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Debt Payoff and Credit Management Tips

I would like to get a loan to pay off all my bills and increase my credit score. My score now is below 500 due to late pay and

I would like to get a loan to pay off all my bills and increase my credit score. My score now is below 500 due to late pay and inquiries on loans any subjection? Please help. Yes I do have a job and been on the same job 7 years ++. I had some medical problems but now I'm better. I want to get on the right track. I need some debt payoff and credit management tips.

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Bill's Answer
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Bills.com | Find Learn Save

Here are the debt payoff and credit management tips you're looking for, which involve both your credit rating and the process for obtaining a loan.

First your credit:

Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.), the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history.

A good strategy is to pay down all of your existing debts, and ideally keep a few trade lines open with little or no balance. Make sure that you pay down your credit card debt close to zero every month.

If you do not have an extensive credit history, you may want to establish small credit files with gas cards or department store cards. But again, make sure that you make your payments on time and pay the balances down to zero.

Secondly, your loan options:

Typically, there are several considerations when getting a loan - three of the most important are: i) your loan-to-value; ii) your debt-to-income ratio; and iii) your credit rating.

I will review each one in turn, focusing on your specific situation.

1. Loan to value: This is calculation looking at how much you want to borrow, relative to the value of the home. It is directly impacted by the amount of money that you can put down on your new home. Fortunately, it appears that you will be able to make some good money on selling your current home (it has probably appreciated over the past 6 years, and you have paid down the loan)... which can be rolled over into a nice down payment.

2. Debt to Income: This ratio looks at your monthly debt obligations (payments of interest and principal) as a percentage of your monthly income. If you are considering retiring in the future, your income will likely decrease... which means that you may want to apply for your new loan while you still have a strong and steady income.

3. Credit Rating: Your loan, including terms like interest rate and points, will depend on your credit worthiness. One measure of credit quality is a credit score (sometimes a specific 'FICO' score). Your credit rating is calculated based on several variables, including: your payment history (do you have any late payments, charge-offs, etc.), the amount and type of debt that you owe, if you have maxed out any of your trade lines, and then several other secondary factors like the length of your credit history and how many recent inquiries have been made to look at your credit history. If you have a good credit score, you will get a better loan.

Therefore, even if you have poor credit, if you have high income relative to your loan obligations or if you own a home with significant equity... you may be able to obtain your loan.

If you would like more information, please visit our loan resource page.

I hope this information helps you Find. Learn. Save.

Best,

Bill

www.bills.com/

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2 Comments

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  • 35x35
    Apr, 2007
    Brad
    A charge-off is an accounting term that creditors use that says that the debt is now in 'bad debt' status. It does not mean that a creditor cannot come back at a later date to collect. In fact, most debts charge-off around 180 days delinquent, but collections can continue right up until (and sometimes after) the statute of limitations expires (4 years here in California).
    0 Votes

  • 35x35
    Apr, 2007
    Valerie
    what is a charge-off? when a debt is charged-off do you still pay it? can the creditor come back at a later date to collect?
    0 Votes

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