Have the money to pay off all my bills, but have some ?'s

[papasmurf]

I finally have the money to pay off all of my bilss, but still have some questions.

1)These are the bills in question:

Target: $200 $300 limit

Menards HSBC: $1100 $1500 limit

1st Financial Bank: $1500 21+% interest closed account

Wells Fargo Visa Platinum: $ 1700 21+% $2000 limit

Kay Jewelers: $700 $900 limit

Goodman Jewelers: $0 $900 limit

Wells Fargo student loan: $1100

Should I just pay them all off, or are there some that I should keep paying on?

2) I would like to maybe have only one card that I use, what should I apply for? I know there are cards with rewards, and I know there are some that let you keep increasing the credit limit. I know I want a card with lower interest, and I want one with a higher credit limit, doesn't mean I am going to max it out again, just want it in case.

I have a Fico score of 650+, and would like to increase it so that in the spring time, I can refinance my mortgage and try to get rid of my second mortgage.

3) Also, how long if I did pay off everything, would my credit scores start going up, I have a mortgage payment that I always pay on time, and my vehicle payment. I have heard that a person can call the bereaus and have them speed up the process, does this sound right? Thanks to anyone that can help, I am really excited to being on my way to being debt free.

[Freak]

You didn't say how much money you have, and since you are asking the question, we have to assume you don't have enough to pay them all off. I think there are two schools of thought of on paying down debt, each is really based on your philosophy:

The first one, pay down the debt with the highest interest rate. If you have cards that have the same rate, start with the highest balance. The thought process is, that this is your most expensive debt over time, and paying it down will result in less money spent in the long run. The downside to this is that you don't see results as "quickly." This can be disheartening if you have to see results "now."

The second thought, is to pay down the smallest debt first so you can see results and won't get discouraged. However, this method would cost you more money in the long run.

Just like credit repair, unless you run into a lump sum of money, the debt doesn't go away overnight, or even next month. I personally like option one because I know I will save money in the long run.

[Freak]

I have taken about $2,000 dollars off my total debt in the 2 weeks, while adding 6k in credit. The scores are reflective of that as soon as your reports are updated. It doesn't take long.

[papasmurf]

I have about $9,000. I cashed out my retirement for the soul reason of paying off some of these debts that I seem to never to be able too. Thanks for the info.

[DucknCover]

Well since you've cashed out a retirement fund, you'll be paying income tax and maybe a penalty on your withdrawal. Keep that in mind and think about putting some $$$ aside for next April. Student loans never go away so I would give that one priority. After that, anything you have that is delinquent but not yet charged off is high priority. The creditors will deal with you before charge off and still consider you a customer. If you let it go past the charge off point, you're going to compound your headaches ten fold. Next concentrate on the highest interest rates.

I went back and added up all your debts. It seems you have more than enough to pay everyone. The one you have listed as "closed account' I will assume is charged off. If it hasn't been sold, you might want to negotiate a reduced settlement or a PFD... but that's crap shoot at best.

[Freak]

I overlooked the student loan, I agree. Like Duck said, be mindful of the taxes.

[papasmurf]

Totally understand the taxes and penalties. I need the breathing room. The one that is a closed account is basically I haven't used the card for a few years, but still try to pay it down.

[VeVe]

Are you currently employed? Don't you have a 401k you can take a loan from? Still not a fantastic option, but at least the money is paid back and the interest goes back to you, and there's not penalty unless you leave your employer before it's paid off.

I just don't understand the logic behind cashing in a retirement account just to pay off credit cards. That's a HUGE waste of money. If you're not of retirement age, you're going to pay a huge amount of taxes (on top of an early withdrawal penalty), the money is no longer growing in your account, and in the end there's not going to be much left to make enough of a difference to justify what you did.

I mean I understand wanting to get rid of some debt, but that's such a bad way of doing it. It's counterproductive.

I think you have 60 days to put it back into the account (or at least an IRA). I'd do that if possible.

[VeVe]

I have about $9,000. I cashed out my retirement for the soul reason of paying off some of these debts that I seem to never to be able too. Thanks for the info.

You do realize that you don't have enough to pay all them off then, right?

If you cashed in a $9000 retirement account (I'm assuming this was cashed in without withholding taxes), you only have about $5000 left.

With that, I'd suggest paying off 1st Financial Bank and Wells Fargo Visa Platinum.

Then take the remaining $1800 and pay the other credit cards down to 30% of the CL, and then put whatever is leftover towards the student loan.

[papasmurf]

I rolled it over into a traditional account right now for free, and if I cash it out, it is a 10% penalty. I do have a 401k through my work, maybe I will check that out first. The guy at the bank said that they did not have a loan program. Thanks for giving me a heads up.

[VeVe]

I rolled it over into a traditional account right now for free, and if I cash it out, it is a 10% penalty. I do have a 401k through my work, maybe I will check that out first. The guy at the bank said that they did not have a loan program. Thanks for giving me a heads up.

10% early withdrawal penalty PLUS 30-40% in taxable income.

If you can do the 401k loan, it's so much better. Tax free, you pay it back directly through payroll deductions, and the interest you pay is payed back to your own account. Yes, the money isn't growing, but at least you are paying it back, and there are no penalty's (unless you leave your job).