Fixing my credit score & Rehabbing defaulted student loans... Help!

[StudentSam]

Hey guys. Ive been through a lot, a long road here... And i'm finally getting things back on track. I was very disorganized before, and during college. I left school after 2 years to start my own business. I have been semi-sucessful and making good money for my age (24). I started getting collection calls and threats around jan-feb of this year. Last time I've been to school was May 2010 so I assume my deferrment/grace/etc period passed and I defaulted on a few loans. They had all old contact information on file, I understand it's my responsibility to keep them updated and current, I learned from that now...

- I Have $4k balance with Nelnet (not defaulted) That I have been paying on time no problem..

- $2600 balance on defaulted perkins loan (being rehabbed as we speak, $300 a month for 8 months)

- $8000 Balance on a defaulted loan with federal gov department of education (just entered rehab program, $110 a month for 9 months)

- $1000 limit on Bank Of America Card completely paid off

- $500 limit on Capital one credit card completely paid off

- Defaulted/settled Chase Credit Card (settled for less then to ttl ammount)

These are all of the things on my credit report. Plus 6 hard inquiries (3-4 from debt collectors, 1 from a potential housing building)

I am in fix-credit mode and really would love if you guys could help me. My score is a 517 until experian updates, should go up to about 556 with my credit use at 0% (both cards are completely paid off)

I keep a good balance in the bank, and could afford to make some larger payments if it was the smarter thing to do. Right now I'm in a deadlock because I can't raise my score until those defaulted loans get rehabbed and converted into new loans that i could either settle with or make a nice payment plan.

My goal now is to fix my credit and get it over 600 if possible. Should I max out my credit card then pay it all off at once and do that a few times in a row ? Will they increase my credit at all?

I have a small business and can't even open a credit line for my business because my personal credit is so poor. I would love to open a biz credit card and one day an amex. I make a good amt of money monthly being self employed so I really want to be smart about my money now in repairing the damage done with my own naivity and stupidity

Thank you very much! 

[havecollectionsaccounts]

Don't max out your card and pay it off. I've actually heard that instead of keeping the card payed off, you need to keep a low balance. Try to put $50 or so on the card, then pay on it every month. I think the credit bureau wants to see that you're not using all the credit that you're given. When I applied for a mortgage, they did a 'credit similator' with one of the credit bureaus and my score raised a few points by keeping $45 bal. on a $500 limit, rather than $0. Good luck!

[thankfulheart]

1) do not max out your cards. Keep one at $0 and the other around 9%.

2) ignore your EX "score" as it is a FAKO. You cannot buy your EX anywhere.  Buy your EQ score from here as it's pretty much the only accurate score you will find and will   give you a good sense of where you truly stand.

3) paying an extra month on that Perkins will pay it off, yes?

4) continue paying the other student loans

5) GW Chase to see if you can get the C/O removed

6) open a secured card with some of the money you have banked with a higher CL than your BoA

7) keep meticulous records since you are self-employed

8) make sure you pay all of your taxes

[SCF]

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@StudentSam wrote:

- Defaulted/settled Chase Credit Card (settled for less then to ttl ammount)

Is this paid off?  If so, sending a GW (goodwill) letter can never hurt.  You can find info/templates/experiences in the other forums here.

I keep a good balance in the bank, and could afford to make some larger payments if it was the smarter thing to do. Right now I'm in a deadlock because I can't raise my score until those defaulted loans get rehabbed and converted into new loans that i could either settle with or make a nice payment plan.

Do your rehabs, that will have biggest impact.  In the meantime, you can break out some loan calculators and strategize.  Can you save enough to pay off one or more of the loans quickly after the rehab?  In terms of credit score, these will be good accounts and will stay on your reports for about 10 years once you're done with rehab, so do what makes sense financially, which is probably to pay off the loan with the highest interest and then work on the rest.

My goal now is to fix my credit and get it over 600 if possible. Should I max out my credit card then pay it all off at once and do that a few times in a row ? Will they increase my credit at all?

Not really.  Your utlization (percent of your credit you're using) has a big impact on your score, but it doesn't have a memory.  What counts is where you are when someone pulls your report.  At that moment, you want your balance somewhere in the 1-9% range for the biggest boost.  For now, just keep the cards active, and don't pay any interest since you don't have to.

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You're on the right track.  Have you checked the National Student Loan Database to make sure you're taking care of all of your outstanding student loans?  Get the rehabs done and you should see a good score jump.  You'll also build more positive history with your credit cards and your one "good" student loan, which will help as well.

[StudentSam]

Thanks a lot guys! Some updates..

My business partner has added me as an authorized user for his Amex Plum card, I should be receiving it this week. In my line of work, we use credit cards to purchase things daily and then we pay it off when our accounts receiveable comes in weekly or bi-weekly. The credit cards allow us to extend credit to fund our marketing campaigns while we wait for the returns to come in a week later.. I should be starting to use that next week, paying it off every week at least also..

Besides that, I have been using my BoFA 1k limit card for these types of 'credit buys' for about 3 weeks now, I receive the funds within a week then pay off the bill back to $200-300.. Never back to 0 though..

This has bumped more score 6 pts.. Also I am using Experian to check my score, should I be using something else? Sorry, I'm a newb but really want my score to be 650+ before all is said and done, i'd love my own Amex one day!

I'm hoping once I rehab these loans I will get a big bump.

my score currently is a 567, I wonder how many pts it will go up once Amex reports me as an authorized user on the plum card...

Thanks again guys! 

[thankfulheart]

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@StudentSam wrote:

This has bumped more score 6 pts.. Also I am using Experian to check my score, should I be using something else?  

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EX is a FAKO and has zero correlation to your real FICO score.  I highly recommend the MyFICO EQ product as it has been spot-on with lender pulls and gives me a good sense of where I stand.  I also use the TU quarterly monitoring, even though it is an older version and doesn't exactly match, the two give me a good sense of what is going on in my credit world.

[StudentSam]

thx Signed up for MyFico today!