New Guy, Challenge to The Credit Gods, Need to Pay Down $90,048 CC Debt Smartest Way Possible to Save Money While Paying Down???

[TravelNut]

Ok everyone, my first post here and I NEED help! 🙂

 

I have $90,048 of CC debt across 10 cards with interest rates ranging from 11.9%-24.9%

 

Card        Balance        Limit         Rate

1             $23000         $23500     24.9

2             $8388           $9000       23.9

3             $4044           $4300       22.9               

4             $2493           $2600       22.2

5             $6700           $7500       20.9

6             $8200           $8200       20.7

7             $6785           $9500       20.2

8             $2014           $2250       16.9

9             $18549         $19000     12.9

10           $9875           $10000     11.9

11           $0                 $1500       27.2

12           $0                 $3050       24.9

13           $0                 $2200       20.2

 

Long story short, I am usually very good on my financial decisions but the last two years have been crazy with family issues, medical stuff etc.  I knew that I would eventually get to a point where all the issues would flatten out and a promotion at work was on the horizon.  Well, luckily there is no need to be bleeding out money anymore and the promotion has been realized so i can now start to aggressively get back to $0 CC debt.  

 

My current calculations show that with my current income and as long as nothing crazy happens in the next couple of years that I could have all of this paid off by 9/2022 if I just focus on the the high rate cards first and work my way down.  This calculation includes the interest as well so it is a solid calculation.

 

My initial thoughts were to just start with the 24.9% card and start there and work my way down to the last card that has a 11.9% rate.

 

I then starting to think that i could maybe save money by paying down all cards at the same time instead of focusing one at a time to get all cards under maybe 50% utilization at the same time to then apply for a SOFI loan and hopefully get like a 7-9% rate for like $50k loan to pay off the rest of the CC debt and only be paying on a personal loan at a lower rate.

 

3yrs ago prior to me jacking up all the cards when i had zero CC debt and one 60 day late reporting my FICO scores were pretty good so if i get my CC utilization down quickly I think my FICO's would get up rather fast and possibly high enough to qualify for a decent rate for a personal loan.  Here are my FICO scores from my "My FICO 3B Report" from 1/2018 when i had 0 CC debt and 1 60 day late reporting:

 

FICO 8:  Equi: 688   Trans: 695   Exp: 705

 

FICO 5:  Equi: 731   Trans: 735   Exp: 740

 

FICO Auto Score 8:  Equi: 715   Trans: 719   Exp: 717

 

FICO Auto Score 5:  Equi: 734   Trans: 768   Exp: 774

 

Since then I have zero lates on my records, my credit age has gone up considerably since I have not shopped for new credit in last 3 years so the only thing obviously seriously holding back my scores is the atrocious CC utilization.  Based off this i think once utilization goes down my FICO's will be looking great.

 

Current FICO's with the like 88% CC Utilization:

 

I have not paid for my 3 B report since 1/2018 so the scores below are from my various CC companies or CU's that provide scores to me monthly:

 

Nasa Fed CU:  724 (Experian)

AMEx CC:        611 (Vantage 3.0 Score)

BofA CC:         683 (Transunion)

Capital One:   611 (Vantage 3.0 Score)

DCU:              687 (Equifax FICO 4)

Discovery:      683 (Transunion FICO 8

Barclay:          683 (Transunion)

PenFed CU:    663 (Equifax FICO 9)

 

I have a home with a mortgage in perfect standing but no room for an equity loan to cover this debt so would have to go for a personal loan.

 

i guess another option would be that as utilization goes down and FICO's go up to look for CC's that have 12-18 month 0% balance transfers offers and focus on the cards that have interest being charged.

 

How would you approach this situation to come out with more money in your pocket in the end?

 

 

[cv91915]

This is a well-thought-out first post.    

