Need Advice on the best way to rebuild my credit!

[Anonymous]

Hey, I am a noob who has been working on my credit since March with the goal of buying a house in 2 years.  Unfortunately, I have been out of the credit scene for several years so I am starting from scratch.  I currently have the following accounts:

Wells Fargo Auto Loan - $20k, 1 month old

Capital One Unsecured - $300 - 1 month old

DiscoverIt! Secured - $500 - 5 months old

I also have 2 previous closed/paid auto loans with many late payments, most 30 day but one 60 day, the most recent late payment was November 2016. 

I also have 7 collections accounts, one which will be removed by the creditor next month after paying it off, and 2 which I believe are being removed as a result of hiring Lexington Law (I no longer see them on my Experian or Transunion reports).  I am planning on keeping Lex as long as possible to try and get my late payments removed.

Finally, I have 8 inquiries, (across all 3 reports) all from June or July of this year, 5 from my auto loan (all within 30 days), one from Capital One, one from Discover and one from an ill-advised debt consolidation attempt but all they would approve me for is secured so I didnt go for it (I know, dumb on my part).

I'm also getting added as an authorized user to my sister's 10 year old high-limit card which reports AU's to all 3 bureaus, that should hit next month.

SO my question is - advice? I keep  my cards under 10% utilization and pay them off every month.  I am paying all my bills on time.  Should I get another card when my score goes up a little or just let everything marinate until I get the mortgage?  I just dont know if I have enough credit to get to my goal of 700 in 2 years.

Also, should I try to get the 2 closed auto accounts off of my credit report?  Does it look worse with all those late payments than no accounts at all?  I do have a positive VW credit account from 2006.

Any advice you guys can give would be great!

[Anonymous]

Bump! Could really use any advice!

[Sandman771]

Keep one card at less than 9% useage reporting each month. So $300 card never let it report more than $26 on a statement. The other keep it PIF each statement or don't use it at all. The Cap One seems to be a credit steps card so after six months you can ask for a CLI (I think it is 6 months maybe 5). But you have an auto loan so that is your installment loan. If you could pick up another card at some point that would be great. FICO likes to see three cards, two showing a zero balance and one less than 9%. Remember they always round up so 9.01% utilization would put you in the 10% group. It is tricky but manageable. Just harder with smaller limits. 

Sorry for rambling and I hope this helps. 

[Anonymous]

1) As far as your current line up
One more revolving TL wouldn't hurt
A secured CU Visa perhaps
The addition of the AU from sis isn't a bad idea IF the payment history is outstanding AND if she doesn't use the card, meaning it's a sock drawer card for her, other wise having another card with a balance and having to coordinate with what % of debt she's using this month vs what you've used isn't worth it + you've got plenty of time to build a solid enough profile in 2 years.

2) Ideally the scoring model likes a 3 & 1 that's 3 revolvers ( CCs) and 1 installer and you got 1 car loan and 2 CCs...their all young but again 2 years allows for some history ( Again, the sister's AU account may help to get a 3rd CC but won't matter much towards a mortgage because the UWers will ignore accounts you aren't legally responsible for...and many times will actually discount your score, as not totally earned by you)
Again, why want to secure TL #3 and allow all the kids the grow older together and allow the HPs to age out of negative effect (12 months)

3) You'll be impressed what 8-10 months of history will do with multiple TLs being managed, all adding history together

4) For RISK scoring purposes
The ideal scenario is ONE account showing a sub 10% utilization with all others showing zero usage
To maximize your score you don't want multiple accounts showing a balance, only ONE
*Remember it's RISK scoring the model sees more risk in having accounts with unpaid balances and again the model doesn't evaluate the amount of the balance, just that one exist, a $5 balance = a balance so be careful

On the other hand a sub 10% utilization shows a well managed profile vs a dormant profile

5) Is this manipulation of how the model is programmed to read and see things = you're darn right, especially as we build a new profile and baby step towards a mortgage qualification

6) With small CLs the calculations shouldn't be hard to understand 10% or a $500 CL is $50, simple as that.
Again the model gives a rat's butt over how many zeros in the CL it reads the debt/utilization rate PERIOD...so again it's 3rd grade math
It's up to you to manipulate the data the model evaluates
*Keep the ratios low, allow time to work for you request SP CLIs every 6 months and BAM!

