Tracy Winters
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Neither. Unused cards don’t build credit
The only thing that builds good credit is making payments over time and avoiding late payments or other negative information. So if you’re not using the cards, they do nothing to build your credit score.
I find that it’s better to have fewer credit cards. Just too much potential for ID theft and fraud. If you don’t intend to use these cards, close them via letter and request a written confirmations that the account are closed and zero balance. Keep these confirmations forever.
Closed accounts in good standing will remain on your credit report for at least 10 years. They don’t count as much as open active accounts, but since you are not using them you probably won’t even notice the difference. See close-credit-card.html and closing-credit-card-sample-letter.html for more information.
Yes. A very bad one
Unpaid medical bills (or any other bills) that wind up with collection agencies have an adverse affect on your credit report and score.
Your credit score may drop by up to 120 points because of a single collection account. Once an unpaid bill reaches collection, it is reported to your files and immediately affects your score.
The credit score algorithm doesn’t distinguish between unpaid medical bills to other type of bills. It’s all the same as far as credit score goes.
You really need to take care of this debt. The collection agency can come after you in various ways, including filing a law suit. If they get a judgment, they can even garnish your wages and attack your bank accounts and property.
See why-pay-off-debts.html and how-to-pay-off-debt.html for more information and tips on dealing with collection agencies.
It is collected from the estate
With one exception (co-signing), family members do NOT inherit debt. The diseased person’s debts become the responsibility of the estate. Assets must be liquidated to pay for the debts before anything can be passed to heirs. In case that there isn’t enough assets to pay off the debts, the creditors will have to write it off.
Life insurance is NOT part of the estate. It goes directly to the beneficiaries and does not have to be used to pay any debts of the estate.
If a family member has co-signed for the diseased person, he assumes full liability for that debt.
Creditors have one year to notify the estate of the debt. Often, collection companies try to make family members believe they are responsible for the debts. Don’t fall for that trick. Just send them a notice with a copy of the death certificate indicating there are no assets to pay the debt.
You can probably get a loan but with a co-signer
Your credit score is probably the least important factor for getting the loan. Your income is a bigger factor, but there are more factors such as size of down payment, car value, depth of credit history etc.
You may qualify, but almost certainly with a co-signer. BTW, where did you get this score? Is it a Fico? It sounds a bit high for someone with your credit profile. It may be a Vantage Score or a Fakko Score. In both cases it means that your score is not as high as you think it is.
Try getting pre-approved by your bank or, better yet, credit union. With financing in hand, you should be able to negotiate a better deal at the dealership.
Re: How to build credit history for my wife
You should be able to get good terms if you co-sign for your wife (as opposed to co-signing to someone else). There are no rules here. It depends on the leasing company.
Credit reports and scores are personal. Your wife’s credit report and score is totally separated from yours. They do not blend or impact one each other (See marriage-and-credit-scores.html for more information).
However, debt associated with joint account appears on both credit report, and is factored in both of your debt-to-income ratio. This may sometimes reduce your ability to apply for new credit.
If you want to build good credit for your wife, adding a credit card in addition to the car lease would certainly help. Naturally, you will have to co-sign on the credit card as well (if she doesn’t qualify – get her a secured credit card). It’s better than adding her as an authorized user to your credit card. Remember that it take at least two years to build a good credit score.
Good luck
Jump on that settlement
Judgments don’t just go away. If they agreed to settle for the $550 you should jump on that.
Even if the judgment is was given in another state other then where you live, they can file the judgment in your state and proceeds to garnish wages, attach your bank accounts, and lien personal property. Once they domesticate the judgment in your state, they won’t be accepting any settlement for less than the full amount.
As to the house you were looking into – mortgage lenders won’t approve a mortgage until that judgment is satisfied. Make sure you get a settlement agreement in writing before you pay.
Make sure that the settlement includes their commitment to file files the satisfaction paperwork with the courts. They are the only ones that file the paperwork, and if they don’t – your credit report will not update to show that the judgment was satisfied. FYI, it will take some time for all that to process and show up on your credit report.
It is true you could try to have the judgment set aside if you never received a summons, but you would have to hire an attorney. Since this is actually your debt, the collection agency will likely just serve you a summons right in court when the current judgment is set aside. So in the end, you might spend time and money just to end up with the same results.
Only reliable credit repair counseling is the NFCC
The ONLY reliable credit repair counseling service I dare to recommend is the non-profit National Foundation for Credit Counseling (NFCC). Try finding a member at http://nfcc.org. They were formerly known as Consumer Credit Counseling Service (CCCS).
From what I’ve been hearing – they’re doing a pretty good job, and can certainly help with overwhelming debts that have not yet defaulted. They cannot help however with any credit cards debts that has already defaulted.
They put you on a Debt Management Program (DMB) for a nominal fee of $40 per month (only if you can afford it. Otherwise it’s free).
While in the program, your credit reports will show “in debt management program“. This might disqualify you from getting a mortgage. Your Fico score however will not be effected by this (See Factors Excluded from the Fico Score). When you complete the program, that remark will be removed and you would be eligible once again.
Take advantage of the time you have and get yourself educated on home purchasing, if you don’t want to find yourself facing foreclosure. There are many books on the subject. Try your public library for a free one.
You need to pull your credit reports and check them
This is an extremely low score. If you have 2.5 credit history with no negatives on your report, your score should be much higher. Mid 600 at least.
