Rebuilding Your Credit

[theraven871]

So I've been rebuilding my credit for the last 2 years.   (The goal is to buy a home).

I had a mortgage broker pull a credit report for me the last week of May.

My "Middle" credit score was 610.

The mortgage broker informed me that I need a 620.

Since then, I've paid the last account I had that was in collections.

This increased my score to 617.

I am currently disputing a judgment (that was paid off) and hoping it gets marked as paid.

I am also disputing the 4 paid collection accounts (all medical) in hopes they get removed.

I really don't know what else to do.

Any way I can get this score bumped up??

[apandabear]

What do your credit cards look like right now? Are you carrying a balance? On how many cards? How much of your available credit have you used up?

Depending on your utilization percentage, you might see a bump by paying off/down credit card balances.

[theraven871]

I have about $1500 of available credit and I am using about 70% of that.

If I pay off my balance to zero, how long will it take for my score to go up the 3 points that I need?

[apandabear]

Yeah, paying that down will help a LOT.

How many credit cards do you have?

Wisdom around these forums says pay all cards except one down to zero, and let that one card report a small balance (less than 10% of that card's credit limit). 

When it will help your scores depends on when your cards report to the bureaus. Generally, they report on your statement date (when you get your bill).

As long as you pay before you get your statement, you should see a very nice improvement a couple days after your statement date.

Generally, Experian will update first, followed by Equifax, and then Transunion (the slowest). It could take about a week after your statements cut.

You *should* get quite a bit more than 3 points, if you can pay off your credit cards off as close to that formula as possible.

[theraven871]

I have 4 credit cards.

2 with a limit of $350

2 with a limit of $500.

So if I pay them all off (today) and keep one at 10%, will this be reflected on my next credit report (assuming the credit cards updated on my credit report)?

Or will I need to do this for several months?

[JPersat]

It should be quick. My midscore went from 565 to 610 just from paying down cards from 96% to about 45%.

[apandabear]

Well, it depends on when you are trying to get credit.

Pay those off today. Then let your statements cut. So you'll have 3 credit cards with a balance of $0 on the statements, and one with less than 10% (I recommend letting one of the $500 cards report less than $50).

That will be reported to the credit bureaus. This is the best equation for applying for credit.

Let's pretend all your statements cut on the 5th of August. You check your credit report ont the 12th of August, and see that all of them have updated. That would be the ideal time to apply for credit.

If you let your cards report high balances in September, your scores will drop again. But if you pay them off the same way, they won't drop. 

You don't have to do this for several months to see a gain in points, you just have to do it when you plan on applying for credit.

Does that make sense?

[theraven871]

Makes perfect sense.

Thanks so much for explaining this to me.