Score not increasing - what to do?

[Anonymous]

Hi, I'm looking for help on why my FICO score is going up so slowly and what I can do to raise it more quickly.  5 years ago my score was in the low 600s due to maxed out cards and late payments.  Two years ago I managed to pay off my cards in full and really turn things around.  I have zero debt, have two major credit cards which I use regularly and pay off in full every month, and throughout the month my balance on those cards never exceeds 25% of my credit limit.

My score went up about 90 points in the first year since I turned things around, but in the second year it's gone up less than ten points.  To be specific, in October 2014 my score was 620, by October 2015 it was 709.  In Janauary 2016 it went up eight points to 717 where it remained for seven months.  In September it actually dropped six points to 711.

There are two "key factors" listed on my report as affecting my score:
1) Collection filed.  This collection was only for $100 due to a misunderstanding between myself and my former landlord at the time I moved out.  I paid the $100 as soon as I found out it was sent to collection.  This was 5 years ago.
2) Lack of recent installment loan.  I have no students loans and finished payments on my car loan 5 years ago.

I would like to buy a new car and a house within the next couple of years.  I realize a car loan will help (based on #2 above), but I'm not going to buy a new car before I need to simply to increase my credit.  Also, when I do buy a new car, I'm hoping to take advantage of good interest rates due to a high credit score, so I'd like to raise my credit score first.  Is there anything more I can do to raise my score?  My goal is 740 which is only another 29 points, but seeing as how it went up only eight points almost a year ago and has not gone up since (in fact went down six points last month), I feel like it might take another three+ years to get where I want to be.

[Anonymous]

Two things that would increase your score quite quickly:

1.  Do whatever you can to get that collection removed.

2.  Open a share secure loan (you can search it on here) and pay it down to 9% of the original balance; typically $500 is used.  That will satisfy your installment loan requirement for the next several years up until you go for that mortgage.

Those 2 things combined would likely thrust your scores up into the "excellent" range where you'd get the best mortgage rates.

[Anonymous]

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@Anonymous wrote:

Two things that would increase your score quite quickly:

1.  Do whatever you can to get that collection removed.

2.  Open a share secure loan (you can search it on here) and pay it down to 9% of the original balance; typically $500 is used.  That will satisfy your installment loan requirement for the next several years up until you go for that mortgage.

Those 2 things combined would likely thrust your scores up into the "excellent" range where you'd get the best mortgage rates.

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I agree. Also, if you can have below 10% in utilization you should see a tremendous difference. It did for me.

[Anonymous]

Thank you both of you.  I had no idea that keeping the utilization below 10% could help - I thought the fact that I was usually around 20% was good.  I will make a point of doing that from now on.  

I have no idea how to get that collection removed.  I don't even have the information for it anymore.  I will look into the share secured loan though.

[Anonymous]

The simplest rule for your credit cards is the "all zero except one" rule (AZEO).  All cards reporting with a zero balance except one, which can report a small positive balance, like $10 say.  You don't need to do that every month.  Just in the month or two before an important credit pull, or if you are trying one month to see how high you can make your score go.  Otherwise just using your cards like you have been and paying in full is just fine -- AZEO can be a pain to do every month and it is totally not needed as a long term strategy.

As far as the installment loan goes, here is a link that will explain everything you need to do.  Just read the first few posts in it.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

Since you only have two credit cards, and since you will not have a need for credit for another two years, you would also benefit from having a couple more cards.  Three are really needed to drive a high score.  Since you won't be getting your car for a while, you might as well grab two more now.  The Chase Freedom might be a nice choice for you.

I agree with what the other guys said.  Good advice about working for the removal of the collection.

[Anonymous]

Wow, I actually managed to get the collection removed from my Experian report!  I submitted disputes to all three agencies yesterday and Experian already replied with the results and they deleted it!  Don't know yet if TransUnion and Equifax will be willing to delete it as well, but it's a start.

I did also end up purchasing a more detailed credit report with all three scores yesterday, and found that it's really my payment history that's keeping my score lower than I'd like.  When they broke it down into 4 categories, my 'Amount of Debt,' 'Length of Credit History,' and 'Amount of New Credit' all were listed as either Very Good or Exceptional.  It's just the 'Payment History' that is only Good.  I have three accounts showing late payments, even though the most recent late payment listed was nearly  3 years ago.

[Anonymous]

Late payments are killer.  I wouldn't put much stock into the language used in terms of the "good" or "excellent" or "very good" stuff that's assigned to a particular category honestly.  When it comes to late payments, I'd give a person 3 categories:  "excellent" being no late payments on any accounts... "fair" if one account has a late payment among a group of many accounts and "poor" if 2 or more accounts possess late payments.

From a scoring standpoint, regardless of what language is used to describe your payment history I can assure you scoring wise with 3 accounts with late payments you are losing a significant amount of points; that sector makes up 35% of your score and you'd be lucky to receive half of the points available from payment history, IMO.  I'd strongly suggest working to get those late payments removed.  If you could get rid of the late payments on 2 out of 3 of your accounts you'd probably see a nice score increase (expecially if it was the most recent accounts) and it would look to a potential lender that you had a single hiccup rather than a history of poor payments across multiple accounts.

