I owe $50k in credit card debt. I have a house with $150k equity in it, but it needs $10k additional renovations before it can sell. But my credit score is too bad to rent after it sells.

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by throw_me_in_garbage

I’m in significant credit card debt for various reasons. Most of it was unavoidable home repairs and renovations to prepare to sell my house (it was a heavy fixer-upper and my family needed a place to live) but some was spent helping family who lost their jobs/faced health crises, and a chunk of it was my own bad habits. I’ve stopped the bleeding by creating a strict personal budget and sticking to living very frugally, along with a regimented pay-down schedule to tackle the highest APR and worst available credit percentage cards first.

But, I have a variety of problems with my situation. They can be broken down into two segments which are, 1) house needs $10k more in work, and 2) I’ll have nowhere to live once the house sells.

Can’t sell yet – I had wanted to sell the house already, but the renovations are not complete so it’s not ready to list. In its current state, I’d take a huge loss on sale price so they really need to be completed. It’ll take about $10k more to finish it, but my credit score is already dropping rapidly every month along with accruing about $600 in monthly interest and many of my cards are maxed out. Additionally, many cheaper contractors won’t take credit payments so I have to allocate cash for them and that creates a bottleneck.

Can’t get a debt consolidation loan or refinance – I tried to refinance my mortgage to cash-out some equity and pay off my debts 100%, but I was denied the refinance due to the debts that I was planning to use the refinance to pay off… I was also denied for a debt consolidation loan for the same reason.

Can’t buy another house after sale – I can’t sell this house then buy another house immediately, because it will take a at least 6 months for my credit score to rebound after paying off the debts when my current house sells.

Can’t rent after sale – But my current credit score won’t allow me to rent and my score is dropping every month due to the high credit card debt. I’ve found some rentals nearby which allow for bad credit scores, but they require proof of income to be 3x rent, which I do not meet living in California with these high rents compared to my low income.

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I feel like I’m trapped in a no-win situation and I’m not sure how to proceed.

TL;DR: I need to sell my house to pay off my debt, but then I’ll have nowhere to go because my credit score is very bad due to the debt. The situation worsens every month as my score is impacted due to the debt. Also the house needs 10k more in work.


comment from rabev:

Your credit score should increase immediately after selling your house because you’d be dropping a huge amount of debt (at least mine did). Add paying off your other debts and it probably won’t take six months to see some improvement.


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