I had great credit until I had a baby, then I was in a financial bind and became in bad debt with my credit cards (all 8) became maxed out and no way to pay it all back with out accumulating more and more interest.
I was pretty much cornered into doing a debt management program that ended up hurting my credit even more than I imagined but definitely gave me more spending/living money.
I have a few questions; I was wondering if refinancing my car could help me get a lower car payment to help pay off debts and delinquencies. Also, will my credit be easier to rebuild once my credit cards are paid off through the debt management program? What do you think the best plan for credit rebuild is at this point?
The best way to rebuild credit is to resolve the old open debt issues by either repaying the card and it remains open or closing the door and starting over quickly with a consumer bankruptcy.
The debt management approach can help to rebuild your credit if the cards included will remain open. Then the length you’ve had the account will help to increase your score. Additionally, being in a debt management program can help you to find a solution outside of bankruptcy but bankruptcy is often a better solution. Read Those That File Bankruptcy Do Better Than Those That Don’t.
Filing bankruptcy to eliminate all of your debt in about 90 days can give you the fresh start to rebuild new and better credit – fast.
But focusing on your credit score would be the wrong approach. First, you need to focus on having a financial foundation by building savings and an emergency fund to have something to use in a pinch instead of going back to credit-debt.
Then we need to look at your overall situation. Are you saving for retirement? Does your employer offer a retirement savings matching program that you are missing out on? What is repaying your debt costing you in lost retirement? You can find out if you use this online calculator.
If you could qualify to refinance the car you need to look at the math of the deal. A lower monthly payment can extend out the length of the loan. Focus on the overall interest you would pay in a refinance deal versus just paying off what you have now.
When it comes to rebuilding credit, I would suggest you read this and this. Rebuilding good credit is actually a stupid easy process. The secret is you have to get back into the credit card game and most incorrectly avoid it because they associate credit cards with emotional pain.