490 Credit- steps to improve

[Anonymous]

Extremely poor choices over the last three years, dropped my score from low 700s to 490. Defaulted on 4 credit cards, was 30-60 days late on several car lease payments (couldn't afford the payments in the first place), and was late on phone bill.
Amex, Cap1, and two U.S. bank credit cards sent to collection agencies. My lease for the car is up in a couple months.

I am now financially in a place where I have a sufficient salary and low expenses, and I have saved up enough cash to pay off the full amounts of the credit cards, but I want to proceed in the smartest manner. I was planning to pay off app balances, and apply for a secured credit card through my local credit union.

However, I just received a letter from AmEx indicating that if I pay off the full balance, they will offer me the Optima card, assuming I have no bankruptcy or other Amex card with a balance. The credit limit would be 50% of the prior credit limit.

I'm inclined to take their offer.

Thoughts? I know this isn't a great card but I would like to get back in the American Express fold. With the other cards (US Bank and Capital One), I'm not sure the best path forward beyond paying the balances.

In addition to this, my plan is to keep credit usage below 10%, pay all bills on time, etc.

Thank you for your help.

[Anonymous]

I was in your boat about 10 years ago. On the optimistic side, when you so close to or at the bottom of the credit pile, there's nowhere to go but up. I went from 700 to right under 500 in about 6 months due to financial constraints in 2008. CC's left to charge off left and right, collections, etc. Wasn't until last year most of that stuff came off and I was able to fully rehab my credit. If you have no credit cards, then beggars cannot be choosers. Go ahead and take the AmEx card and start your rebuild. Also try Capital One. They've been known to give people with poor credit a second shot. Did it for me back in 2010 and my wife and sister-in-law also. All of our scores were in the 500s when approved for the Capital One unsecured cards. Always try to negotiate a pay for delete to get back in good standing on your credit report and satisfy your debts. If they will not accept, at least try to get a settlement offer to pay less than the full amount. Best of luck.

[Anonymous]

Thank you for the reply. How long did it take to get your credit back up past 600?

[Anonymous]

When my credit bottomed out in late 2008/early 2009, I just left it alone as I had no means to pay for any debt. Got the Cap 1 unsecured card in winter 2010. I didn't get above 600 unti 2013 and that was without me trying to repair it. Got serious about buying a home last year and went at the repair very aggressively and got a few things removed here and there, some others fell off, I had some early exclusions and my repair efforts, in conjunction with paying my credit card debt from 99% and 10k total down to around $250 and 1% utilization got me from low 600s around May of last year to 730s by October. Brought my wife from 580 to the 730s in 6 months using all of the methods I read about here and just Googling things. Lots of phone calls, letters, and disputes but it was worth it. Just have to stay focused and diligent.

[Anonymous]

Sometimes things happen beyond our control. When the recesion hit, I found myself unemployed.  I had to let my Amex Blue card go.  Once I got back on my feet I started the process of rebuilding my credit.

American Express offered me the Optima Card.  I took it.  They gave me a $500 limit.  I took extremely good care of the card, and a year later they approved me for a Charge Card and a year after perfect payments with the Charge, they approved me for 2 revolving cards. 

Capital One offered me a Platinum MasterCard, unsecured.  They approved me for a limit of $300.  After a year they converted it to a Quicksilver MasterCard and increased the limit to $750.  Recently I tried to get the limit increased but they told me that since the card had originally been another product, the limit couldn't go higher than what it was.  So they suggesed applying for the Quicksilver Visa.  They approved me for a very high limit Visa Signature version of the Quicksilver.

Rebuilding my credit was one of the most frustrating things I've ever gone through.  My advice, get these cards and take extremely good care of them.  Patience is key.  Nothing happens over night.  Things do get better.  Best of luck to you.

[manyquestions]

With where your credit is now and will likely be for the near future I would take the Optima card and apply for a CapOne secured card.

[Anonymous]

Yeah, just get whatever credit you can (secured or not) and be responsible with it.  Use it and pay it on time.  Don't go near the limits and don't overapply for new credit. 

It just takes time and at your current juncture, there really isn't too much in regards to FICO nuances that will make much of a difference other than establishing a good payment history and increasing the age of your good credit accounts, both of which just takes TIME.  Once your scores gets higher, then you can "play" the system in regards to finer nuances to bump them, but for you now, there's really no point: just open a secured account, establish a payment history for a few years until your credit is worthy enough for an unsecured account, then build from there.

Good luck.  Just remember, nothing comes quickly and hopefully you learned from this.  Here's another tip, once you establish your credit again, don't use it unless you can pay it off completely each month.  Not an easy thing to do, but if you can abide by that, you will be control of your finances instead of that new TV or expensive dinner you shouldn't be buying dictating your life.

[jbsea]

I would take the Optima card.  That and a couple of secured cards will bold well for you in your journey.  A year and a half ago I couldn't even get a secured card. I was turned down 3 times.  But once I got one and then two it moved very quickly (at the time is was sooooo slow) But now I'm at 710.  I did have the luck of must things following off and able to remove a few things so that helped.  If you able to pay off everything ( do do the pay for delete) then that will help greatly.  In a year you will be really impressed with how far you have come.  Read these forums.  I would not be past the whole credit one type cards without the knowledge of the people here.

[Anonymous]

Thank you all for your helpful advice. I have definitely learned from my mistake and am grateful to all of you who can share from your experience.