 

Mathematically, if you were only to focus on paying down the balances where they currently sit, highest -> lowest APR would be the only answer, but the hybrid approach you suggested has merit, because at some point (that's difficult to pinpoint now), as your utilization gets under control you'll have better alternative options.

 

Before diving into the details, and this may be a longshot since your current issuers are likely softing you with justifiable anxiety every ~30 days, are there any BT offers on your zero-balance cards?  Even if the APRs are only mildly awful, they might at least be a modest improvement (but make sure to factor in any BT fee).

 

Also not a strong option, but worth checking, is if you have any mildly awful consolidation loan options (Lending Club, local kredit younyun, etc.), even for only part of your outstanding balances.

 

The other thing to consider besides priority of debt is looking at where else you're spending money and see what can be redirected (re-shop your insurance, cut cable, downgrade your internet speed, move your mobile phone plan to a MVNO, cancel a couple of streaming services/subscriptions, have your house cleaned less often, whatever is relevant to wherever your other money is going).

[TravelNut]

2 hours ago, cv91915 said:

This is a well-thought-out first post.    

 

Mathematically, if you were only to focus on paying down the balances where they currently sit, highest -> lowest APR would be the only answer, but the hybrid approach you suggested has merit, because at some point (that's difficult to pinpoint now), as your utilization gets under control you'll have better alternative options.

 

Before diving into the details, and this may be a longshot since your current issuers are likely softing you with justifiable anxiety every ~30 days, are there any BT offers on your zero-balance cards?  Even if the APRs are only mildly awful, they might at least be a modest improvement (but make sure to factor in any BT fee).

 

Also not a strong option, but worth checking, is if you have any mildly awful consolidation loan options (Lending Club, local kredit younyun, etc.), even for only part of your outstanding balances.

 

The other thing to consider besides priority of debt is looking at where else you're spending money and see what can be redirected (re-shop your insurance, cut cable, downgrade your internet speed, move your mobile phone plan to a MVNO, cancel a couple of streaming services/subscriptions, have your house cleaned less often, whatever is relevant to wherever your other money is going).

Yes all great suggestions!

 

Already down to bare minimum now on monthly expenses and forecasting about an extra $5k a month from here forward so i should be able to make quick work of the debt but just trying to see what the smartest way to go about it to save some money in the long run.  

 

No BT offers on the $0 cards and haven't shopped for any consolidation loans yet but might be worth checking since they can take into account that the loan will be fully to pay for CC debt and will then lower my monthly liability increasing the chances of paying the consol loan off.  My payment history is Exceptional so that should be taken into account too.

[legaleagle2012]

With 10/13 at 20% or better, killing one card at a time is really no different than paying on each one, which you have to do anyway to avoid default. I would work on getting those interest rates down; perhaps if you talk to them and blame it on Covid, they will do that for you. You're giving them close to 18K a year in interest now. That is hard to overcome. A 50-90K personal unsecured loan ain't likely.

[TravelNut]

3 hours ago, legaleagle2012 said:

With 10/13 at 20% or better, killing one card at a time is really no different than paying on each one, which you have to do anyway to avoid default. I would work on getting those interest rates down; perhaps if you talk to them and blame it on Covid, they will do that for you. You're giving them close to 18K a year in interest now. That is hard to overcome. A 50-90K personal unsecured loan ain't likely.

Is there any negative reporting for reducing a rate on a card if they agree?  Worth a try if no negative reporting

[centex]

As I recall, card issuers have to show a minimum that includes 1% of outstanding balance plus the interest and fees for the statement period.  So with the APR's on some of those cards, roughly two out of every three dollars is going just to debt servicing.  The excess payment amounts should certainly be going to the higher interest cards unless you just like paying interest.  

 

That said, if you can toss an extra $25-50 to each of the low interest cards, that helps, even if it seems on the face like just drops in the bucket.  

