

As for your obsession with the myriad of shitty little bills, they will always be there whether you pay things off or not. I just put all my bills on autopay with either my bank or their website. I only have to make sure I have enough in the bank to cover all costs. Good idea to have a little cushion there too...

 

Thanks for all the input & advice...

my 2 major cc are as follows:

1) 5000 balance, 7.9%
2) 2000 balance, 9.9%

Like I said, I used to have good credit.. now it is fubar... and it is like a catch 22, cause I can't pay all the bills off without a loan, and can't get a loan until some of the bills are paid (and score rises)

 

7k, is that it? How much are the other ones? I was imagining you were 20-30k in cc debt. 7k is not that bad.

Chase is a good suggestion, also my friend owns one of the money warehouse locations, he is in NYC. I think his number is 888-59fixed or try www.moneywarehouse.com.

I will look up our HELOC dept as well tomorrow.

 

Problem is, whether he goes HELOC or Home Loan, they are gonna have him close those cards anyhow(bad for his credit score, but better for him)...I can almost guarantee it. ESPECIALLY if he refinances.

A small heloc or home loan is not going to be nearly as fee-laden as refinancing his first mortgage...not to mention the much higher interest rate he'll be paying now. No way I'd dump my first balance in with a few cc's and pay high rate on all of it...that only makes sense if he had a huge cc balance and a ton of equity.

And as long as he uses a correct outlet to check his score(TU, Equifax, Experian), he can check it every month with no harm to his numbers.

Being an underwriter for 10+ years gives you a certain perspective on these issues.

 

For ex: Like a $300K home value, $100K in cc debt and a mortgage balance of like $100K or so, etc, etc...

Then, refinancing would be worth every penny since the cc balance(maybe 20% APR) would be so ridiculous.

 

Like someone said, 7k is not too bad. I think the best thing for you to do at this rate is create a plan. Those who fail to plan, plan to fail. Stupid sounding but true. I don't know if you have a budget but that's all you need to stick to get out of this problem. Sit down with your wife and bring together all your spendings in the past few months. Set a budget for food, insurance, mortgage, clothes, and all your costs for EVERYTHING. And create a plan where you set 2 levels of expenditures.

Level 1 is the NECESSITIES. And believe or not, food and clothes are not on here. The only things on Level 1 is mortgage, how much you plan on paying down your credit cards, and your utilities. Plan conservatively for your utilities and any amount left over is going to be untouched and kept as a reserve for next month. Plan generously on paying down your CC. Of course, pay the minimum on the lower rate one and pay down the higher one until completely paid off. I'd recommend a principal paydown of at least $500. You should be able to pay off your credit cards in 14 months at that rate.

Level 2 is everything else. The most important part is that you HAVE to pay level 1 first before touching level 2. Try hard to stick to the plan. Every little additional cost will add up to make this harder. You'll be surprised at how you can reduce expenditures drastically by sticking to this plan. If you pay down the CC a lot, you'll find that you somehow magically manage to live with less.

It also sounds like you are mixing your business spending with your personal accounts. For many reasons this is a bad idea. You want to keep separate accounts for business and personal. Also, if you haven't already, you should be incorporated (do not do sole proprietor) and actually using your company to cover many of your costs (personal food, gas, car, etc.) You can probably incorporate by yourself for nominal filing fees if you read up on it.

Good luck and keep us apprised of your progress. It'll take about a year to fix your credit but that's pretty good.

 

He said it's only 7.9 and 9.9% and the total is only 7k. Figuring he gets a decent HELOC he may be able to get 2.5% over PRIME which is going to be 8.75%. Even with the tax savings, it's not going to be worth his costs to get one instated (unless it's fee free). If those credit card rates are fixed, I don't think it's worth his time or possible fees to get a HELOC. I'd still stick to paying down the CC. It's also probably a better life lesson to pay down the loans and get the credit back together than to get another loan to pay it off and have a false sense of financial stability.

 

Now this is good advice SD. BUDGET, BUDGET, BUDGET!!!

 

As long as he leaves his first alone, he'll be fine. Agree with the rest of the post.

 

Chris.....

When is the last time you pulled all 3 credit reports...?

If you have not go to www.myfico.com and buy the FICO Deluxe package


type in UNIONPLUS where is asks you for a discount code and will give you 15% off.


Your score is not the greatest but its not the worst, you need to find out how many "lates" you have and start writing " good will letters" to try and get some of the lates removed. IT DOES work ..!!!

