debt consolidation or student loans

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Q. I'm in grad school and I have 5 years before I settle down and buy a house. Let's just say I've made some bad financial decisions in the past so I need to get my 617 FICO score up as high as possible in this 5 year period. My credit report shows one 30 day late period. It's been paid off, but that card was canceled by the company (so that won't vanish for 7 years), so not much I can do about that. I have three credit cards more or less maxed out to ~4000. Two of the interest rates recently skyrocketed to ~30%!. I'm in the process of calling the companies to find out why, unless someone here knows why. I'm using my student loans (~6% interest v.s. 12 - 30%) to pay off these high interest rate credit cards. The problem is that I receive about $3000 quaterly, so this puts me a year away from converting my credit card debt to student loan debt. Am I going about this in the right way? Should I get a debt consolidation loan in the meantime? Should I get a debt reduction service to help me out? Any general advice?

A. -No. Get a job over your breaks and pay the stuff off. Work during school and pay it off if you aren't already working to support yourself. Putting it off isn't going to help you much. The rates got jacked because you defaulted and they know you're maxed out. Who's going to consolidate your unsecured debt unless you have something to borrow against? -The school does support me via a teaching assistantship. But another job is out of the question, I'm a graduate student not undergraduate (in Physics if that matters). First of all the student loans will pay these off in a year, but in the meantime I'm making 78 + 96 + 101 = 275 in interest a month (if I did this right)! so over a year this is close to 3000 in interest. I can convert this over to student loans debt which would put me at a better 0 - 6% interest rate (0 if subsidized). After that any subsidized money can go into a decent mutual fund to make a hopefully 4000 dollar return over 5 years (Assuming a large principle). But that 3000 dollars makes me sick. I think I'm going to try and get a consolidating loan if I can get one to lower the interest rate. If that doesn't work I'll have to work with a debt reduction service to see if they can lower my interest rates (hopefully this won't affect my FICO score.) -If you can get a loan at a lower rate, do it. BUT, do NOT do it until you cut up those credit cards! You cannot afford to live beyond your means! Check with banks and credit unions in the area. Is there a university credit union? With your stipend and loans, they may be amenable to risking a loan to you. Do NOT take a loan for "extra cash" -- ONLY for the outstanding balance of your debt. Once you get a loan and pay off the credit card balances, CANCEL THE ACCOUNTS. Don't just allow them to remain open with 0 balances. Then put yourself on a strict cash basis. The university should also have credit counseling available via the financial aid or student affairs office. Use it to put together a budget. Use of those services may also be looked upon favorably by the credit union or bank at which you apply for the loan.

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