 

You indicated no 0% offers, but are there ANY offers on the cards with no balance?  Also, if you have a small, local bank, it would be worth plopping down in front of one of the lending officers who can actually make decisions.  You won't get a loan for the full nut, but you might be able to get a short-term loan with single-digit APR for $15-20K.  If you actually have the $5K a month to plow into the outstanding amounts, then you can clear that inside of a year and then rinse, lather and repeat.  The good history with the bank could also help prop up a local avenue when you pursue the mortgage.  And while small, local CU's have their place for some, I am talking small, local BANK...staffed by local people who help those in the local community.  You don't get that at the mega-banks as they often churn their staff and often don't have the local discretion on lending decisions...  

[centex]

2 hours ago, TravelNut said:

Is there any negative reporting for reducing a rate on a card if they agree?  Worth a try if no negative reporting

You run the risk of them closing the account if they sense fiscal distress as the reason for requesting a reduction...and a closed account with a balance is a score-killer. 

 

If you call to seek a reduction, I would be inclined to couch it in terms of 'since the Fed has kept rates so low, I wanted to see if a reduction on the margin existed.' The phone drone will be confused and ask what you mean, at which time you discuss the spread attached to the current rate to arrive at the APR on the card.  This has the potential to come across as an informed consumer as opposed to one who is maxed out all across the board...

[TravelNut]

2 hours ago, centex said:

As I recall, card issuers have to show a minimum that includes 1% of outstanding balance plus the interest and fees for the statement period.  So with the APR's on some of those cards, roughly two out of every three dollars is going just to debt servicing.  The excess payment amounts should certainly be going to the higher interest cards unless you just like paying interest.  

 

That said, if you can toss an extra $25-50 to each of the low interest cards, that helps, even if it seems on the face like just drops in the bucket.  

 

You indicated no 0% offers, but are there ANY offers on the cards with no balance?  Also, if you have a small, local bank, it would be worth plopping down in front of one of the lending officers who can actually make decisions.  You won't get a loan for the full nut, but you might be able to get a short-term loan with single-digit APR for $15-20K.  If you actually have the $5K a month to plow into the outstanding amounts, then you can clear that inside of a year and then rinse, lather and repeat.  The good history with the bank could also help prop up a local avenue when you pursue the mortgage.  And while small, local CU's have their place for some, I am talking small, local BANK...staffed by local people who help those in the local community.  You don't get that at the mega-banks as they often churn their staff and often don't have the local discretion on lending decisions...  

No BT offers on any cards at all.

 

Yep, will try the local bank idea, couldn't hurt, thanks!

[TravelNut]

2 hours ago, centex said:

You run the risk of them closing the account if they sense fiscal distress as the reason for requesting a reduction...and a closed account with a balance is a score-killer. 

 

If you call to seek a reduction, I would be inclined to couch it in terms of 'since the Fed has kept rates so low, I wanted to see if a reduction on the margin existed.' The phone drone will be confused and ask what you mean, at which time you discuss the spread attached to the current rate to arrive at the APR on the card.  This has the potential to come across as an informed consumer as opposed to one who is maxed out all across the board...

Yeah I don't think I will be trying this because I don't want to rattle any cages and have them close one of my cards.  Bofa decided to do that all on their own and closed my account with them and Barclay took my Max limit on their card from $20k down to $3050 and I don't need that happening to the others at all.

[monacho]

If one of your higher limit cards is one that typically offers balance transfers maybe pay that one down completely first and see if you get the BT offer.

 

When you start paying down though watch for them to balance chase you and drop your limit.  If they do that then pay that card down last.  My preference would be to close any account that balance chases you because that's just rude

 

If neither of those ideas work then just start plugging away at it.  You have a workable plan and paying down that level of debt that quickly is admirable.

[TravelNut]

3 hours ago, monacho said:

If one of your higher limit cards is one that typically offers balance transfers maybe pay that one down completely first and see if you get the BT offer.

