Currently our credit is pretty dismal. I don't know the exact score but I know it's low. Last time I checked it was like 500-something.
Back in 2006 I was contracting in Iraq. In December of that year I bought a brand new truck and then returned to the states the following January. We struggled to pay the note on that truck, the house, and my wife's SUV. In 2008 I called Citi and did a voluntary repossession....
Fast forward to today. I am back contracting in Afghanistan. I am making good money. My wife's SUV has been paid off, (the motor has since died and we will be buying a used vehicle for CASH when I go on R&R in June). All of our bills are current and we do not have any debt other than the house and our standard monthly bills, (cable, phones, lights, etc...) We haven't had credit cards in years so that's not an issue.
What can we do to raise our score. I know it's still pretty low, (exactly how low I'm not sure at this point but I know it sucks).
Also, with the money I am making we can pay off our house in about a year, (still owe about $70k), and have money let over. Should we pay the house off or just keep making the payments as normal and bank the money? We still have about 18 years left on our mortgage, (bought the house in January of 99), and I just hate the thought of having to make those $1100 payments for the next 18 years.
Another thing, from now until I go on R&R in June, we can have about $40k in the bank. We are going to use part of that to pay cash for a used vehicle. Would it be a good idea to set aside the money for the vehicle and then get a loan from our credit union using that money as collateral and buy the vehicle that way? If we did that we would pay the vehicle off in about 6 months to a year and then still have our original amount when the vehicle is paid off.
Ultimately I want to have the house paid off and some money set aside for our girls, (12 and 3 currently), to go to school on. At some point in our future a piece of land to retire on would be tossed in the mix as well.
Man, when its typed out like that it seems like its so far away. Also, Im 44 and my wife is 42 although we are not "old" we do feel that time is of the essence!
Sadly, if you want to boost your credit score, you need to use credit.
I think you are on the right track with borrowing for your wife's car, and keeping your mortgage open a bit longer. Make double or triple payments to cut down the payoff date to 2-3 years away. Don't pay it off in one lump payment. Split your remaining cash up between an interest bearing account and part of it into safe invesments (bonds or cds). You can always use it to pay your loans down if you get into trouble again. If you have a decent sum of liquid cash, start investing more into an IRA or other retirement fund.
You can pay loans off early, but eliminating your debt completely will not improve your credit score. You can also apply for a credit card again and start buying your dailing purchases on credit. Pay the bill off each money and don't dig yourself into debt with it.
Overall, you have the right idea. You can use credit safely and responsibly to build your credit score back up, without putting yourself in over your head.
What are your income prospects in the future? Are you willing to keep working in Afghanistan to make the big bucks, and if not, how much money can you make while still living in your current house?
I ask this because if you can really depend on keeping your current income level for a long time, you may not need credit at all. If that's the case, I'd pay cash for everything, and not give money away to banks by financing things just build your credit score.
Not knowing the answer to that question, I'll give this advice:
1) Read Dave Ramses' Complete Money Makeover, and do what it says. It sounds like you're already doing some of the steps he recommends.
2) Get a rewards credit card and use it to make all your purchases. Then, pay it off within the grace period every month. I use an Amazon.com Visa; it gives 1% back on everything I buy, 2% on gas, food, and restaurants, and 3% back on purchases at Amazon.com. Then, I pay it off twice a month. In the last 1.5 years I've received over $700 back by using it. Also, the regular monthly payments will slowly build you credit, essentially for free since you should never be paying interest on the charges and there is no annual fee.
3) Beyond that, you'll need to decide how fast you want to pay off your house, balanced against how much you want to save for your girls. Ar-Jedi should be along shortly with some sage advice on that.
Thanks for your service, and I hope one day your girls appreciate the sacrifices you made for them.
Well, our original plan when we decided I was going to start contracting again was for 3 years and I am thinking that's a good figure, if not more! I contracted in Kuwait and Iraq from 2004-2006 then went home for 4 years before coming back about a year ago. This time I'm staying until they kick us out!
Originally we were going to pay the house off and that was that but after doing some serious thinking about it I'm wondering if that's such a good idea now. I definitely want to pay it down quite a bit and that shouldn't be an issue now.
I do IT work so I don't think I will have a problem finding something when I do finally go home for good, but like I said, that will probably be 2-3 years down the road.
I have ready Dave Ramsey's book and we have also done the FPU. That is where we got the idea to pay off the house. Other than the house we have absolutely no other credit type debt. One of the reason I want to repair our credit is that at some point we want to find a place to spend our golden years. Either a piece of land somewhere or a place down on the coast and I know that credit will be needed for that since I don't realistically see us paying cash for an expense like that.
EDIT: I have been doing some reading over at myfico.com and several people there have suggested to get a secured credit card from a bank. We currently use a credit union that we really like. A secured card is something like where we take them $500-$1000 and they give us a card with that as a limit and we use it just like a normal credit card with that as collateral, right? Is that a good idea to use something like that since I doubt very seriously we could get a card any other way.
www.creditkarma.com An actual free credit score website.