[Anonymous]

BrutalBodyShots, you suggest working to get the late payments removed. How would one go about that? Disputing the collection made sense because the nature of the bill itself was disputable. I had no idea late payment history on a credit card could potentially be removed though. What do you suggest, or is there a particular thread on this forum you can recommend with more details?

[Anonymous]

Note to the OP:

As BBS will explain I'm sure, gettting rid of lates is something that can take a long time.  Assuming the lates really happened, getting them removed requires a great deal of "good will" on the part of the creditors.  A typical strategy for removing lates is writing lots of "good will letters" begging your creditors to please remove the late.  It might take repeated letters, and even so the creditor might never agree to remove it.

So feel free to learn about strategies for removing lates, just be aware that it could take a while.  You'll also need to put the late removal issue in the proper perspective.  For example, are these 30-day lates only?  Or are some of them 60-day or 90-day lates?  30-day lates are penalized much less than a 90-day late is.  Furthermore, be sure to also puth them in the perspective of time.  Even if you have a 90-day late, is it (say) 6 years old?  If so, it's probably simpler to just let the late fall off your report in one year, given that you have no major need for credit for the next 24 months.

By way of contrast, there is something that you should probably get started on fairly soon, and that is adding one or two more credit cards.  The sooner you do that, the sooner they will be building up age of their own and the more certain you can be that the inquiries will have fallen off long before you might want to start looking for your car or house.

Basically what I am telling you is don't decide that you have got to get all your lates removed before you do anything else.  (I am sure BBS would agree.)  My own personal recomendation would be:

(1)  Add a Share Secure Loan using the full technique as described in the link you were given.

(2)  Implement AZEO for your two existing credit cards.

(3)  Start looking around for credit cards that you might like -- don't apply yet, just do your research to find the ones you might like and are realistic given what your scores are.

(4)  Continue to learn about credit scoring and follow up further with BBS to learn what would be involved in removing lates -- but don't feel like you have got to get them removed right away,  Just develop a plan for what you might want to do.

(5)  Implement "auto-pay" on your cards so that you will never ever be late again on any CC payments.

Items 1-5 can all be done at the same time.  60 days from now they should all be done (except your lates being removed) and you will have a much higher score.

Once your credit score is much higher (two months from now) apply for a couple more cards.  And begin plugging away at the lates. 

Once you have four credit cards, you can stop with AZEO if you want.  Just make sure your are paying you CC bills in full.  AZEO is only something to do in preparation for applying for credit.  By the way, you will get even more benefit from AZEO once you have four cards.  Because you'll be able to create several $0 balances.  Right now all you can do is create one $0 balance.  Creating several will get you some extra points.

[Anonymous]

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@Anonymous wrote:
BrutalBodyShots, you suggest working to get the late payments removed. How would one go about that? Disputing the collection made sense because the nature of the bill itself was disputable. I had no idea late payment history on a credit card could potentially be removed though. What do you suggest, or is there a particular thread on this forum you can recommend with more details?

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As CGID stated above, late payments can be removed from your credit reports through the use of goodwill letters.  Results vary from person to person and certainly from creditor to creditor; some are easy to get results from, some take a lot of work, and some seemingly are unwilling to ever make an adjustment. 

My first question for you is who are the creditors that you have late payments with, what is the severity of the late payments and how aged are they.  If you could list them out that would be helpful.  For example:  "Chase:  2 late payments one 30 day late that's 1.5 years old and one 90 day late that's 2.7 years old."

If you hit the rebuilding credit forum you can find a bunch of threads on how to write a goodwill letter.  They don't need to be fancy and short and sweet is usually your best bet.  Nobody wants to read a novel.  Generally you can get everything you want into it in about half a page.  The general idea though is:

1 - Apologize for your late payment(s)

2 - Give them a reason as to why you were late (job loss, major medical expense, etc)

3 - Assure them that it will never happen again (perhaps referencing what changed with respect to why you were late to begin with)

4 - Reference your excellent payment history outside of the late payments; hopefully you have great payment history since

5 - Give them a reason to want to do an adjustment.  This step IMO often gets missed and many GW threads offering advice won't mention this.  You have to understand that you're asking them for a favor.  What's in it for them?  99% of the time people sending GW letters don't paint the image of a win-win.  Tell them how you would like to open up another CC with their company for example.  Tell them you are looking into getting a mortgage in the next 6 months and would like to do it through them.  Tell them you would like to take out a personal loan.  Something along those lines.  This creates the image of you continuing to be a profitable customer for them not just now, but into the future and gives them an incentive to make a GW adjustment for you.  You can actually state in the letter that the only reason you haven't applied for it yet [the CC, mortgage, loan, etc] is because you're apprehensive due to the uncharacteristic late payments on the account you're writing about.

Once you've got your letter written, which shouldn't take you all too long, I suggest the Saturation Technique which involves getting it into as many hands as possible.  You can read about that here:

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/The-Saturation-Technique-Best-GW-adjustment-odds/td-p/4727098

You've already done the work of writing the letter, so why not print off many more than just 1 copy to increase your chances of success?  

If you can provide us with that feedback on the creditors, late payment severity and age it would be very helpful.