How To Take on Credit Card Debt

blanket I could find that my children. Even though Mommy gets the nice blankets from home Goods, my children always steal them because they need to build forts. And so don't tell me why this really nice home Goods blinky is down here in the playroom. But here's where we're at. So I put on a red lip because it's freezing. We are in the winter. We are in the winter of all winters. This is the time of year when my little Georgia's southern peach heart starts to wither and

shribble up. You guys can't see it, but I actually finally listened to my therapist and I got one of those daylight therapeutic light things and it is useful. I recommend it. I can't say for sure if it's like had a huge impact because for me, December, I mean my body is like, okay, fine, it's cold and dark, it's December. It's the holidays when you really need to check on me, check on your girl, check on your

seasonal effective disorder. Girlies is the end of February and March, because March has no business being as miserable as it is up here in the North. Okay, but I am really excited for today's episode. Y'all be AQA. You know, in the past, we would do one week career, one week money, but now there's no rules because I'm rewriting all the things for Brown Ambition, and I'm going to

do one career in one money question every week. I'm going to do whichever questions I think are really representative or universal problems that can That's just my approach to choosing questions. I'm like, oh, do I think this question could appeal or pertain to like a lot of people? So please keep sending your questions and you can send them to me directly at Brand Ambition Podcast on ig. You can also email us Brand Ambition Podcast at gmail dot com. You can send a voice note, you can

type it out whatever you feel. Okay, And you know what, I don't even really do a lot of prep for my answers, so they're going to be really off the cuff. So let's dive on in. Now, get your salt shakers out, because y'all ain't going to sue me, not today, because the disclaimer is going to do the work. Okay, disclaimer, this is for entertainment purposes only. I am not a registered financial advisor. I am not a fiduciary. I am not your financial advisor. I ain't nobody's financial advisor. Okay.

I'm just someone who's got a lot of years under her belt in the business and finance space and has been doing Brown ambition for nearly a decade, so there's not much that I haven't seen. I'm also a career coach. I have a thriving career coaching community called the Mandy Moneymakers. Check it out if you haven't Mandymneymakers dot com, Mandimney

dot com. And let's dive in, because why wait and I'm going to do my best not to sing the soundtrack to Wicked during this little moment, because listen, I have a microphone in front of me. I got a red lip on and I saw Wicked, and it is everything. It is my entire personality now. But I y'all did not come here to hear me saying defying gravity. That is not why we are here. We are here for this question from Tony on ig and I love a name ending and why but you make it an ee

for obvious reasons. Mandy with an eye, Tony with an eye? All right, Tony, Tony says, dear brown ambition. I recently started a catering company, and I'm currently working on my personal credit journey to build good credit so I could apply for a business credit card with a low interest rate. I cried when my credit score took a one hundred point hit. I've taken some steps to pay down all

three of my credit cards. First, I was paying off a charged off card, which I was able to settle in full for less than nine hundred dollars in twenty twenty three. Okay. Second, I applied the avalanche method to paying down the credit card with the highest interest rate. I've been able to cut down at least sixty percent

that card's debt. On my third card, I asked my creditor for a lower interest rate so I could afford the payments while I was working while I was looking for gainful employment, which lowered my rate to nine point nine to nine percent. That's amazing. They locked the card for a year and I made a minimum of sixty dollars payment per month. Now the year is over and this card has the highest amount of threeenty eighteen dollars.

The second card currently has a balance of nineteen hundred dollars. However, that card is now restricted, and even if I pay off the balance in full, I won't be able to use the card again. The credit limit will still show on my credit report. So my question to you, ladies is would it be best if I close the account that is restricted and pay a settlement amount for the

second card. That way, I can save some of the money and put on and put that money toward paying the only active card that I have Now with a high balance, I don't mind my credit taking another hit because I really want to pay off all the debt and then start rebuilding from scratch. With a better credit history and payment happens from an avid listener hopefully Tony. Okay,

hopefully Tony. Can I just give you some major props because what I love about your story is that you are not someone who just stuck their head in the ground when it came to tackling various credit card debt. You actually did something about it, and you use some strategies that a lot of people even though maybe we know you could call them and ask them for a lower rate, or you could call them and ask for this,

or that, you've actually done it. So I just want to point out some of the great things that you've done. So you chose to settle a credit card debt, So credit card debt settlement, I mean it's going to vary by issuer, right, And we have a really cool episode coming up with a representative her name's Natalia. She's wonderful from the National Debt Relief which is an organization that that's all they do is help customers settle their debt. So we learn a lot about that in that episode,

which is going to be coming January. First, stay tuned back to your situation. So when you settle credit card debt, you're basically saying to the credit card company like, I ain't got it okay, and I've been missing my payments. I do want to get this debt taken care of, but what can we do? Can I settle it for less? And if you are pretty the thing is you need to you technically need to be pretty delinquent on that debt.

