is my credit repair plan going to help hurt or do nothing

[Anonymous]

Hello there this is my first time using this site and this forum.  I am currently 25 and I have had some troubles with my credit some are my fault some are due in part to economic problems either way I have debt and poor credit, score of 579.  I am hoping to try and buy a house sometime in the next 2 years and want to make sure I can. I have 2 credit cars both 2 years old with balances of 400 and 600.  they have been sent to collections as of now but I do have a credit card with my credit union that I have had a year without missing a payment.  I also have an old auto loan that was reposed, the repo date was in jan of 2006 and they have asked to settle for 3000.  other than that I have some old defaults from student loans which some are old and have been paid on regularly since then 1 of which is still left unpaid as there is a dispute with the amount.  My plan was to pay the credit cards off and try to work with the auto loan and other student loan but at least for the auto loan the 7 year mark is fast approaching, and after several attempts of paying the loan off I am to the point of just waiting the last 2 years and then asking to have it removed due to age of account.  I also planned to get a secured loan from my bank for about 1000 dollars and begin paying it back on time and possibly applying for a target credit card so that my usage would go down being I would have credit but not really using it.  what would anyone advise me to do in this stage.  am i on the right track or are there some other tricks to help get my score at least above 620 so that I might be able to qualify for a home loan thanks for any and all help anyone can provide. 

John

[guiness56]

Hi and welcome to the forums.

It is always best if you repair your credit first, then rebuild.  Trying to get credit with poor scores is not going to help you.

For the credit cards that are in collections you have several options.  1).  Contact the OC and see if they are willing to reopen your account in good standing if you pay the balance.  2) Send the CA a DV letter and if they validate, request a PFD.  You should only go this route if the debt is outside of your states suing SOL and you have the money to PIF.

Settling any account is not going to improve your score.  All negative annotations would need to be removed.

Just paying a collections will not improve your score, it would need to be deleted from your CR.  FICO looks at paid and unpaid collections the same.  It will look better on a manual review.

Never talk to a CA, always communicate by CMRRR.

Know what the DoFD and SOL of each account is.  If you have not done so already, pull a free report from https://www.annualcreditreport.com/cra/index.jsp List any accounts you have questions about, leaving out personal information.

[Anonymous]

Hi John,

I've just finished repairing and now am in the process of rebuilding.  Here's a couple of things I wish I knew then that I now know which you may find useful:

1) I took out a three year installement loan with my bank to improve my credit score.  Despite the payments having always been made on time I've just learnt that installement loans do NOT increase credit scores.  Only revolving lines of credit do this (Credit cards and lines of credit - both of which I think you can secure with a deposit)

2) I also always thought that paying my CCs on time would increase my score and never gave any consideration to the utilization (the amount they report owning on a set date once a month relative to your credit limit).   Even though I paid my balance in full every month, the fact that I had almost always over 90% utlziation was killing me.  I've since learnt the date my CC reports and make sure that as of that day I do not owe more than 10%.  That has a positive impact on my score.

3) Bad debt stays on your report for seven years as of the last date of activity.  If you go out and pay the balance on a debt that is currently six years, expect the clock to start over again from the date you paid it.  If you wish to settle your outstanding amounts, have the creditor agree in writing (always in writing ) that they will remove their entire listing from your report.  Do not accept them saying they will "mark it as paid" as again it will be on there for another seven years and show all your late payments which will keep your score down for even longer

4) acknowleding your debt by writting a letter to the creditor resets the date of last activity as well.  For this reason you should consider always using the phrase "alleged debt"

5) If you are taking out new credit with an existing institution (IE your credit Union) see if they can do a soft  inquiry as the "hard" inquiries keep your score down

6) study your credit report and look for any discrepancy (IE inaccurate date of last activity, payment dates, etc).  Dispute it! (always via registered mail with the credit agency).  Here in Canada if they have a mistake then they techincally have to delete the entire listing if it is derogatory.  I've been persistent and have had a lot removed that I'd otherwise have to wait several more years to get rid of.

Hope that helps you out a bit

Good luck!

[MarineVietVet]

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@Anonymous wrote:

Hi John,

I've just finished repairing and now am in the process of rebuilding.  Here's a couple of things I wish I knew then that I now know which you may find useful:

1) I took out a three year installement loan with my bank to improve my credit score.  Despite the payments having always been made on time I've just learnt that installement loans do NOT increase credit scores.  Only revolving lines of credit do this (Credit cards and lines of credit - both of which I think you can secure with a deposit)

2) I also always thought that paying my CCs on time would increase my score (Paying on time is 35% of your total score so it is very important) and never gave any consideration to the utilization (the amount they report owning on a set date once a month relative to your credit limit).   Even though I paid my balance in full every month, the fact that I had almost always over 90% utlziation was killing me.  I've since learnt the date my CC reports and make sure that as of that day I do not owe more than 10%.  That has a positive impact on my score.

3) Bad debt stays on your report for seven years as of the last date of activity. Date of last activity has nothing to do with when a derogatory item will drop off from old age.

Here is how and when derogs drop from you CR, and are thus no longer included in FICO scoring.

Monthly delinquencies under an OC account drop at 7 years from their individual date of delinquency. The date of first delinquency (DOFD) has nothing to do with these drop-off dates. They drop from their own individual dates. So look at each prior OC reported monthly derog date, and simply add 7 years.

If the OC subsequently reports their account as a charge off, that is a totally different and additional post to your CR. Their post as a charge-off will remain in your CR for up to 7.5 years from the DOFD on the OC account, which is the first 30-day delinquency you had on the account, and disregards any later 60/90+ delinquencies that followed. That cannot be reset.

If the OC then refers the account for collection, and a CA posts to your CR, the drop-off date of their collection reporting is the same as that of a CO. It is up to 7.5 years from the same DOFD on the OC account, and the CA cannot reset this date.

If you go out and pay the balance on a debt that is currently six years, expect the clock to start over again from the date you paid it.  Nothing can reset the CRTP (Credit Reporting Time Period). Paying that balance may hurt your score in the sense that it looks like a newer account but nothing can "restart" the CRTP.

If you wish to settle your outstanding amounts, have the creditor agree in writing (always in writing ) that they will remove their entire listing from your report.  Do not accept them saying they will "mark it as paid" as again it will be on there for another seven years and show all your late payments which will keep your score down for even longer Again the CRTP cannot be changed.

4) acknowleding your debt by writting a letter to the creditor resets the date of last activity as well.  For this reason you should consider always using the phrase "alleged debt"

5) If you are taking out new credit with an existing institution (IE your credit Union) see if they can do a soft  inquiry as the "hard" inquiries keep your score down

6) study your credit report and look for any discrepancy (IE inaccurate date of last activity, payment dates, etc).  Dispute it! (always via registered mail with the credit agency).  Here in Canada if they have a mistake then they techincally have to delete the entire listing if it is derogatory.  I've been persistent and have had a lot removed that I'd otherwise have to wait several more years to get rid of.

Hope that helps you out a bit

Good luck!

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