Paying Off Debt/FICO Considerations

[Saving in Austin]

I am helping some family friends pay off their credit card debts. They have $9,000 in the bank and are saving $1K per month after bills and credit card payments.

His FICO score is about 600 or so and he owes $18K on one card at high interest that he's paying down on. He is trying to balance transfer to a 0% card for the 1st 18 months which will cost 3% of the balance.

Her FICO score is in the toilet as she has 4 or 5 credit cards combined owing $16K that are delinquent about 3 years. She has various collections agencies offering her to settle for around 50% of the balances. Is this a good idea ? How long will these delinquencies stay on her report if she settles ?

She has other options: https://fcaa.org/debt-counseling/  has offered to negotiate for her and has offered her a plan of 33 payments @ $371 for a total of $12,243. I don't know if this plan helps her credit score more than just settling directly with the collections agencies.

These guys are frugal and are just now learning the game. They have 2 car loans at 4% for about $36K that they are paying on as well. I wish I could have talked to them before they bought their cars but it is what it is. Any advice directly related to getting rid of the debt/improving credit scores would be appreciated.

[ixtap]

In what sense are they frugal? How did they get into this much debt?

The link you posted takes to an debt counseling association, not a specific debt counselor or agency, so it is hard to comment. They need to research the tax implications of their options.

[Saving in Austin]

They have had some temporary job losses over the past few years. They are 10 year immigrants from Ghana and Nigeria. They are frugal in the sense that they spend less than they make. They are trying to atone for past mistakes, I guess.

[Duke03]

Not to be a Debby downer, but why do they need or want to up their credit score?  I hope it's not to go into more debt as their past shows they can't handle it.  The car loan interest rate doesn't bother me and I'm actually surprised it's that good honestly.  As far as any credit card debt that is past due or delinquent just let sleeping dogs lie.  I mean the CC could sue her, but they probably won't and even if they do show up to court as I bet the CC attorney won't be there.... you will win by default.  I wouldn't even call them or offer them a penny as they will just reaffirm the debt and start the clock all over again.  Do not pay any sleazy debt company to come up with a crappy plan and make payments.  It's all a scam.

[Saving in Austin]

Thanks Duke03 - I think they want to eventually by a home. They do not buy flashy things and the new car purchases were a mistake that they now realize they made. The advice to let sleeping dogs lie confirms what I wanted to know. I don't have a lot of experience with collections/credit score considerations.

[Duke03]

Thanks Duke03 - I think they want to eventually by a home. They do not buy flashy things and the new car purchases were a mistake that they now realize they made. The advice to let sleeping dogs lie confirms what I wanted to know. I don't have a lot of experience with collections/credit score considerations.

I helped my brother in law a few years ago who was in 40k of credit card debt and lost his job.  He wanted to declare bankruptcy, but after looking into it there was no reason to and would have actually cost him more than just letting the CC go further into default.  Out of 4 different CC companies only one sued him over a $3,000 debt.  He showed up to court and the CC attorney was not there so the judge dismissed the case in his favor.

On the male family friend if his CCs are up to date what's hurting his score is his utilization get it paid down and his score will bounce back.  That or if you really want to help him add him as an authorized user on your oldest cc that you have.  Don't give him a card obviously, but by adding him to a good stable account his score will bounce up.  Not a ton but 20 to 40 points.

[Saving in Austin]

Thanks again Duke03. These guys are in their 30s and have time to pay everything down and get it together. There is no emergency to get the FICO score up. They won't be buying home until well after the debts are paid off and they've saved FU money and a down payment. His score is decent so if they need to utilize credit for anything they can rely on his credit while her debts clear the system.