How does THIS happen?

[Meflyman]

So I've been trying to be pretty good about paying down my credit cards, paying on time, etc.  Today these were my alerts:

Equifax      Balance has increased by $56, score down 11 points

Experian    Balance has increased by $56, score up 9 points

Experian (from yesterday)  Balance has gone down $92, down 5 points

This is really exhausting me. $56 in the scheme of my overall debt really is nothing.  I've been tackling collections one by one, as I said earlier, paying everything.....

Next week, I get a bonus at work.  I have 2 student loans, revolving credit debt of about $5000 and an amex card. I will be able to pay off the student loans AND the revolving debt; but, with this craziness, I'm worried it will hurt me rather than help.  What do I do to get my scores up?

Any help is very much appreciated.

[Anonymous]

Glad to hear that you will be getting a bonus!   Awesome, buddy.

But please do not jump into paying off any loans.  Surprisingly, that could be bad for your score.  We'll be happy to explain to you why that is and what the best plan would be for you.

In the meantime, don't hesitate to use as much of your bonus as you need to pay off all your CC debt.  That means all cards down to $0.  That should clear you of any responsibility for interest.  (Though you may still owe some interest on last month.)

But basically the next day, use one card to buy something that you need: groceries, gas, whatever.  Moving forward, continue to pay all your cards in full, and if you want maximum scoring points, try to have most of your cards reporting $0.

In the meantime, we can better advise you about your installment accounts if you list them here.  If you use this template it will tell us everything we need to help you out.

Loan 1.  Current balance = ______    Original loan amount = ______

Loan 2.  Current balance = ______    Original loan amount = ______

Loan 3.  Current balance = ______    Original loan amount = ______

etc.

I am guessing you have only two open installment accounts, but I can't be sure.

Have you explored the possibility of a pay-for-delete arrangement regarding your collections?  PFDs are far superior than simply paying the collection -- the latter approach still has the collection remaining on your report, which hurts your score.

[Anonymous]

Excellent guidance from CGID above.

One thing you should know is that the alerts that you're receiving are not tied to the score increases/decreases.  They are different events and the score change isn't always (actually often not at all) tied to the event that triggered the alert such as a balance increasing or decreasing.

With one tiny exception, LESS debt is always better than MORE debt.  So pay off your CCs.  If your revolving debt is paid down, tackle your loans next.  The tiny exception is that you want to have the smallest possible amount of each of these... that is a small balance reported on a revolving (CC) account and a small balance reported on an open installment loan.  Both of these things can be accomplished very easily if you have $0 for each.  As CGID suggested, a single small purchase is all you need on a CC and the SSL Loan Technique (which you can search for on this forum) is all that needs to be employed to tackle the other category of "credit mix."

[Meflyman]

Thanks so much CGID!  Here's the info you suggested I give you guys:

Loan 1.  Student Loan Current balance = 126.06   

Loan 2.  Student Loan Current balance = 203.07   

Loan 3.  Student Loan Current balance = 1901   

These loans are really old--from about 1996 and they've been sold and resold over the years, so I can't give you an original amount.  I have no secured installment loans. I have credit cards for a total amounbt of about 10,000 that I will be able to pay off in full next week so that I will have all 0 balances.

There is an installment loan for $75,000, which is now at about $72,000.  This was a construction loan that was to be part of  a mortgage; however, the bank first sent out an appraiser whose numbers they couldn't use because he wasn't "on their list." By the time they sent out the second appriaser, the construction had commenced so they refused to appraise it. Because the bank had already given me the take out letter and basically approved the loan, they just turned it into an unsecured signature loan where I make monthly interest payments with a balloon in 5 years.  The bank cannot go back and file a lien on the house turning this into a secured loan, so I'm stuck with this ridiculous unsecured loan until I refinance my house, which I can't do if I don't raise my credit score.This has been such a mess that lawyers have been involved! My suspicion is that this really hurts my credit score; but, I have no way of proving it. Luckily for me, I have a bit of leverage because the bank has an unsecured loan out there in such a high amount.  This is probably too much information; but, gives you the full picture.

As always, any advice much appreciated.

[Meflyman]

Thank you BBS--I think SSL may be helpful to me. I appreciate your input.

[Anonymous]

On your actual credit reports it should tell you the original amount of the loan. 

For example, when I look at my 3B report from myFICO (back in July 2015) the field was called "High Balance."  When I look at my credit reports from Credit Karama, the field is called "Highest Balance."

We really need that figure to help you out.

It also looks like your list is incomplete.  You list three loans, but then later say you also have another open installment account (a large unsecured personal loan).  You also mention that you'd like to re-finance your house at some point, which suggests a fifth open installment loan (a mortgage).

What we need is a complete list, all in one place, with current balance and original (high) balance.  That list might consist of three loans, four, six, thirteen, whatever.  You should leave off the installment accounts that are closed but we need every open one. 

Examples of installment accounts:

      *  Student loans

      *  Personal loans

      *  Mortgages

      *  Auto loans

      *  Finance company accounts (buying a big furniture set through 0% financing at rooms-to-go)

The SSL technique will give you no help at all right now, because of the multiple open installment loans you have.

[Meflyman]

I now have what you need!

Loan 1.  Student Loan Current Balance = 1901   Original Balance = 10,845

Loan 2.  Student Loan Current balance = 1500   Original Balance = 8,702   

Loan 3.  Mortgage balance = 153,577  Original Balance = 168,808

Loan 4   Construction Loan balance = 72,910  Original Balance =    75,520

Loan 5 (joint w wife) Car Loan balance= 49,015  Original Balance = 53,127

Loan 6 (joint w wife) car loan balance = 35,423  Original Balance = 38,374

I appreciate all of your help.  My question is really what to pay off in the way of installment loans, while also planning to pay off revolving debt.  My wife and I both recieve bonuses at this time of year and our goal this year is to raise our credit as much as possible as quickly as possible.

Thanks in advance.

[Anonymous]

Thanks, buddy.

So remember, as we have mentioned before, your cards need to get priority over your installment loans.  Pay all cards to zero, for both you and your wife.  Then you guys can continue to use your cards as you need to, but always pay the amount on the statement in full.  You have roughly 25 days to do that after the statement prints.

As far as you installment loans go, I want you to do an exercise right now.  Add up all the amounts you currently owe on your open loans.  Let's call that total amount CURRENT.  Then do the same for the original amounts of the loans.  Let's call that total amount ORIGINAL. Now I want you to divide CURRENT by ORIGINAL and you will get a percent.  In your case the percent is pretty high, because of the big mortgage that you owe most of it on, and the cars and the construction as well.  I am guessing the percent is over 90%.

That percent is called total installment utilization.

You do get a scoring benefit from paying that down, but in your case you'd have to pay a LOT of it down before you begin to get a substantial benefit.  My advice is to do the following:

(1)  Try to keep loans from closing before they have to.  Great idea is to talk to the lender and see if they will let you pay off a lot of the loan but still keep it open for the full term.  That's called pre-paying it.  When you make extra big payments, they push the next payment due back quite a ways, and they are also applied to the principle first.

(2)  If your loans have a big difference in their interest rates, focus on paying down the high interest loans first.

All that said, you will do just fine by paying off your cards and then continuing to make all future loan payments on time.  That alone will be fine, given your situation -- at least from a credit score perspective.

[Meflyman]

many many thanks to you!