I'd say based on what i know about how the Fico Score works, i'd say with all your credit cards payed in FULL IE 0 balances reporting, your score should be in the Low 600s, (just a wide guess) Max out credit cards is not good, but its not as bad as having late payments.

Regarding your late payments, does it show 30-60-90 day lates ?

 

Do not get the home loan,it will be another bill.Do you have a retirement fund,or life insurance . You can get money from then. Pay off the c/c . Don,t forget you have a little one on the way . The score will not come up over night. It will take time .

 

I'll try it. I normally use Trans Unions True Credit...but that shit gets expensive every 6 months at $40 a pop.

 

You can get free ones if you contact them directly. I'm pretty sure it's one free one a year.

 

Here's the info on free reports.... Got it from one of the three's websites.

Please Note: Under a new federal law, you may have the right to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies. To request your free annual report under that law, you must go to www.annualcreditreport.com. ConsumerInfo.com and Freecreditreport.com are not affiliated with the annual free credit report program.

 

How often can I request a free credit file disclosure through this website?
You are entitled to receive one free credit file disclosure every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit file can be requested through this website, by phone or by mail.

 

Thanks man, I read this thing 3 times! I think this is some of the best advice on here. I'm going to show it to my wife, and see if we can do this.

 

Thanks! I will do this too.. what exactly is a "good will" letter? Just saying that I am going to make some payments?

 

Glad I could be of help. Also, most of what I've learned about fiscal prudence and conservatism, I got from a little book called "The Richest Man in Babylon." You can probably pick up a used copy from www.addall.com or borrow a copy from your local library. It's a pretty popular book back in its days.

 

I don't just get my score, I like to view the whole file and I do it more than once a year...which is pretty prudent these days.

About every 90-120 days I'll usually pop for a tiered bureau. I bitch about the $40, but I really don't mind spending it to watch my credit. I'm in the high 700's and I try my very best to keep it that way.

 

I just did it and they actually give you the whole report. If you want the score, you have to pay $6 additional. So you get the whole report with everything for free. Check it out. And you can get one from each of the 3. Equifax makes you send in the application so I just did TransUnion and Experian over the internet.

Squeaky clean report!

 

Meh...Equifax has always has stale info in my experience anyhow...stick with TU ans Experian.

They still have my job listed as managing a pizzeria...did that in 1993.

 

Here is a Sample Goodwill letter.

>>>>>>>>>>>>>>

Date

Regarding: Account No. XXXXX

Sears NAAC
ATTN : Credit Bureau Desk
13200 Smith Road
Middlebrook Heights, OH 44130

To Whom It May Concern:

I am writing a letter about my experience with Sears that is a mixture of a grateful "thank-you" and a pressing request concerning a Sears Charge Card tradeline in my credit files that I would like to have revised.

I received the Sears card in [YEAR], several years before I [CHAOTIC LIFE EVENT -- A MOVE, A BIRTH, MEDICAL SICKNESS, ETC.]. Later when I experienced the [CHAOTIC LIFE EVENT] and while working on [WORK PROJECT], I became disorganized with respect to, as you saw, making timely payments with Sears. I fully recognize my responsibility with respect to payable accounts and have worked diligently to rehabilitate my relationship with Sears since that time.

To be honest, that year was a "wake-up" call for me regarding fiscal organization. Since then I believe I have learned the essential organizational and financial management principles I desperately needed at that point. Thankfully, responsible credit management is now reflected in my credit records which -- excluding the Sears card late entry -- are excellent. I wish to thank you for renewing your confidence in me and for giving me a second chance at a relationship with you, one that I am determined to keep spotless.

We are about to shop for a mortgage, and it has come to my attention that the late notations from Sears may preclude me from taking full advantage of the very lowest interest rates now available. Since those notations do not reflect my current status with Sears, I am requesting that you give me a second chance at a positive credit rating by revising those tradelines. Your customer service representative suggested that I write you for a "goodwill adjustment." I sincerely hope that there is redemption at Sears, and I beg you for such consideration. Please let me know if any additional documentation would assist in reaching a positive outcome, and I thank you again for the time you have spent reading this letter.

Very hopefully yours,

Name
Address
City, STATE ZIP




The whole point of writing a goodwill letter is too get some of the late payments removed from your credit reports, which will increase your FICO score.

Call the CS number on the back of the card and ask them for the Address rr phone number for there Exec offices, they usually have CS reps who deal with letters like this....

 

Good discussion.

One point that I did not see clearly; make at least a minimum payment to everybody that you owe, on time every single month.

What course of action did you decide on?