You probably need to have been missing payments for a few months or more and then like and unfortunately, that means your credit will be taking a hit because you've got to be so behind that they're like, oh, yeah, this person's clearly, you know, not going to be paying this back. So it's in our best it's in our best interest as a bank to at least get something from them. So yeah, we'll let them settle the debt.

So I love that you took advantage of that, even though, like you said, it's brought your credit score down one hundred points. I mean, at this point, your credit score is probably in the poor to fair category and you can that back up. But I'm glad that you're kind of like trying to attack it all at one time, because if you have this this period of poor credit behavior, the good news is that it will eventually fall off and you can you know, get some positive credit behavior

to improve your score over time. So but you're just in a tough period. Okay, all right, so we have you've settled that card for less than nine hundred dollars. That was in twenty twenty three. Now you're you know, organizing the rest of your credit cards by highest interest rate, and you've tackled sixty percent of your highest interest rate credit card debt. That's amazing. And so and then you've asked your creditor for a lower interest rate so you

could afford your payments while you were unemployed. So you got your rate down to nine point nine to nine percent. I mean, that's extraordinary. The average interest rate these days is definitely like, is it almost twenty percent or close to like, it's somewhere around there, you know. And it's interesting to hear that because you've lowered, they've agreed to lower that rate. They said, okay, sure, but we're going to lock the car card so you can't actually make

any more payments on it. You can't actually sorry, charge anything else to it. So I kind of like that because it stops you from using that credit card as a crutch or using it in times where you maybe would have when you maybe couldn't technically afford something. So

that but that's a repercussion. So if you're thinking about using this strategy to call your credit card and ask for a lower rate, just based on Tony's story, I'm learning that they may say, okay, cool, we'll give you the lower rate, but you ain't gonna be able to use this card anymore. So that's a give and take, all right. So that's great. Now your payments on that

card are only sixty dollars. But now the year is over, and going back to that high interest credit card, it's got a balance of about three thousand dollars, all right, So now you're wondering, should I try to settle that credit card balance, that three thousand dollars with a higher interest rate? Should I try to settle it so I can say some of that money and put it on the active card that you have. Now, now this is

the thing. It's another settlement. And because you've been on a payment you've basically been on a payment plan, like you've been paying sixty bucks a month, and they've locked in your interest rate. I'm wondering if they would be open to settling that debt with you because you've been current on your payments, and like in my experience, lenders creditors will settle, but they tend to be more willing

to settle if you're like severely delinquent. So unfortunately, that could be a situation where you may need to stop making payments to qualify for that. But I think before you do any of that, just call them and ask. You could say, hey, it's been you know how it's been a year since i've and thank you so much for working with me on the rate, But now I really need to like figure out what to do. I'm worried I won't be able to pay the balance in full.

Is there any opportunity to settle the debt for less and then see what happens. Then, at this point, your credit score has already taken the hit, so I know that this would cause another hit. You're losing. You'd be potentially losing the the having that credit limit on your credit report. And we know that utilization rate is such a big component of your credit score. So utilization rate is how much available credit you have compared to how

much you're actually using. So when you close a credit card, it reduces the amount of available credit you have, So that can I know it's a little confusing, but stay with me. So it reduces how much credit you have. And also, credit scores are so goddamn stupid. Have I mentioned that. It's like, so, here's all this credit that you can use, but we're only going to give you a high score if you don't use any of it, if you use the least amount possible. So it's it's

such a trap. It truly, truly, deeply is. And then they make it so easy, they make it so incentivizing to like use that credit card for the points for the airline, for the miles, for the cash back, right, And because of that, we'd use it more than we maybe necessarily would, because we can justify it by saying, well, I should use it because I get more points this way. And then you could end up with the high balance and then you're just stuck there with a really high

interest rate. Right, and then it's like, oh, wait, you used the card and you didn't pay it off in full, Well, then we're going to start knocking points off of your credit card debt, I mean your credit score, right, because that is increasing how much credit you're using versus how much credit we gave you. The magic percentage is usually

thirty percent or less. So if you've got ten thousand dollars worth of credit across like three different cards, you never want to be carrying more than like three thousand dollars across those cards. So thirty percent is about where you want to stay. But of course, ideally we'd be paying our credit cards off in full, but like we don't live in an imaginary fairy tear land. Okay, sometimes you don't listen. I don't pay my cards in full

all the time. Sometimes you just ain't got it. Sometimes there's other priorities, right, But anyway, let me step off of that soapbox for a moment, because credit scores are trash and it's all rigged and like they're dangerous, so dangerous, but I think listen, like if it has worked for you, like if you can call and you can settle that debt for less, and you know, you may get a hit to your credit score, but then you could go and you could get a secured card from a credit union.

So a secured credit card, it's not really a credit card at all. But it basically helps you rebuild your credit. You can also get what's call it a credit builder loan through a credit union and this is where and there are some like private companies that are not banks. I believe there's one called self lender, but you get to do your own research to find the best ones.

