Fixing my credit; some questions...

[naaman]

A couple of questions regarding specific accounts...

There is an account on my report that shows $0 balance, 0 late payments and nothing "bad." The account was "closed due to transfer." On the status, it says:

"Unrated or Bankruptcy." The account is 10 years old. Is this hurting my score? Could it in any way be helping my score? Should I dispute it?

************

Another account is from 1999. It shows 5 late payment (4 of 90 days+). The account is "inactive." The "current status" shows as 120+ days past due. How is this affecting my credit?

 

[robr]

A couple of questions regarding specific accounts...

There is an account on my report that shows $0 balance, 0 late payments and nothing "bad." The account was "closed due to transfer." On the status, it says:

"Unrated or Bankruptcy." The account is 10 years old. Is this hurting my score? Could it in any way be helping my score? Should I dispute it?

************

Another account is from 1999. It shows 5 late payment (4 of 90 days+). The account is "inactive." The "current status" shows as 120+ days past due. How is this affecting my credit?

Was 1998 and 1999 the last reporting date shown on those? The older they are, the less weight they are given, but I'd definitely try to get rid of both of those, ESPECIALLY the one showing all the past due flags. They're supposed to only keep them 7 years, but that's 7 years from last reporting date, so even if the account was closed in 1998, if the issuer continued to report to the CRA, it could have a more recent reporting date. I had issuers that continued to report to CRAs months after my bankruptcy and had to get them to stop reporting before I could dispute and get them remove (otherwise they would have gone right back on again the following month). Annoyingly enough I still have one account showing a late that I stopped paying after I filed BK, but because they don't report an actual day and just a month, it came in on the same month as my BK, but after I filed and Equifax still refused to remove it claiming it was verified.

 

[naaman]

Thanks, Rob.

Here's another one for anyone who may know:

For long term credit improvement:

Is it better to pay down credit card balances slowly, thereby establishing good payment history; or is it best to eliminate all credit card debt and have no payments due. After 6 months, which will be more beneficail? 12 months? 24 months?

In my case, this point is moot, as I have just zeroed out my last credit card, though I suppose I could start using some for small purchases to "re-establish" good payment history...

 

[BluryNSX]

ok I will be honest I have't read all posts before mine so sorry if this is a repost.

I have a slightly different view than most people and was able to help my dad raise his score 150 points in a little over a year doing this, this method takes alot of self control. get 5 low limit credit card anywhere from 200-500 $ use 1 for gas, 1 for groceries, 1 for going out to eat, etc... use these cards every month for everything but never for anything you wont have the cash for to pay off the same month. so in effect you only use credit cards for everything and pay it off when you recieve the bill, now I know with so many high interest cards this gets costly but to how bad do you want the credit?

now as I am sure everyone has said pay off you exsisting credit cards asap, I pay the smallest first just to get rid of as many as possible as fast as possible.. if you can sell off all you bs toys(except the nsx ) use the cash to the fix my credit score goal.

hope this helps.

 

[NSXGMS]

A couple of questions regarding specific accounts...

There is an account on my report that shows $0 balance, 0 late payments and nothing "bad." The account was "closed due to transfer." On the status, it says:

"Unrated or Bankruptcy." The account is 10 years old. Is this hurting my score? Could it in any way be helping my score? Should I dispute it?

************

Another account is from 1999. It shows 5 late payment (4 of 90 days+). The account is "inactive." The "current status" shows as 120+ days past due. How is this affecting my credit?

Those accounts are not affecting your credit in any measurable way. If you dispute them online with the 3 bureaus they will be updated and either removed or most likely shifted to the "closed" accounts section of your credit if that makes you feel better.

 

[NSXGMS]

Thanks, Rob.

Here's another one for anyone who may know:

For long term credit improvement:

Is it better to pay down credit card balances slowly, thereby establishing good payment history; or is it best to eliminate all credit card debt and have no payments due. After 6 months, which will be more beneficail? 12 months? 24 months?

In my case, this point is moot, as I have just zeroed out my last credit card, though I suppose I could start using some for small purchases to "re-establish" good payment history...

The speed at which you pay down accounts is irrelevant. It's the age of the account (older is better) coupled with the balance at that moment the score is generated. So, ideally, one wants very old accounts with no balance. Hope that makes sense...

 

[naaman]

So then, is it safe to conclude that the credit score will automatically increase over time as long as there are open accounts on the report AND no late payment history?

That is... it is not necessary to actually be making payments to improve/maintain one's credit score. Rather, he simply must possess acounts and those accounts must be in good standing.

A person who opens several credit card accounts, for example, may never make a single purchase with any of them. But because of the credit available and no late payment history, his score will go up as the accounts age. Correct?

 

[NSXGMS]

So then, is it safe to conclude that the credit score will automatically increase over time as long as there are open accounts on the report AND no late payment history?

That is... it is not necessary to actually be making payments to improve/maintain one's credit score. Rather, he simply must possess acounts and those accounts must be in good standing.

A person who opens several credit card accounts, for example, may never make a single purchase with any of them. But because of the credit available and no late payment history, his score will go up as the accounts age. Correct?

