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Regular Contributor
Posts: 237
Registered: ‎03-27-2007
0

Can someone offer advice?

I have been attempting to pay off my debts and need some advice on the next step.
 
I established credit two years ago and it hasn't been peaches since then.  Originally, I purchased a brand new car, but ended up selling it back to the dealership, having to pay off the difference.  My credit report shows that I paid off 25,000.00 in a few months, but I'm not even sure if that helped my score at all.  The turning point was when I lost my job but still got approved for various credit and charge cards at the time.  I accumulated more than 12,000.00 in unsecured debt.
 
Since then, in a years time, I have paid off a 5,000.00 account, on time.  After a while, the other accounts were left charged off by the original creditors.  So, what I've started doing is, settling my accounts.  Up until recently I thought this was the best thing to do, but have been reading forums that tell me otherwise.
 
When it breaks down, I settled 3 accounts but have 7 remaining (small accounts).  I really would like my fico score to go up, so should I attempt to pay in full or will settling in full suffice?  I would appreciate any feedback, thanks.

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Valued Contributor
Posts: 2,374
Registered: ‎03-15-2007
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It Doesn't Matter

The FICO formula is utterly indifferent to whether or not a chargeoff is paid or not.  The FICO system is designed to only log negative data about an account and to ignore any positive data that comes in afterwards.  Once it charges off, that's the end of the story...you get a big fat ding and there's nothing you can do about it.
 
The only advantage to having a charge-off listed as "paid" is that, for loans where a human actually has input on approving or rejecting you (many mortgages and some auto loans) having it listed as "paid" might work slightly in your favor.
 
But my advice is to not pay anything more on the charge-offs.  To FICO, it's water over the dam, and the system cares only about rubbing your nose in it for the next 7 to 10 years, regardless of any efforts you undertake to rectify the defaults.
 
My bottom-line advice (and it may not win me any popularity points, but you'll see from my other posts I tell the unvarnished truth) is to try and apply for a credit card or two.  Not to use for credit, mind you, but simply to see if you have any chance of credit score recovery.  If you get rejected, then your FICO is beyond repair, and you're best off to just not worry about it until the charge-offs drop off your account sometime during the next decade.  If you really want to buy a house, look overseas where they don't care about FICO.
 
If you can get an unsecured credit card, then you may have a chance to raise your FICO.  Keep the card, and charge just enough to get a bill (usually around $20).  Give it about nine months, keeping just enough of a balance to have a bill, and see if your FICO goes up.  If it does, you may be able to recover.  Try going for a credit-line increase.  If it doesn't, or you get rejected for a credit-line increase,  just forget about FICO; it's no use trying to raise it.
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in a credit-scoring postnuclear Stone Age...
Valued Member
Posts: 54
Registered: ‎03-15-2007
0

Drew, please don't listen to the negativity.  You CAN tur...

Drew, please don't listen to the negativity.  You CAN turn your score around.  I'm not sure what the best advice for you is on the charge offs, but definitely try to get an unsecured card or two and use them responsibly.  If you ever decide to get a mortgage, they will most likely make you pay off any collections you have, so keep that in mind.  Acouple of years ago, my score was 520.  I started settling my old baddies and got a couple of small unsecured cards, and now I'm at 580.  I let my utilization get to 100% which was bad, now it's down so I'll let you know next week if it helped!
Valued Contributor
Posts: 2,374
Registered: ‎03-15-2007
0

Yes, by all means try and get an unsecured card. The prob...

Yes, by all means try and get an unsecured card. The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or so. But they won't let you get a credit-line increase because your score is too low. But you can't get your score up if all you have are small cards. Get the picture? That's EXACTLY what happened to me. And there's no way out. They will NOT give you those CLIs without a high credit score, and they will NOT raise your score without them.
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in a credit-scoring postnuclear Stone Age...
Established Member
Posts: 10
Registered: ‎03-19-2007
0

try being an authorized user

 
Get someone to put you on as an authorized users on a major credit card.  This will instantly increase your credit score.  From reading many messages in these forms I learn you can increase your FICO scores this way. 
Regular Contributor
Posts: 237
Registered: ‎03-27-2007
0

Thanks

I appreciate everyone's feedback on the matter.
 
I would like to know a little bit more about settling an account versus paying in full, though.
 
The other thing is, I have an open charge card with a 6,000 credit line, which I don't know if it helps at all.  But I have a 0 balance on that card as of last December.  I know Lasalle Bank is also offering a secured loan program where they deposit money in a locked savings account that you eventually pay off.  Would that help out my score at all?

American Express Blue Cash Everyday $25000
Barclays Sallie Mae World MasterCard $25000
Capital One Venture World MasterCard $12500
Chase Freedom Visa Signature $25000
Discover IT $13500
US Bank Cash+ Visa Signature $25000
Synchrony Bank Old Navy Visa $25000

Valued Member
Posts: 54
Registered: ‎03-15-2007
0

"Yes, by all means try and get an unsecured card. Th...

"Yes, by all means try and get an unsecured card. The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or so. But they won't let you get a credit-line increase because your score is too low. But you can't get your score up if all you have are small cards. Get the picture? That's EXACTLY what happened to me. And there's no way out. They will NOT give you those CLIs without a high credit score, and they will NOT raise your score without them. "
 
Not true.  My two $300 limit cards helped my score, my husband's score, and it does the same for others.  Make your payments on time for a while and they'll eventually raise your limit.  Once you start rebuilding you can ditch your loser cards for better ones.
Regular Contributor
Posts: 169
Registered: ‎03-16-2007
0

"The problem you'll run into is that they won't rais...

"The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or ..."
 
You don't need any particular limit for a good score. In fact your limits aren't even factored into the score, only utilization. And it requires almost no effort to have that be zero.
Regular Contributor
Posts: 169
Registered: ‎03-16-2007
0

" I would like to know a little bit more about settling a...

"
I would like to know a little bit more about settling an account versus paying in full, though.
 
The other thing is, I have an open charge card with a 6,000 credit line, which I don't know if it helps at all.  But I have a 0 balance on that card as of last December.  I know Lasalle Bank is also offering a secured loan program where they deposit money in a locked savings account that you eventually pay off.  Would that help out my score at all?"
 
Depends on whether the card is reporting (and again assuming it's all positive payment history).
 
With respect to selling/paying in full - has your account been sold to a CA, or still with the original creditor? In either case, your ideal scenario is getting an agreement to pay in full in exchenge for them not reporting it. However, depending upon the answer to the previous question, they way to go about it may vary.
Valued Contributor
Posts: 2,374
Registered: ‎03-15-2007
0

"Eventually." Is that right about the time the...



twnkltoz wrote:
Make your payments on time for a while and they'll eventually raise your limit. Once you start rebuilding you can ditch your loser cards for better ones.



"Eventually." Is that right about the time the sun moves off the main sequence, swells into a red giant, and fries the Earth? I've been at this for a year now and have exactly NOTHING to show for it.
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in a credit-scoring postnuclear Stone Age...
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