How Best to Repair Your Credit Score After Foreclosure, Repossession, and Default
Hi Michael, I recently decided I was going to tackle my husbands bad credit myself. Unfortunately, like so many, I do not have the best idea where to begin. Below is a breakdown of the situation I am trying to resolve as a DIY-er. Anxious to hear your thoughts.
Background: Lost job due to sudden company wide lay offs. Was the only income for our family at the time. The lay off caused a relocation, which in turn felt like starting from square one. We now have a two income household, which we hope will allow us the flexability to rebuild. Because my husband was the only one working at the time everything financed was in his name, only. We currently have everything that requires financing in my name...
Events (not in any particular order):
Forclosure of home: July 2012
Reposession of cars (2) November 2010
Credit card debt: We had 7 open revolving lines of credit, all of which are now in bad standing.
Student Loans: (2) I have recently contacted Sallie Mae and committed to a repayment plan.
Current Score: 540
Goal Score: 650
Let me know if you would like any further information. I look forward to hearing back from you. I figure there is no better time than now to at least get a game plan and start making steps in the right direction.
Is my situation far to much for the DIY-er?! Do you think we have a chance of bouncing back?!
—MelissaD
Short answer
You can often get better results repairing your own credit than by hiring someone. What it takes is patience, some money to resolve old collection accounts where that makes sense, and a bit of know how. If your report carries more negatives than positives, plan on 24 months and longer.
Key points on this page
- Negatives hit hardest when they are recent. Roughly 24 months after a negative appears, it has less impact on your score.
- Someone with one or two negatives among several positives can see fairly rapid results. Someone weighed down with more negatives than positives needs a patient perspective.
- A repossessed car is auctioned, and any shortfall becomes a deficiency balance. That balance often settles at good savings, and getting it updated to zero helps your debt to income ratio, though not the score immediately.
- Defaulted student loans limit your ability to consolidate or qualify for income based repayment. You have to bring them out of default, which usually means several on time monthly payments, often 6 or more, before the reporting improves.
- Unpaid credit cards charge off at 180 days. Setting up a plan or settling before that point limits some of the damage. If they have already charged off, resolving them now is how you start to bounce back.
- After charge off, accounts go to third party collectors or debt buyers, who may add their own entries to your report. Some are placed with attorneys, and a judgment arrives with its own fresh 7 year shelf life.
Recovering from a temporary financial setback (not that the years you endured could be called temporary), and repairing your own and your husbands credit score, is possible. You can have better results going about your own credit repair, than by hiring someone. The number one ingredient you will need is patience, a sprinkle of resources to resolve old unpaid bills in collections (when it makes sense to do so), and a dash of know how – and you are on your way to recovering your credit score. Well… at least getting to your goal of 650. First thing I want to address is the patience part.
How quickly can you repair credit on your own?
There are going to be different circumstances for each person trying to repair their credit. Someone with one or two negatives, set beside several positives, will have an easier go of repairing credit and increasing their score, and can often see fairly rapid results.
Compare that to someone whose credit report is weighed down with more negatives than positives and you need to have a patient perspective. Measured in time, that will often mean 24 months and more. And given the information you shared, that is going to be the case here.
Negatives on the credit report tend to have the heaviest impact the more recent they are. 24 months after a negative appears on your credit score – the damage is going to have less of an impact. With that in mind, I will size up your situation with some general feedback.
Repairing Credit with a Foreclosure on Your Credit Report
That foreclosure will have less of an impact starting next summer. There is not much you can do about that at this point. So using the next year to improve other areas should be the goal. If you can clean up much of the other negative reporting, you could find yourself in a position to get a new home loan approved (if you enter the market that soon) within 2 years from now.
FHA underwriting standards for home loan approval have pretty low credit scoring thresholds compared to other lending standards. But you can need 3 years separation from a foreclosure or short sale event in order to qualify.
With the new qualified mortgage rules, that will take affect at the beginning of 2014, you would need to handle all of the collection accounts and get them to reflect zero balance owed in order to improve your chances of getting approved for a home loan. This is because of the debt to income ratio that will soon be required to be met in order for loans to meet Fannie and Freddie purchasing.
