Will my score improve without credit cards?

[Anonymous]

I'll admit it - the recession hit me hard. In 2010 I lost my income and was unable to pay anything except my mortgage. I now have 7 charge offs on my credit file, all of which are now Out of Statute for suit and will age off within the next 12 months. When I finally paid off my mortgage in April 2016, FICO docked me about 20 points for that and another 15 when I took out a car loan. Both of these happened this year. My Credit Karma FAKO score is now at 625.

In the six years between the financial crash and the payoff of the mortgage, my FAKO score went up about 10 points all by itself. due (I presume) to continued payment of the mortgage - it was NEVER late - and maybe the ever decreasing balance on the mortgage. I have no plans to take on any more credit of any kind after the car is paid for. I tried to settle with the creditors but their demands were either way beyond what I could afford or they were too intransigent about removal of their Trade Lines.

As the baddies age off, can I expect any increase in the score?

[MrsCHX]

You should surely see an increase if those are the only negative things on your report.

But you will find here if you go searching, it is optimal to have a mix of credit reporting. So you have an installment loan in your car, you "should" (used loosely) add a couple of cards. Since you're not really interested in a credit card the suggestion is usually to put some small recurring charge on there (like Netflix or something)...

[Anonymous]

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@Anonymous wrote:

I'll admit it - the recession hit me hard. In 2010 I lost my income and was unable to pay anything except my mortgage. I now have 7 charge offs on my credit file, all of which are now Out of Statute for suit and will age off within the next 12 months. When I finally paid off my mortgage in April 2016, FICO docked me about 20 points for that and another 15 when I took out a car loan. Both of these happened this year. My Credit Karma FAKO score is now at 625.

In the six years between the financial crash and the payoff of the mortgage, my FAKO score went up about 10 points all by itself. due (I presume) to continued payment of the mortgage - it was NEVER late - and maybe the ever decreasing balance on the mortgage. I have no plans to take on any more credit of any kind after the car is paid for. I tried to settle with the creditors but their demands were either way beyond what I could afford or they were too intransigent about removal of their Trade Lines.

As the baddies age off, can I expect any increase in the score?

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Some... But the credit scoring system is 'mostly' about credit cards. Having even one credit card will push your scores up dramatically.

[Anonymous]

Agreed.  You're losing points on credit mix, and on utilization - crazy but true, if you have zero debt your score suffers, while if you have small manageable debts you benefit.

Nobody is saying you need to go an a spree and pursue 17 credit cards with huge limits - but if you got three small cards, and barely used them, you would see a rise in your score.  Especially once the baddies start disappearing.

If you have three $500 cards (credit cards, or gas/store cards) and you have a reporting balance of $45 or less each month (i.e., the aforementioned Netflix subscription, or something like that, plus one dinner out or movie ticket purchase or gas purchase or whatever each month) on one of them and zero on the other two, then you will receive the maximum possible points on FICO scoring from credit cards.  With your scores where they are right now, it isn't realistic to think you can run out and get an Amex Premium and two Signature Visa cards, but you should be able to get a Capital One card or two from their rebuilder line, and maybe a Walmart card or a gas card or something along those lines as your third.  You might even want to look at secured options from your bank or credit union, or from Discover.  The idea is not to go crazy trying to go from handling no cards to handling two dozen and trying to keep everyone's reporting dates and payment due dates and balances straight - just to add some variety into your file, which makes you more attractive to lenders in general and benefits your FICO scores.

[MrsCHX]

Oh and find out what your actual FICO scores are (easiest route is Credit Check Total for $1 trial). 

I would highly recommend going the Cap One route. And a store card *IF* it's one you frequent (Amazon, Walmart, Target...a place where you actually buy things regularly anyway).

If you do not want any store card then get the one cc and in 12 months with good usage/payments on your card, car and the COs drop off you'll be in great shape!

[Anonymous]

All the above responses were on point, from great voices I'm familiar with.

I'll add that the title ask about CC and you end your post inquiring about your scores going up, so it's difficult to know your overall goal.

If you have no specific or target, which is fine, even better in some cases.
As mentioned the model craves revolving accounts because they show current management of debt.

And, again it's called a credit score but RISK score is a better title IMO because the model's purpose is to gauge risk and give vendors a numerical indication of said risk after crunching the numbers.... that's why the lack of currently managed revolving accounts hurts the model's ability to properly gauge what it is programmed to do, so it will NOT give as good a 'nod'

Towards a profile it can't vet, using the criteria it was built to judge from....

That being said if one wants to be READY and have a vetted 'reputation' one has to be in the game to be 'rated' as a player

Like other posters have said one needn't be outrageously involved but no bystanders can expect to be rated good risk, for watching from the sidelines.

Gotta play 'some'risk

The model ideal profile
1-2 mortgages (yours will report, even after PIF 10 yr)
1-2 installment accounts
3-5 revolving accounts (active accounts are the juice here...)

(Installments lose steam as they are paid off, hence the drop after your mortgage payoff but because your file isn't otherwise blank or thin, there's no need to fret over adding installers, just because)

But a few no AF CCs are basically essential to your credit health and as mentioned just allow some token usage flow thru the cards, so the model can see your alive and well.

I don't agree that you need debt, you need to rearrange payment structure that's all.

Ex: If you normally pay Netflix or the gas bill by check or debit card.... just rearrange

Your A-B payment to a A-B-C set up and you're fine,no debt, no %, no lost in the shadows

Pay the gas bill with the credit card, then pay the CC from to same checking account you would paid the gas bill from in the 1st place... that's it, you are good.

Good luck

[Anonymous]

I thank you all for the advice. I have no need for credit in the future as I have a $10,000 "rainy day" fund and have already replaced the four most expensive items that might blow a budget - car, roof, central air conditioner (it gets very hot in Arizona) and hot water heater. All that remains are the refrigerator and stove and I have the cash for them. My priuncipal concern is that my cost of insurance is somehow heavily tied yo my credit score according to Consumer reports, so I see a savings there, and that would be my ONLY need to nraise my credit score.

Question - should I start the rebuilding process after the baddies fall off in a year or now while they are still there? Under which scenario would I be most likely to get the less onerous terms? And, once again, as the baddies fall off (charge offs and Junk Debt Buyers/Collection Agencies) should I expect my score to improve by itself?