Nancy wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Dear Steve,
I am a full time graduate student who works occassionally. Mainly, I live off my student loans. I have 23K in credit card debt and need to get out of it because I don’t have much money to work with.
I’m nervous about consolidating my credit cards because I heard that it doesn’t look good on your credit report if that is done. Is that true? Also, if I consolidate my credit cards will that hurt my chances of getting future student loans.
Nancy”
The Answer:
Dear Nancy,
When I read that you were living off of your student loans, I cringed. Student loans are almost one of the worst debts to have. If you default or fall behind on your student loan debts up to a 40% collection charge can be added, they can’t be discharged with bankruptcy, and even if you are dependent on public benefits to get by, those benefits can be garnished to pay the student loan.
I would suspect that your occasional work schedule, need or habit has lead to some of your $23,000 of credit card debt. While you might not be taking cash advances from the cards to get by, I would bet that many small expenses were charged to the cards to help make ends meet.
I am less concerned about how your credit report would look from going into a debt management program to consolidate your debt. If you are not working much then having $23,000 of credit card debt gives you a horrible debt to income ratio and that is already hurting your credit score.
I implore you to get a copy of this consolidated credit report and see what all the credit bureaus are saying about you right now. I think you’ll find that you score is low now but the good news is that the consolidated credit report I recommend will tell you the exact steps you will need to take to increase your credit score.
Nancy, please stop adding to the debt on your credit card. Please stop living off of the student loan money and you may have to adjust your workload so you can get by.
The last option to consider is for you to go and meet with a bankruptcy attorney for a free bankruptcy consultation and discuss discharging the $23,000 of credit card debt so you can focus on finishing your college education.