But basically, they extend you some credit and they give you a certain minimum payment to pay each month, and you've got to make those payments on time and you can't like use the card and charge it at grocery restores and stuff like that. And then basically after certain and those payments will be counted toward your credit report and then hopefully will help you rebuild your score. Like I said, I mean, you've got these charge off these

charged off accounts that's already dinging your score. You don't have a lot to lose. I mean, I know that you've just started your catering company, and that's what I'm like, I'm toying around with this, not toying around, but I'm considering that. I mean, your credit score is already on the lower side. You said you took one hundred point hit. You may already have a hard time qualifying for a

business credit card or a business line of credit. I honestly think that you should pursue for your business, pursue some non line of credit financing. If you need some financing, you can apply for an SBA loan. You can look at what kind of grants or loans are available through your state or through your There are programs that not enough, especially women of color, that we just are so much more likely to dip into our own piggybank to finance our businesses. And that is not what the majority of

successful business owners are doing. They're not using their own money, They're leveraging debt, they are leveraging loans or grants. There's other options for starting up a business. And I highly recommend listening to an episode of our show where we interviewed I interviewed Stacy Abrams, who should have been governor of Georgia. Bo was whatever, It's fine. So Stacy has a book I forget what it's called now where is

it is? Somewhere around here, but anyway, she tells a story of how she founded a couple of companies at through her entrepreneurial days and how you know, she learned so much about financing and how that was one of the reasons why her business is closed, and how access to capital is like the biggest hill to overcome as

a black, black or woman in business. And yes, we are the fastest growing entrepreneur in the country, but we are also the most underserved when it comes to financing and having access to capital, and that's got to effing change. So I really encourage you to look and see what opportunities you have to raise capital without having to take

on debt yourself. Because even if you do qualify for business credit, like how do you have to buy the supplies for your catering company, you may need to, like, you know, hire help to expand and grow and with the debt problems that you're having. On the personal side, I don't I don't tend to feel like you have a bunch of money just lying around that you could go ahead and like float yourself as through your business,

and you shouldn't have to. Like if you're a bomb ass caterer and you cook amazing food then and you have like a client list and you have the potential to have a thriving business, there should be opportunities out there for you to get the kind of financing that you need to get your business off the ground and actually open up that opportunity for you. So what is it?

The SBA, the Small Business Association. There's loan programs. If you're a minority owned business, get classified as a minority owned. This is something that I'm working on right now too, a minority and woman owned business in the state of New York. I'm trying to get registered as that because that sometimes you're only eligible for these types of programs

if you are classified in that way. But there is all there are opportunities to finance that don't have to come out of your own pocket, Okay, And that's definitely a topic that I'm passionate about. I've heard other you know, incredible black female, brown female entrepreneurs talking about the same thing, from Morgan Debonn from Blavity and all the sessions I went to when I was at Afro Tech and Rachel Rogers.

We've had Lgope on the show, and she also talks a lot about, you know how a lot of her business and helping women is coaching them on where to find money that is not out of our own Where to find money that is not out of our own our own bank accounts, which is rare because I think we tend to think, Okay, I'm going to do this. I got to pull myself up on my bootstraps. Here's the gag. Ain't nobody else using their bootstraps but us. Okay,

everybody else is like catching all cash that check. I'll apply for this, I'll get that, you know, venture capital funding, and I'll get that loan or whatever. It's a yeah, it sucks to feel like, Okay, no one really explained this to us, and that's got to change. So hopefully this can be the beginning of that conversation. I hope

that this helped. I think that you're on the right track, and you have been so strategic and smart about the way that you are managing your debt right now, and I just don't want the idea that, Okay, your credit is obviously not great right now. That doesn't need to

stop you from launching your business. You just need to be more tactful and strategic about financing your business in a smart way and leveraging resources that may not have to just be you know, your credit, to take on business credit that you may struggle to paid off, as well, maybe other forms of financing. Also, this is not going to be a quick journey. You know. It takes money to pay down debt, It takes time for your credit

to improve, it takes time to launch a business. And I just want to acknowledge and like validate the probably the frustration that you may be feeling, like I just want to do this as my dream. I want to get it going, but I have these other things in the way. It may just take more time than you would like it too, but it is possible. And I think that you have everything you need to get done, what you need to get done to make your dreams

come true and to make this really come alive. But it just may take a longer time than you would like to and that can be okay, all right. I hope that this helped you, Tony. Thank you so much for being so vulnerable and transparent with your story. Please, you know, send another DM, let us know how it's going, Let me know how going, Let me know if this was helpful, If there's other questions, b A fam I love getting your questions again. Hit us up at Brand

Ambition podcast on ij on ig. You can slide into our d MS or email me at Brand Ambition Podcast at gmail dot com. Thank y'all,