That Car Repossession on Your Credit Report
The car repossessions happened nearly 3 years ago. That means the credit impacts could have lost some potency. But that would be more applicable if there were only a few negatives compared to many more positives on your husbands credit report. In other words, those 2 defaulted auto loans do not exist in a box. Dealing with those alone will not improve the credit score overall because of the other things that are weighing him down.
Auto loans that go unpaid, and cars being repossessed, result in the cars getting auctioned. More often than not, the auction price paid will be less than the loan balance that was still owed. The auction price will get subtracted from the loan balance and any amount on the loan left over is referred to as a deficiency balance.
The finance company will typically make some initial attempts to collect on the deficiency balance by making a couple collection calls, and sending a collection notice or two. But their collection efforts are often quickly turned over to outside collection agencies. The unpaid debts from repossessions are also bundled up and sold off to debt buyers.
At this stage (after 3 years), you probably will see the auto loan default and charge off, but could see other negative credit reporting from a debt collector or debt buyer. Settling the deficiency balance can often be accomplished at a pretty good savings, and the updates to the credit report that the balance owed is zero will help improve the debt to income ratio, just not the credit score immediately.
Who are the last known collectors on any deficiency balances from the repos? Are there any additional negatives on his credit report (besides the original reporting by the finance companies)?
Credit Report Showing Defaulted Student Loans
When you default on many student loans, you limit your options to consolidate them into more affordable monthly payments, or to qualify for income based repayment plans. You have to bring the loans out of default in order to again qualify for better payment options.
Similarly, you often must bring student loans current, or out of default, in order to improve how they appear on the credit report. This will often mean getting set up on payments, which you indicate you have already done, and also making several monthly payments (often 6 or more), on time.
Was there any part of your conversations with Sallie Mae that involved the benefits to credit reporting once the loans were brought out of default and timely payment being made for a certain period of time? How long have you been making the new payments you set up?
Credit Reporting and Credit Cards in Collection
Unpaid credit card bills that go 180 days without payment get charged off. If you can get a payment plan set up with the banks before that happens, or even settle the balance for less than what you owe before the accounts charge off, you can mitigate a little bit of the damage to your credit. If all 7 of the accounts have charged off already, there is little to be done about that. But you can start to bounce back from that by resolving the debts now.
Once credit cards get charged off they generally will get sent to third party debt collectors for further collection efforts, or sold off to debt buyers, who may add additional collection accounts on your credit report. Some banks (and debt buyers) place collection accounts with attorneys. This can lead to being sued. If a judgment goes against you, that fact will appear on your credit report with a whole new 7 year shelf life. That said, I have some questions about the credit card debts.
- When were the last payments made on the accounts?
- Who were the original creditors? Who is collecting on the credit cards now (if you know)?
- If the credit reports are showing the original creditors as charged off, but with a zero balance owed, it nearly always means the debts were sold. Are there any collection accounts showing up that you can tie to the original credit card banks?
- Are there any attorney collectors trying to collect on any of the accounts? If so, are any of those attorneys located in the same state as you are?
- If you were to approach your credit repair efforts by methodically and strategically resolving old debts one by one, how much can you commit from your monthly budget consistently? Can you tap any lump sum resources in order to be more aggressive with resolving the debts?
Making progress with your efforts to repair credit is going to take time, but from what you have shared, if you have credit goals with a 1 to 2 year view, and can apply resources to this, you can meet your goals. There are alternatives like bankruptcy that may make more economic sense, but I will save that for some comment feedback after you post answers to the above questions.
Anyone looking for feedback about repairing credit after experiencing a tough financial setback 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. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
28yr old mom of 3 boys. I have a repo for my vehicle on my credit with a zero balance. They got more for it than what was owed. I just consolidated my student loans which were only $3k I’ve got a cellular bill and a cable bill on my credit. My score is 430. I pay everything on time. I’m trying to get another car and buy a home but don’t have any idea where to start. I work full time and make good money so I know I can afford one. Down payment is an issue though. I don’t want to do credit cards at all. Where should I start to raise my score to buy a nice home and rebuild my credit?
