Advice needed on improving credit score

[Anonymous]

I have heard many, many things over the years on how credit scores are determined. Most recently I have tried refinancing my house (my ARM is now at 11.875%). My median credit score a few years ago was 673. My credit scores from my last credit report from a loan officer were:

Equifax/Beacon: 529

TransUnion/New Empirica: 591

Experian/Fair, Isaac Risk Model: 564

The credit scores above also include 4 collections that I just paid in full this past week.

(I was self-employed for 7 years and I had a bad downward spiral afterI first got my house.)

Here is a breakdown of my current credit report/situation:

House Mortgage - $82,814 (last 30 day late was almost 2 years ago)

GM Card - CL $5105, Balance $4627

GE Money Card - CL $5000, Balance $3400

Best Buy - CL $2105, Balance $1644

Value City Furniture - CL $300, Balance $1058 (They reduced my credit limit to $300 after some deliquencies)

RadioShack - CL $2600, Balance $860 (This isn't actually showing up on my credit report though) 

(Total Balance - $11,589, Total Credit Limit - $18,660)

There are also these accounts which are still open/active, but have no balance:

Discover Card - CL $15000

Mervyns - CL $200

Kay Jewelers - CL $755

I have either 6 or 7 other creditors in which the account has been closed.

I had some serious deliquency issues up until August of 2006, and except for one mistake with Chase back in May of this year and a , I haven't had a late payment to anyone in about a year.

I have a good chunk of change currently that I could use to pay off some credit cards. One of my main questions was this; the loan officer said that I shouldn't be too concerned with keeping each credit card limit under 50%. I should be more concerned that my TOTAL BALANCE all cards combined is 50% less then the TOTAL CREDIT LIMIT of all the cards combined. Any suggestions with what I should do with this chunk of change and how exactly to apply it towards my credit cards?

I will definitely have more questions, but wanted to get this one out of the way first : )

Thanks in advance!

[SmartCookie]

Hi dshevnock and welcome!  Please start here if you have not, and refer to it as needed  http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&thread.id=2654

Overall UTI is more important than individual... but individual does count a lot and ideally you want it all below 10%.  Also, it seems that only having 2 cards with balances reporting at any given time is better than having 5 for instance even if everything is at a good UTI.  What your loan officer told you is incorrect. 

Any collection type things that you are paying off in the future please use a PFD letter so that you will be rid of any derog info on your CBRs. 

Keep the Discover, Mervyn's, and Kay cards active and reporting by charging a small amount on each maybe 2x a year.  Make sure the balance reports (use a monitoring service like PrivacyMatters.com or other) before you pay it off... but of course pay it before it's due if for some reason it does not report timely.

Call Radio Shack and ask them why they are not reporting and ask if they will to all 3 CBRs as long as you have no derog history with them.  If you do, consider it a blessing and don't stir the pot.  

I am assuming all of your balances are with cards that are still open.  If this is not the case, there would be a different game plan such as a PFD letter if there was any serious derog info reported.  Never even consider paying off any account that has negative information until you have exhausted all GW and PFD attempts or are getting sued.

Without knowing how much you can pay off and still make payments on everything else, my personal game plan in your instance would be to PIF in order of lowest balance to highest... but I would save Radio Shack for last unless the interest is so bad that you would rather get it over with now.  You should work on Value City and see if they will restore your CL once they are paid so that it looks better on your CBRs on manual review.  Right now it looks like you went over limit when you did not... I hope they are not charging you any special fees.  Tell them you need new furniture and $300 won't cover it, you need (insert your highest balance rounded up to 100 at the min).  Make sure they don't won't hard INQ you before doing this, but you might be willing to take the score hit for the future  good.

Your situation seems a little more involved though and I think that even with open accounts, I would write a GW (good will) letter explaining your recent resolved financial difficulties and offering to pay the entire balance immediately if they will have some mercy and remove any derog info.  Can't hurt... and if they say no at least you tried... pay it off in full anyway and keep writing GW letters.

[Anonymous]

Great advice from SmartCookie-

I am making an assumption you are going FHA or VA- they are not score driven-

I would also immediately dispute the paid CA's as "inaccurate"


Good luck -

[Anonymous]

Thanks Smarty! : )

I did read the FICO 101 and it provided lots of great info.

To answer some of your questions, all of my accounts with balances are currently open. I have no intention on closing them.

As for how much play money I have to put towards my balances, lets say I have $3000 to put towards balances. The Value City Furniture one is one that I really was considering taking care of first since the balance is over the limit. (My original CL was about $2,000 then they decreased it because of late payments. The last late payment they reported to a CB was back in 04/2006 though. They do not charge me any over limit fees.)

As for the PFD letter, I just found out about those types of letters after I paid them off in full. I have started writing each company a personal letter to see if they will make a goodwill removal.

I just started using my radioshack card back in January of this past year. Other then that, the account stayed dormant for probably 8 years without any activity. The CL is about $2,100 and the current balance is about $800.

Which scenario is typically better, calling a credit card company on the phone and explaining the situation or writing a letter?

[SmartCookie]

Welcome!

