topic Re: Next Steps? in Rebuilding Your Credit

Next Steps?

Anonymous — Thu, 16 Sep 2021 14:23:51 GMT

I'm struggling. My husband and I are trying to obtain a renovation loan to make changes to our home. Trouble is, we are having a difficult time getting our FICO scores up to where they need to be. Let me try to paint a picture: our amount of debt (rated 'fair')/credit authorization percentage is high (revolving utilization is 108% ), but quite a few of the accounts are either closed or old (probably not the right terminology). All things I've read up until this point basically say the score won't change even with a pay off. This is obviously our greatest issue. Anyone have an insight? Credit Mix, Amount of New Credit, and Lenght of Credit History are all rated 'very good'. Separately, we've been consistently on time with all payments for a few years now and just can't get over this hump. Payment history (rated 'good') was impacted negatively in ~2018 (mortgage related, unfortunately). It's been pristine since then. Thoughts on being able to have those late payments removed from the mortage company? I called and asked and they told me that it's unlikely. Would it even be that beneficial?

Re: Next Steps?

Cowboys4Life — Thu, 16 Sep 2021 14:53:36 GMT

@Anonymous wrote:
I'm struggling. My husband and I are trying to obtain a renovation loan to make changes to our home. Trouble is, we are having a difficult time getting our FICO scores up to where they need to be. Let me try to paint a picture: our amount of debt (rated 'fair')/credit authorization percentage is high (revolving utilization is 108% ), but quite a few of the accounts are either closed or old (probably not the right terminology). All things I've read up until this point basically say the score won't change even with a pay off. This is obviously our greatest issue. Anyone have an insight? Credit Mix, Amount of New Credit, and Lenght of Credit History are all rated 'very good'. Separately, we've been consistently on time with all payments for a few years now and just can't get over this hump. Payment history (rated 'good') was impacted negatively in ~2018 (mortgage related, unfortunately). It's been pristine since then. Thoughts on being able to have those late payments removed from the mortage company? I called and asked and they told me that it's unlikely. Would it even be that beneficial?

Without exact details and only generalizations it is impossible to say with accuracy what would or would not improve your score(s). However, one detail does stick out and in my opinion is the biggest problem: your utilization is over 100%. You need to get your debt to income ratio WAY lower to qualify for the kind of credit (or any new credit) you are seeking. When it comes to calculating DTI the accout being "closed or old" won't help if the balance carried is required to be calculated in DTI. Until you lower your debt I don't see FICO scores moving much despite other changes that might happen.

Re: Next Steps?

Anonymous — Thu, 16 Sep 2021 15:11:05 GMT

All things considered, it is apparent that your revolving utilization is dragging you down. No lender will want to extend you much credit with utilization that high because it is a major red flag that you may be insolvent, that you may be living beyond your means or are suffering through some type of economic shock (which is common right now due to the pandemic and has many lenders tightening up the purse strings anyway). I'm not sure how much revolving debt we are talking about but you need to get it down before you see any significant improvement in your Fico scores. Getting it down below 30% should be your first goal. Down below 8.9% should be your second goal, but ideally you want it under 4.9%. If you are able to achieve this goal in just a few months, then you should try employing the AZEO method with your revolving accounts in order to complement the Fico algorithm and maximize your scores.

Re: Next Steps?

SoonerSoldier33 — Thu, 16 Sep 2021 20:23:55 GMT

Reading your post...it's hard to offer good advice without some more specifics. You can be specific without being specific if you're worried about privacy: Example

1. Card A - $5K balance $10K limit

2. Collection account - $5K balance

3. Charged off account - $5K balance

If you give us stuff like this, we can help you more. That said, I agree with what the others have said. Revolving utilization over 100% is killing your scores. This could be caused by your current cards, or old, charged off accounts. In this case, paying some old debts could offer you an immediate score increase, and there are possibly ways to have any collections removed from your reports in exchange for your payment. So, it's not always true that paying old debts won't help your score. We'd have to know a bit more to tell you for sure. Getting the late payments removed via goodwill can't hurt, but isn't likely to help much (if at all) based on how you're describing your current profile until you clean up some other stuff. I understand you may be hesitant to provide too much info here for privacy reasons, or possibly just being embarassed, but know this...we don't judge people here for past credit mistakes. We've all made them, and that's why we're here. So, if you give us some non-specific specifics (LOL) we can help you more.

