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Rebuilding Credit and looking to apply for Credit Cards

minniesky
Member

Rebuilding Credit and looking to apply for Credit Cards

Hello all,

 

This is my first post and I am recently learning and understanding how credit and credit profiles work. 

 

I have been avoiding my credit profile since 2017 when I went into charge off status on my USAA car loan, a NFCU cc, and defaulted on my mortgage for more than 180 days. At the time, my income had dropped due to a lay-off and taking a new job that barely paid me ~$30k/yr, a 50% decline in income. I stayed at that job for way too long (4 years) and could not continue to manage my bills because of the huge decline in income, hence the charge-offs and mortgage default.

 

In 2017, I ended up selling my home before it went into foreclosure with a minimal profit so there are still the vestiges of those lates payments on my credit profile, but with paid off status for at least the past four years. Last month I settled the NFCU cc charge off (balance $7,068) for $3k, which boosted my scores by 30+ points, decreased my high reporting utilization %, resulted in a paid status, and will ultimately stop the monthly c/o reporting and allow it to age. 

 

I still have the car that USAA charged off in 2017; of which they are reporting c/o every single month with a $17,586 balance. While USAA remains the OC, they are using American Coradiuis to collect on the debt. I am certain, based on my annual credit report DoFD, the SOL expires in July ( I live in Texas). However, I sent at least three settlement letters to both USAA and ACI to settle the debt to no avail. USAA won't settle, they keep referring me to ACI and ACI wants $13k to settle... which is more than I have to pay. I have started my negotiations at $5k, and am willing to go to $7k to settle. Looking for any advice here on the best way to approach as my letters have not yielded much results.

 

Also, I recently realized that I was leaving points on the table by not having an active cc on my profile, so in Feb 2022, I was approved for a secured line with Discover It for $2500. I am certain it has helped with my credit profile and score as I have paid the balance to 1% - 3% for the past four months.

 

I would like to apply for the Chase Sapphire and an additional unsecured card to boost my limits and add cusion for my utilization. My current income is $210K (since Jan; I recently started working in tech). I do a lot of travel and dining out, so open to the best cards I should apply for and when its best to begin applying. I have not had any credit cards since the NFCU charge off in 2017. 

 

Data points:

Current Fico 8 scores:

EQ: 636 (Jan 2022 score: 556), AAoA = 5 yrs

TU: 615 (Jan 2022 score: 543), AAoA = 4 yrs, 11 months

EX: 656 (Jan 2022 score: 559), AAoA = 6yrs, 4 months

^My work has paid off over the past six months as the effort I have taken has yielded some good results!

 

Active Accounts:

Discover

Pays as agreed

Limit: $2500

Balance: $217

util: 11%

 

Maple Federal Credit Union

Pay as agreed

Loan amt: $5k

Balance: $4655

 

Baddies:

Bank of American (all three CRAs)

(transferred)

Opened: 8/2011

Date of Last Payment: 10/2017 

Multiple 30, 60, 90 lates - most recent 4/2017

 

Carrington Mortgage (all three CRAs)

Paid/closed

DoLA: EQ: 10/2017 , TU 09/2018

Closed - over 120 days past due

DoFD: 10/2017

 

USAA

Charged off

Balance: $17,586

DoFD: 11/2017

 

NFCU

Charged off

settled/closed

DoFD: no date listed on CP

 

Penn State (TU)

Collection 

$12,346 

currently disputing

 

Any advice or insight would be greatly appreciated!

 

*Edited to add USAA and NFCU account info under baddies

Starting Score: 559
Current Score: 656
Goal Score: 750


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Message 1 of 13
12 REPLIES 12
GatorGuy
Established Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards

If you're making $210k, you can pay $17k that you agreed to pay. You still have the car so you could even sell the car and drive something cheaper till you get your debts paid off. The $2500 you put towards your Discover card should have gone towards this.

 

You won't be approved by Chase with your scores and a charge off reporting every month.

Message 2 of 13
SouthJamaica
Mega Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards


@minniesky wrote:

Hello all,

 

This is my first post and I am recently learning and understanding how credit and credit profiles work. 

 

I have been avoiding my credit profile since 2017 when I went into charge off status on my USAA car loan, a NFCU cc, and defaulted on my mortgage for more than 180 days. At the time, my income had dropped due to a lay-off and taking a new job that barely paid me ~$30k/yr, a 50% decline in income. I stayed at that job for way too long (4 years) and could not continue to manage my bills because of the huge decline in income, hence the charge-offs and mortgage default.

 

In 2017, I ended up selling my home before it went into foreclosure with a minimal profit so there are still the vestiges of those lates payments on my credit profile, but with paid off status for at least the past four years. Last month I settled the NFCU cc charge off (balance $7,068) for $3k, which boosted my scores by 30+ points, decreased my high reporting utilization %, resulted in a paid status, and will ultimately stop the monthly c/o reporting and allow it to age. 

