Credit rebuild strategy

[Anonymous]

At 27 years old I was a second-year law student, married to a pharmacist, and had a good credit score. Two years later I was unemployed drug addict who got kicked out of law school and was getting divorced.

That was in 2012, and I have not paid a single Bill since.

I have been clean now for three years, and my life is starting to come together fairly well. I'm working, and actually making pretty decent money. There's a new lady in my life, who I think might have potential to be my future wife. However my credit score is about as rotten as it gets. It's right around 490.

I owe about 150k in student loans, including 3k in a Perkins loan that is causing issues.

Other than that, on my credit report are a handful of credit card type debt so I have defaulted on. An old PayPal account at 2800, two credit cards at about 800, a cable bill at 70, and something else that is about 500.

I have not paid or acknowledged these debts since 2012.

Would it be more advantageous for me to start repaying these old debts?

Or should I wait the 3 more years until the 7 year fall off?

Also, I can't get approved for an unsecured card, would getting a secured one help someone in my situation rebuild their credit?

What steps would you take in my situation?

I have literally not paid a single cent on any of these since 2012.

Thanks for any advice.

[Anonymous]

First, congrats on being clean for three years and counting!

If this were me- I would start paying these debts. If you're making good money now- start by making a budget and sticking to it. From there, I would start on the highest interest or the smallest balance. I would pay off as many accounts as you can, maybe start with the newest? There's a worry you'll be sued for these balances and have to pay them anyway. Maybe someone else can offer you more advice on this, but I'm pretty sure student debts don't fall off like other accounts.

Wish you the best of luck!

[stargazer25]

Congrats on the clean. Pay $1 for CCT to see all of your credit reports. There may be things on there you didn't even know existed and you will have a reference point from where you started. 

Figuring out the DoDFD, if it's a collection or charge off would dictate who I paid off first. If I can get a PFD I would aim for those. Then check the SOL in your state to make sure you can't get sued on those old debts. Also check if anyone has had luck with goodwill letters. 

So so yes pay off those debts. 

In in the mean time, opening up secured cards will help. You can check the Capital One prequalified site to see if you can get a platinum card. This won't pull your credit score. You need 3 credit cards and an installment loan for a good credit mix and under 10% utilization. 

[Anonymous]

Someone told me that paying them off wood not actually be all that much help to my credit score. He said anyone checking my credit would see the four year window where I didn't pay anything. That applying for a car or any type of loan for the next three years while this is on my credit report will be pretty much the same if I pay them off or if I don't.

If I were to pay all of these off, or start making payments on the debts are you guys suggesting that my credit score would increase?

Just as an FYI, these are all with collections agencies now I suppose the deaths have been sold.

[enjoimorenow]

Well, the good news for you is that since they are old, and have been sold to CAs (Likely more than once), those CAs did not pay the full amount of your debt when they bought it.  This would make it much easier to settle the debts for a lesser amount.  Your credit score is kind of tricky, the old debts are holding down your score, but paying them off by itself is not going to increase your score unless you also start to show new accounts in good standing.

If I were you, I would first start by pulling your credit report to find out exactly what is on it.  Figure out your DOFD for all of the accounts, and also make sure that you are past the SOL for your state so that you cannot be sued for any of them.  If you have any you can still be sued for, those are probably best to take care of first so that you can avoid any judgements against you.  If you have others that are set to fall off of your credit report in the next several months, you can probably ignore those since they will age off soon anyways.  When you contact the collection agencies offer to settle the debt if they agree to delete it from your credit report.  If they agree, ask for it in writing before you pay.  You can probably settle these debts from anywhere between 5-50% of their balance, so you could start low and see if they counter if you'd like.

Getting the baddies off of your report is one thing, but you will also need to start some new positive tradelines.  Try for a CapOne secured card, you might get a $200 limit with a $49 deposit.  If you can't get approved, you can try for something like OpenSky which would be a $200 deposit for a $200 CL and they don't run a credit check so it's basically guranteed approval.  Only charge 10% of the limit to your card each month, so a $200 limit means don't spend more than $20 on it.  Pay it in full and on time every month.  Also, consider getting a secured loan.  You can try with a local credit union or there are some options online if you search this board.  Pay this in fulll every month, and once you complete the payments you will get the money from the loan.

Even though you did not file BK, consider reading the BK to 700 thread.  You will probably have to follow a somewhat similar path to increase your scores!

GL and congratulations on becoming sober and getting your life back together!  It can seem like a long and tedious process to rebuild your credit, but patience pays off and slow and steady wins the race!!

[sjt]

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@Anonymous wrote:
Someone told me that paying them off wood not actually be all that much help to my credit score. He said anyone checking my credit would see the four year window where I didn't pay anything. That applying for a car or any type of loan for the next three years while this is on my credit report will be pretty much the same if I pay them off or if I don't.

If I were to pay all of these off, or start making payments on the debts are you guys suggesting that my credit score would increase?

Just as an FYI, these are all with collections agencies now I suppose the deaths have been sold.

---

Congrats on 3 years!

i would get your credit reports and see if any of your credit debts are still owned by the original creditor or if they have been sold. If they are still owned by the original creditor chances are they are still reporting monthly. If that is the case paying or settling these debts will get you a score bump. If they have been sold you can settle and try to get a PFD from the owner of the debt.

also check the pre quail site at Capital One and look into a credit union.

