Understanding FICO® Scoring

[amyjo]

Last week I had a credit score of 550.  I paid off several accounts that were in collections and a judgement.  I have no more debt!!!  Problem is I am trying to purchase my first home and the bank pulled my score today and said it was a 535.  How could it drop in a matter of a week when I paid everything off??   I am so upset and frustrated!  I called the credit bureau to notify them of the recent payoff's and they told me that it could take over 90 days before my credit score is updated.   I am going to loose my dream home if my credit score doesnt go up very soon.  What can I do to improve this??

[soliloquy]

Did you do Pay for Delete on the accounts you paid off?

[llecs]

To add, paying a CA (collection agency) or a judgment will never improve your FICO score. It doesn't matter if you owe $0 or $10,000, the damage is equal. FICO and lenders are focused on whether or not it is reporting, vs. the balance.

Congrats on paying off the debt. What you should have done, as the prev. poster hinted, you should have sent PFD letters to the CAs. You can't now since the debt is paid, but you can send GW (goodwill) letters to those CAs and ask them to delete themselves. For the judgments, you'd have to contact plaintiff's attorneys and ask them to file a motion with the court to have the judgment removed.

I'd suggest reading the following:

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

and What Steps Do I Take - great for learning the repair process.

[amyjo]

Please explain, as this is all new to me.  What is Pay for Delete?   When I pulled my credit report, I notice 5 things that were potentially negative so I went to the places and paid them off.  Some of them worked with me and I payed a lower amount and some stayed the same.  It would be great if I can get them off of my report, but as I said before this is all new and a learning experience for me that's for sure.

[Kimberly68]

First of congrats on paying off old debts.  Your LO should have told you NOT to do this, if he/she was aware.  We experienced the same thing, and was advised WRONGLY, but we got a new LO and I got 2 secured credit cards since I had NO revolving debt and this increased my score tremendously.  One more thing, they may have re-aged your account to look new, which may cause a problem.  If not already, uou will need to prepare a letter of explanation.  So again, get a credit card if you do not have one, pay it off prior to statement date, keep balance at lease 1-9%.  You will be OK.  We lost what we thought was our dream home, but it came on the market 3x's, but we end up finding another DREAM home.  

Good luck