Newbie here. Need some help please

[Anonymous]

Hi,

Thanks for reading my post.

I am very new to the forum and trying to learn some knowledge and experience to re-build my credit. 

My current Equifax score is 710, and Experian is very low 588. (not sure why the difference is so huge)

Here is my situation:

      I have only had 2.5 years credit history from my car loan and I have paid it on time. Currently still owe about $4000. About 1 year and half ago, I moved from Oregon to Texas for new a job after graduation. During that transition, I missed one payment to the previous apartment's cleaning fee (some dog pee damage) . I was very dumb and stupid that I missed this payment, and it went to collection. Even I paid it off, it still effected my score and it dropped hard.

So I opened a credit card, and start to use it for some small purchases, and pay it off right away on time.  And also, as I have mentioned, still have the car loan about $4000, that I pay it monthly on time.

Questions:

1. Should I pay off the $4000 car loan right away? I do have the money to pay it, but some source online says don't do that. My common sense tells me it should always be better to reduce my debt, is it correct for building the score?

2. Is there any suggestions?I know it does not have short cuts to rebuild score, but it should have better ways /  habbits to do so. Please let me know what you would do in this situation. Any input is appreciated. 

3. Why the Experian and Equifax has huge difference?   

Thanks again

[jamie123]

DO NOT PAY OFF YOUR CAR LOAN! Once your car loan is paid off it will actually hurt your score but if your interest rate is high you could save money by paying it off.

The reason your Experian score is much lower than your EQ score is that you probably have that collection on your EX report. You should visit the "Rebuilding Credit" forum here and learn how to have that collection removed from your report. If you don't have it removed it will stay on your report for 7 years and be a drag on your score for 7 years.

If all you have on your reports is a car loan and 1 credit card, I would suggest apping for 2 new credit cards right now. You have a very thin credit report and need more good credit reporting.

[Anonymous]

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@Anonymous wrote:

Hi,

Thanks for reading my post.

I am very new to the forum and trying to learn some knowledge and experience to re-build my credit. 

My current Equifax score is 710, and Experian is very low 588. (not sure why the difference is so huge)

Here is my situation:

      I have only had 2.5 years credit history from my car loan and I have paid it on time. Currently still owe about $4000. About 1 year and half ago, I moved from Oregon to Texas for new a job after graduation. During that transition, I missed one payment to the previous apartment's cleaning fee (some dog pee damage) . I was very dumb and stupid that I missed this payment, and it went to collection. Even I paid it off, it still effected my score and it dropped hard.

So I opened a credit card, and start to use it for some small purchases, and pay it off right away on time.  And also, as I have mentioned, still have the car loan about $4000, that I pay it monthly on time.

Questions:

1. Should I pay off the $4000 car loan right away? I do have the money to pay it, but some source online says don't do that. My common sense tells me it should always be better to reduce my debt, is it correct for building the score?

2. Is there any suggestions?I know it does not have short cuts to rebuild score, but it should have better ways /  habbits to do so. Please let me know what you would do in this situation. Any input is appreciated. 

3. Why the Experian and Equifax has huge difference?   

Thanks again

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1. If your car loan APR is good, no reason to pay it off in a rush. Paying it off or not should not have a major impact on your score. Installment loans stay on your report for 10 years after closing. With that said, FICO scores act strangely sometimes and people have reported changes after paying off their loans. Paying off the loans will generally not have a major impact on your score, not till 10 years after the account closes anyways. Outstanding installment loans (car loans) effect your debt to income ratio that impacts a lenders willingness to lend to you. It does not effect your FICO score, however. The loan itself will have an impact, but the major debt utilization that impacts credit scores is your revolving credit utilization rate. Credit card debt, not installment debt, hurts your credit score. Anyway, everything I am saying is generalizations. So the short answer to your question is no it will not effect your score drastically, but YMMV. 

2. You might want to check the rebuilding section. A PFD if you have an outstanding debt still unpaid or a goodwill letter might be options you can pursue. 

3. One CRA probably knows of the collection and the other does not. It's also possible one or more of those scores are FAKO scores. For example, my Quizzle Equifax score is 130 points lower than my FICO Equifax score. If both your scores are FICO scores, the most likely explanation is that the missed payments are on just one of the reports. Pull all three of your reports and check. 

[takeshi74]

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@Anonymous wrote:

Should I pay off the $4000 car loan right away? I do have the money to pay it, but some source online says don't do that. My common sense tells me it should always be better to reduce my debt, is it correct for building the score?

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For scoring purposes no.  Installment debt is assesses differentl from revolving debt.  As mentioned above, paying off an installment generally incurs a score hit.  Unless the interest on your car loan is higher than your other debt it generally does not make sense to pay off the car loan first.

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@Anonymous wrote:

Is there any suggestions?I know it does not have short cuts to rebuild score, but it should have better ways /  habbits to do so. Please let me know what you would do in this situation. Any input is appreciated. 

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I always recommend starting with this since it breaks down the factors that affect your score:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Derogs will kill your Payment History which is the biggest slice so address your derogs first.  Hit the Rebuilding subofurm to see if there is anything you can do.

Revolving Utilization (Amounts Owed) is the next biggest slice.  If the utilization on your cards is above the recommended 30% max then get it down.

The other factors generally just take time and responsible usage to build.

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@Anonymous wrote:

Why the Experian and Equifax has huge difference?   

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Scores are generated based on the data in your reports.  If you have not already pull your reports and compare.  The other major factor is the scoring model used.  Where did you pull those scores from?  Determine the scoring models used and see if they're are different scoring models or not.  Given that Payment History and Utilization are the two biggest factors I'd also guess that you have the derog reporting on one CRA and not the other.  However, you need to confirm.  We do not have access to your reports.

Don't overlook Transunion.  Make sure you're regularly montoring your reports with all 3 of the major CRA's. 

[Anonymous]

Thanks a lot. 

[Anonymous]

Thank you. I will definitely check the Rebuilding section.

[Anonymous]

Thanks for the info. I will try to understand it and start my rebuild plan.