Rebuilding Credit... In a Quandary

[optionmint]

Hi MyFICO Forum Members, this is my first post!

I'm rebuilding my credit and I'm stuck at a bit of an impasse on how to properly proceed. I effed myself in my Mid-20s (Mid-30s now) when working a sales job with low base salary and heavy commission. I had worked with a debt settlement group but the juice really just wasn't worth the squeeze. Unfortunately that didn't end too well overall. Most of my accounts got sent to collections and I was able to settle for pennies on the dollar and in exchange get almost all removed from my credit report and begin anew if you will.

Currently, I have very little debt compared to income -> 16 accounts on my credit, 10 active... 18% debt to credit ratio, one personal loan for about $2,000, auto loan for about $40,000 through Capital One ---  no delinquincies for the past year or so and one deragatory item...

One of the holdbacks I've been experieincing is many lenders telling me I have serious delinquincy. I believe I isolated this to one settled account with OneMain Financial that I let go 150 days past due per the debt settlement company. This is falling off my credit report in the next few months.. finally. My credit score ranges from 665-695  currently. Now let me move onto the real question here...

Currently, I have several cards designed of course for people with little or poor credit history.

-Capial One Platnium $300 

-Cerulean Mastercard $750

-Surge Mastercard $750 

-Credit One Visa for Rebuilding Credit $500

-Credit One Visa Platnium $500

-Macy's Store Charge $300

-Bob's Discount Furniture $2500

The CURRENT Problem - My household income is just over $200,000 - With how much we make/spend... I can barely put one or two bills or expenses on one card. I've requested credit line increases, however, see above on serious deliniquncy that is usually the reason I get told no. I'm paying annual fees for most of these and it's just ridiculious.

I'm stuck just waiting and seeing if I get any credit line increases or am I better off just canceling the majority of these minus ones that do have some upside - For example Cerulean and Surge are both serviced by Continental Finance, they had a promotion where they would double your credit limit after six months (I'm just about there).

I'm relieved I at least got an auto loan through a legitimate lender rather than a shady one like my previous car and I'd love to get a credit limit on a card that is actually of substance. I know it isn't an overnight process, but any insight on how I can best navigate this situation to my advantage? Will that old item 150+ days past due really change anything from where I am currently at?

Thank you for any insight!

[Patient957]

You're not in a bad position.  I think things are going to get a lot better for you soon.  Be patient.  I wouldn't take on any more cards right now.  Hold tight for at least 6 months,  a year is better.  Get the CLIs you can get.  Since your income is decent, I would hold your AF cards another year or two and then cancel them. Some might recommended you cancel them now, but I wouldn't.   And when you do app for a new card, pick a no AF  card.

What's your revolving utilization?  I would practice AZEO religiously for now and see if that gets you any immediate points.  With low limits, AZEO takes extra discipline, but I would do it anyway.

Whether that 150 late falling off will make a difference depends the rest of your profile.  It might.

Tldr: Get AZEO going, if you're not already, try for as many CLIs as you can get, and otherwise just stay the course.  Reassess in 6 months.

[Varsity_Lu]

You're not stuck. Just pay cash for now. Close all but your oldest no AF card. Use it some, but PIF each month. Pay all your other bills with cash/debit card. Then just wait. You don't have to pay for things on credit cards. At some point your credit will improve and you can get a better card with rewards. Now is not that time. I know you might not like to hear this, but unfortunately your past choices have consequences. Patience and discipline will pay off and someday this will all be behind you.

[Minimalist]

Kind of in the same situation, minus the income level.

I have about $4k in CC debt (was higher but thanks to Date of last delinquency, it was zeroed out and close to being removed) and am currently nursing a Credit One Platinum with $300 limit.  My only card until that debt (and a few other minor collections) are paid for.  I'm kind of an outlier around these parts since I don't believe in getting more than maybe 3-4 cards at one time.  That's my plan for the foreseeable future once everything else is taken care of, and I get closer to the 10 year mark when that BK 7 is off my credit (Feb 2027).

I plan on using cash and debit for now, and only using the C1 card for small purchases, gas, and such.  Even with any new credit, I'll still pay bills with cash/Automatic Bill Pay. That would be an okay plan to follow on your part.  With your income, obtaining any kind of new prime credit shouldn't be an issue.  As said previously, one card, use it every month, PIF. Then go for 3-4 Prime cards in the future.

[drewricomakeubu]

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@Patient957 wrote:

You're not in a bad position.  I think things are going to get a lot better for you soon.  Be patient.  I wouldn't take on any more cards right now.  Hold tight for at least 6 months,  a year is better.  Get the CLIs you can get.  Since your income is decent, I would hold your AF cards another year or two and then cancel them. Some might recommended you cancel them now, but I wouldn't.   And when you do app for a new card, pick a no AF  card.

What's your revolving utilization?  I would practice AZEO religiously for now and see if that gets you any immediate points.  With low limits, AZEO takes extra discipline, but I would do it anyway.

Whether that 150 late falling off will make a difference depends the rest of your profile.  It might.

Tldr: Get AZEO going, if you're not already, try for as many CLIs as you can get, and otherwise just stay the course.  Reassess in 6 months.