 

When you start paying down though watch for them to balance chase you and drop your limit.  If they do that then pay that card down last.  My preference would be to close any account that balance chases you because that's just rude

 

If neither of those ideas work then just start plugging away at it.  You have a workable plan and paying down that level of debt that quickly is admirable.

Good point to watch for the balance chasing and tell them to F off once I'm paid off to them

[cashnocredit]

Yes, excellent first post. Rare. Too rare.

 

@centex point of throwing in extra bucks beyond the min is a great idea.

 

When you start, whether highest interest rates first or more evenly, pay at least twice the minimum on each card. This has the best chance of reducing the risk of balance chasing. It's well established that people that pay more than the min. have significantly lower risk than they would based just on FICO scores.

 

 

[TravelNut]

16 hours ago, cashnocredit said:

Yes, excellent first post. Rare. Too rare.

 

@centex point of throwing in extra bucks beyond the min is a great idea.

 

When you start, whether highest interest rates first or more evenly, pay at least twice the minimum on each card. This has the best chance of reducing the risk of balance chasing. It's well established that people that pay more than the min. have significantly lower risk than they would based just on FICO scores.

 

 

Yep good point, this would get me out of a high risk bucket if I'm in one and keep me out till the end.  Thanks for the feedback!

[hdporter]

Coming into this discussion late.  You rule out the feasibility of a home equity loan to refi at least a portion of the debt.  I wonder if you were a little too hasty.

 

HEL financing for up to 100% of your home value (w/ first mortgage factored) are offered.  Rates typically run about 6% (YMMV).  One should be circumspect before securing previously unsecured debt with their home, but the savings and additional speed with which you might tackle your debt makes it worth consideration.

 

You haven't spelled out any details why you discount the possibility of a HEL.  However, a refi of just $20k-$40k could do wonders.

[PlasticDude]

On 1/13/2021 at 3:16 AM, TravelNut said:

Ok everyone, my first post here and I NEED help! 🙂

 

I have $90,048 of CC debt across 10 cards with interest rates ranging from 11.9%-24.9%

 

Card        Balance        Limit         Rate

1             $23000         $23500     24.9

2             $8388           $9000       23.9

3             $4044           $4300       22.9               

4             $2493           $2600       22.2

5             $6700           $7500       20.9

6             $8200           $8200       20.7

7             $6785           $9500       20.2

8             $2014           $2250       16.9

9             $18549         $19000     12.9

10           $9875           $10000     11.9

11           $0                 $1500       27.2

12           $0                 $3050       24.9

13           $0                 $2200       20.2

 

Long story short, I am usually very good on my financial decisions but the last two years have been crazy with family issues, medical stuff etc.  I knew that I would eventually get to a point where all the issues would flatten out and a promotion at work was on the horizon.  Well, luckily there is no need to be bleeding out money anymore and the promotion has been realized so i can now start to aggressively get back to $0 CC debt.  

 

My current calculations show that with my current income and as long as nothing crazy happens in the next couple of years that I could have all of this paid off by 9/2022 if I just focus on the the high rate cards first and work my way down.  This calculation includes the interest as well so it is a solid calculation.

 

My initial thoughts were to just start with the 24.9% card and start there and work my way down to the last card that has a 11.9% rate.

 

I then starting to think that i could maybe save money by paying down all cards at the same time instead of focusing one at a time to get all cards under maybe 50% utilization at the same time to then apply for a SOFI loan and hopefully get like a 7-9% rate for like $50k loan to pay off the rest of the CC debt and only be paying on a personal loan at a lower rate.