Again, I'd like a nice generous CU added to your profile, one might open the floodgates with a little history under the belt 10-15 months from now you'll be looking 'pretty'

7) Removing the auto TLs is dicey, you'd like to keep old paid off accounts on one's profile as they add juice and thickness for 10 years after their closed but I really don't like the fairly recent lates ( not even a year ago) not a mortgage approval killer but not a gold star either

All things considered, you look like you're in great shape...add the one more CC, keep the utilization down, pay on-time and I can't see why you wouldn't have a 700 score in 2 years

[Anonymous]

Thank you so much guys! I knew you would be able to help. I pay my balances in full each month so I don't have to pay interest, then after the billing period but before they report to the credit bureaus I will put a small purchase on there, because I thought a small balance was better than $0 to show you are using your credit. I had no idea you should only carry a balance on one card!

My sisters AU card is a $0 balance (and stellar payment history) sock drawer card so no problems there. Actually she cut it up she just keeps it open because it's good for her credit.

One quick noob question though - what is a CU?

[Anonymous]

1) CU= Credit Union
But not just any ole CU some are mind numbing conservative, others as I mentioned can be mind blowingly generous, really setting you up nicely CL and % rate wise.
Also, remember CUs also do car loans, IRAs, MORTGAGES 😎 and or refis one never knows where the relationship winds up😉

IMO all things considered why not start all relationship with 'marrying' potential vs some Slam-Bam-Thank-you-Ma'am mistress that you know is gonna have to be replaced.
Again, if 2 if not all 3 or your 1st '3' can be keepers why not it adds to your long term AAOA and gives you more candidates for oldest account.

Example:
I had both my kids (21/19) app with Navy FCU ( Federal Credit Union, almost 98% are FCU😊) those accounts may be still be around 40-50 years from now.
My 19 has a auto loan in addition to her CC, what might be financial relationship be like with over a decade of history prior to 30?
My son's initial 2 CC apps ( the only 2 he's ever applied for) awarded him nearly 20k ( 1st CC sub 10% rate) he thinks credit is EASY but because his Pops knew how to manipulate the use of AU and whom to apply to he doesn't know anything other than he made 2 calls in 30 minutes later his got signature level cards out the gate.

2) To expand slightly on the AU situation based upon you scenario
*Remember AUs are good for 'jump offs' auto approvals, those 60 second deals with light UW...
Perfect for adding a CC ( so one doesn't have to tie up security deposit money) but other than that the usefulness is less of value.

Again, use them to prop up getting a few approvals w/o risking too many HPs but then your profile has to be built on primary or joint accounts, where you are legally responsible.

I will say again this is even more important for someone seeking a mortgage in short order because, some UWers will absolutely DISCOUNT your score because AU accounts muddy the waters, making it unclear how much of your credit history is YOURS.

This is an absolute = No
If you ask 5 UW ( UW = underwrites, just in case 😁) absolutely somebody is discounting and will GUESS what they think is relevant ( we don't want that)

*Think about it like this to give an example
You got a 21 y.o. kid ( or 41 doesn't matter) who has 2 AU accounts and 2 regular accounts average age 3-5 years etc
That kid's score may be 715 but an UW is going to DISCOUNT the history with the assumption that his profile is arbitrarily prop up...he ain't about to get approved for that heavy auto loan he THOUGHT the 715 was gonna ensure him...
Because again the UW is left GUESSING...

That's why I say use the AU to get your TL if you want but then build YOUR profile and pull the AU ...as I said earlier you've got plenty of time to build a solid enough profile...
AUs are great for jumping off = grabbing a few 'automated' (low/little UW... because lenders want to fatten CC debt and they offer rates to offset some mistakes) but once we're playing high level ball the rules and scrunity go up, especially once we start talking UW a mortgage.

CC = baby easy, 1 minute approvals
Cars = Elementary School, sometimes 20 minutes
House = Grad School, They grind and regrind and check once more before closing

Best of Luck ✌

[Anonymous]

Thank you so much Gemini101! That is great advice about the AU. I will look for a good credit union around here too