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I would just wait until your derog falls off your credit and apply for a better card then. Close all the nonsense credit cards except for your oldest one 

[Patient957]

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@optionmint wrote:

The CURRENT Problem - My household income is just over $200,000 - With how much we make/spend... I can barely put one or two bills or expenses on one card.

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For this particular problem, you could consider a high limit secured credit card.  Some will go up to $5K limit.  This thread is pretty old, so some info may be dated, but it's still on point:

https://ficoforums.myfico.com/t5/Credit-Cards/High-limit-secured-cards/m-p/6394843

[Girl_In_The_City]

I would keep the cards you have open for now until the anual fee comes due again. No point in shutting them down if you already paid the fee. Many of them you can call and get them to waive the annual fee when it is coming due if you have had positive payment history and are paying in full each month. If you can't get them to waive the annual fee I would close the card instead of paying it. Sometimes when you do that they will transfer you to the "retention" department who will then waive the fee for you. If not, close the card and look at secured cards that graduate if you can't get approved for the regular card with no annual fee. Discover, Capital One, Bank Of America, and Navy Federal Credit Union (if you qualify for membership) all have secured cards that will grow. When I first started to establish my credit I started with a Discover secured card and now several years later am up to a $15,000 credit limit. The same would go for BOA, & Navy Fed. Capital One will go in a "bucket" due to the card type where after it graduates you only get $100-$300 limit increases at a time and won't really grow past $3000 credit limit. When I had that one I just shut it down once I qualifed for a better Capital One card that would not fall in the bucket. Also, I would not stress too much if you close one of the accounts that you have now. If you utilization is low on other cards it won't really hurt your score because even if the account is closed it will still be reflected on your credit file as positive payment history for 10 years.

[dfwxjer]

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@optionmint wrote:

One of the holdbacks I've been experieincing is many lenders telling me I have serious delinquincy. I believe I isolated this to one settled account with OneMain Financial that I let go 150 days past due per the debt settlement company. This is falling off my credit report in the next few months.. finally. My credit score ranges from 665-695  currently. Now let me move onto the real question here...

Currently, I have several cards designed of course for people with little or poor credit history.

-Capial One Platnium $300 - Close

-Cerulean Mastercard $750 - Keep

-Surge Mastercard $750 - Keep 

-Credit One Visa for Rebuilding Credit $500 - Close

-Credit One Visa Platnium $500 - Close

-Macy's Store Charge $300 - Close

-Bob's Discount Furniture $2500 - Keep

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I'd close the above listed accounts, and then use one of the $750 cards to buy a tank of gas every month. Assuming that tank of gas is less than $75, let it report, and then pay that balance off immediately once the statement cuts. Do not use the other $750 card at all. I'm not sure what the furniture store line of credit involves, but if there's already a balance pay it off immediately and stop using it. 

Use a debit card for everything else, and maintain strong discipline for 6-12 months while you wait for the derog events to fall off your report. Unfortunately you have some additional late events that will remain but you can dillute that bad credit with positive behavior going forward. Do not continue applying for new credit at this time. You're only burning inquiries that don't lead to anything productive. 

There's no reason to pay annual fees on low tier subprime cards from Credit One, and you can use those funds to apply extra payments to your personal loan. 

You will want <10% utilization reporting every single month and to pay down that personal loan as fast as you can. This behavior combined with the aging derog falling off will boost your scores significantly. If you can stay strong and avoid applying for new credit for 12 months then you will be in a good position to apply for good no annual fee cards this time next year. Trying to rush the process will just set you back further in the long run as you'll crater your score with new subprime accounts and rack up inquiries for these junk cards. 

[Kforce]

Welcome to the forum.   

Agree with @drewricomakeubu , @Varsity_Lu  and @dfwxjer 

Cut back the AF cards, pay things with billpay service and a debit card or two,  just let time do it's magic.

Do not get more cards, waste funds sitting with high limit secured cards or bother with Azeo.  I would let all cards sit with zero use, unless I really needed a loan, then let one report $10, for a couple of months.  This all goes away with time, 20 points for all zero when your score is already low and you are not seeking credit means nothing.  Make your life simple, don't need credit cards to spend money, and the AF's, time, low CL's and inquiries all cost more than the score gain's, while at a point where the score means nothing.  

You are in good shape, sit back and relax.   

[FicoMike0]

Welcome to the forum.

You've gotten good advice, some of which differs, lol. Exactly what to do depends on your goal. 

First, don't make any app's until the 150 day late drops off.

Second, freeze all three bureaus, so any cli requests don't result in a hard pull.

Third, close fee cards as fee comes due, unless they waive fee.

Now, if you want to see short term score improvement,

Keep at least three bank ( not store) cards open. Do azeo. Keep reported individual utilization under 29%, total under 9%. Pif before due date. Remember, reported util is usually based on statement balance. Yes, it's a bother to manage and it's effect is month to month. You can use all the cards, just pif all but one before statement date. Useage will help with clis.

You seem to be happy with car loan. What's the rate? As your scores improve, you might be able to refi at a lower rate. On $40k, a 3% reduction could get $50/month saving.

As others have said, time is your friend, but remember, one late is worth a thousand on times.