How I knew I was in trouble
If you have been reading this blog with any regularity, you know that I am lugging around $263,000 in debt. I explained how I got there mess in my “How to Create a Financial Disaster” series. I have received more than a few emails asking how I could let it get so bad, and what made me financially see the light. Here’s how I knew I was in real trouble:
1. Too broke for necessities
There was an incident last summer when I had to ask my fiancé for money so that I could put gas in my car to get to work. What upset me even more was that he didn’t have $20 to give me. We ended up cashing in change so that I could fill up my tank. It made me angry and embarrassed to find myself in that situation (I had an unexpected vehicle repair expense earlier in the month). That was when I started looking for teaching jobs to supplement my income and start an emergency savings account.
2. Declined
Recognizing my credit card debt was out of control, I applied for a consolidation loan from a national bank who sent me correspondence promising I was “pre-approved.” I was declined for the consolidation loan because my debt-to-income ratio was too high (actually, what they said was they couldn’t understand how I making my payments). I explained that I got rental income from my fiancé. They told me that didn’t count. I had never had trouble getting credit before - this was a huge red flag.
3. FICO score stalled
One of the features I love about my WaMu (formerly Providian) credit card is that it tracks my FICO score monthly. I have enjoyed watching it creep upward for the past year, but it has stalled out at 705. I know that it’s my DTI (debt-to-income) and DTA (debt-to-available) ratios that are keeping me from breaking through to the ‘excellent’ credit level. Until I get my credit bureau score over 740, I am going to have a hard time negotiating better credit terms, especially now that credit conditions are really tightening.
4. No sleep
After I was declined for the consolidation loan, I called all of the banks I had credit lines with and requested my interest rates be decreased. I was shocked to find out one of the cards was charging me 28%! How did that happen!?! Turns out the ‘introductory interest rate’ had expired and I hadn’t been paying attention.
I knew that I would have a hard time refinancing with my current DTI, and that started to keep me up at night. I still have trouble shutting my mind off when I lay down to rest, but I have started sleeping a bit better since I started this website.
If knowing is half the battle, I hope that doing helps me win the war.
Stumble it!
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