Re: Next Steps?

HowDoesThisAllWork — Thu, 16 Sep 2021 22:57:13 GMT

@Anonymous

What others have said.

Keep in mind that two "segments" account for 65% of your FICO score: Payment history and Credit Utilization. If those two segments are strong, then you stand a high likelyhood of having a strong score. If they are not......

I would encourage you - if you have not already done so - to look at your free Credit Reports (we are now allowed to look at each CRAs report every seven days.....this is valid until at least April, 2022) and document the accounts listed on each and ensure that everything is accurate.

Assuming that to be the case (which is *NOT* a good assumption at all), then I would focus on taking care of any baddies (payment history) and on reducing your exposure (credit utilization).

Here is something (all good things come in three's, right?) that might help:

https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Collection-agencies-that-do-PFD/td-p/5675391

https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/ABCD2199-s-Eleven-Rules-to-Credit-Rebuilding/td-p/5074148

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Credit-Scoring-Primer-pub-5-17-20/m-p/6023348

And welcome to this amazing forum. Lots of really really smart and experienced people roaming around here.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 11:40:00 GMT

Also, bear in mind that paying off closed credit cards will most definitely help your credit scores. Even closed account balances are counted in your utilization, so as you pay these closed accounts off you should see a corresponding bump in your score (the greater the amount paid off, the larger the bump). And don't worry about paying credit cards off hurting your credit score. This only happens if you pay ALL your credit cards off so they all report with a zero balance. As long as you have one card reporting with a balance you are good. If that card reports with a balance no more than 8.9% utilization, but no less than $2, you will maximize your Fico scores by acing the utilization factor.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 17:43:32 GMT

thanks for the feedback, all. I sincerely appreciate it. Here are more details:

Charge Offs (4 total)

1. Balance $3,745.00; Limit $2,700.00

2. Balance $12,641.00; Limit $12,000.00

3. Balance $2,423.00; Limit $2,000.00

4. Balance $5,388.00; Limit $5,200.00ish

Collections (1 total)

1. Medical Debt; $1,200.00

It's a mess. Writing this out truly makes me feel ill and incredibly irresponsible. I struggle with keeping the momentum going; my greatest issue. It's a marathon (unfortunately, for me) not a sprint. It will take time and I really get that. Separately, my husband and I each have one credit card (current) and carry low balances on each and they're in great standing. We intentionally have a monthly expense that goes to each card and pay them off in full each month; just to build the history, etc. Good idea, bad?

Now...do you think it's time to begin contacting the creditors/collection agencies and negotiating a lump sum payment amount? I want to get a solid plan in place, but I'd be remiss to not be curious about SOL. In your experience, is that worth pursuing? Or do I go directly to negotiations and ensure I have the amount to pay the day of the contact?

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 17:46:37 GMT

OH. would it help to know my scores?

FICO Score 8

Equifax 635

TransUnion 639

Experian 637

Re: Next Steps?

SoonerSoldier33 — Fri, 17 Sep 2021 17:57:24 GMT

Ok, a couple last things, and we can help you make a plan. Are the charge offs revolving accounts (credit cards) or installment loans? And, do you know if they're still being reported to the CRAs monthly? If you have your credit reports in front of you, there should be a 'last reported' date or something similar to that for each account. If you don't, you can pull all 3 credit reports from annualcreditreport.com for free, and it will have all this info as well as when each account is scheduled to be removed from your reports.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 17:58:20 GMT

thanks for the free credit report tip!! I had no idea.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 18:06:42 GMT

@SoonerSoldier33 wrote:
Ok, a couple last things, and we can help you make a plan. Are the charge offs revolving accounts (credit cards) or installment loans? And, do you know if they're still being reported to the CRAs monthly? If you have your credit reports in front of you, there should be a 'last reported' date or something similar to that for each account. If you don't, you can pull all 3 credit reports from annualcreditreport.com for free, and it will have all this info as well as when each account is scheduled to be removed from your reports.

