topic Re: Rebuilding Credit without Filing BK in Rebuilding Your Credit

Rebuilding Credit without Filing BK

Anonymous — Fri, 14 Feb 2020 04:30:55 GMT

Most of the topics that I read show how to rebuild after you file BK.

My wife and I have had a huge amount of unsecured credit card debt, that has all been charged off.

We are currently judgment [collection] proof.

We have been advised that due to our financial situation, filing is not necessary.

Our credit scores are currently in the high 400's.

Would the same advice for rebuilding after BK apply in our situation, i.e secured credit card , etc. apply in our situation?

Re: Rebuilding Credit without Filing BK

thornback — Fri, 14 Feb 2020 05:19:04 GMT

Pretty much, but given the outstanding debt, you'll likely have to pursue secured cards from lenders that do not do a credit check:

Open Sky Secured

Green Dot Secured

Applied Bank Secured Card

Each of the above have annual fees, but are non-predatory. You can also check with your local bank or credit union for secured options.

Add a Shared Secured Loan (if you do not have an installment loan in good standing):

Self, Inc. Credit Builder Loan

After 3 months of paying on the Self Credit Builder Loan, you can use your "savings" (ie. secured loan deposit) to open a Self Secured Credit Card.

Secured cards do not need a high limit. You can put down whatever their minimum deposit is and work with that. Credit limit has nothing to do with your credit score, what matters is how you manage the utilization of the limit. A $200 secured card is just as beneficial as a $20K unsecured card when managed correctly.

Utilization: Keep your utilization low. Below 8.9% aggregate and below 28.9% on each individual card for best scoring results. I recommend using secured cards for light purchases and always pay the balance in full by the due date. Their sole purpose should be building a positive history, not day-to-day spend.

Keep in mind that your scores will suffer until all of the derogatory accounts drop off. If your charge-offs are still reflecting outstanding balances, those balances will factor into your overall utilization which will keep your scores suppressed. However - if you manage your secured accounts well, your scores will begin to skyrocket as those negatives drop.

Any questions?

Re: Rebuilding Credit without Filing BK

Anonymous — Sat, 15 Feb 2020 01:44:35 GMT

Thornback. Many thanks for your detailed response, it was very helpful.

With respect to derogatory accounts dropping off, my understanding is that they will remain on the credit reports for 7 years. Even with using secured cards or credit building loans, I assume that it would take a long time to get the scores to go up.

Another question concerns secured cards. I agree with your comments concernimg utilization and paying off the balance each month. However, I recall reading on another site,a few months back, a recommendation to get secured cards and don't use them, just put them away in a drawer and your scores will go up. That can't be right.

Re: Rebuilding Credit without Filing BK

thornback — Sat, 15 Feb 2020 02:10:56 GMT

Yes. Accounts drop off 7 years after the Date of First Delinquency (DOFD) which is the month/year the account first went delinquent and was never brought current. So - you're correct, it will be quite a while before you start seeing any real movement in your scores -- mainly because the accounts will remain unpaid which means they will continue to reflect outstanding balances and creditors may continue with monthly or sporadic updates of new negative notations in the payment history.

You can get the secured cards and not use them also -- but some lenders won't even bother with regular reporting during months of inactivity. So, while the accounts would be aged and in good standing (which is still a big plus), you run the risk of showing no history of repayment - which would not be very helpful should a lender evaluate your creditworthiness via manual review sometime down the road. You don't have to use them every month -- but I'd suggest at least running a small charge through each one at least once every 4-6 months, letting the balance report, then paying it in full. A small charge could literally be a bag of chips. Or, you can place a small recurring charge on each one and pay it in full -- maybe a Netflix or Cell Phone bill --something you already pay on a monthly or quarterly basis.

Some people just go credit free for the full 7 years and wait for all the negatives to drop off, then they start rebuilding from scratch. That's also an option; the only problem with starting with no history is that it can be difficult to obtain new, unsecured credit - you may be forced to start off with a secured card anyway just to build a bit of history so you can qualify for unsecured credit. If you obtain your secured cards now (one or two will do) then you'll already have some history from a tradeline in good standing when the time comes for all of your negatives to drop and you'll be able to acquire unsecured credit pretty easily.

Re: Rebuilding Credit without Filing BK

thornback — Sat, 15 Feb 2020 02:13:38 GMT

Also - as for adding a secured installment loan -- that can abosolutely wait till you're maybe 6 months to a year away from all of your negatives dropping. Installment loans help with your 'credit mix' factor for FICO scoring - so it's a good idea to have positive installment history.

Re: Rebuilding Credit without Filing BK

Azuieldrago — Sat, 15 Feb 2020 06:17:53 GMT

To help with the derogs, you can always try for a goodwill letter campaign. If the money is available, possible PFD. You may not get them all but may be able to reduce the numbers.

Re: Rebuilding Credit without Filing BK

Red1Blue — Sat, 15 Feb 2020 11:59:16 GMT

OpenSky is a good card to start with. Affinity Federal Credit Union ( New Jersey ) offers secured credit card with out credit check. That could also graduate after 12 months. State Department Credit Union also offers a good secured card and easy to apply. Both Affinity and SDFCU cards does not have any AF and hidden fees. As other experts stated Secured Cards alone will not help you raise the score but they will start adding to positive credit activity on your report.

Re: Rebuilding Credit without Filing BK

Anonymous — Sat, 15 Feb 2020 12:47:06 GMT

Are we forgetting to mention that, if any of the charged off accounts were credit cards, that they'll still count against their utilization? If so, your scores will be depressed due to always having high utilization due to those charged off accounts until you can "balance" them out.

Re: Rebuilding Credit without Filing BK

thornback — Sat, 15 Feb 2020 15:46:23 GMT

@Anonymous wrote:
Are we forgetting to mention that, if any of the charged off accounts were credit cards, that they'll still count against their utilization? If so, your scores will be depressed due to always having high utilization due to those charged off accounts until you can "balance" them out.

Noted in my very first post.

Re: Rebuilding Credit without Filing BK

sjt — Sun, 16 Feb 2020 16:30:18 GMT

@Anonymous wrote:
Most of the topics that I read show how to rebuild after you file BK.
My wife and I have had a huge amount of unsecured credit card debt, that has all been charged off.
We are currently judgment [collection] proof.
We have been advised that due to our financial situation, filing is not necessary.
Our credit scores are currently in the high 400's.
Would the same advice for rebuilding after BK apply in our situation, i.e secured credit card , etc. apply in our situation?

What do you mean by "judgement proof"? Are you out of the statue of limitations or is it that you have a negative net worth.