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New job - how to approach repayment?


allysons0222
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I recently divorced, which resulted in 2/3 of my income disappearing. I'm 6 months behind on credit card payments, and a few have now gone to collections. I recently got a new job which significantly increasd my income, so now I am in a place where I could definitely make more than the min. paymenton my cards. My debt-to-income is actually really low now that I have this new job, but unfortunately missing payments for the last 6 months has probably damaged my what 6 months prior was perfect credit.

My questions are are - if I can't get the cc companies to budge on the interest rate, would it be better to enroll in a DMP plan where maybe they could negotiate better?

Should I try to do a debt consolidaton loan with my bank?

My preliminary estimates are that I could have this paid off in 2 yrs v. 5+ if I just made min. Payments.

My other concern is how any of the above scenarios will affect my credit as I would like to be able to buy a home in a few years.

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First...most debt management plans (I call them "debt fixers") are scams.  Do it yourself.

 

Work out your own budget / payment plan.  Figure out how much total you can pay on your accounts (much more than minimum payments, I hope).  You've got two choices:  1.) Pay off the smallest balances first  2.) Pay off the highest interest rates first.  I favor option 2, but if your smallest balances can be done in two or three months, go that way.

 

As each account is paid off, close it.  You might want to keep two open...1 with a small credit limit for on line shopping...another with a large limit for emergencies...but...close any that charge a yearly fee.

 

Then...don't worry about the "lates"...they won't affect your FICO Mortgage scores.

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First off, take 2 - 4 weeks to assess the where you stand. on each account. If the account is salvageable then see what you can do. If the account is charged off and went to collections, the put it on the back burner because the damage is already done.

For any salvageable accounts, find out what it will take to make them current and do that first. Once you have done that, then save up some money and settle with the dead accounts later.

It would be great is all are salvageable but that may not the case.

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None of the accounts are showing up on my credit report as in collections, but the fact that I received 2 collections letters this month is not a good sign.  I guess I'm not sure what to do about arranging a payment plan if I'm already 6 months behind on payments.  I can certainly afford more than what the minimum amount due is, but if the account is with a collection agency, as soon as I sign up for a payment plan (vs. paying the balance in full), I'm assuming it will show up as a collection account on my credit report.  

 

I will be able to pay off/close out some of the smaller accounts once I get my tax refund, but the other high balance accounts will take me a year + to pay off.  

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I wouldn't deal with the CA, only the original creditor. 

Look on your credit report for each account and make sure it hasn't been sold.  If not, I would assess how much of your income you can afford to pay total. 

Then break that down by what the min. payments are on each account.  Pay the min. on each account, except the lowest one, or the highest interest account, and put everything extra every month toward that account, while making the min. payments on all the accounts. 

 

When the lowest one is paid off, then do the same for the next to the lowest, and so on.  It will usually keep you from being sued even if your still behind on the accounts, while paying them off.  If they (the original creditor only) call you while doing this plan, you tell them, look, I am putting all that I can toward the account right now, and will continue to do so.  If my income changes, I will increase the amount of what I am able to pay.  Don't let them sucker you into paying more on any one account, the idea is to pay them all off, and doing it this way is going to be the fastest way to achieve that. 

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I spent the better half of my day calling credit card companies and setting up payment arrangements.  I guess I could consider myself lucky because out of the 5 cards, only 1 had been charged off but the rest had not - they were set to be charged off by 1/31 if I hadn't had made a payment. Unfortunately for the account that was charged off, I had no luck trying to get the orignial creditor to pull back the account, but that was to be expected.

 

I should be able to be caught up on all of my late payments by the end of next month and then continue to make regular payments after that.  I had excellent credit for 10 years and then this 6-month 'hiccup' really put a damper on things.  Hopefully the fact that I'm making every effort to get caught up quickly and also the fact that my debt-to-income is actually pretty low (thank to the new job) won't completely ruin my chances of qualifying for a mortgage in the future.

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