Harry Gross: Cadillac sent me in downward credit spiral
WHAT HARRY SAYS: I finally hit bottom. I had no other sources of money so I got a "payday loan." When I realized that I was paying an annual interest rate of 150 percent (6 percent for two weeks), I decided that I just had to bite the bullet and
DEAR HARRY: I finally hit bottom. I had no other sources of money so I got a "payday loan." When I realized that I was paying an annual interest rate of 150 percent (6 percent for two weeks), I decided that I just had to bite the bullet and beg for help. I got on this merry-go-round a few years ago when I bought a Cadillac to keep up with my friends. The payments very soon put me in a hole, and I sold it before it was repossessed. That should have awakened me, but it didn't; I still tried to keep up. I hit up my credit cards to the max, and I started to rob Peter to pay Paul.
I'm lucky that my employer still doesn't know of my problems. I'm usually very well-disciplined, but I need help to get back to a good credit rating. Help!
WHAT HARRY SAYS: Interest is the secret killer in many cases. Find out which of your cards bears the highest interest and fees and transfer the balance to one of those come-on deals for a new card at a low introductory rate. Then pay extra money on the remaining card with the highest rate. Destroy all your cards except the two with the lowest rates. Avoid all late payments like the plague. Do not use any more current credit than you can pay in full before the due date. If you own a home, consider a home-equity loan to pay those credit cards. Interest rates on them is usually lower than credit-card interest. Above all, be consistent in your payments. No more slip-ups. It may take two or three years to get back to normal, but it's worth it.