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New Visitor
keala
Posts: 2
Registered: ‎04-24-2007
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paid off accounts but still have bad credit

My husband and I have just paid out $15000.00 in debt in about a month period. Our credit scores are the high 500's even though we owe nothing. Now our finances have changed and we want to buy our first house. We don't know what else to do to help our credit and because our scores are low it's seems impossible to get new credit rolling. What can we do to raise our credit score? We don't owe any money so what else is there? Any advice would be wonderful.
Valued Member
Erik
Posts: 31
Registered: ‎03-19-2007
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Re: paid off accounts but still have bad credit

A couple of thoughts.
1. How recently have you paid everything off? Depending on when your accounts are reported it may take up to a month for them to report a zero balance.
2. Utilization is a big factor in your FICO score (30% I believe), but not the only one. If you have late payments, collections, judgements or other negative items on your reports, especially if they are recent, it will take time for them to have less of an impact on your score.
Hopefully this helps out.
Erik
Established Member
keneyone
Posts: 20
Registered: ‎04-18-2007
0

Re: paid off accounts but still have bad credit

[ Edited ]
Paying all your debts wont help you as much to increase your score. Payment history and good management of your credit cards will have major impact when it comes to establishing your credit scores.  You guys have to wait for like 6 months or a year before having better score to buy house. I as an example. For instant, i was in debts for 5 thousand dollars, which also  has three 90 late days, and four 120 late days as well. I managed to paid off all my debts in 12/05. And when i was trying to buy a car in May 2006, my Equifx credit score was 585 not even possible to get a desent % rate...Some people told me that it will take me like six to seven years to get to 700ss, but what i did was maintaining my credit, and paying all my bills in time. As of yesterday, i received myTU credit score...my score is now 725 just after one year....and i cant wait to get a car. So, all i can say is for you and your hubby to have patience for upto a year. I am sure by then your score will improve more. GOOD LUCK. checkout this site....it will help u a lot to understand http://www.fool.com/ccc/check/check02.htm


Message Edited by keneyone on 04-24-2007 09:52 PM
Frequent Contributor
HouseHunter
Posts: 351
Registered: ‎04-02-2007
0

Re: paid off accounts but still have bad credit

Mid-2006, I had awful credit - barely got a car loan at all much less the best rate.  I don't know what my scores were but I know they couldn't be anywhere near good.  By simply paying my car loan on time every month my scores jumped from somewhere in the pits of hell to the mid & upper 600's.  That is my only positive tradeline and I had one negative tradeline fall off of all of my reports just last month.  So it took about 8-9 months for my scores to get to where they are now.
 
My advice: never ever miss a payment which can drop your score dramatically.  Making payments on time steadily raises your score.
 
Based on what I've read: keep your CC balances below 10% of your limit and never more than 30%.
 
Your scores should start improving within the next few months if you do only those two things.
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
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Re: paid off accounts but still have bad credit



keneyone wrote:
Paying all your debts wont help you as much to increase your score. Payment history and good management of your credit cards will have major impact when it comes to establishing your credit scores.  You guys have to wait for like 6 months or a year before having better score to buy house. I as an example. For instant, i was in debts for 5 thousand dollars, which also  has three 90 late days, and four 120 late days as well. I managed to paid off all my debts in 12/05. And when i was trying to buy a car in May 2006, my Equifx credit score was 585 not even possible to get a desent % rate...Some people told me that it will take me like six to seven years to get to 700ss, but what i did was maintaining my credit, and paying all my bills in time. As of yesterday, i received myTU credit score...my score is now 725 just after one year....and i cant wait to get a car. So, all i can say is for you and your hubby to have patience for upto a year. I am sure by then your score will improve more. GOOD LUCK. checkout this site....it will help u a lot to understand http://www.fool.com/ccc/check/check02.htm


Message Edited by keneyone on 04-24-2007 09:52 PM

NOT TRUE! Your balances hold just about the same weight as payment history!
 
35% - Payment History
30% - Debt Owed\Utilization
15% - Length of History
10% - New Credit
10% - Mix of Credit
 
OP - Was the $15k you paid credit card debt or something other?
 

 
Established Member
keneyone
Posts: 20
Registered: ‎04-18-2007
0

Re: paid off accounts but still have bad credit

Whats not true?...maybe you dont understand what i said. what i am trying to say is that paying all your debts off wont help your credit score to rise as much. But proving that you can pay your bills in time will help much more in terms of establishing their scores.
New Visitor
keala
Posts: 2
Registered: ‎04-24-2007
0

Re: paid off accounts but still have bad credit

To answer one of the questions, we used our $15000.00 savings to pay off ALL of our credit cards which added up to be 6 total, two small personal loans, several hospital debts and traffic debts, and a few other odds and ends including a Blockbuster account (go figure). So our credit issues was more than just credit cards. At least we don't have to worry about all that oh so irritating interest rates and percentages. We just about drowned in fees.
Regular Contributor
MM1234
Posts: 165
Registered: ‎03-18-2007
0

Re: paid off accounts but still have bad credit

Not sure if you need ScoreWatch to get notified when it goes up - OR - you can wait and buy another Report in a month or so. But it may take a month or 2 so either join SWatch for a few months or order your score in few months. Usually the CCard companies are pretty fast to report - the other loans you have may take time to report like the Hosptial or Traffic ones.

For that much of a payoff you should see jump of maybe 20 or more points once ALL the Creditors Report. Im basing this on my experience withing paying about $15K that are equal to yours but mine were all CCards. But its all based on other factors Im sure thats we cannot control.

Hope this helps a bit.
Moderator Emeritus
Tuscani
Posts: 6,182
Registered: ‎03-29-2007
0

Re: paid off accounts but still have bad credit

[ Edited ]


keneyone wrote:
Whats not true?...maybe you dont understand what i said. what i am trying to say is that paying all your debts off wont help your credit score to rise as much. But proving that you can pay your bills in time will help much more in terms of establishing their scores.



Did you even read my previous post?
 
:smileyhappy:
 
How can you say paying your debts (thus reducing the money you owe and your overall utilization) does not increase your score?


Message Edited by Tuscani on 04-25-2007 12:13 PM
Moderator Emeritus
masdeocho
Posts: 2,050
Registered: ‎04-17-2007
0

Re: paid off accounts but still have bad credit

Tuscani - Please correct me if I'm wrong.  I understood that if you paid off a lot of your debt with lump sum payments, you don't get an immediate big score boost. This is because people might use a income tax refund, inheritance, etc. to pay it off.  While you do lower the amounts owed, it doesn't "prove" that you won't run up big balances again and fail to pay them.  It helps to have a good payment history plus low util for some period of time AFTER the big payoff to see the best effect on your score. True?
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