 

3yrs ago prior to me jacking up all the cards when i had zero CC debt and one 60 day late reporting my FICO scores were pretty good so if i get my CC utilization down quickly I think my FICO's would get up rather fast and possibly high enough to qualify for a decent rate for a personal loan.  Here are my FICO scores from my "My FICO 3B Report" from 1/2018 when i had 0 CC debt and 1 60 day late reporting:

 

FICO 8:  Equi: 688   Trans: 695   Exp: 705

 

FICO 5:  Equi: 731   Trans: 735   Exp: 740

 

FICO Auto Score 8:  Equi: 715   Trans: 719   Exp: 717

 

FICO Auto Score 5:  Equi: 734   Trans: 768   Exp: 774

 

Since then I have zero lates on my records, my credit age has gone up considerably since I have not shopped for new credit in last 3 years so the only thing obviously seriously holding back my scores is the atrocious CC utilization.  Based off this i think once utilization goes down my FICO's will be looking great.

 

Current FICO's with the like 88% CC Utilization:

 

I have not paid for my 3 B report since 1/2018 so the scores below are from my various CC companies or CU's that provide scores to me monthly:

 

Nasa Fed CU:  724 (Experian)

AMEx CC:        611 (Vantage 3.0 Score)

BofA CC:         683 (Transunion)

Capital One:   611 (Vantage 3.0 Score)

DCU:              687 (Equifax FICO 4)

Discovery:      683 (Transunion FICO 8

Barclay:          683 (Transunion)

PenFed CU:    663 (Equifax FICO 9)

 

I have a home with a mortgage in perfect standing but no room for an equity loan to cover this debt so would have to go for a personal loan.

 

i guess another option would be that as utilization goes down and FICO's go up to look for CC's that have 12-18 month 0% balance transfers offers and focus on the cards that have interest being charged.

 

How would you approach this situation to come out with more money in your pocket in the end?

 

 

My first post here as well.

 

Assuming you don't or can't get a decent personal loan and need to pay the cards off as is with respect to APRs, I'd pay the minimum or slightly above the minimum on all cards (to minimize your accounts from drawing attention by the issuer by paying only the minimum with high utilization) and first focusing on easy wins which not only has an immediate effect on your scores, but also allows you to accelerate payments on remaining accounts. 

 

For instance,  focusing on card #4 enables you to knock it out quickly while saving some interest since its at 22%+ and the balance is relatively low. Once its paid off, you would then focus on card #8. Even though the rate is lower on card 8, its another quick knockout win. By eliminating card 4, the minimum payment is gone, and that minimum (~$25) can be applied in addition to the max amount you would be paying (for example $1,000/mo) to knock out #8. Once card 8 is paid off, you would then focus on card 2, which has a high rate and a smaller balance than your larger balances. Of course you will be paying your maximum amount (e.g. $1,000, plus the $25 minimum payment you freed up by paying off card 4, plus the ~$20 minimum payment you freed up by paying off card 8. Now your maximum payment amount is $1,045). So for card 2, your paying $1,045/mo to pay it down. Your scores improve somewhat because you paid off 2 cards. After that, you may need to start looking at card 1 or a combination of card 1 an another card with a moderate balance. The last cards to be paid off will be card 10, and then lastly #9, since they are the lowest APR cards you have. By then, your maximum payment amount will be over $1,500 a month to pay off card 9, further speeding up your payoff.

 

If you get a few cards with lower rates or get a consolidation loan, those balances can be paid last if the rates are substantially lower and the balance is more than of moderate size. They would become less of a priority and the others a higher priority. 

 

This strategy will help minimize interest paid but also help your scores and minimize time to pay them off.

 

Good luck.

[TravelNut]

14 hours ago, PlasticDude said:

My first post here as well.

 

Assuming you don't or can't get a decent personal loan and need to pay the cards off as is with respect to APRs, I'd pay the minimum or slightly above the minimum on all cards (to minimize your accounts from drawing attention by the issuer by paying only the minimum with high utilization) and first focusing on easy wins which not only has an immediate effect on your scores, but also allows you to accelerate payments on remaining accounts. 