 

I still have the car that USAA charged off in 2017; of which they are reporting c/o every single month with a $17,586 balance. While USAA remains the OC, they are using American Coradiuis to collect on the debt. I am certain, based on my annual credit report DoFD, the SOL expires in July ( I live in Texas). However, I sent at least three settlement letters to both USAA and ACI to settle the debt to no avail. USAA won't settle, they keep referring me to ACI and ACI wants $13k to settle... which is more than I have to pay. I have started my negotiations at $5k, and am willing to go to $7k to settle. Looking for any advice here on the best way to approach as my letters have not yielded much results.

 

Also, I recently realized that I was leaving points on the table by not having an active cc on my profile, so in Feb 2022, I was approved for a secured line with Discover It for $2500. I am certain it has helped with my credit profile and score as I have paid the balance to 1% - 3% for the past four months.

 

I would like to apply for the Chase Sapphire and an additional unsecured card to boost my limits and add cusion for my utilization. My current income is $210K (since Jan; I recently started working in tech). I do a lot of travel and dining out, so open to the best cards I should apply for and when its best to begin applying. I have not had any credit cards since the NFCU charge off in 2017. 

 

Data points:

Current Fico 8 scores:

EQ: 636 (Jan 2022 score: 556), AAoA = 5 yrs

TU: 615 (Jan 2022 score: 543), AAoA = 4 yrs, 11 months

EX: 656 (Jan 2022 score: 559), AAoA = 6yrs, 4 months

^My work has paid off over the past six months as the effort I have taken has yielded some good results!

 

Active Accounts:

Discover

Pays as agreed

Limit: $2500

Balance: $217

util: 11%

 

Maple Federal Credit Union

Pay as agreed

Loan amt: $5k

Balance: $4655

 

Baddies:

Bank of American (all three CRAs)

(transferred)

Opened: 8/2011

Date of Last Payment: 10/2017 

Multiple 30, 60, 90 lates - most recent 4/2017

 

Carrington Mortgage (all three CRAs)

Paid/closed

DoLA: EQ: 10/2017 , TU 09/2018

Closed - over 120 days past due

DoFD: 10/2017

 

USAA

Charged off

Balance: $17,586

DoFD: 11/2017

 

NFCU

Charged off

settled/closed

DoFD: no date listed on CP

 

Penn State (TU)

Collection 

$12,346 

currently disputing

 

Any advice or insight would be greatly appreciated!

 

*Edited to add USAA and NFCU account info under baddies


1. It's way too early to think about a card like the Chase Sapphire.

 

2. You were right IMHO to take  out the secured card, and manage it the way you have.

 

3. Continue to work out a deal with the car loan.  Don't bother thinking about the statute of limitations, because they'll sue you before it runs out.


Total revolving limits 689000 (587000 reporting) FICO 8: EQ 718 TU 721 EX 698

Message 3 of 13
minniesky
Member

Re: Rebuilding Credit and looking to apply for Credit Cards

Thank you for the insight! I called today and it seems my account is now back in house with USAA as I was able to speak to the debt settlement dept. Apparently, you make an offer and then they counter and you can accept or decline the counter. They countered at $11.6K; more available cash than I had to pay. But the woman on the call said i can call back in a couple of weeks and try again. The "system" might offer me lower or higher settlement, depending.

 

Anyway, gonna hold off on applying for any cc until this is settled and then go from there. If you all have any additional advice on getting my score up, it would be much appreciated!

Starting Score: 559
Current Score: 656
Goal Score: 750


Take the myFICO Fitness Challenge
Message 4 of 13
SouthJamaica
Mega Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards


@minniesky wrote:

Thank you for the insight! I called today and it seems my account is now back in house with USAA as I was able to speak to the debt settlement dept. Apparently, you make an offer and then they counter and you can accept or decline the counter. They countered at $11.6K; more available cash than I had to pay. But the woman on the call said i can call back in a couple of weeks and try again. The "system" might offer me lower or higher settlement, depending.

 

Anyway, gonna hold off on applying for any cc until this is settled and then go from there. If you all have any additional advice on getting my score up, it would be much appreciated!


You're doing good.  Moving in the right direction. 


Total revolving limits 689000 (587000 reporting) FICO 8: EQ 718 TU 721 EX 698

Message 5 of 13
OmarGB9
Community Leader
Super Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards


@GatorGuy wrote:

If you're making $210k, you can pay $17k that you agreed to pay. You still have the car so you could even sell the car and drive something cheaper till you get your debts paid off. The $2500 you put towards your Discover card should have gone towards this.

 

You won't be approved by Chase with your scores and a charge off reporting every month.


I second most of this, just not necessarily the not getting a secured card part. That I think you did fine.

 

But for sure, if you're now making $210k, surely you can swing $13 or $14k to settle that USAA CO?

 

And also, I'd forget about the Chase Sapphire for now, until all of your baddies are cleaned up and you have at least a year or two of revolving history. Maybe get another starter card or two.