If your main goal is home ownership I would look for a savvy independent mortgage broker in your area that has FHA experience. You can get an FHA loan with less than a 600 credit score, and some good hardship talking points, as long as you have no unresolved debts.
You will want to resolve anything unpaid.
Getting a car loan and paying on it for 6 to 12 months will go a long way.
Do you rent now? From a property management company or an individual?
Hello I’m trying to rebuild my credit I had a c edit card from a bank cl of 1,000 …due to financial struggles I maxed it out to 800 and couldn’t pay its been around 14months . What can I do now my score is in the low 500s…… oh and I accident,y closed off a chase cc recently … what can I do to rebuild my credit I recently got a secured card from wells fargo
What accounts do you have showing as positive on your credit? What accounts do you have showing negative?
I have two car repos on my credit from 2011. I have medical bill for 500 dollars on my credit. I had student loans but two years ago my federal check was taken and that was paid in full, but Is still showing up on my credit report with 0 dollar balance. How can I rebuild my credit from the 540 credit score to good credit?
If those collection accounts remain unpaid, settling them would help. The repossessions sound like they will come off in 2018. If those deficiency balances are large, it may just be best to wait for those to fall off rather than settle.
In the mean time you may want to look at setting up a secured credit card.
What goal are you looking to achieve, and when, with the improved credit?
I am trying to buy a house within 5 months.
Hello,
My husband and I are thinking of giving our SUV back to the finance company. The SUV is solely in his name. We only have 1 income right now, which is his. He has 4 credit cards that are in good standing on with a high balance on all. We plan to pay those balances down soon. How would this voluntary repo affect his credit and how long do you think he would have to wait to purchase another vehicle and a home? Also, we filed bankruptcy in 2012 and that’s due to be taken off our credit in about 2 years.
Hard to say how the Repossession will impact his credit score. But you can get FHA financing with a 620 (even as low as a 580). You will want to have any deficiency balance that may result from the repo settled before applying for a loan.
Getting a new car loan after having a repo is not too hard at the time I am replying to you. I have worked with many people who waited a year or two and had no problem (but had no unsettled debt on their credit).
Hi Mike,
My wife and I came to a realization after a few untimely medical bills that we needed to look at other options for our debt. We were only making minimum payments, and treading water. We decided to go the route of a company to settle our debts for us. We figured we were at least trying to do the right thing. We were very uncomfortable about ‘not paying’ our credit cards, as advised by the representative. We are still in this program, have paid off (2) credit cards, but a 3rd credit card sued us. We were represented as part of our agreement by a litigation firm, and agreed to a settlement. Fast forward 5 moths later, and the settlement went null & void as I was laid off from work, and was unable to keep up with the payments. Next up, our bank account was levied for the amount owed. Obviously they got very little because we didn’t have the funds.
At the moment, I am currently working with the Collection firm representing my creditor to work out a plan for repayment. But I am worried because now we have a judgement showing up on our credit report, as well as 4-5 charge offs.
Luckily we do have 2-3 other credit cards open that we rarely use, very low balances, and pay on time and are in perfect standing.
I know the judgement and charge-off will stay on our credit for 7 years. What is the best way to repair our credit (without bankruptcy), and a realistic time frame until we can improve the scores? 7 years? We’re currently in the mid 500’s. No bankruptcy or foreclosure on our reports. Charge off’s and the judgement are the worst factors, other than the late payments. Yuck.
Any advice is greatly appreciated. Thanks very much.
Very disgusted with our situation.
You are likely looking at 12 to 24 months of rebuilding your credit after the last settlement is done. Payment plans will not update to your credit reports as a paid or resolved collection account. Try top get everything knocked out as quickly as possible as you bounce back and are back to work.
HI,
I have an auto loan with NFCU, and I have 7 negative reporting months. 3 (30 day late) 3 (60 day late) 1 (90 day late). The latest was 30 days late in July. Prior to that it was Feb, Mar, April of this year. The ones prior to that were Sep, Oct, and Nov of 2015. I was separated from the military when they had to get rid of a lot of people and I struggled finding a steady job afterwards. I now have a permanent job where I can make every payment on time. Is there a way to have these negative reports cleared up if I pay consistently for a year? It is the only negative thing on my credit report. I still owe 34,000 on the loan and I have 102 monthly payments left.
