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New Visitor
tomvolvo
Posts: 2
Registered: ‎05-21-2013

So I just learned my credit is a lot worse than I thought. What do I do now?

So I just found out how bad my credit really was. I wish I was more informed on how the system worked before but I am trying my best now to learn.

When I was in college I opened up a few credit cards and I guess I didn't know what I was getting into. Now I am out of college and working a great job. I have $30,000 saved and I want to buy a house for my fiance and I. However I have a score of 560! That was shocking because I didn't really think it was that bad.

Here is what I am working with:

 

Score of 564. No accounts past due. 8 year credit history

4 accounts with negative indicators

 

revolving accounts $2,906

installment loans $3,115

 

8 accounts/ 4 with balances

 

Bank of America Credit Card $2,906 (30 days late 7 times, 60 days late 2 times)

Sallie Mae (Three Accounts) $3,115 (Never late since 2005)

Sears CLOSED (30 days late 5 times, 60 days late 4 times)

Sanpon Credit CLOSED (Never late from June 2007-November 2011)

Sovereign Auto Loan CLOSED (opened April 2005, closed February 2007... 30 days late twice in 2006)

 

and then this is the BAD one that I'm sure is bringing my score down at least 100 points

Bank of America CLOSED Account paid for less than balance owed (opened May 2007-September 2011 No late payments.) (October 2011-May 2012 NO PAYMENTS MADE 120+ DAYS LATE)

 

I have no inqueries affecting my score and I have never been to collections before.

 

In late 2011 I was struggling financially. I was uninsured and broke my patella which I am still paying off. I was out of work for a month and had no short term disability. I had to make sacrifices on what bills to pay and unfortunately I was ignoring Bank of America's calls.

 

I am in a much better place right now financially. I am making $50,000 a year. I have very little debt. My student loan will be paid off soon and I have one open credit card with a 3,000 balance.

 

What can I do to make my score go up to at least a 620. I would like to apply for an FHA loan with $30,000 (15,00 is mine, 15,000 is a gift) down on a $110,000 house.

 

Thanks in advance for any help. I am hoping that I can turn all of this around soon.

Established Contributor
InvincibleSummer3
Posts: 640
Registered: ‎11-20-2012

Re: So I just learned my credit is a lot worse than I thought. What do I do now?

[ Edited ]

The good news is that it's not the end of the world. Start with this thread:

 

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Your-Guide-to-Credit-Scoring/m-p/718550#U7185...

 

The fastest way to get a score boost is to look at your utilization. As you can see from the above link, FICO scores are based on what percentage of your open revolving credit is used. You didn't say what your credit limits are for the B of A card, but paying that down to less than 10% of your total will likely get you a score boost of some sort. Installments aren't weighted as much, so the credit card should be your first priority.

 

I would also suggest that once your utilization is down, to maybe look at getting another card. "Good" credit is important, as it can dilute out the effects of the bad stuff. Although - you shouldn't apply for anything within 6 months of a mortgage app, so depending on your timeline this might be up for debate.

 

Last but not least, the more recent negatives are hurting you more than the older stuff. Keep that in mind when you make a game plan for goodwill letters, etc. Not every creditor will agree to remove tradelines, but a goodwill letter or two can sometimes work. Good luck!

New Visitor
tomvolvo
Posts: 2
Registered: ‎05-21-2013

Re: So I just learned my credit is a lot worse than I thought. What do I do now?

Thnaks for your response. I didn't realize what utilization was and how it was weightedon my score.

If I applied for a secured card would that help me? Will that still come up as an inquiry?

 

Valued Contributor
p-
Posts: 2,539
Registered: ‎06-05-2008

Re: So I just learned my credit is a lot worse than I thought. What do I do now?

[ Edited ]

tommarvolo wrote:

Thanks for your response. I didn't realize what utilization was and how it was weighted on my score.

If I applied for a secured card would that help me? Will that still come up as an inquiry? 


Applying for new credit is not the answer.  If you have open unsecured revolvers, pay them down until only one has a balance, and make sure that balance is less than 5% of your available credit.

 

Then see if you can negotiate a PFD on the one settled credit card, and goodwill the rest of your lates.  Search here for terms like "GW success", etc.

 

Most importantly, from now on always pay everything on time all the time.  Never put something on a credit card that you don't have the cash to pay in full.  Pay every credit card in full each month.

 

Those lates and things from 2012 are going to haunt you for a while.  Do these things and check your FICO again.  Spend some time at the mortgage board and learn the FHA minimums.  

 

Good luck!

 

 

  2-13-14: FICO EXP: 779 - EQU: 742 - TRAN: 765 - AVG: 762 - +212 points from JUN 2008 - MY CREDIT JOURNAL

Established Contributor
InvincibleSummer3
Posts: 640
Registered: ‎11-20-2012

Re: So I just learned my credit is a lot worse than I thought. What do I do now?


p- wrote:


Applying for new credit is not the answer.  If you have open unsecured revolvers, pay them down until only one has a balance, and make sure that balance is less than 5% of your available credit.

 

Then see if you can negotiate a PFD on the one settled credit card, and goodwill the rest of your lates.  Search here for terms like "GW success", etc.

 

Most importantly, from now on always pay everything on time all the time.  Never put something on a credit card that you don't have the cash to pay in full.  Pay every credit card in full each month.

 

Those lates and things from 2012 are going to haunt you for a while.  Do these things and check your FICO again.  Spend some time at the mortgage board and learn the FHA minimums.  

 

Good luck!

 


Totally agree with the bolded. But I have to say that it is difficult to rebuild, especially with a single revolving account. The advice I heard most often was at least two cards, one to report at less than 9% and the other to report at zero balance. For someone like me, with negatives that may not be removable, having good tradelines is imperative.

 

Yes, a secured card will still be a hard inquiry. How soon are you looking to buy? I still think the first priority should be to pay that BoA card down.

Senior Contributor
drkaje
Posts: 3,482
Registered: ‎07-25-2008

Re: So I just learned my credit is a lot worse than I thought. What do I do now?

Sears (or whoever does their cards) might be amanable to goodwill.

 

I'd also try the old car loan.


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Valued Contributor
madmann26
Posts: 1,402
Registered: ‎08-30-2012

Re: So I just learned my credit is a lot worse than I thought. What do I do now?

To add

Most banks want to see at least 12months of good/on time payments before even considering you for a mortgage.

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