[Anonymous]

1) Congrats on your 3 years and wishing you many more clean sober happy years😀

2) As for the what to do
It depends...You've gotta SEE what you're up against

A) No offense to your 'helpful' pal...Sure they mean well but...Most ppl are guessing and working with bad info, they THINK is right

In fairness, you've gotta be brutally honest about what you can do financially and go from there.

Someone suggested to start paying these back debts and as moral and ethical as that may sound...

If credit profile and score building is the primary goal, that might be the WORST option to take 1st

As somebody mentioned you want to know the SOL in your state, that way you know which debts you can be sure for and which can just request payment.

Also, don't rely on the 7 year reporting period to be the end all, many, many ppl can tell you better...That's ONE of the reasons credit rebuilding and repair are still around, things don't always happen the way you think or the way the fairytale reads.

Many times getting those Student Loans vetted for updates helps tremendously because they dup themselves so often causing a few latest to seem like a gazillion.

Also, the age of these accounts (again based upon reporting, you see when you) may help you a bit, as new dings carry more weight and older ones lose sting as they go.

You want to be honest about, how much money you have towards your rebuild, not what you HOPE..What you HAVE, period
Especially in terms of secured account money.... Because you must see that money as GONE for at least a YEAR

You can't NEED it for food or gas in 3 months, it must be TOTALLY disposable, end of discussion.

If and when you're ready to rock using secured accounts (which is most likely, where you'll be starting with the profile you laid out)

IMO and I know those who know me have heard this b4, so skip it if you must
But for the OP & others

Contrary to popular thought...It gives you more BANG with limited bucks to START with a secured LOAN b4
A secured CC

If you secure a CC 1st your money stop moving and you need more or have to wait to add TLs

When building you need multiple TLs and variety or credit mix adds value via the credit scoring model, so use the same funds the complete the Gemini method (2 or more things with 1 rock)

Example instead of securing ONE $500 secured CC

Step 1 get a $500 secured loan (share secured) from CU #1
Step 2 use the $500 'loan money' that CU#1 just gave you to secure a $200 Discover card
Step 3 use the other $300 to secure a Visa from Bank B

Now you have 3 TLs building on your reports
1 install account & 2 revolving accounts
Vs
Just 1 account otherwise

After 8 months profile A has 24/24 on time payments + credit mix and well managed debt ratios among multiple TLs

The best profile B can have is 8/8 on time payments on 1 account, the end

Profile A is a much better credit profile

Simply by properly staging, understanding which way the end zone is and how to game plan to get there, with the same funds.

* Note
No spending or real debt is required to get here the 'payment' made towards the secure loan are
1) Made using one of the CCs monthly to show usage and low debt ratios (again it's a public relations campaign)
2) Then CC is actually paid via a one time deposit of say $60 bucks to cover the small % charged to do the secured loan
Then has the loan is paid down monthly more funds become 'available' to pay the CC bill
No new funds EVER added

3) Long story, short
Say at year's end (as the HPs to get the accounts open lose their negative pull)
Both CCs unsecure (meaning the $200 & $300 deposits are returned)
And the only true 'cost' was the say $60 bucks in % for the secured loan that's now done and with the deposits back in hand.

All is good and all the little video game did was add 12 months of as agreed install loan account history (good for 10 years of credit juice before it ages off, as a closed account)
2 now UNSECURED CC accounts have REPORTED paid as agreed and are now 1 year vetted EACH

Not bad for $5 bucks a month (actually would never cost THAT much, just making the point)

Now, you likely start getting offers by month 6 but again pick n choose each move strategically and you'll be fine

Just don't bite off more than you can do...
Best of luck
?s PM me

[nolamike]

dbf

congrats on being clean for 3 years! stay sober!

there is solid advice here for different parts of your problem / situation.

You need to rehab your student loans. They NEVER go away.

This will sound odd, but it is meant as a favor to you. DON"T financially attach to anyone until you rehab those student loans!

that means don't get married, don't live with them, don't buy a dog together. NOTHING

to rehab a student loan you have to bring it current which involves a lot of paperwork and negotiations. If you are financially attached to someone, that alters the available income they can say you have and that raises the costs of the rehab to you.

you want to try and get on one of the IBR programs if possible. Don't know what kind of work or income you have, but the more you make the harder they will hit your bank account to make the rehab work.

Read up on student loan rehab on multiple forums before you dive in. With the other debts you will either be sued (catch a judgement) or they will eventually fall off your CR's. With Student loans they NEVER can be discharged in bankruptcy and unless you are terminally ill or a victim of an identified predatory school, you are stuck with them. forever.

Also note that the Trump transition team and a bunch of House and Senate republicans are yammering about privatizing all student loans. They have already said as much. This means you need to move quick and get a plan in place and going before the laws change.

Good luck, keep us informed, Stay Sober.

Mike

 Minor edit, politics --Rev

[Anonymous]

What an awesome and thorough post!! 

OP, congrats on being sober and turning things around! Being a couple months removed from a BK discharge the only advice I have to sitck around these parts and use the search button. My own rebuilding process literally keeps me up at night so I spend the wee hours (like now) poking around this site. Good stuff and good people!