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Building credit - at a stand still

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Anonymous
Not applicable

Building credit - at a stand still

Hi all,

 

Everyone is so great at giving advice here, and I am so lost, that I figured that I'd try asking myself!

I'm in my early 20s, trying to build credit to buy a house within the next 10 years (preferably 5, but no real rush). I seem to be stuck, as my credit isn't improving (or moving at all, really) much, at the moment. I'm at:

TU - 676

EX - 670

EQ - 676.

I have 3 major (bank) credit cards, limits between $3k to $6500, utilization on two is about 40%. A handful of other store cards, with either nothing on them or less than 15%. I recently got an auto loan for $13k. I have never missed any payments on any accounts, and usually do pay more than the minimum on the few that I carry a balance with. I did have 3 accounts in collection, all medical, but they are all paid off and closed. Student loans are being paid monthly on time as well. I've been working on my credit for about 3 (nearly 4) years now, so some of those credit lines are new (within 1 to 2 years), and I know that can impact the score as well. My DTI is about 30%, possibly lower now since I have a new job.

 

Should I be doing something else to raise my score? Is it true that keeping a balance month to month will help improve your score? I would love to be in the mid 700s by the end of the year. How would I even go about doing that, or maybe getting higher than that? Credit is an enigma to me, all I know is never be late and never default, haha.

 

Thanks for your help - I'm young, and unfortunately they don't teach useful things like this in school. Smiley Sad

Message 1 of 7
6 REPLIES 6
Anonymous
Not applicable

Re: Building credit - at a stand still

Welcome to the forums. You have the right perspective in asking for assistance and wanting to do the right thing. High utilization will kill your score every time, however. Try to get your utilization down below 20% (and ideally down below 10% if at all possible), and that will help quite a bit. Both individual and overall utilization matter, so you need to pay attention to both and keep them as low as possible. You also want to have just one or two cards with balances to optimize your score.

 

Perhaps someone else can address or help you with the effect of negatives on your report. I'm not much of an expert there as I don't have negatives on my report.

 

I have seen on the forums of many others reporting that negatives in their report continue to hold their scores back to an extent and for a time even when they do as many things right as possible. It just takes time.

 

Getting into better utilization habits will help (that is one I do know about, I at times used to keep 2 of my cards at 40%-50% utilization before I found myfico and learned about utilization.) My scores stayed the same from one month to the next when I did that, and they skyrocketed when I brought my utilization way down. Good luck! Smiley Happy

Message 2 of 7
Anonymous
Not applicable

Re: Building credit - at a stand still

Welcome. It's unclear to me whether some collections are paid but still showing as negative. If so, that could be it. Same thing with late payments (sounds like student loans might show some lates?) 

 

Other than that: utilization. 

 

To optimize scores, you want 1 (or a two or three if you have LOTS of tradelines) reporting between 1-9% of that line. Sounds like you've got several reporting at any given time and a couple around 40. That could be a big part of it there too. The good thing about that is utilization has no memory so if you paid them all off today, your scores would shoot up and not remember that you ever had high util. 

 

As you pay the autoloan, that will help too. Chances are have high utilization there too. This was a big learning thing for me here (re: any loan including a mortgage and including a refi of a mortgage)...That utilzation counts against you too. As you pay your car down to 75% of the original loan, then 50% then 30% it will help. Now you're being dinged for a new loan AND high utilization on the loan. Next time we buy a car I know to finance as much as I can and then immediately pay a big chunk down. 

 

 

Message 3 of 7
Anonymous
Not applicable

Re: Building credit - at a stand still

You've been given good advice so far concerning utilization but I'll just add one thing.  Those collections unfortunately can really hurt your score if they are fairly recent.  It doesnt matter whether they're paid and closed.  Your score is hurt the same as if they weren't paid.  You might want to take a visit to our rebuilding forum and look into sending out goodwill letters to see if the creditors will remove them from your file.  Because they are medical collections, you might also want to Google the HIPAA process and contact the person there.

Message 4 of 7
Anonymous
Not applicable

Re: Building credit - at a stand still

I'm in a similar situation to you. Years ago (6+) I burned Chase and Citi when I was a student. I settled about 3 years ago for less than full and the baddies will drop off later this year. I started rebuilding with secured cards and got an auto loan with a co-signer. Now I have the paid off 24 month car loan and good credit lines totaling 69k. I make 86k, util is around 5% and my AAoA is 1yr2mo as I built my credit card profile. But my scores have been languishing in the mid 600s for the past 2 years. I have been gardening for 4 months now and don't plan to app for anything new over the next year when I plan to buy a house. Hoping the score will get a significant bump when the baddies fall off.
Message 5 of 7
KSK1912
Valued Contributor

Re: Building credit - at a stand still


@Anonymous wrote:

Hi all,

 

Everyone is so great at giving advice here, and I am so lost, that I figured that I'd try asking myself!

I'm in my early 20s, trying to build credit to buy a house within the next 10 years (preferably 5, but no real rush). I seem to be stuck, as my credit isn't improving (or moving at all, really) much, at the moment. I'm at:

TU - 676

EX - 670

EQ - 676.

I have 3 major (bank) credit cards, limits between $3k to $6500, utilization on two is about 40%. A handful of other store cards, with either nothing on them or less than 15%. I recently got an auto loan for $13k. I have never missed any payments on any accounts, and usually do pay more than the minimum on the few that I carry a balance with. I did have 3 accounts in collection, all medical, but they are all paid off and closed. Student loans are being paid monthly on time as well. I've been working on my credit for about 3 (nearly 4) years now, so some of those credit lines are new (within 1 to 2 years), and I know that can impact the score as well. My DTI is about 30%, possibly lower now since I have a new job.