NFCU is not going to be open to removing those late pays. But time will help you bounce back from being late, even if that is still on your credit reports.
September of last year I received a trust fund and decided to work on my credit. It’s been a slow start but has come to the time where I can really pick up speed. At first I worked on keeping my account above water and establishing a pattern of healthy habits. The next step I took was opening a secured card directly through my bank with a small limit of 300. I have a credit history of one year and three months which is hard on my score but in the time frame where the age is negative towards my score but each month is more and more positive and has finally turned into a fair amount of time becoming more beneficial. The age of my credit card is 1 yr 1 mth. I have zero late payments and have a utilization of 6 of 300$ on the last update. I have tried to make sure each updating day that the account was fully paid at first and then after learning that having a small utilization amount was a good thing each week I would make sure it was paid up to leave only a small amount and each month the bill was paid up before hand. This was simple due to the card only being an extension to my daily amount. My limited opportunity account has a low cap on my debit card each day and when needed I would charge the credit card the full 300$ and instantly pay online and use again when buying things that were more then the daily amount allowed to my debit card. So most times I used the card it was for things that required me to pay it off and recharge the remainder, ex a purchase of 345$ the 300 was charged and paid and 45$ was charged, so card utilization was shown, Payments were early and on time and no interest had ever had to be added. The only things really bringing my score down are that I only have the one open account so that’s a negative effect each month that’s not changing and the few derogatory remarks. I wonder how to accumulate more open accounts. Now that my score has grown from around 428 to 650 I am able to apply for more credit cards, real unsecure cards will be a more beneficial account to have and now it’s an option with a score that makes me eligible but I wonder how good my chances will be while filling out the application due to the fact that when it asks about employer and income I have nothing to put on there other than Im unemployed and i have no definite amount for my yearly income. Can I just put down what I withdrew from the trust last year as my yearly income and say self employed or do they look into it enough to verify it? And what’s the best way to pay accounts in collections? I have a Capitol one debt from a secure card in 2014. I simply stopped using the card one day when the balance was 0 and they sent it to collections for 171$. I didn’t cancel the card or owe money so I can only think there was some penalty for not using the card for a period of time but don’t know. Should I look into why this charge accumulated and dispute it or should I just pay it. I assume I have to contact capitol one to find the specific reason and then the collector not capital one to pay it. If I decide to just to call right now to pay it should I haggle the amount down and if whatever is agreed do they automatically contact capitol one and let them know and will it then be automatically removed from my credit account helping the score go up. Also why is it only on my Equifax and not trans union? Will it affect both scores. And why are some things only on one credit account and some on both and some things show as the same thing and amount but from different collectors and then some show all the same info and two times on the same account. Also of all derogatory remarks one is capitol one, one is sprint, which I consider true but the rest are mostly hospital bills. Is either one more harmful or once sent to collections I’ve noticed sometimes the hospital bills have been removed on there own but Im not sure if they get replaced or if they are removed for good after a period of time. Is it harmful to haggle down and pay the account off at a low cost instead of paying the full asking amount when they report it to the original company and is it better to make payments or straight out pay full amount?
I would file a credit reporting dispute over the Capital One account. Depending on the outcome, I would then pay it off. Settling that small a balance to save money is not all that common. Capital One is not going to remove the item from your credit reports.
I would settle the sprint account and get it updated to show paid.
I would settle the medical bills for a savings wherever possible. Check out this video about negotiating medical debts before you get started. Paid or settled medical collections do not hurt your credit like they used to. And once an account is to the point it is with outside collection agencies, there is not much of a difference between the account being updated to show paid in full, or settled for less, so I would go for the cash savings.
It is normal to have some things show on one credit report and not the other. The credit bureaus do not share with each other necessarily. They rely on the furnishers of the credit information to push the information to them. Capital One, or others, simply may not be pushing that information to all credit bureaus.