Three are credit cards/revolving and one is an installment ($5,388.00 balance). On the TransUnion report, all show a current 'date updated' and they're listed under "accounts with adverse information', so I'm assuming they're being reported monthly. I see the estimted dates of removal, too. Do you need that info?

Re: Next Steps?

SoonerSoldier33 — Fri, 17 Sep 2021 18:23:28 GMT

Three are credit cards/revolving and one is an installment ($5,388.00 balance). On the TransUnion report, all show a current 'date updated' and they're listed under "accounts with adverse information', so I'm assuming they're being reported monthly. I see the estimted dates of removal, too. Do you need that info?

Only if any of them are set to fall off very soon, bc it may be better in that case to just save the cash and wait. Are any of them falling off really soon, like in the next year or so or in a time frame where you feel it's worth waiting it out versus paying to help your scores sooner?

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 18:29:35 GMT

@SoonerSoldier33 wrote:
Three are credit cards/revolving and one is an installment ($5,388.00 balance). On the TransUnion report, all show a current 'date updated' and they're listed under "accounts with adverse information', so I'm assuming they're being reported monthly. I see the estimted dates of removal, too. Do you need that info?
Only if any of them are set to fall off very soon, bc it may be better in that case to just save the cash and wait. Are any of them falling off really soon, like in the next year or so or in a time frame where you feel it's worth waiting it out versus paying to help your scores sooner?

based on the dates estimated on the report, they're not falling off soon. most show 2025, one is blank, actually. but I wonder what that date is based off of and how the SOL comes into play.

Re: Next Steps?

SoonerSoldier33 — Fri, 17 Sep 2021 18:40:10 GMT

based on the dates estimated on the report, they're not falling off soon. most show 2025, one is blank, actually. but I wonder what that date is based off of and how the SOL comes into play.

Ok, there's a difference in credit reporting and SOL. The SOL is determined by your state's law, and determines how long a creditor or debt collector can legally sue you for the debt. For credit reporting, a delinquent account falls off your reports 7 1/2 years from the Date of First Delinquency (DoFD). Nothing can ever reset this date.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 19:12:34 GMT

Okay, I understand that. My next question is if the SOL has been met, but the drop date has not on the credit report, is it worth pursuing submitting a letter based solely on SOL? I've seen a lot of conflicting information. And do you think by paying these charge-offs off my utilization percentage will go down? That's been conflicting as well.

Re: Next Steps?

tnhomestead — Fri, 17 Sep 2021 19:21:19 GMT

The SOL has nothing to do with how long they stay on your report, that's fixed at 7.5 years, in practice it's a bit under 7. Some companies, such as portfolio recovery will delete the charge off after being paid, so if you want to post who has those accounts, folks can tell you if they do pfd. But getting rid or paying off those bad charges will probably be a huge help.

On the late payments, all you can do is try a goodwill campaign to beg for mercy 😏 and see if they will be nice and remove them.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 19:43:29 GMT

@tnhomestead wrote:
The SOL has nothing to do with how long they stay on your report, that's fixed at 7.5 years, in practice it's a bit under 7. Some companies, such as portfolio recovery will delete the charge off after being paid, so if you want to post who has those accounts, folks can tell you if they do pfd. But getting rid or paying off those bad charges will probably be a huge help.
On the late payments, all you can do is try a goodwill campaign to beg for mercy 😏 and see if they will be nice and remove them.

Oh okay. So even if the charge off is paid in full, it may not be removed from my credit report until it meets the ~7 year mark, HOWEVER, my FICO score will be impacted (positively)? Also, is there a reason to pursue a settlement letter for the charge offs, based on the expired/met SOL, in hopes that they may forgive that debt? I am prepared to make the calls to set up the payments, but I'm afraid without knowing the answer to the previous question first this could create an issue if I ultimately try to submit a settlement letter. I hope that makes sense.

Re: Next Steps?

