sahuddleston
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Oct 2007
Location: Little Rock, AR
|
| some quick credit ?'s |
 |
|
hey guys, im graduating from college in 3 months and will begin working as a tax accountant at moore stephens frost financial group in little rock, AR. my current situation is as follows....
around 9k in credit card debt - all at credit limit
60k in student loans
10k remaining on my car loan at 6.25%
i refinanced my car this summer after joining a western federal credit union with my dad as a cosigner. his beacon score is 800+. overall i have managed my credit well, with the exception of 2 late payments and one of my card accounts being closed by the creditor. it was not sent to collection. i have paid on time for everything other than that exception for 2 years. when i checked my score this summer my highest bureau was 685, followed by a 654 and 628. i have a few questions, here are some other factors to consider:
1. i have $10,000 from a school loan i will not be needing due to an early graduation, i plan on using it to completely eliminate my credit card debt. giving me $10,000 in available credit that will not be used.
2. i also now have a car loan on my credit report, it has been paid on time since august.
id like to purchase a new car soon after graduation using my current auto lender, i am thinking the the combination of me eliminating my credit card debt and the fact that i wil have an auto loan history(althought short) will potentially help me to get to 700+ by january or february, allowing me to purchase the car by myself.
is this reasonable? how much time should i expect it to take for the paid off balances on my credit cards to show on my credit report? how long will it take for the auto loan to help boost my credit score?
thanks for the help, its much appreciated.
scott
|
Mon Oct 15, 2007 2:50 am |
|
|
pf101
Senior Member
Cash: $ 62.25
Posts: 311
Joined: 12 Sep 2007
Location: Portland, OR
|
| Re: some quick credit ?'s |
|
|
quote:
1. i have $10,000 from a school loan i will not be needing due to an early graduation, i plan on using it to completely eliminate my credit card debt. giving me $10,000 in available credit that will not be used.
This is called fraud and lenders tend to frown on it. You could void your loans which will put a big financial hurt on you. Also, don't get it into your head that you paid off any debt. You didn't. You just moved it.
quote:
id like to purchase a new car soon after graduation
No offense, but you can't afford a car. What's wrong with your current car? Why can't you just keep that? You already have $80k in debt and you want to go deeper? REALLY, REALLY bad idea. One of the top 5 mistakes new grads make is buying a new car. One of the worst financial mistakes ALL people make is financing a new car. It's a waste of money. I'll bet you big money that about 12 months after you do this you'll be kicking yourself.
I work with clients exactly like you all the time and they all say the exact same thing: "I was a freaking idiot to buy that car."
If you're stuck on doing this, wait a MINIMUM of 12 months after graduation so you can see what your real budget is going to be like. That paycheck looks nice until you have to start paying student loans, rent, utilities, buy business clothes, eat more lunches out, buy new furniture, pay higher insurance and a host of other expenses you've never even thought of. Don't make the mistake of committing yourself to an expense you DON'T NEED and may not be able to afford.[/quote]
Personal Finance 101
|
|
Mon Oct 15, 2007 10:05 pm |
|
|
sahuddleston
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Oct 2007
Location: Little Rock, AR
|
|
|
|
quote:
Originally posted by coaster
Scott --
That's all very good advice above. 6.25% on a car loan is a pretty good interest rate for that kind of loan. I think you should pay the $10K back on your student loan to get that down and just keep the car you have now. If you can't get a date without a new, hot car then you're dating the wrong girls.  (J/K)
You seem to be a little obsessed with credit scores. I think you just need to concentrate on good, sound fiscal discipline, pay off those loans, be a good employee at your new job, and the credit scores will take care of themselves in time.
Say, is Cajun's Wharf still open in Little Rock? I haven't been to your city in years. I often enjoyed going there for dinner when I was in town. 
Cajuns Wharf is still going strong. Thanks for the advice on this topic. I will negate the notion of purchasing a new car. Im not too concerned with getting a date - ill be getting married in June. The student loan i have the 10,000 left on is a private loan. Im not sure if or how they check to see what the money is used for, but it seemed to me that eliminating the higher interest credit card debt would be a smart financial move. i could then use the money i spent on my monthly payments on the credit cards to pay down my auto loan. after that is paid for id have more to put towards the student loans. is this a better strategy?
|
|
Tue Oct 16, 2007 12:39 am |
|
|
pf101
Senior Member
Cash: $ 62.25
Posts: 311
Joined: 12 Sep 2007
Location: Portland, OR
|
|
|
|
quote:
Originally posted by sahuddleston
The student loan i have the 10,000 left on is a private loan.
Be aware that private loan interest rates can be REALLY high. I've seen it at 15% or higher and it's adjustable. Before you take out more than you need, check what the rate is going to be before you take more than you need. As you keep a steady payment history (your student loan payments will help with that) you should be able to negotiate lower CC rates or get low rate balance transfers. I personally wouldn't be in a huge hurry to pay off the car loan if the credit card rates are higher.
The most financially sound way to pay off debts is to pay minimum payments on everything and pile every extra penny to the highest rate debts. Since it sounds like your CC rates are high it makes more sense to focus on paying those off instead of your car.
What you need to do is lay down your goals on paper. Figure out what you want to do and how much money you have. Figure out a debt reduction plan by making a list of all of your creditors. Include payment amount, balance and interest rate. Make sure you use effective interest rate in the case of your student loans if you will qualify for the interest deduction. Then sort them in order of highest rate to lowest rate. That's the order you should focus your payments.
As you're developing this plan, see what you can do to lower your interest rates. Call your card company and ask them to lower the rate. You may be surprised that this works quite often. Just be nice when you ask. If they say no, call back a couple weeks later and ask again. Keep calling. See about doing a balance transfer to a lower rate card. If you can't qualify for one on your own, see if you can get a joint one with your Fiancee or if your parents or a friend will let you use their card. Just make sure there's no balance before you do the transfer.
Personally, I think it's a better idea to do these other steps first before you get into more student loans you don't need.
Also, if you haven't done so already, put all of your payments on auto-pay so you're never late again.
Good luck!
Personal Finance 101
|
|
Wed Oct 17, 2007 2:47 am |
|
|
|