Hello Michael, thank you for all that you do! I’m afraid I am making mistake after mistake and not sure what else to do and came across your posts in google. We entered into a credit counseling program and AMEX Platinum was one of the accounts accepted. The account was current/never late when entering the program. The account had a debt of 17,000 for which AMEX and the credit counseling program agreed upon a monthly payment plan to repay that amount as listed for the full amount). Come to find out AMEX had the debt in 2 different buckets, the 15,000 pay over time bucket and the 2,000 pay now bucket. Although they never reached out to us once looking for payment, nor sent it to collections (and we didn’t catch it as were we naive and trusting), they flagged the 2000 as delinquent and finally a write-off/charge off (even though the money they received through the credit counseling program they applied to that debt 1st and they marked it as write-off once the debt was paid in full). The credit reports show AMEX payment history as either “good” or “NR” across all 3 reports over that time. I have filed disputes with all 3 bureaus, called the credit counseling program coordinators and have been calling AMEX non-stop… I’m not getting too far… AMEX agrees something is off depending upon the dept, credit counseling is basically “sorry, can’t help”. The early return on Experian shows “remains” with Outcome: Remains, Results Due: 11/27/2016. Calling AMEX CVR or CBR, (not sure which it is) multiple times has gotten a manager review who has now added to the notes it has been passed to the concerns dept? where he is waiting for AR/AP line items for further review. I keep getting “call back in 2-3 days from them” and I feel like I’m against a clock that I don’t know what happens when time runs out. I have a 30 year credit report and this the the 1st/only negative on it, from trying to do the right thing no less… and although I now finally understand why it happened, I don’t think it is right and hope to have it reversed. Any ideas?
~B
How many years back did the charge off occur?
What financing goals do you have in the immediate future?
from 6/06 through 7/15 the account was always current, no “lates” or “missed payment”. When we entered the credit counseling program the account was current/up to date, just debt owed against it. So in 7/15 the credit counseling program and the creditor agreed to a repayment plan for the entire debt at a reduced interest and fixed payment… as stated in the welcome letter from the creditor “this will not impact your credit history in either a positive or negative way while the accounts heading into the program by the counseling program showed the entire amount as one debt (including the 2000) . From 7/15 to current we have made every payment through the program on time. The 2000 was flagged by them as delinquent in 12/15 and a charge-off/write-off 9/16 (although they had received over 5000 in payments during that time). My 1st knowledge of any of this was 10/16 and I began calling the creditor filing disputed shortly after. Our initial checkups in 2015 with the credit counseling program said “all is well, your doing great, stay the course”. We learned about this because we were looking at a home refi. My report shows 30 years of positive credit history with no lates/negatives, ever. Like many others, medical put us in a really bad situation and we saw this program as a way to “do the right thing”, pay what we owe in a manner that worked for us allowing us to maintain our positive credit history. If we would have received any notice in any manner from anybody that something wasn’t right, we would have addressed it immediately… so eliminating this negative account has become our primary financing goal and revisiting the refi (we were denied due to this “recent” negative mark) would follow.
I would file a credit reporting complaint with the CFPB against AMEX depending on the outcome of what they are looking into right now for you.
Let me know how things progress.
That will be my next step, thank you!
I opened my dialog with AMEX on 10/28 and filed disputes with all 3 bureaus on 10/29. AMEX keeps telling me to “call back in a few days as they investigate”, and I do. I believe they are investigating and hoping they work with me but it is difficult to know for sure. Are their any time frames that could pass while I work this that could make things even more difficult than they currently are, or just stay the course for now?
If it were me, I would wait for what AMEX does to conclude your current dispute.
I called every 3 to 4 business days throughout the month, spoke with many people across several departments with all businesses involved and invested a ton of time. The last supervisor who reached out to me from AMEX verified everything I had claimed across all parties involved and worked the corporate maze in addition to making the corrections on my credit report(s)… many lessons learned. Thank you for your help and input!
Hi Michael, I stumbled upon your extensive list of posts on this site about about an hour or so ago. I find them to be very insightful! So ahead of my question/issue, I wanted to say Thank You on not only my own behalf, but I’m sure many others as well. Now my situation….
