She's too ill to work but wants to pay off credit card debt
MONEY TALK
Dear Liz: I need help. I'm a 42-year-old woman with serious medical problems and $5,000 in credit card debt. My only income right now is $668.25 a month in Supplemental Security Income. My daughter recently turned 18, which means we lost her Social Security allowance of $720 a month. I recently had to apply for food stamps. I was in a debt consolidation program to pay off my credit card debt, but now I can't pay. I want to work but I'm too ill, and I don't want to file for bankruptcy. I feel that I should pay my debt, but how?
Answer: How, indeed?
The fact that you qualify for SSI (a federal program that pays benefits to disabled adults and children who have little or no income) indicates that you have few resources or assets to sell. If you can't work, you can't earn the income you need to pay the bills.
You say you don't want to file for bankruptcy, but finding the money to file would be a challenge even if you did.
A bankruptcy filing might not be necessary: It sounds like you're "judgment proof," which means you don't have any assets or income that the credit card companies could legally seize. Check with a lawyer.
You also might check to see whether you have disability coverage on your credit cards. This coverage is usually a bad idea but it could cover your minimum payments while you're ill. Otherwise, you'll have to ignore this debt until you're in better shape to deal with it.
How payments affect FICO score
Dear Liz: You advise not to charge more than 30% of a credit card's limit as a way to boost or protect one's FICO credit score. How and when is this measured? Should I go by the ending balance each month, or is it the highest balance during the month, even if I pay down that charge by making an extra payment before the statement end date?
Answer: The balance that is reported to credit bureaus, and then used in credit scoring formulas, is typically the balance from your latest statement -- what you owed as of the statement closing date.
If you make a payment before the closing date, you typically will lower the balance that's reported to the credit bureaus and improve the "credit utilization" ratio that affects your credit scores.
Just make sure to make a second payment after the closing date but before the payment due date. Some card issuers will count you as late if you don't make a payment during that window. Besides, smart consumers pay off their balances in full.
