It is weird how now that I no longer worship at the alter of the FICO, I am seeing my score move in an upward trend.
Last January, according to the chart on the Providian website, I had a 598. In May it was up to 612, then down to an all time low of 540 in June. It went up and down between June and Sept. (547), before steadily increasing to a 602 as of January 2008.
With this bit of information, I wonder if I shouldn't see about getting a loan to pay off Fingerhut, AmeriFirst and the KGB IRS. Question though is it really wise? Would I be able to afford it.
Perhaps, if I visited the Credit Union, where I am trying to build my emergency fund. The same one, that rejected the plan when my FICO was in the 540's, because it was about 10-15 points to low for their lowest standards. My plan would be to continue to automatically deposit $50 from each paycheck into the savings there, but allow them to debit $25 of that each week to pay on the loan. In that way I can still work on building the savings, while I also pay off these debts. But, would the payments on $5,000 really only be $100/month? Of course that would take care of the IRS, who isn't getting anything right now. The problem I see is that it would leave me short for my insurance premiums and property taxes, which come out of this same savings account.
It might be better to let my IRS debt to lie for a little longer, since I have deferment, and work on paying off the other two debts (FingerHut and AmeriFirst).
- Jan. 2007 - 592
- Feb. 2007 - 600
- March 2007 - 598
- April 2007 - 612
- May 2007 - 540
- June 2007 - 588
- July 2007 - 565
- Aug. 2007 - 547
- Oct. 2007 - 579
- Nov. 2007 - 579
- Dec. 2007 - 600
- Jan. 2008 - 602
- Provided by: TransUnion
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go ahead share your thoughts with me now.
5 comments:
I still think you should pay these off the traditional way; i.e. pay the largest interest rate first, then pay the minimums on everything else! Good luck with this.
Worship at the FICO alter just a little longer until your score goes up to 700 then you'll be able to consolidate with a lower interest rate (hence lower payments) that you can afford.
Anonymous -
I will be debt free and will not need any consolidation or any loan products ever again, before my FICO is 700.
My ultimate goal is to have a FICO of zero (0).
When you aren't maxed out in terms of your debt vs. your available credit, you start to look like a better bet to banks. And you are. I say absolutely try to refinance... but only to a lower rate. So don't refi Fingerhut if it's at 1%. (Is that a teaser rate???) In fact just the very high rate would be better off refinanced. There's little advantage of having one debt vs. the four or so you have... UNLESS you can lower the rate below what you have on them now. If you refinance the home loan into unsecured debt (debt not tied to your home), it will lose its tax advantage. Refinance the high-rate loan to a lower rate? Absolutely! Then call them and tell them you're closing it! You'll get quite a different story then you got when you asked for a lower rate! ;)
I would say no, even if it would save you a few dollars per month. And I'll tell you why.
Right now you are doing just fine and you are paying extra on your debts. You are just paying off the worst one and so your snowball will increase. And as time goes by and you pay off more, it will further increase. So things will only get better as you go along.
If you refi, you will have a set payment for the life of the loan and the payment will never decrease, and so your snowball will never increase, for the length of the loan.
So in the future, your monthly minimum obligation will remain the same for as long as you are paying. As it stands, however, your monthly minimum obligation can only go down. If something unforeseen were to happen, it would be best to have your monthly minimum obligation as low as possible.
That's the way I see it, anyway.
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