As of November 5 2016 currently my credit scores are…
Equifax -592
Transunion-600
Experian-607
I’m 23, and from Ohio. (Mentioning my state in case there are relevant limitations associated). My background and credit report summary….
â–ª4 credit cards
Chase- $475 used of $500 limit (opened February 2015)
CapItal One-$190 used of $200 limit (opened August 2011)
                      $1475 used of $1500 limit
(Opened December 2013)
Crédit One- $565 used of $600 limit
(Opened June 2016)
â–ªRetail card
Fingerhut , $119 used of $700 limit (opened September 2016)
â–ªAuto loan just under $20,000 taken out
in July 2016.
***All of these accounts are reflecting a “paid/never late” status. Credit utilization is currently at 82%
2 derogatory accounts
1.A JCPenney Crédit Card with a $300 limit..
I got this card in November 2015. Maxed it out by December. But paid it IN FULL before the close of 2015. I then used $120 in January. Lost my job, which I explanned to them. They gave me time. Unfortunately 180 days after the due date I had just got hired with my current job. Unfortunately, it was already charged off and sent to collections. Despite my constant verbal culommunication with them for the first 60 days…I have since paid the collection agencyclopedia IN FULL. They agreed to remove the collections activity from my report. They followed through with the their agreement and my updated report reflects that. However JCPenney did not remover the account via my dispute the bureaus, but changed it to a “Paid in full, was a charge off” status.
2. This one is simply a utility opened in my name without my knowledge. Back in 2011 and reported as charge off in March of 2012. It was never paid off apparently for a mere $17. I am working on a police report since they said even with a payment they won’t remove the collection/derogatory activity from my report…without a an identity theft claim.
Between 9 and 12 hard inquires reporting.
So with my background insight. My issue is my credit score is fluctuating between 595 and 605 amongst the 3 major bureaus. I had tried to apply for a small personal loan(1,000) and I was declined byou every Avenue from sites like opploans to my local credit union. I had also attempted to get a Best Buy and Walmart card and was declined for both as well. I know my utilization is higher than the ideal <=30% and my score could be better. But I can't seem to understand the constant decline even for a Discover Secured Card….many of them are holding my dereogatory accounts to be the reason for decline. Literally, no one will approve me of the mere 4 apps I put in between personal loans and both store cards. I can't seem to understand why. Am I missing something here? Mind you only one credit bureau is reporting the utility bill. So presumably the majority of lenders according to their declination letters have pulled reports showing only the JCPENNEY card amongst my several other accounts in Perfect standing, never late. I have considered writing a letter of Goodwill with hope of removal. Any insight on this would really assist me in a few extra hours of sleep at night. Again I Thank you in advance. Lastly, I apologize for the extensive comment.
– KP
That utility bill and a paid JC Penney collection are not the problem from my view. The credit utilization and amount of inquiries are.
You are going to need some patience and time.
Let the JC Penny collection item be what it is, a paid collection.
Dispute the $17 account like you are.
Pay down your balances to under 30% on each account. How long will that take you?
Do not apply for new credit for the next year.
What is your ultimate goal with building your credit?
Hi Michael. My current credit score is 557. It went up 14 points after going down 47 points from me applying for credit. I have student loans that were the only good account being reported on my credit. After applying and being approved for 2 secured credit cards, I applied and was approved for 5 more. The new credit brought the age of my credit down from 3 years to 1 year 6 months. I am paying everything on time and making sure that less than 30% usage is being reported on my statements as I know all my statement closing dates. Now I have 8 accounts in good standing. And 12 in collections. 2 of those accounts are repos. 1 is 6 years old and the other 4 years old. Overall, most of the collection accounts are 3 years or older except for 4. I’m wanting to get a 10k loan but need to get my credit score up to atleast a 620. Any advice as to the best way to go about this.
If it were me I would look to resolve the old collection accounts. And depending on my credit goals, and when I want to achieve them, I would focus on the most recent collection debts. I may let the really old ones fall off in a year.
