Can anyone look at my specific situation?

[travisn]

I am coming close to paying a bunch of accounts off and am not sure if I should close some accounts, pay off others or what. I tired searching but didnt find anything.

 

I dont mind posting my whole financial situation, but I want to make sure someone will actually provide solid advice before I do so.

 

 

Thanks!

[radi8]

Are these accounts in good standing, or are they negative for some reason? I guess a little more detail would be good.

[travisn]

Thanks for your response. here we go:

 

Summer 08

-paid off a 6k GE money credit card, the limit was like 8k, i lowered the limit to 2500, since closed that.

-got my truck loan refinanced from 16.9% to 10.89% with five star

 

Fall 08

-opened a Lowes card with zero interest till October '09 with $900 on it/ 1200 limit.

 

December 08

-traded the truck in for an 01 accord at 8.59% with hsbc.

 

 

I have never had anything go to default/collections and the last time I had a late payment was with paypal, but they said they wont report it (few days late, now I pay a few weeks before its due) and they even removed the late charge without me asking. Before that was a 30 day on my esl credit card in Dec 06, and another 30 day in 6/06 on a monro muffler credit card (which was paid off/closed 8/06).

 

I pulled my reports Feb 07 and had a 668 with trans union, 659 with experian and a 616 fico with equifax.

 

Current Debt:

Sallie Mae 31,510 (various loans 6-11%) (autobody degree and tools)

Student loans 5-7k? (recent from this school year) (back to school for business/engineering)

lowes 0 (paid off before the interest only period expired)

ESL Credit Card 397 (10.65%) (500 limit)

Paypal Buyer Credit 353 (20.80%) (500 limit)

Walmart 723 (19.87%) (900 limit)

Hsbc 926 (12.74%) (1200 limit)

car 5595 (8.59%) (4 year term)

Personal Loan 2732 (16%)(1 year term)

 

In a month or so ill have about 2500 in savings. I make about 1200 after taxes each month (I know, I am a poor college student, lol), which leaves me with about 250 to put towards savings after bills/rent/groceries/etc are paid. I am going to be in school for 3-4 more years, so income will be limited. My plan is to have everything paid off before June '10 (besides school loans and the accord) so I can focus on school instead of having to work a lot.

 

I am not sure what accounts I should close and what I should keep open after paying them off that will help me the best credit wise. Whenever I get denied for credit its because of DTI and not not enough/too many revolving credit lines (I forget which one, its been a while) In my defense I walked into HSBC and within 15 minutes got a check for 3500 for a personal loan in July(dont ask).

 

I am also debating paying off the personal loan because that's 300 a month, so it will give me more breathing room, and I'll have that 300 to put towards the other cc's each month. I just am afraid that I wont put the whole 300 towards those cc's if I am not required to (as in being forced to make the personal loan payment instead).

 

I have quit using the credit cards as I wasn't disciplined enough to pay them off as I used them. Which was my plan with the walmart credit card, I suppose I could use it for groceries instead of my debit card then immediately go home and do a transfer/payment to that card for the same amount.

 

After this weeks fiasco of the Accord needing an emergency brake job I realized it wouldn't be smart to suddenly bring my cash savings to zero, unless I paid off a credit card to have in an emergency. Thankfully I can fix my own cars, I couldn't imagine having to hand over 3-500 for a brake job.

 

Any/all advice is greatly appreciated.

[radi8]

I am not sure what accounts I should close and what I should keep open after paying them off that will help me the best credit wise.

 

I am also debating paying off the personal loan because that's 300 a month, so it will give me more breathing room, and I'll have that 300 to put towards the other cc's each month. I just am afraid that I wont put the whole 300 towards those cc's if I am not required to

 

 

There is generally nothing to gain, credit-wise, by closing positive accounts. Unless you are paying an annual fee, I'd leave them open. There's really no such thing as "too much credit", but there is definitely "too little".

 

I'd pay off whatever debts are at the highest interest rates first. You always come out ahead long-term that way. If you are concerned about discipline, you can "force" yourself to make payments of a certain size by setting up an automatic recurring payment online from your checking account.

 

If your plan is to not use the credit cards, you'll want to take them out and make a purchase with them at least every 6 mos or so- then pay them off ASAP if you like. Leaving them dormant can result in the issuer closing them.

 

 

Good luck with your new career path!

[travisn]

I am not really worried about the interest because either way everything will be paid off in <1 year.

 

So there is no positive or negative to closing PIF accounts? I really dont like having things I dont need or use, like the lowes card. I have read somewhere that having too much available credit can hurt you as much as having money on the cards because your potential to occur new debt?

[breeze]

Having too much available credit is only an issue with a few mortgage companies - and that is really pretty rare. However, with Lowe's card, if you don't use it for a long time, they will close it for you. Keep in mind, though, it may be worth keeping it active if you need one of their "same as cash" deals on large ticket items.

 

The negative to closing paid in full accounts is in how scores are calculated. Although no one knows exact details, we do know that having available unused credit is an important part of the score. There is also a calculation for "average age of accounts" - the longer the better. So it's better for your score if you keep your oldest accounts active. After they are closed, they are supposed to remain on your report for 10 years, but that is not always what happens, and once it's gone, you really can't get it back.

[radi8]

I have read somewhere that having too much available credit can hurt you as much as having money on the cards because your potential to occur new debt?

 

 

That is a really common misconception, you'll see it on all sorts of "finance" sites. Problem is, like Breeze said- it isn't true outside of a handful of mortgage underwriters. Having large amounts of credit available (note: "available", not with correspondingly large balances being revolved) with a track record of wise use tends to result in higher scores, not lower.

[travisn]

Cool. thanks guys.

 

well tonight I just completed my first 'responsible' credit card purchase. I bought $50 worth of groceries tonight on the cc, got home and set up a payment for $60. I think Ill continue this trend every week.

 

I almost forgot, I have an Old Navy credit card that I got one day because of some deal they were offering, but it has been paid off for a while. I just hate having cards I dont use or need. If it doesnt directly hurt me I am going to close it, along with the lowes card. I only ever impulse buy on store cards, not things I plan and budget for.

[breeze]

One other thing to remember - get credit while you do not need it. If/when you really need it, chances are you won't be able to get it.