Last App: 12/27/2021
Penfed Power Cash Rewards Visa Signature

Currently rebuilding as of 04/11/2019.

Starting FICO 8 Scores:




Current FICO 8 scores:


Message 6 of 13
minniesky
Member

Re: Rebuilding Credit and looking to apply for Credit Cards

@OmarGB9 - is there a good thread that talks about the best starter cards? I'd like to not have too many secured cards or cards that won't grow / graduate. Also, I think my credit mix/ profile would be better with at least one more card reporting.

 

Also, generally, I mentioned my annual salary mostly as a data point for cc approval. I didn't know if income was a major factor in cc approvals, so just provided the salary in the event it was. My main focus right now is building an emergency fund and maximizing 401(k) match/coontributions. 

 

Clearly I am in this situation due to poor money management in the past and I'd like to set myself to not be in a position to repeat this financial season. I don't have 200k sitting in an account where I can just give out $13k.... and I can't write off w2 wages like a business owner can; my tax bracket is high as well. Trust, I don't take home all of it.

 

Point being, this car charge off is my only unaddressed baddie and if I can settle for less, I am going to go that route and place most of my funds in savings anad vow to not put myself in this situation again.

 

I appreciate all of the suggestions; super helpful!

 

I'll update again once I settled this final baddie; in the meantime, I am switching gears to goodwill the lates for my past mortgage with BoA and Carrington.

 

 

Starting Score: 559
Current Score: 656
Goal Score: 750


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Message 7 of 13
Anonymalous
Frequent Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards


@minniesky wrote:

@OmarGB9 - is there a good thread that talks about the best starter cards? I'd like to not have too many secured cards or cards that won't grow / graduate. Also, I think my credit mix/ profile would be better with at least one more card reporting.

 

Also, generally, I mentioned my annual salary mostly as a data point for cc approval. I didn't know if income was a major factor in cc approvals, so just provided the salary in the event it was. My main focus right now is building an emergency fund and maximizing 401(k) match/coontributions. 

 


It sounds like you're thinking of credit cards in terms of rewards and long-term use, and I think that's premature. Rewards are pretty marginal compared to servicing debt or the high rates that come with a damaged credit profile, and the way credit cards work is you have to start with starter cards and then gradually build your way to up to better cards. Building your credit is more important than rewards, and there's nothing wrong with starting with secured cards. Just avoid subprime banks and annual fees, and make sure they eventually graduate, and you should be fine.

 

If you're serious about not getting into this trap again, you're right to think about savings. Because it doesn't matter how much money you make, living paycheck to paycheck means you're just one unexpected event away from a financial crisis. That's why an emergency fund with 3-6 months worth of income is a good target. Simply having that money sitting around makes it a lot less likely you'll get in trouble. Beyond that, I agree maxing out your 401k is a great choice. And if you've recently moved from making $30K to $210K, it might be a perfect time to establish a set of new financial habits. Consider doing a budget, looking at where you spend money, and cutting what you can. Consistently living below your means adds a lot of security and lets you build for the future. 25% is a good target, and I wouldn't go below 10%.

 

Sounds like you're on the right path, so you've probably thought about most of this, but hearing it from someone else can sometimes help.

Message 8 of 13
minniesky
Member

Re: Rebuilding Credit and looking to apply for Credit Cards

@Anonymalous - Yes, that is exactly how I was thinking of cc. While disappointed, I definitely get your point about it being premature, however, for best point maximizing and rebuilding, I'll likely need @least one more cc reporting. I'll look into a good starter card that I may qualify for unsecured. Maybe something with my credit union. Still working on negotiating the last c/o for USAA.

 

And yes! I already have a HYSA and 3 months of expenses socked away and I'm maxing out 401k contributions and the federal annual max as well.

 

I use bucket budgeting (sinking fund acct, bill acct, etc). 

 

Thank you for the redirect on cc and the validation on prioritizing saving; it is definitely amazing to be reminded that I'm on a better path!

Starting Score: 559
Current Score: 656
Goal Score: 750


Take the myFICO Fitness Challenge
Message 9 of 13
Anonymalous
Frequent Contributor

Re: Rebuilding Credit and looking to apply for Credit Cards


@minniesky wrote:

@Anonymalous - Yes, that is exactly how I was thinking of cc. While disappointed, I definitely get your point about it being premature, however, for best point maximizing and rebuilding, I'll likely need @least one more cc reporting. I'll look into a good starter card that I may qualify for unsecured. Maybe something with my credit union. Still working on negotiating the last c/o for USAA.

It's definitely worth talking to your credit union. Credit unions can be both generous and conservative when it comes to credit card underwriting, and can be hard to figure out because there's so little information about most of them on the internet. But part of their mission is helping people who've gotten in a little trouble, and they're definitely relationship-oriented, so those are positives. It sounds like you're a W2 employee, which helps, but it might be worth looking at your DTI, because that's a sticking point for many. And if that doesn't work, one of the big national credit unions might give you a chance. You burned Navy, but there are others.

Message 10 of 13
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