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Hi Iconic! Without sounding too trite, I'm going to reinterate what treasurekids has to say. Don't give up and don't get frustrated. There have been a number of great suggestions by our esteemed community here. I don't plan on reinventing the wheel. I do think you did the hardest thing, you checked your credit report and now are an informed consumer. That means your going to be smart consumer with regard to your future credit management. A significant number of the population has no idea what's even on their credit report, and most of these people may be living (and spending beyond their means) without even realizing it. (Although, I'm sure its less now than what it was pre-2007). Here is my $.02:
1) Join a credit union (CU) or local community bank. Even if you don't get approved for a secured credit card, its a good idea to have a rapport with the credit union for the future. CU's love members who have a long history with them. Unlike banks, credit unions are owned by their members, so if your a member you can actually go before the loan committee and plead your case. Having a face to match to the name makes the world of difference. I agree with most of the contributors here that getting a secured card by a small amount (say $500, or so) and eventually "graduates" to a coventional card (unsecured) is a good step. Be up front with them before you apply. Also, make sure that they report to the credit bureau if you have a secured card.
2) Become an Authorized User (AU). If you have a responsible friend or family member who has an excellent credit history, get them to add you as a AU. Don't let them give you the card, some of their good history will start to post to your report. Although, I'm unsure exactly how much.
3) Time heals all wounds. This goes double for FICO. Important point is FICO score is just your snapshot at one particular time, one part of the score will take into account if your paying your bills on time. Even though, negative (or as FICO calls it derrogatory) information stays on for seven years, the improvement in your score will become evident as soon as one year, and in two years there will be a significant increase. Yes, your derrogatory information will stay on there but it will have less effect over time.
4) FICO 481 = not all accounts being paid as agreed or charge offs are very recent (like just one or two months old) If you have a FICO in the 480s, I would assume that you still have some accounts that are not reporting as agreed. You get severely dinged if you have any accounts reporting as agreed. Try to settle these will your creditors. Beware, if you are dealing with debt collectors, always get a payoff amount IN WRITING, and pay only by money order. Not all, but some of these guys will take your checking account number off the bottom of your check and keep debiting your account, same goes for a credit or debit card. Keep that written letter forever, until you die.
5) Charge off = income taxes. My apologies to add fuel to the fire here. Charge offs is money that the creditor didn't get repayment for, thus they can deduct it from their business taxes as a loss, and as a result THEY pay less tax. What does this mean for you? The money that is charged off may get reported to the IRS and you could be responsible for income taxes on that amount. A 1099-C (Cancellation of Debt) might be sent to you for filing on your taxes next year. I only mention that so you can do what you can to prepare for that situation. The reason is this, the company that didn't get paid means that you got income (at some point). I'm not a tax-person, so you should check with a CPA or someone important that handles that stuff.
6) Paying bills on time will be your friend. Paying bills on-time every month will be a significant factor in your credit score, that and credit utilization make up more than 1/3 of your score. So don't get discouraged, you'll get there!
Hope this helps, you'll make it don't worry. It will take some time, but just remember your credit score doesn't define the rest of your life. Its set up so that it can be improved! Hang in there!
There is some strange encoding in the filename of the image source URL in your signature. It is strange cuz the filename renders correctly in the browser and it looks correct. Try this link http://ficoforums.myfico.com/html/assets/challenge.png
@Iconic_since1989 wrote:
Yes that is my plan however i don't think i have a chance to get a secured card yet with my score being 481. Im planning on trying to wrote some good will letters to try to bump my score up enough to get a secured credit card. I don't know what else I could do! The problem is i don't have any open account reporting anything to anyone right now. Thats the biggest issue. I thought by paying off my debt my score would increase but i guess thats not the case due to the charge off's.
Try the Open Sky Secured CC. I have been pretty happy with it. And there's no HP for the application, which is great!
Don't feel so bad. I started with a 433 in September 2012, and now 2 of my 3 scores are above 600!
I got a bad-credit car loan in September- which is when I realized how terrible my score was!! I didn't start working on it until November, but once I did things happened pretty quickly for me. I made some calls, wrote some GWs, and had some success. In January I got a Capital One secured card (took the HP- figured it couldn't make my score much worse than it was!) and the Open Sky CC (yay to the no HP!!). With just those and getting an old- and iincorrectly reported- CA account off my reports I've seen pretty significant gains.
Good luck to you!!
@sghosh5: Was that efective on any account, even the major lenders or just the collection agency itself? Is that something I can easily do within each credit bureau website?
There is no rule for that. You can dispute for collection agency or major lender accounts as well. All 2 CBs have that option in general. But it may or may not work depending on the lender's response or ability to repond within 30 days.
All is not lost, you just have to have patience. My wife and I hired a credit consultant who came reccomended to us by a trusted associate and she helped clean up our mess. You might want to consider a similar route.
I totally agree with applying for the "Open Sky" secured credit card (www.openskycc.com). It reports to all 3 credit bureaus, there is NO credit check to obtain this credit card (so you get no hard pull inquiries on your credit report) and you can open up to a 5 K. line of credit if you have the cash. I have had their credit card with a limit of $1,200 for over two years, and have been very pleased (my goal is to raise the limit to $2,000, as the credit bureaus like to see limits of over 2 K). Good luck!
Not sure how old this post is, but I feel the same way as you. Sending you positive vibes.