 

Should I be doing something else to raise my score? Is it true that keeping a balance month to month will help improve your score? I would love to be in the mid 700s by the end of the year. How would I even go about doing that, or maybe getting higher than that? Credit is an enigma to me, all I know is never be late and never default, haha.

 

Thanks for your help - I'm young, and unfortunately they don't teach useful things like this in school. Smiley Sad


You already got some solid advise, but here is a little more from an expert Smiley Happy I say expert only because i had collections too, until i started rebuilding and working on my credit since last june. People with no collections on their account can only help you to a certain extend. Since everyone else has mentioned utilization, i will skip that part and give you a little information how collections can affect your score more than one way.

 

Age of collection: How old are the collections? The older they are, the less impact on your credit score. For example, If they are 6 years old and they have not been paid, unless the collection agency agrees to PTD (Pay To Delete) which means you will pay it off, and they will be deleted; then you might be better off waiting another year from them to fall of. Because, if you pay them now, you will update the last date of activity on the collection account, and once collection agencies update your credit report as paid, your scores will probably go down further because you will have a very recent last date of activity. So they will become fresh accounts again and the collection company can keep them on your reports for another 7 years. 

 

Open or Closed Accounts: Are the collections being reported as open or closed accounts. Another way they impact your credit score.

 

Best action: Talk to the collection agency. Do not ever admit it is your debt, do not pay them even a penny before they agree to delete them, in writing, as it will be considered admiting to the debt. Tell them you do not remember going to the hospital, if you did your insurance would have covered them ( dont worry if you dont have insurance, it's just a way of telling them it is NOT your debt without telling them it is not your debt Smiley Happy Just ask them what it would take to get them deleted from your reports. If they agree to do Pay for Delete (find more info on myfico) then go ahead and pay them if you can.

 

Rebucketing: This is one thing that will have a huge impact on your credit score as long as you have those collections. In my case, after my last 2 collections deleted from my credit reports, TU and EX, i literally had a huge jump on my credit scores overnight. Find information about rebucketing here on myfico forums, but i will give you a little information. When i had a collection on my credit reports, lets say TU, fico score simulator would tell me if i pay my bills on time for 2 years, my score would go up about 40 points. (it all depends on each person's credit file) Everything else being the same, all the accounts, all the balances, in my EQ report, only without the collection account, fico would tell me if i pay bills on time for 2 years, my score would jump up 120 points... See the difference? 40 to 120. that is because when the last collection fell off of my whichever credit report, i got rebucketed, meaning my credit score started getting compared to the other people who also have no collections in their report, giving my score the ability to increase more over time. Think of it as being the smartest student in a class room full of dumbs, where your learning can only go so far because the teacher has to base everything on the dumber students thus preventing you from advancing more and more, and you jump up a class, and now you are the dumbest student in a classroom full of geniuses, but with the potential of becoming a genious if you study and practice well. That's why, with those collections, your scores will only go so high and eventually you will get stuck at some point until those are taken care of, one way or another.

 

Now if you need help with those, let us know the dates, amounts and collections agencies and which bureaus they report to, and we can definitely help you on that too.


6/14/15: Equifax 576 Experian 542 Transunion 571
8/17/15: Equifax 626 Experian 619 Transunion 622
9/28/15: Equifax 655 Experian 636 Transunion 641
11/11/15: Equifax 698 Experian 687 Transunion 672
Short Term Goal Score: 720 Across the board


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Message 6 of 7
SouthJamaica
Mega Contributor

Re: Building credit - at a stand still


@Anonymous wrote:

Hi all,

 

Everyone is so great at giving advice here, and I am so lost, that I figured that I'd try asking myself!

I'm in my early 20s, trying to build credit to buy a house within the next 10 years (preferably 5, but no real rush). I seem to be stuck, as my credit isn't improving (or moving at all, really) much, at the moment. I'm at:

TU - 676

EX - 670

EQ - 676.

I have 3 major (bank) credit cards, limits between $3k to $6500, utilization on two is about 40%. A handful of other store cards, with either nothing on them or less than 15%. I recently got an auto loan for $13k. I have never missed any payments on any accounts, and usually do pay more than the minimum on the few that I carry a balance with. I did have 3 accounts in collection, all medical, but they are all paid off and closed. Student loans are being paid monthly on time as well. I've been working on my credit for about 3 (nearly 4) years now, so some of those credit lines are new (within 1 to 2 years), and I know that can impact the score as well. My DTI is about 30%, possibly lower now since I have a new job.

 

Should I be doing something else to raise my score? Is it true that keeping a balance month to month will help improve your score? I would love to be in the mid 700s by the end of the year. How would I even go about doing that, or maybe getting higher than that? Credit is an enigma to me, all I know is never be late and never default, haha.

 

Thanks for your help - I'm young, and unfortunately they don't teach useful things like this in school. Smiley Sad


No it's not true that keeping balances will improve your score. The more zero balances the better in your case. The only time that would be true would be if all your balances were at zero; then it would be good to have a balance on one account. But you're a long way from being in that position.

 

You could raise your scores FAST by:

 

1. getting utilization on each card down to 9% or less;

2. paying off more than half of the auto loan; and

3. getting the collections off your record, by using someone like Lexington Law or sending 'verification' letters on your own to the credit bureaus reporting them.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 7 of 7
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