As part of my weekly FILAM articles, I will also be keeping track of the three major debts in my finances: credit card debts, loan on vacant land, and student loan.

Credit Cards
After paying off at least $20,000 of credit card debts in 2002, I have stopped using those plastics for a couple of years. However, I realized that not having a credit card would surely affect my credit score. Since I’m trying to re-establish my credit, I had opened a couple of credit cards again in 2004 but this time it’s a joint account with my wife. My wife just got here in 2004 so she does not have any credit history as well. We’re planning to purchase a home, hopefully, in five years but to do that, we need to start cranking up with our credit scores. We used the credit cards solely to keep a good credit history of ongoing payments. Also, we used them to take advantage of the rebates offered by credit cards.

I have six major credit cards but I’m only using the following:

  • American Express Card - we only use to pay for groceries at Costco and all other emergency purchases to take advantage of the1% rebate
  • AAA Card -  I got a 5% rebate each time I use it for gasoline purchase.

My current credit card debt stands at $5,050 and this is due to the travel expenses that we incurred during our first three years of marriage and some medical expenses not covered by insurance. We always travel during our anniversary as friends had advised us to do so while we don’t have children yet. Regarding my other four accounts, I only used them once a month to keep them active and pay off the balances immediately. The reason for keeping these credit cards open is to keep my “total unsecured debt” to “total credit line” ratio under the 30% recommended threshold. This way I maintain a good FICO score. See my post 7 Don’ts To Improve Your Credit Score to understand the effect of the ratio in your FICO score.

Loan on vacant land
This one is the biggest killer in my finances. I had to admit, I got caught up with the real estate frenzy in 2005 and now I looked back and still wonder if I made the right decision on purchasing this. The interest rate on this is 10% with 10 years to pay. We’ve been paying this for almost two years now and I’m trying to work out a plan on how to accelerate this payment.

Student Loans
Initially, my rate on this was 7.25% with a $500 a month payment, but I managed to consolidate this right before they implemented a new law a couple of years ago. I am now paying only 4.00% interest rate with a $191 per month payments but the loan terms has been extended to 20 years. This would be the last debt that I have to pay because, by far, this has the lowest interest rates among the three.