Short credit history... what else can I do??

[Anonymous]

For the last few years, I've been really interested in this whole credit thing...  when I first checked my scores, they were around the 615-625 mark. I got as high as the high 680s until last summer when my car needed $1,100 worth of work and was forced to put it on CC.

Here's a snapshot of my report I pulled today:

EQ: 669  TU: 662

payment history: very good

amount of debt: good (I do have a high utilization of 62% on the revolving side - currently $1,809 in CC debt and $3,061 in installment - remaining school loans)

length of credit history: not good (I'm currently 24 with just 5 years, 2 months of history with AAoA being 3 years)

amount of new credit: very good

No missed payments and 1 collection that occurred 3 years, 8 months ago ($90 doctor bill I forgot about and didn't rec'd any notification! Once I pulled report and saw it, paid it in full 12/06)

So, I have three dings - 1 collection, short history, and high utilization. I just called Discover and they lowered my interest rate from 12.99% to 11.99% (still high, I know, but I didn't want to mess with the unpredictable variable rate). My current plan is to pay my exisiting CC off by 2/10.

I know I just have to wait and suck it up for my accounts to age and wait for that ridiculously stupid collection to fall off... but what else can I do? Will paying off my CC quicker boost my score as much as it would if I paid it down consistently over time? Also, I know soft-pulls won't ding me ...but can you pull them too much? I've heard to do it twice a year and that's what I've been following...

I want to make the smartest decisions possible... I know what I do now will affect my credit for years to come... what's the smartest action plan?

Any help is greatly, great appreciated!

[PayingTheBills]

Read up on the HIPAA Process in this thread. 

HIPAA Process

You can get that medical collection off your credit, which would be a huge bump to your score since it is your only baddie, maybe into the 700's.  Follow theprocess exactly.  It is tedious, but worth it.

Did you ask Discover for a CLI? That too would help.

[PayingTheBills]

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@Anonymous wrote:

So, I have three dings - 1 collection, short history, and high utilization. I just called Discover and they lowered my interest rate from 12.99% to 11.99% (still high, I know, but I didn't want to mess with the unpredictable variable rate). My current plan is to pay my exisiting CC off by 2/10.

I know I just have to wait and suck it up for my accounts to age and wait for that ridiculously stupid collection to fall off... but what else can I do? Will paying off my CC quicker boost my score as much as it would if I paid it down consistently over time? Also, I know soft-pulls won't ding me ...but can you pull them too much? I've heard to do it twice a year and that's what I've been following...

I want to make the smartest decisions possible... I know what I do now will affect my credit for years to come... what's the smartest action plan?

Any help is greatly, great appreciated!

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Your FICO score is a "snapshot" of whatever your report says at the instant you request it.  Paying your CC down now helps your score dramatically (<10% utilization is a good goal), the only advantage to paying over time is the added age of your account(s).  So if you don't have the $ right now to pay it down, but don't need to apply for a loan or anything soon, paying it down over time as you can manage it is fine and will net you just as many points when you're done.

Message Edited by PayingTheBills on 02-26-2009 10:43 PM

[Anonymous]

I didn't ask for a CLI from Discover... they gave me one in January of this year. Original line was $2,000 and now it's $2,600.

Thanks for the HIPAA link -- I'm semi-new to this... mostly a lurker... anyway, no idea for what the acronym stands but I'll be sure to check it out!

I have heard that it can do more harm than good trying to get a collection taken off. Is this true if it's already been paid? I just assumed I'd have to live with it... I'd hate for my score to go down even more...

Thanks, again!

[PayingTheBills]

If it's a paid collection, there is no risk at all.  If it is unpaid, there are risks - you can "awaken a sleeping giant" and cause the CA to come after you for their money.  But you've already given them their money, so they could care less about you.  You definitely want it off your report, because many people report a huge bump when getting rid of their last "baddie."

Medical collections are special, because once they are paid, the law states that the CA has no right to your Private Health Information, so it must be removed.  The HIPAA process looks confusing, just keep re-reading it until it makes sense.  And ask anyone here for clarification if you need it, the mods here are super helpful.

As far as Discover goes, you're on the right track.  Wait 9-12 months between asking for CLI's if they aren't giving you automatic CLI's, and try to do so when your util is <10%.

Message Edited by PayingTheBills on 02-26-2009 10:50 PM

[PayingTheBills]

Feel free to add a retail or gas card to your CC mix, which will add a few points to your score.  Just make sure it is a retail card (no Visa or Mastercard logo) and not a credit card.  Macy's has a good card, but get a card you actually want from a store you actually use.  Anyone can get use out of a gas card, so maybe that route is for you if you'd prefer.  But adding a retail is up to you, and definitely not necessary.