SoonerSoldier33 — Fri, 17 Sep 2021 19:53:38 GMT

@Anonymous wrote:
thanks for the feedback, all. I sincerely appreciate it. Here are more details:

Charge Offs (4 total)
1. Balance $3,745.00; Limit $2,700.00
2. Balance $12,641.00; Limit $12,000.00
3. Balance $2,423.00; Limit $2,000.00
4. Balance $5,388.00; Limit $5,200.00ish

Ok, here's the deal after getting all the info from the rest of your comments. The 3 charged off credit cards that are still being updated monthly are definitely affecting your revolving utilization %, and killing your scores on top of the monthly reported CO status. Paying/settling them WILL give you a score increase. The thing is, bc you have just your 1 credit card open now, you likely won't see an increase until you get them ALL reporting a $0 balance. When an account is charged off, you lose the credit limit for utilization scoring purposes, but the balance still counts against you. So, you have like $19K against whatever the CL of your 1 open card is...well over 100% utilization probably unless your current card has a $20K+ limit. So, it can be really discouraging let's say if you get that whopper $12K card paid off, and you see nothing happen score wise, bc you might still be at or over 100% utilization even when that one goes to $0. You should know up front, that's how it will happen. You likely will not see a score increase until they're all at $0, or at least under the amount of your current card's limit. Since there are no collections agencies associated with these, you don't have to fight the PFD battle to get CAs removed to avoid the CO/CA double whammy. The installment CO hurts too, but not as bad as the revolvers. I would focus on paying the revolvers first, and then the installment. I don't know what your cash position is like, but getting the revolvers paid/settled will offer you an immediate score increase once they stop affecting your utilization %. They will also begin the aging process, hurting your scores less and less until they fall off.

Collections (1 total)
1. Medical Debt; $1,200.00

For a collections account, you want to do everything possible to get the account removed from your reports in exchange for your payment. A paid collections account offers no immediate score increase to FICO 8 scores if it stays on your reports as paid. You want it removed. There are several options to get this result...especially with medical collections. You can see if it was an insurance error, and have it rebilled to insurance to get the collection removed if your insurance should have paid it. If it's a legitmate bill that you're responsible for, you can call the doctor/medical provider and ask them to recall the debt from the CA in exchange for your payment. You can call the CA and ask if they will delete it from your reports in exchange for payment (PFD). It's generally a lot easier to get medical collections removed than other types of collections.

It's a mess. Writing this out truly makes me feel ill and incredibly irresponsible. I struggle with keeping the momentum going; my greatest issue. It's a marathon (unfortunately, for me) not a sprint. It will take time and I really get that. Separately, my husband and I each have one credit card (current) and carry low balances on each and they're in great standing. We intentionally have a monthly expense that goes to each card and pay them off in full each month; just to build the history, etc. Good idea, bad?

Perfect. Put your Netflix, buy a tank of gas, whatever, and then pay it off each month. You may even consider a second card to do this with to get more positive history reporting. You may have to get a secured card, but there are lots of options. Discover secured and Cap One are both great options.

Now...do you think it's time to begin contacting the creditors/collection agencies and negotiating a lump sum payment amount? I want to get a solid plan in place, but I'd be remiss to not be curious about SOL. In your experience, is that worth pursuing? Or do I go directly to negotiations and ensure I have the amount to pay the day of the contact?

As I said responding to one of the other posts, you can't reset the credit reporting times no matter what you do. Each delinquent account will be removed 7 1/2 years from the DoFD of that account. The SOL is something different entirely, and is dictated by your state's laws. You CAN reset the SOL for which a creditor can sue you for the debt by making a payment, or even by just acknowledging the debt in some states. My advice is to contact each one only when you have the funds ready to make a deal. You'll get better terms if you have a lump sum ready for payment. When you're ready, call, negotiate a settlement offer you can afford, get them to email you an agreement saying the will consider your account 'settled in full for a payment of $xxxx.xx', and then pay them once you have the agreement in writing (email is fine).

I know it can be really overwhelming, but you're taking the first steps already, and I wish you luck. We're here if you have more questions.

Re: Next Steps?