Regarding what Timothy said I'd say that is the first thing to do.  He's good with catching stuff like that.  Only dispute on (every one it appears on) paid reports, not the free annuals... the CA will have less time to respond if you do it on the paid CBRs and that works in your favor.  To clarify, if it is showing 'unpaid' as of today that is inaccurate... dispute it and possibly it will be wiped off instead of updated to paid.  If they update to paid, GW letter.

For GW situations with the credit card company... I have always believed it's worth a phone call first if the account is still open, especially if it is just 1 late.  If you don't get any help, then write.  If you call, make sure you know the reason in your head you are asking them to fix the issue.  With 1 30 day late (like your one from 4/2006), sometimes it was because you did not get the bill on time etc.... it wasn't your fault if you understand what I mean.  For closed accounts... I personally would go right to the letter.

The Radioshack account would add nice bit of history and help with overall UTI on your scores.  It might be tricky though.... if they do report, you want that balance to be no more than $259.  Not sure if you can call them and ask if can report first, and if the answer is yes... you can ask them too and immediately pay that down or off if you can.   Again, you might want to just leave this for last and just keep up with the regular payments.

I agree get Value City paid off in full.  Then, call them and see if they will reinstate your CL without a hard INQ.  If not, write and ask again.  If they will only do so with a hard INQ, wait until you have done more repair work before doing that.  Very glad they aren't charging you fees... not that I think they could on a balance that happened before the CL decrease.

So with 3k you can get a bunch paid off and that's great! Now, one possibility would be to spread this around to just reduce the individial UTI as much as possible.  I think though that with the balances, you will get the most bang for your buck and get off to the best start going ahead with a PIF with Value City and Best Buy and getting that over and done with.  Then, I would put anything left over to the GM balance.  Obviously that is still going to leave a high individual UTI on GM and GE for the moment... but we all have to eat the elephant one bite at a time.

Also, with all of your open cards (minus Value City which is it's own similar situation), call customer service as soon as any payments clear and ask if they can give you a CLI without a hard INQ.  This is a painless way to improve your score by lowering your UTI.  Just make sure no hard INQ.  Word of advice... if you do get some CLIs, proceed with your payoff gameplan as planned.  It can tempt the best of us.  

Message Edited by SmartCookie on 12-04-2007 01:47 PM

Message Edited by SmartCookie on 12-04-2007 02:35 PM

[Anonymous]

Well, just got off the phone with Value City. I told the lady I had spoken with two other credit companies and one said they would remove the derogatory remarks to my credit report and that the other CC company would give me a CLI. In the end she gave me these two options:

1) She could remove the derogatory remarks OR

2) Run my credit report and see if she could give me a CLI.

I told her, "Darn, I really wanted to pay you guys off, but it really didn't make much sense since there is only one derogatory remark or having to run my credit report." I told her I would call her back. I guess if I did go with the removal of the derogatory remark and pay of Value City, that could still leave room in the future for a CLI.

[SmartCookie]

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dshevnock wrote:

Well, just got off the phone with Value City. I told the lady I had spoken with two other credit companies and one said they would remove the derogatory remarks to my credit report and that the other CC company would give me a CLI. In the end she gave me these two options:

1) She could remove the derogatory remarks OR

2) Run my credit report and see if she could give me a CLI.

I told her, "Darn, I really wanted to pay you guys off, but it really didn't make much sense since there is only one derogatory remark or having to run my credit report." I told her I would call her back. I guess if I did go with the removal of the derogatory remark and pay of Value City, that could still leave room in the future for a CLI.

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Take the verbal offer of GW yes!!!!  That's great!!!  Derog gone, then you pay it off and do some more repair... you should be back to where you were with them with a pristine history.

You're a quick study!  Excellent... call em back while the offer is hot!

[Anonymous]

So I called RadioShack tonight and asked about my account activity. I have actually had this card for 8-10 years and hadn't actually started using it again until the beginning of this year. (The account stayed dormant for probably 8 years with no activity and the highest has never been over 50% if I remember correctly since the beginning of this year.) I have no had a single late payment to them since I started using the card at the beginning of this year. So that is where I stand with RadioShack, Smarty.

PS - I didn't ask them to start reporting it to any CBs.

[SmartCookie]

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dshevnock wrote:

So I called RadioShack tonight and asked about my account activity. I have actually had this card for 8-10 years and hadn't actually started using it again until the beginning of this year. (The account stayed dormant for probably 8 years with no activity and the highest has never been over 50% if I remember correctly since the beginning of this year.) I have no had a single late payment to them since I started using the card at the beginning of this year. So that is where I stand with RadioShack, Smarty.

PS - I didn't ask them to start reporting it to any CBs.

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I can't believe you were able to use it after all those years.... wow!  Going to a very nice addition to your account age in the future if they are able to report and you decide the time is right to ask them to.

[Anonymous]

Ok, Value City isn't as cool as I thought they were. I called them back to make the payment, and the rep I spoke with tonight read the notes from the previous nights call and offered me these 2 options:

1) CLI will a hard inquiry

2) Or they will remove like $50 in finance charges

I could have sworn 110% that last nights conversation ended with the option of removing the derogatory remark or the CLI with a hard inquiry. I guess no matter what I still need to get that payment taken care of since I have a balance that is 3 times the CL.

Value City is getting a lump of coal from Santa this holiday season!