What effect does freezing a credit card have on my credit score and what effect does closing a credit card have on my credit score and what effect does being an authorized user on one of my mother’s credit cards have on my credit score? I have 7 credit cards in my name (2 have a zero dollar balance) and 1 where I am an authorized user. I want to apply for an installment loan that will be less than 18% apr to consolidate 3 credit cards that are over 23% apr. Also, is it true that I should utilize 7% to 50% of every open credit card limit every month and pay in full every month to keep my credit score high? And adding up all of my credit card limits, what percentage of my income should those limits be even if I am not using the entire limits, or does that matter?
The impact of this and that on someones credit is unique to that person. No one has your credit profile.
Closing an account that has nothing but positive information could hurt your credit if it is a well established and older account. But that may not be the case on a newer account.
What do you mean by freeze an account?
Being an authorized user can help your credit, but by how much I cannot say. You can also be harmed as an authorized user.
It is not true that you need to maintain between 7 and 50 percent utilization each month to maintain your credit score.
I am not aware of any scoring model that factors your income.
Thank you for your reply, Michael. This is the article that talks about credit utilization, to which I thought you might be able to add or second: https://www.creditkarma.com/article/CreditCardUtilizationAndScore
Consumer lenders do look at debt to income ratio but usually don’t share their ratio with applicants, so, again, I thought you might have some knowledge on that that you would share – whether they look at credit limits (potential debt) or only actual debt.
Credit Utilization is not unimportant. It has a huge impact. But you do not have to be hyper concerned about it each and every month. You simply do not need to use every card every month to maintain your credit score.
Thank you for replying and for the information.
Hi Michael, wondering if you could give me some advice on how to climb up out of the mess I’ve made of my credit. I graduated college 2 years ago and have been employed full time for all of that except a few months. My report looks something like this:
2012- $440 charge off from loan company.
2012- $850 charge off from furniture financing which I recently paid off in full.
2015- $380 charge off from capital one
2015- $360 charge off from capital one
2015- $472 charge off from MasterCard
2015- obtained a car loan with a co signer for 3000.00. Have paid on time every month since. No late payments.
2016- obtained small 500.00 loan to help repair credit. Lost job and fell behind. I am currently making payments on this but remain behind close to 300.00.
I also have student loans in the amount of 37000 that I have yet to start paying. My credit score is currently in the upper 400s which is terrible. I work hard and would like to be able eventually to buy a new car with a low interest rate and quit renting to buy my own home. I just don’t know where to start to fix my bad credit. Also just to let you know I have over 25 inquiries on my report. I know that was dumb but I fell for the percentage off the stores
Offer when you apply for a card. This has also hurt me. Please help with any advise you may have. Thank you!
I would save up in order to settle the charge offs first. I would not apply for any loans right now. Not until all unpaid collections are updated.
How long until you can save up half the balances owed?
Hello sir, I have some questions for you! My wife and I have recently been hit with daughters medical bills and my moms funeral, both which we paid for. Our credit scores are both in the 700 range, but are considering letting her new car go, we are obviously wanting to do this right like turning it in ourselves and attempting to possibly work something out with the bank! We have two credit cards with small balances and always pay on time. I need some advice! Can we speak over the phone? This is much easier for me?
I got your voice message Adam, and left you a message back. Give me a call on Monday and lets go from there.
I have 4 collection account and my credit card balance is $600 ($900 credit limit). I applied for a montage loan and was told to delete the collection accounts and bring my card balance down to 25%. Total comes out to $1500. If I pay them off and lower my credit card balance how soon can i see improvement on my score. 572
How old are the collection accounts on your credit reports (when did you start missing payments)?
Who is reporting them now, the original creditor or a collection agency (include name of company)?
How large of a home loan are you applying for?
Any ideas on how to best resolve a repo post bk7? We made a bad finance decision really fresh out of bk7 due to desperate measures, and the car ended up going back relatively quickly. We are really trying to resolve this, but with little to no luck.
How much is the deficiency balance?
The balance is just under 3300.00
I often negotiate deficiency balances in this situation for 40% or less. Can you pull that amount together?
Who is the finance company? When did the repossession and auction occur? If you are dealing with a third party collection agency now, who is that?
Company is Reliable Auto Credit and no 3rd party. Repo and auction happened about 3 months ago. Bk7 discharged last January. Right now 3-4K isn’t do-able.
