I am in desperate need of advice. I am approximately $18,000 in debt spread amongst 5 credit cards. I will be a graduate student in economics during the 2003-2004 school year. I have been approved for a student loan in an amount greater than my cost of education. The excess loan amount will allow me to pay off my credit card debt completely. However, I would like some opinions on the best way to pay off the debt so that i might maximize my FICO and other credit scores. I heard something about a 3-month, 6-month, and 12-month credit score period where substantial payments (i.e. in amounts much greater than the minimum due) over any of those periods will increase the part of my fico score which considers that particular period (i am sorry for the confusing wording). In other words if i make substantial payments over any of the time periods listed above (i.e. 3, 6, 12 month) my credit score will increase; and if i make substantial payments over all three of those time periods, then my credit score will increase by a much greater amount. I have also been told that paying off 80 or 90 percent of your total credit card debt will increase your score as well. So here is what i was considering doing: Option #1 Pay off 15,000 of my debt in a lump sum, and pay off the remaining 3,000 over a 12 month period. Then i would spread my remaining 3,000 debt amongst each of my credit cards evenly so that the 3, 6, and 12 month periods of substantial payments will apply to each of my credit cards (i assume this may lead to a higher fico score but am not positive). My monthly payments will be substantial (with respect to the minimum payments required) so my credit score should increase since the 3,6, and 12 month periods of substantial payments will have been satisfied. Not only will they have been satisfied, they will have been satisfied 5 times (once for each credit card) and reported to the credit bureaus from 5 different sources (though three of my credit card companies have been bought out by a single credit card company) Option #2 Do the same as in option #1 except transfer the remaining 3,000 debt to a single card and then make 3,6, and 12 month substantial payments. Since i will have paid off at least 80% of my debt in a single lump sum, my credit score will increase and since i will have followed the 3,6,12 month substantial payment rule, the result will be an even higher credit rating. However, i am not sure whether transferring 3,000 to a single card is the best thing to do since if i do so, the 3,6, and 12 month periods of substantial payments will only be reported to the credit agency by a single bank (whereas, if i spread the 3,000 evenly amongst the 5 cards, the credit agency will receive such reports from 5 banks...however, please note that three of my credit card companies have been bought out by a single credit card company so i am not sure exactly how that adds more complexity to the situation). Option 3 Just pay off the entire debt in a lump sum. This seems like an option which will increase my credit score since at least 90% of my debt will have been paid off. However, the 3,6,12 month periods of substantial payments will not have been made and i therefore believe that my credit score will have not been maximized. Option 4 Negotiate with my credit card companies to pay 70% or less of my debt. This will negatively affect my credit score, however, and i will only do this if it is determined that doing so will make the most sense (i.e. i have been told that credit scores can be built up again in the future and that i should try to pay as little of my debt as possible....though i will be in the job market after i graduate from graduate school and i am sure my credit history will be considered by the firms i interview with) Option 5 Don't make any substantial lump sum. Simply make substantial payments to each credit card for the 3,6, and 12 month periods. I will be sure that the payments are great enough to ensure that the debt is paid off in full after exactly 12 months. This seems to be the more expensive route since i will be carrying a high balance throughout a 1-year period. However, i am willing to spend some money if it will result in a maximized credit score. I calculated that with my current interest rates, it will cost me about $1,000 in interest alone to carry my existing balances for a period of 1 year. Option #6 Don't pay off my credit card debt at all. Rather, invest in stock options and attempt to turn the 18,000 into 100,000. This is the least likely route i will take but i mention it because the thought crossed my mind more than a few times in recent days Option#7 Please fill in this option as i need some other advice. Maybe you have a strategy which i have not thought of? Your ideas will be greatly appreciated. So that is my admittedly long question. Also, if you have any idea whatsoever on how a new student loan in the amount of $60,000 can affect one's credit rating, please let me know. As for now, I will await your responses and see what some of you people think the best course of action for me is. By the way,my FICO score is currently 635. Maybe someone can tell me approximately how much I can expect my FICO score to increase were i to follow each option above (i.e. if i take option 1, then the FICO score is likely to increase by x points, if i take option 2 then my FICO score is likely to increase by y points, and etc...) If you have some comments on my situation, please send me an email at: youwin11220@yahoo.com Thank you very much for your time! Sincerely yours,
I strongly advise against option 4. If I were you, Iâd manage to pay off all your debt no matter what. You created your own problem, now you should take care of it. That is a responsible man. You can choose option 4, but if you keep that kind of mentality, you do not have a future. So why not act now and take responsibility. Think about the following two cases when truly successful people are in debt. Sorry, I cannot recall their exact names: One is a famous American writer. He had lots of money, and then he is busted and bankrupt. Legally you do not have pay back your debt if you are bankrupt. But this guy toured the world for 2 years to give lectures to earn money to pay back his debt, although he hate lecturing. Why? He thinks it is morally unacceptable not to pay back his debt although legally it is acceptable. The other one is one of the most famous Japanese entrepreneurs. When he is young the small factory he operates went bankrupt. He then took his workers to work for the company they owe money, earning only minimum wages to pay back their debt. Think about that!! Several years later they paid off the debt and off they went and they created another company, and eventually this guy is hugely successful. Do not be a loser! Pay off your debt!! Option 4 is easy, but youâd end up a lousy loser if go that route. Whoever advised you of that option, do not talk to him/her anymore.
Frank, You should be a mortgage broker. Specialize in subprime lending. You could give that loser routine to people with unsecured credit card debt and get them to convert it into a secured claim against their home. You could wack the borrower with huge fees - maybe 2,500 - 3,500 on a 20K second mortgage PLUS you would be buying the loan from the scumbag lender at wholesale and selling it to the borrowers for an outrageous markup which you also collect. This way, when they pop (most do) they are at risk of losing their home when for 500$ they could have gone and seen a bankruptcy lawyer which is exactly what the gentleman with the question above should do for advice. Geo.
You should not go to school, you should get two or three jobs and pay what you owe. You have no business being in school right now. You need to grow up and be a person of character not some deadbeat who runs from his debts. Get some help on why you allowed yourself to make such poor decisions. Using student loan money to pay off personal debt is the same as stealing. You will have a lot more satisfying life if you are a person of character, and people of character take care of their problems. Should take six months busting your ass waiting tables, bar tending or loading trucks.
jeesus christ freakin unbelievable...hahahaha next thing we'll hear from you is you're defaulting on your student loans. thank god for my hard earned tax dollars to bail you out of this mess eh? pathetic.
seeker, can you share with us how you got into so much debt and what did you spend the money on? we're all curious. :-/
Let's take a guess ahhhh.. Drinking, chasing skirt and living way beyond his means. He blew the money what else?
This can happen to anyone. Have you heard about Mike Tyson? And guess what? Tyson does not have such moral dilemmas as our poster. He just wants to declare bankruptcy. Not bad for a guy whose wealth was estimated at $300 M at some point.
You forgot to mention how he was never taught anything but boxing and had a band of thieves following him everywhere. And as a side note: I pay to see that tall-haired promoter play Robin Hood.