Rebuild your credit score after settling collection debts.
I had just settled my last debt collection account, but i have settled with about four different creditors on debts i have had lasting about three years. I have had a lease for three years and have made payments on time, as well as two phones that i was never late with payments on for about seven years, and i also have had other credit cards which i had payed off in full. I am just a little confused because i had just gotten a very good credit card offer with a low limit and an offer of months to pay if off with no interest.
My credit is very bad but I am still getting this offer but why? And will having that credit card and making correct payments on it help my credit rating increase? How much of a positive affect can it have on my credit report or rating?
How much of a positive affect will a new card have on my credit report or rating?
—mike
It sounds like you are saying that you want to rebuild credit after you were in a settlement process that lasted 3 years and you just recently funded the last settlement. You have other accounts you that were not part of the settlement program (the other credit cards you paid off in full).
Are your 2 phone accounts and auto lease showing up on your credit reports now?
I have seen credit profiles bounce back after debt settlements are completed in a matter of a few weeks; a few months; and a couple years. I rarely work with files that take 3 years to complete settlements, but rebuilding credit will work the same at this point.
How quickly can you rebuild your credit score after settling debt?
Given the limited credit history you outlined (no secured loans like a car or mortgage), and depending on how many revolving accounts you have in your file that did not go delinquent like the 4 that were settled, and assuming the settled accounts are all reflecting accurately on your credit reports, if you were approved for the new account it could help raise your score, but not immediately. Do you have open revolving unsecured accounts right now? If you have 2 or 3 already, you should look to establish other forms of credit than a credit card.
If you do not have any revolving accounts that are active today, establishing a couple will be part of your credit rebuilding strategy. You can also use some of the secured credit card products out there that report to the credit reporting bureaus as method to rebuild credit.
Check your credit reports to be sure that all of your settled credit card debts are showing up resolved and with no balance remaining. You will likely find your original credit card bank shows the accounts you settled as charged off. That is normal. You may also see several entries from collection agencies or even debt buyers in the credit reports. Be sure these show accounts resolved and paid as well. In order to rebuild credit the fastest, be sure that what your credit reports shows today is accurate.
Anyone with additional questions or concerns as you set out to rebuild your credit after resolving collection accounts is welcome to post in the comments below for feedback.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.
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