Am I doing this right?

[specialcase]

First off, I would like to extend a HUGE Thank You for this site and the information available on these forums. I have learned so much (including the acronyms) from just reading the posts on this board. I beg your forgiveness up front for the length of this post, but I wanted to provide as much insight into my situation as possible.

I recently relocated to a new state (WA) after spending the entirety of my adult life in California. I know my credit report is a mess and I made a promise to myself that upon arrival here I would do things right, leave my issues of the past where they belong and start fresh. I also want to get my past accounts in order so I can be in a position to buy a house in the next 3-5 years.

I spent most of my 20s being completely reckless with my credit history by not paying cards when times got tough (and they did). Currently my score is in the 475-525 range, with a goal to get to 650-700 by the end of 2014.

Current snapshot of my credit report (not including student loans):

EQ:  0 open | 8 CO | 2 CA | 1 auto loan (paid off, several 30-60 lates, 2 90 lates)

TU:  0 open | 6 CO | 7 CA | 1 auto loan (paid off, several 30-60 lates, 2 90 lates)

EX:  0 open | 6 CO | 6 CA | 1 auto loan (paid off, several 30-60 lates, 2 90 lates)

What I have done since I decided to change things:

1 - Paid off car loan [Santander Consumer USA] in April (paid $1000 to settle $1250 remaining balance, reports as PIF-closed).

2 - Applied for $300 US Bank LANPass secured Visa (since I travel a lot for my new job and the airline I fly is affiliated)

Other things to note:

Most COs are from late 2008/early 2009 when I had some especially trying financial times. 2 COs are from early this year when I was unemployed (one for $438, other for $491).

So I'm not really sure the best way to proceed. I figured I need to get something positive and current to report (hence, the secured card), but how should I go about handling the past collections since they are beyond the SOL (4 years for WA, 3 years for CA) and I know that paying off old debts can counterintuitively reduce your score.

My question to you all is this:

-  As my next step, I was considering getting a second secured card (Bank of America, Wells Fargo or DCU - based on what I have read here), or would it be better to add additional funds to the existing card?

-  Pay off the two recent COs: better to settle or pay-in-full?

Thanks again for any assistance you can provide. I know the road ahead is going to be rough and might seem like I'm just idling in neutral but I hope the rewards will speak for themselves in time.

[guiness56]

SOL in WA is 3 years for CC debt, not 4.  Written contracts are 6 years.

Paying off a collection should have no impact on your score unless the CA has not been updating monthly.  If it has been dormant for several years it could drop your score when it updates by having a newer date. 

The newer the collection the worst impact it has on your score.  Is there any question as to whether the CA accounts are valid or not?

COs that include the balance and CL are factored into your utilization.  When they are paid to 0 they no longer will and you will get the ding for the CO only.  It is better to PIF unless you settle and can get them to report as PIF.  You don't want any settled comments on your report.

Another CC would help you.  The CL is really of no importance, it is how you manage the CC.  Let one card report a 0 balance, the other at 9% or below.

Did you get your CR from annualcreditreport.com?

[specialcase]

That's great about the 3 year SOL in WA state. That would mean that almost all of my CA accounts would be at or near their statutory limit.

I haven't done any validations on the CA accounts yet. I'm kinda scared of "waking the sleeping dragon" especially on the older accounts. I think all but 3 of the CO/CA accounts are circa 2011 or older.

For reference, the two CO from early 2013 are Capital One (former Orchard) and First Premier. Do any of them accept PFD offers?

Got credit reports outside the annualcreditreport.com process (want to save for later). I used CreditKarma (TU), denial letters (EQ/EX).

[guiness56]

FP normally will not accept a PFD, Cap 1 is inconsistent with it.  All you can do is try.

These accounts are factored into your utilization.  By paying them off they no longer will be.  Since they are just months old I would deal with these first, even if they won't remove them.  I know Cap 1 likes to sue even for small amounts.

For the CA accounts, you can send a DV but if they are not timely there will be no cease collection bar.  Also, if still within SOL, make sure you have all of the money to pay in case they validate.

[specialcase]

Since it looks like PFD is off the table:

-  Should I instead offer to settle for less, take the "savings" and add to the deposit on my secured card?

-  Pay the items off in full, even if there is no possibility of deletion?

How does settling vs PIF affect the score once the account has entered CO/CA status?

Thanks again for all the help.

[guiness56]

If they mark your CR as PIF, it will have no impact.  Settling is scored on par with the CO or CA.  It also looks bad to potential lenders.

The reporting is something you can negotiate during your settlement negotiation.  Some CAs/OCs just won't settle and want the entire balance.

[specialcase]

From what I have read here, is calling someone on the phone ever a good idea on these things? Or should all contact be made via USPS CMRRR?

[guiness56]

You can call an OC anytime.  CAs you may want to send a written letter. 

ETA:  Or an email.  They seem to work just as well.