 

For instance,  focusing on card #4 enables you to knock it out quickly while saving some interest since its at 22%+ and the balance is relatively low. Once its paid off, you would then focus on card #8. Even though the rate is lower on card 8, its another quick knockout win. By eliminating card 4, the minimum payment is gone, and that minimum (~$25) can be applied in addition to the max amount you would be paying (for example $1,000/mo) to knock out #8. Once card 8 is paid off, you would then focus on card 2, which has a high rate and a smaller balance than your larger balances. Of course you will be paying your maximum amount (e.g. $1,000, plus the $25 minimum payment you freed up by paying off card 4, plus the ~$20 minimum payment you freed up by paying off card 8. Now your maximum payment amount is $1,045). So for card 2, your paying $1,045/mo to pay it down. Your scores improve somewhat because you paid off 2 cards. After that, you may need to start looking at card 1 or a combination of card 1 an another card with a moderate balance. The last cards to be paid off will be card 10, and then lastly #9, since they are the lowest APR cards you have. By then, your maximum payment amount will be over $1,500 a month to pay off card 9, further speeding up your payoff.

 

If you get a few cards with lower rates or get a consolidation loan, those balances can be paid last if the rates are substantially lower and the balance is more than of moderate size. They would become less of a priority and the others a higher priority. 

 

This strategy will help minimize interest paid but also help your scores and minimize time to pay them off.

 

Good luck.

Makes sense, thanks for the feedback!

[TravelNut]

On 1/16/2021 at 1:37 PM, hdporter said:

Coming into this discussion late.  You rule out the feasibility of a home equity loan to refi at least a portion of the debt.  I wonder if you were a little too hasty.

 

HEL financing for up to 100% of your home value (w/ first mortgage factored) are offered.  Rates typically run about 6% (YMMV).  One should be circumspect before securing previously unsecured debt with their home, but the savings and additional speed with which you might tackle your debt makes it worth consideration.

 

You haven't spelled out any details why you discount the possibility of a HEL.  However, a refi of just $20k-$40k could do wonders.

Yes you are right, I'm now considering this possibility but this would only come into play until I get all cards to about 50% utilization to get my scores up enough to qualify for one but yes even if it's a 6-8% HEL that is better than paying 18-25% on the rest of my balance on my cards at that time.

 

I ruled it out initially because I didn't think homes in my area have gone up as much as they have and now after looking into it I think I could have about at least 65k-90k of equity depending on how favorable the appraisal would come back.  Going to seriously look into this once my Mortgage scores get to at least 720 across the board which might take about 40-50% utilization.

 

I will also have to take into account the fees involved with an HEL or a refinance but I still think even with fees it would still be less than paying high rates on like $45k of CC debt by the time i could qualify for a HEL/Refi.

[TravelNut]

Question on the different utilization buckets there are like over 89% you are considered maxed and in a bucket and between 69-89% you are in a lower (but better score) bucket.  What would the rest of the buckets be that you would see a decent score boost on?  I've read that if you get under 50% utilization would be a good score boost so is that the next one after the 69-89% bucket with a decent score bump up?  After that would it be under 30%?  Then after that I would imagine the only way to get good size score bump would be to have $0 across the board on all cards and only report one each month under 5%?

 

My eventual long term goal after getting the CC debt under control is to get a new mortgage and qualify for the best rates with that and with my research is that the mortgage FICO scores normally used (EQ 5, TU 4, Exp 2) don't have as much focus on credit utilization as FICO 8 does.

So my scores should be a bit higher on Mort scores than FICO 8 scores with assuming the same amount of utilization.  

 

I looked up my mortgage scores from an old MyFico 3B report from 12/2016 when my utilization was about 20-30% and they were 

 

EQ 5 - 750   TU 4 - 740   Exp 2 - 753

 

These scores were with a 60 day late still reporting across all three reports and that is now gone and my credit age has doubled since then.

 

I have a better credit mix now too with a mortgage on my file that i did not have at the time of those scores.

 

I imagine when I get down to 20-30% utilization again that it wouldn't be out of the question that my Mortgage scores could be in 760-775 range.  Thoughts?