Anonymous — Fri, 17 Sep 2021 20:10:58 GMT

@SoonerSoldier33 wrote:
@Anonymous wrote:
thanks for the feedback, all. I sincerely appreciate it. Here are more details:

Charge Offs (4 total)
1. Balance $3,745.00; Limit $2,700.00
2. Balance $12,641.00; Limit $12,000.00
3. Balance $2,423.00; Limit $2,000.00
4. Balance $5,388.00; Limit $5,200.00ish

Ok, here's the deal after getting all the info from the rest of your comments. The 3 charged off credit cards that are still being updated monthly are definitely affecting your revolving utilization %, and killing your scores on top of the monthly reported CO status. Paying/settling them WILL give you a score increase. The thing is, bc you have just your 1 credit card open now, you likely won't see an increase until you get them ALL reporting a $0 balance. When an account is charged off, you lose the credit limit for utilization scoring purposes, but the balance still counts against you. So, you have like $19K against whatever the CL of your 1 open card is...well over 100% utilization probably unless your current card has a $20K+ limit. So, it can be really discouraging let's say if you get that whopper $12K card paid off, and you see nothing happen score wise, bc you might still be at or over 100% utilization even when that one goes to $0. You should know up front, that's how it will happen. You likely will not see a score increase until they're all at $0, or at least under the amount of your current card's limit. Since there are no collections agencies associated with these, you don't have to fight the PFD battle to get CAs removed to avoid the CO/CA double whammy. The installment CO hurts too, but not as bad as the revolvers. I would focus on paying the revolvers first, and then the installment. I don't know what your cash position is like, but getting the revolvers paid/settled will offer you an immediate score increase once they stop affecting your utilization %. They will also begin the aging process, hurting your scores less and less until they fall off.

Collections (1 total)
1. Medical Debt; $1,200.00

For a collections account, you want to do everything possible to get the account removed from your reports in exchange for your payment. A paid collections account offers no immediate score increase to FICO 8 scores if it stays on your reports as paid. You want it removed. There are several options to get this result...especially with medical collections. You can see if it was an insurance error, and have it rebilled to insurance to get the collection removed if your insurance should have paid it. If it's a legitmate bill that you're responsible for, you can call the doctor/medical provider and ask them to recall the debt from the CA in exchange for your payment. You can call the CA and ask if they will delete it from your reports in exchange for payment (PFD). It's generally a lot easier to get medical collections removed than other types of collections.

It's a mess. Writing this out truly makes me feel ill and incredibly irresponsible. I struggle with keeping the momentum going; my greatest issue. It's a marathon (unfortunately, for me) not a sprint. It will take time and I really get that. Separately, my husband and I each have one credit card (current) and carry low balances on each and they're in great standing. We intentionally have a monthly expense that goes to each card and pay them off in full each month; just to build the history, etc. Good idea, bad?

Perfect. Put your Netflix, buy a tank of gas, whatever, and then pay it off each month. You may even consider a second card to do this with to get more positive history reporting. You may have to get a secured card, but there are lots of options. Discover secured and Cap One are both great options.

Now...do you think it's time to begin contacting the creditors/collection agencies and negotiating a lump sum payment amount? I want to get a solid plan in place, but I'd be remiss to not be curious about SOL. In your experience, is that worth pursuing? Or do I go directly to negotiations and ensure I have the amount to pay the day of the contact?

As I said responding to one of the other posts, you can't reset the credit reporting times no matter what you do. Each delinquent account will be removed 7 1/2 years from the DoFD of that account. The SOL is something different entirely, and is dictated by your state's laws. You CAN reset the SOL for which a creditor can sue you for the debt by making a payment, or even by just acknowledging the debt in some states. My advice is to contact each one only when you have the funds ready to make a deal. You'll get better terms if you have a lump sum ready for payment. When you're ready, call, negotiate a settlement offer you can afford, get them to email you an agreement saying the will consider your account 'settled in full for a payment of $xxxx.xx', and then pay them once you have the agreement in writing (email is fine).

I know it can be really overwhelming, but you're taking the first steps already, and I wish you luck. We're here if you have more questions.

this info is all so great. I'm taking it all in. thank you so very much.

Re: Next Steps?

HowDoesThisAllWork — Sat, 18 Sep 2021 01:39:36 GMT

@Anonymous wrote:
thanks for the free credit report tip!! I had no idea.

@Anonymous You are most welcome!