- Centurion Member
- Posts: 239
- Joined: Wed Feb 18, 2015 9:04 pm
- Location: Texas
Welcome to the forum and good luck with all the hurricane mess!
The good news is that as far as your credit score goes your utilization is completely temporary. So being maxed one month and then paying it down to 15% the next month will be exactly the same as if it had been 15% both months. So absolutely focus on paying it down, but don't stress too much about the current utilization and how it affects your score.
However, that said, the missed/late payments are a much bigger deal and will unfortunately continue to impact your credit for the next 7 years. It's imperative that you pay at least the minimum on time every month to prevent further damage. Also, if you're behind and feel like you'll never catch up, remember that staying 30 days behind is much better than falling to 60 days or 90 days behind. So whatever you do, don't take on a "it doesn't matter at this point" attitude. Also, the sooner you're caught up, the sooner the clock will start on your credit score improving.
Another potential source of trouble would be if your creditor decides to take AA (adverse action) as a result of your high utilization and missed/late payments. This could result in the account being closed or in 'balance chasing,' whereby every time you pay some of the card off, they lower your limit to just above the new balance, thus derailing any utilization improvements you were making.
Your first step for solving this problem needs to be to carefully and honestly evaluate your income and expenses. You need to create a budget and be very aware of where your money is going and how much you should have left over after bills and other fixed expenses (including your credit card payments). If you're in the black, then it may be discouraging being in debt and having to curtail your lifestyle, but the situation isn't THAT bleak as long as you hang in there and resolve not to overspend and to send whatever extra money you can to the credit card.
If you're in the red (more expenses than income), then unfortunately your only solution is to figure out a way to either earn more money, reduce some of your fixed expenses, or both. You might try things like getting a second job, doing some freelance work, selling unneeded items, eliminating things like cable or gym memberships, eating out less, etc.
I'd be very hesitant about taking out a student loan to pay off the credit cards. Student loans cannot be discharged in bankruptcy (I mean presumably you're not concerned about bankruptcy at this point, but just worst case scenario), whereas credit card debt can be. Also of course, trading one debt for another isn't really optimal. On the other hand, it could potentially save you a lot in interest and you may feel comfortable with the additional risk and your ability to pay off the student loan in the future. So I won't say definitely don't do it, just think it over very carefully.
A few other options you might consider besides the student loan are: borrowing money from friends or family, getting a regular, conventional personal loan, getting a loan from a peer-to-peer lending site, or doing a balance transfer to a credit card with a lower rate. However, the loan and new credit card options may not be realistic due to your current credit scores and credit problems.
Another risk to any kind of loan/balance transfer is that by essentially shuffling the debt instead of eliminating it, you aren't really addressing the underlying cause that got you there in the first place: a lack of steady income and insufficient savings. You'll definitely be in the same boat next summer unless you figure out a long-term solution - and at that point you might have TWICE (or more) the debt.
Ultimately, $3,700 in debt is painful, but it's absolutely something you can come back from. Focus on avoiding late/missed payments, carefully budgeting, and increasing income/reducing expenses if possible. If you truly can't make the payments on time every month then you may need to call the credit card company and ask about a payment plan. Basically that would involving having your account closed and being required to make fixed payments, but in exchange they would typically reduce your payments and lower your interest rate.
Best of luck with whatever you decide and let us know it how it goes!