Get Out Of Loan Debt

Comment from sgoldperson
Time July 2, 2009 at 3:50 am

Closing the cards is WORSE. Either way you still have the debt. Why not STOP USING THE CARDS. See oddly enough even if you have a card you don’t have to spend on it. Get a little safe or lockbox or something and LOCK THEM UP. That way you have them but can’t use them basically. As to why closing them would be worse. Simple you would have the debt and NO credit. Instead of being in debt you would have even worse. It would be seen as a negative credit line, instead of debt. A debt means you have the credit line but you owe too much basically. A negative credit line means you have NO credit line it is just the debt. Hope that makes some sense.

Comment from justme
Time July 5, 2009 at 12:48 pm

Generally speaking it would be better not to close out your accounts. What you want to do is to pay them all down 50% or less (best) of the available credit limits. This will bring your FICA scores way up. This shows that you are living well below your means and could afford to spend more if desired and will raise your scores. Closing accounts will only lower your scores. Never close accts. Keep them active by keeping some minimal activity on them. Example: Maybe use one for gas only and pay off monthly, however keep doing/using this monthly too. Credit is what your FICA scores are based on.

Comment from landwish
Time July 7, 2009 at 8:16 pm

It’s difficult to give you a good answer without knowing more details about your situation and debts. I was in this situation, myself, about 5 years ago and quit paying EVERYTHING. My minimum payments were so high that I wasn’t getting ahead, AT ALL, and was struggling to pay my basic bills. (rent/electric, etc.)

It turned out to be a good deal for me. The debts will be off my credit report in another year and a half and I will have finished my education and be making more money. One creditor did sue me and win about $5000, but the rest of my debt is as good as history and companies seem willing to extend credit to me.

One thing I didn’t know back then is how important it was to have some good credit on my report when all the bad stuff disappeared. I’m taking care of that now, but if I had a chance to do it again, I would have tried to keep one or two major credit cards in good standing instead of letting them all go.

A few more things to consider:

I live in TX, so my wages cannot be garnished. In your state, it may be different.

I didn’t own a home or valuable car or anything else of great value.

Making payment arrangements with the creditors will start the statute of limitations over. If you’re going to quit paying them, you’re probably better off ignoring them, completely than you are making payments. Making payments also keeps the debt “fresh” and in collections instead of “old” and in collections. Fresh debts carry more influence on your credit report.