I would save up and settle for 30 or so percent with the third party this lands with later. You do not have the cash flow to work with right now anyway, and the deal will likely be better as this debt ages.
I lost my home in foreclosure in April 2011. It’s still showing on my credit report as an open past due item. Is there anything I can do to change this and improve my credit score? Thank You
Is the foreclosure the only negative item on your credit reports? If there is more, post an outline of all that is negative. Include whether or not the account has been resolved or if it is unpaid.
What are your credit scores currently?
Equifax 705
Transunion 667
One other item, I cosigned on a motorcycle for a friend in 2009-2010 that was repossessed, credit report states “Account Removed”
The foreclosure will be on there for 7 years. It sounds like it drops off in 2018. You can get financing, including a new home loan, even with the foreclosure, if it had been 3 years. Your credit scores are in shape enough to allow for that.
The repossession appears to have fallen off too.
What is it you want to get done credit wise that you are concerned the foreclosure will hold up?
Would like to bring my scores up, especially the 667 which shows as fair. I only have 2 credit cards, tried to upgrade my Macy’s account and was declined.. I have a Visa that I owe $650 and limit is $5000. Thank You for the information. Guess I could be in a lot worse shape. Thanks again. Vicki
I have recently started paying off my credit report. I am far in debt. I have 35 medical accounts which are $75 a piece some a little more. I have 5 credit cards that I owe the hightest is 1700 on one but I am working with the bank and making payments on that one. I owe tmobile, att, verizon. I owe 2 utility companies that are 900 a piece and a I just paid off my furniture I owed which was a judgement for 700. and will be paying off another judgement for 450. I allowed people to use my name with cellphones and stuff and it has cost me. I am working on paying down my charge offs. Is it better to pay the credit cards first or the other ones? I know the judgements need to be paid first. And by the 1st of September the judgements will be paid. So should I pay off the utilites or the credit cards next?
Utilities do not often sue for collection where credit card banks and debt buyers do. I would focus on the credit cards, then move on to medical and utility bills.
TMobile, ATT, and Verizon sell to debt buyers that can sue, so I would start with those utility bills first.
I recently paid off all my collections that shows up on my credit report. The weird thing is but I have heard this is common is that Out of the three reporting services (Experian, TA and Equifax) Some show certain ones closed and others do not.
Is there a way to ensure that all three get the information and my score starts going up. The Derogatory remarks are the only negative things on my report (its a huge one of course) and was told once these close my score should go up quite a lot in 3-12 months and want to make sure this happens. Could I contact the ones that are not showing these accounts closed yet or is it better to wait awhile to let it all shake out. Thanks for your help.
Review this article about disputing incorrect information on your credit reports.
I went to refinance my home and the bank refuse me because my score was below 640.currently I am at 586. So they told me to work on my credit and pay some charge off I have but then someone else told me to pay my credit cards because my charge off were from 2014. What do I do?.
Post a reply with who you owe, how much, and when you last paid on the accounts. I can help you from there.
From June 17:
I’m 26 years old. I purchased a 2013 Ford Focus, with Ford Motor Credit to finance it. The vehicle was totaled in 2014, and our insurance company paid the remaining balance of the loan minus $917. I didn’t realize that we still had a balance, received no notices or statements in the mail, and did not follow up with Ford Motor Credit to make sure the full balance was paid. Now, it is marked as a derogatory account on my credit, as of 4/15/16. I have been in contact with a debt collector, and I verified with Ford Motor Credit that they sold my debt to this company. The debt company has agreed to settle my debt from $917 to $600, and upon receiving payment, they said they will send a confirmation to Ford Motor Credit’s Recovery Service. I asked the Recovery Service if the derogatory mark could be resolved or removed from my credit once paid, and they said that it would show as paid and be closed. While I don’t want to have any outstanding debts, I just want to know if it’s worth it to pay, if this will help my credit at all or if there is anyway to negotiate better terms?
Update: I settled with the debt collector for $600 on June 26th, deciding to resolve the debt as best as I could and moving on.
Thanks for posting this update Theresa. Did your credit scores go up with the 3 bureaus? If so, by how much?