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I am in a very tight situation and I am wondering how the FICO score behaves if I stop paying 2 cards out of 4. How badly would it go down and how badly would it affect applying for loans at different banks?

Here's the situation:

  • I got 4 credit cards and 2 loans.
  • Won't pay 2 cards anymore.
  • I am from Mexico so there's no legal implications for me if I don't pay anymore.

Question: how badly would it affect the FICO score if these 2 unpaid debts would automatically reject new loans thus rendering pointless the payment of the other debts?

I won't apply for new loans until a couple of years later.

  • 6
    I'm from Mexico so there's no legal implications for me ... uh, that's ... not correct :/ – CactusCake Apr 3 '18 at 15:22
  • Well technically there are but I need a over 1 million pesos debt for a proper case in the court, the bank needs to pay a lot for the authorities to proceed and there are other thousands like me – Roberto Torres Apr 3 '18 at 16:51
  • And they all have terrible credit scores. – Beanluc Apr 3 '18 at 23:23
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The biggest single factor in your credit score is payment history, which makes sense since the credit score is supposed to indicate the likelihood that you will pay off any additional debt.

The missed payments will affect your score more than anything else. I would make AT LEAST the minimum payments if at all possible, and try to come up with a plan to get them paid off as quickly as possible:

  • focus of the lowest balance card and get it paid off as quickly as possible to reduce the number of payments you need to make and increase flexibility
    • If you have cards with similar balances, then focus on the ones with the highest interest rates first.
  • take on extra work to increase income
  • sell stuff
  • Find expenses to eliminate (cable? cell phone? restaurants?)
  • look for consolidation opportunities (but be very aware of additional fees that will add to the balance)
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How bad will it hurt? Badly. VERY badly. Depending on your current scores a single 30 day late can cost a hundred points or more. Before stopping payments, I would suggest looking for ways to use those cards such that the minimum payment is effectively removed from your budget. For example, say one card has a $100 minimum payment and you have a $200 recurring monthly bill. Instead of using cash to pay the recurring bill, use the cash to pay $200 on the card, then when the payment posts, you pay the recurring bill with the card. Your minimum will be satisfied and the bill will be paid with the same $200. You may need to pay a bit extra to cover interest on the card's balance in order to keep the balance from rising further.

This is only a way to get through a temporary tough period without getting behind. You will still need to look for ways to increase your income or cut overall spending in order to start paying down the debt.

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