Most people here would suggest getting a CC from another bank, a Visa or MC since you already have a Discover.  You never know when a certain bank/company is going to go belly up or if you're going to be somewhere Discover isn't accepted, so you want to be prepared.

After that, you'd just be "credit gardening" and waiting for your accounts to get older.

[Anonymous]

My goodness, I have to say I'm certainly impressed by such kindess on the boards! Thank you!

I have a Best Buy with a CL of $900 and a $0 bal..   is that retail enough?  I've thought about a gas card before... just to get extra available credit but not use it so my utilization ratio would automatically go down. Or should it be a small balance I pay off every month? And thinking of that, if I paid it off every month before they reported, it'd be just the same as not using it at all, right? Sort of a moot point, I suppose.

And you're right, the HIPA ..A..AAA, whatever it is sounds like a boatload of confusion but will work on over the next week.

[Scamp]

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FurALease wrote:

My goodness, I have to say I'm certainly impressed by such kindess on the boards! Thank you!

I have a Best Buy with a CL of $900 and a $0 bal..   is that retail enough?  I've thought about a gas card before... just to get extra available credit but not use it so my utilization ratio would automatically go down. Or should it be a small balance I pay off every month? And thinking of that, if I paid it off every month before they reported, it'd be just the same as not using it at all, right? Sort of a moot point, I suppose.

And you're right, the HIPA ..A..AAA, whatever it is sounds like a boatload of confusion but will work on over the next week.

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Right!  Best Buy, if it's the store card, is retail enough.  A card that gives good rewards for gas might not be a bad addition, though, if you use it and pay it off religiously to keep it reporting a 0 while you're paying down the larger balances elsewhere.

As for the HIPAA process, you might go over to the Rebuilding Your Credit board and browse through some of the threads on there that discuss it - might help get it clearer for you, and as Paying noted, getting that baddie off your reports should be a significant boost to your scores.

[Mark_in_Pasadena]

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FurALease wrote: 

And you're right, the HIPA ..A..AAA, whatever it is sounds like a boatload of confusion but will work on over the next week.

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Did you pay a collection agency or the doctor directly?  If you paid a collection agency, then there's no HIPAA process left for you.  If that's the case, you'll need try to do a Goodwill Letter.  If that fails, then try disputing the item on your credit report.  Many of the collection agencies won't reply to the Eq/Ex/TU request for validations on paid accounts like yours.  After 30 days of the collection agency failing to reply to the dispute, the negative item will be removed from your credit report. 

In the future, always try to do a HIPAA process payment prior to paying the debt on medical collections.  On non-medical collections, always try to do a PFD (pay for delete) negotiation with the collection agencies PRIOR to paying.  Paying a collection and having it stay on your report does the same damage as just not paying it as far as a FICO score is concerned, though it will be looked on more favorably when a manual human being review of your credit report is done. 

The basic premise of the HIPAA process revolves around you paying the doctor directly, while notifying them that they're required, under HIPAA laws, to accept your payment in full directly and notify the collection agency to delete you from their records & remove any negative collection info from your credit report.  You should never contact a collection agency directly for medical collections, since you're denying that they even have a right to collect the debt.  Always deal with the doctor directly, even if they try to claim "it's been sent to collections"...under HIPAA laws, they're required to always accept direct payment and recall the collection.

Message Edited by Mark_in_Pasadena on 02-27-2009 02:15 PM

[Anonymous]

Well, crap. Wish I would've known that sooner! When I pulled my report back in late '06 and saw it was from my former doctor's office, I called them directly and they said I needed to speak with the collection agency ...so, I just paid them in fear of it further damaging my credit. I had no idea of anything to do with HIPAA ..if I did, I would've definitely taken action!

Thanks for the insight on goodwill letter...  is there a standard outline or is it appropriate to wow them with my personal writing prowess? Should I send it certified and ..being a stickler, I wonder if from the day they rec'v it start counting the 30 days or day they sign for it? I know under other laws pertaining to other things, you can start from the day you mail it. And granted, it probably varies from state-to-state. So, okay, I've got the letter and mailed it off ...do I need to copy the credit bureaus, too? I hate to be such a newbie but do not want to flub anything more than I, apparently, already have.

Oh, and upon further review of my reports, Best Buy reduced my CL from $900 to $314. Those crabapples didn't even tell me! So, I think a gas card is probably in my future.

Knowledge is power and I'm in training! (cue Rocky theme)