That is theoretically correct. The only caveat is that if one never uses their cards some card issuers don't consistently report to the credit bureaus if there's absolutely no activity on a given card for a certain period of time. A good rule of thumb would be to let the balance revolve for at least one month per year. IOW buy a candy bar for a buck, wait for it to appear on your statement (don't pay if off during the grace period--yes, it will accrue interest of about one cent) and then pay it.

 

[Ko-nsx]

Im personally exploring the,"use your creditcard to pay for everything and get the reward points" option. I have an associate that pays all his bills, even his mortgage with a amex cc and gets a ton of free stuff throughout the year, airline tickets, free hotels and such. he does pay the balancein full and he has has saved the cash to match the CC limit. seems like a good idea

 

[Daedalus]

Im personally exploring the,"use your creditcard to pay for everything and get the reward points" option. I have an associate that pays all his bills, even his mortgage with a amex cc and gets a ton of free stuff throughout the year, airline tickets, free hotels and such. he does pay the balancein full and he has has saved the cash to match the CC limit. seems like a good idea

Are you sure about him paying the mortgage with the Amex? I looked into that a few months ago, and the few servicers that do take credit cards charge outrageous fees...or it's a cash advance and the credit card charges the fees. The Amex is probably only giving 2-3% at most in rewards, and the fees were way more than that. If there's a way to do it without the fees let me know. I'd love to get reward points on the mortgage too.

 

[NSXGMS]

Are you sure about him paying the mortgage with the Amex? I looked into that a few months ago, and the few servicers that do take credit cards charge outrageous fees...or it's a cash advance and the credit card charges the fees. The Amex is probably only giving 2-3% at most in rewards, and the fees were way more than that. If there's a way to do it without the fees let me know. I'd love to get reward points on the mortgage too.

+1

I would be very surprised if the MTG company didn't charge a substantial fee for this option. I know for a fact that most of them absolutely do. Hell, a check by phone usually costs at least $10-15 and that's virtually free for them to process. A credit card charge costs the payee to process--often at least 3%.

And yes, it's not considered a "purchase" or "sale" transaction so many CC companies consider a payment to a MTG company a cash advance and hit you with ridiculous interest and/or additional fees.

Typically this won't be a rewarding strategy for using your CC for bonuses. However it can be for just about everything else that you would pay cash for as long as it's paid off before interest accrues.

 

[naaman]

Progress Report:

I checked up on my credit recently and the two scores that I have checked are both over 700 now (6 months after I started working on my stuff).

Equifax shows a score of 715
TransUnion shows me at 704

I have not looked up the Experian score yet, but it tends to share the same trends as the other two.

 

[transdzn]

UPDATE!!! Since the original posting, my FICO score has gone up 41 points.

Okay...

So I'm home on leave and feel secure enough to look up my credit report online.

I found out my score for the first time in my life. It is currnetly above 550, and below 600. This is, from what I understand, abysmal, but it is in recovery from a God-only-knows-how-much-lower score.

There are no bankruptcies and no judgements on my record.

I do have some accounts that have gone into collections, and a some of my credit cards are at/near the limit. This, from what I understand is the primary influence in my low score.

As of now, all of my accounts are current, and have been so for over a year.

My primary goal is to boost my credit score over 700 (and eventually over 800). My secondary goal is to have no/low/manageable/comfortable debt. I have some cash saved up which I can use to zero out a few of my low limit credit cards all at once. I can also pay down some of my higher balance/limt credit cards as well.

From what I have researched, it's best to have revolving debt at less than 50% of the maximum limit, though maintaining some debt is good, because it can be used to analyze financial behavior.

Now, would it be best to zero three or four credit cards which have low limits, or just pay them down to about 20% or so? And for the higher ones, I can't afford to pay them all the way down, but some is better than none, I gather. For example, if I had one credit card sitting at 85% of the limit, I'd want to pay it down as much as I could, even if it was only down to, say, 75%, as that would improve my score. Correct?

Bottom line questions:
What's best to improve my credit score in the short term?
What's best for long term?
What's best "freeing" up money now and in the future?
How good of a score is 650? I have received some advice from the online "Credit Wizard" that tells me some actions that can boost my score to approximately this amount (presumably in 1 month, but that much is not 100% clear).

Also, I've wondered: if I have a few thousand dollars, is there some way to spend/invest it so that it will grow by... say... 25%-50% in 6 months? 12 months? And if so, how much of an investment of time/stress would be involved?

I am going to need to buy a car soon and will need to take out a loan to do so (about $25,000). I currently have control over my debt, but my score is still recovering from just being broke when I was younger.

Am I likely to be able to get the loan in... say... four or five months? I would prefer not to get the loan from one of those agancies that specializes in "bad credit" loans, as I understand that this has a negative impact on my credit score.

Any advice is much appreciated.

First off, I congratulate you on having the courage to be open with your credit problems. I believe many Americans are in the same situation but are afraid of the stigma.

You are getting some sound advices from here. Another source of help is from your bank. Most banks offer some sort of financial adviser to help you plan out your economic and credit goals. Ask them to show you what they are seeing when credits are being reviewed. My bank did and I knew exactly what to prioritized.