It sounds that something is very wrong. It could mean a few things:
1) Is that score from just one credit bureau, or all three? It matters, because your credit cards may not be reporting to all 3 credit bureaus, so you may lack credit information with one bureau. In that case you can ask them to use your credit report from a different bureau.
2) You may have incorrect information on your report. It happens all the time. You can have someone else’s bankruptcy reported as yours, which can explain such a low score. In that case, a simple dispute will solve the problem.
3) It may very well be a case of identity theft. Someone may have opened credit cards in your name and have defaulted on them.
4) You may have unpaid bills that you aren’t aware of, that have gone to collection. It can be anything: a bounced check, medical bill, unpaid parking ticket…
What you need to do is to pull your credit reports from all the 3 major credit bureaus and check them thoroughly. You’re bound to run into something unexpected. Get to the bottom of it and solve the problem.
Good luck
P.S. when you find what was the problems, please do come back and it share with us.
Credit Karma cannot be used as an accurate reference
Your Credit Karma score is only an estimation. Credit Karma provides users with the TransRick score. It is TransUnion’s version of Fico, and it is based on your credit report at TransUnion. Although it’s usually within 50 points of your “real Fico”, it’s not what lenders use.
Your car dealer may use a different score (called “Auto Enhanced”). It’s a special version of Fico, especially tailored for the auto industry. He may be buying the score at Transunion, but he can also be buying it at Experian or Equifax (See understanding-fico-scores.html for more information).
For this reason, you can’t use these two numbers as an accurate reference. The score that you see is not what your lender sees. The only way to know if your score is good enough is to actually apply for the loan.
Building good credit takes time. If you make timely payments, your score will increase a few points each month. It may take you a year or more to raise your score.
If you have high balance-to-limit ratio (over 35%), you can get an immediate score increase of up to 50 points by paying off your debt. Other than this, it takes time.
Good luck
Don’t cancel your Citibank card. At least not yet…
Just because you got an offer doesn’t mean that you will qualify for card. You got the offer as part of Discover’s pre-screening for potential customers.
It’s very common to get a tempting offer, but to end up with a lesser card. It’s o.k. to give Discover a shot, but don’t be surprised if you end up with a similar card to your current Citibank card.
By the way, it’s okay to have more than one credit card. Use both cards for small purchases such as groceries, gas, clothes and such. Wait for the statements and pay the balance in full each month. That builds credit and avoids interest.
If you choose to close a card, make sure go get a written confirmation that it was closed with 0 balance (See close-credit-card.html for detailed information on how to close credit card accounts).
Lastly, if you carry no balances on your cards (which you shouldn’t), then the cards’ APR makes no difference anyway.
Your options are very limited
The only way do raise your score in such a short time is to reduce your credit card utilization, in case that it is high. Carrying credit card balances of more than 30% hurts your score. Paying off your credit card balance and lowering your utilization below the 30% mark will give your score an immediate boost. Whether it’s worth 35 points depends on how high your utilization was before.
Other than this – noting you can do. Paying off derogatory items won’t help your score at all. However, you stand no chance of getting approved for a mortgage with open derogatory items.
Paying off installment loans might actually lower your score because the account will now be closed and will not count as much in your score as an open active account. However, it will improve your overall debt-to-income ratio, which may prove to be more important than your actual credit score when it comes to mortgage lending decision.
Opening a new account is a very bad idea. It might actually lower your score for the short term. Do not open new accounts at least 6 months prior to applying for a mortgage.
Other than this, only a steady stream of timely payments can raise your credit score, but that takes time. For a 35 point raise, you’re looking at least 24 months.
Good luck.
It’s an accounting term for uncollectable debts
A charge-off is an accounting term. Basically it means that your creditor has deemed your debt as uncollectable. In plain language, charging off an account is like saying: “we really don’t think we’re going to see a dime of this“. It doesn’t mean that they can’t try.
Usually, creditor will deem an account as “charged-off” after 180 days of delinquency. The account will be closed, written off and most likely sold to collection companies for cents on the dollar.
Charge-offs are particularly bad for your credit. Your account status will change to reflect this status, and your credit score may drop as much as 120 points. You may not be able to get new credit with an unresolved charge-off in your file.
The fact that your creditor has written off the account doesn’t mean that your debt is forgive. Your creditor (or a collection agency that bought your dent) may (and will) try to collect it. They may even file law suite against you, and have good chances of getting a judgment against you.
A more detailed explanation to what is a charge off can be found here: Charge-Offs and Credit Scores.
Not gonna happen
You cannot simply erase credit history. If you could, there was no point in having the credit reports and scores system in the first place.
It’s true that people sometimes do get lucky with good will letter or pay for delete agreement, but those work only on single time late payments such as unpaid medical bills etc.
Recurring late payments such as credit cards cannot be removed. No credit card company would ever agree to that. And taking into account that you where 150 days late – you stand no chance with good will letter either.
FYI, you are very closed to having your account being charged off. A charge off is much worse than late payment for your credit. If you can – get current immediately and try not to be late again.
In two years the effect of this late payment will start to diminish.
Good luck
You can do your rate shopping safely
Fair Isaac, the developer of Fico credit score recognizes the importance of rate shopping, and the need to be able to shop for better terms without fearing of the consequences it may have on your credit.
So they have come with a set of rules that allow you to shop for rates with ease:
- Your current Fico score doesn’t consider inquiries made in the previous 30 days.
This means that any inquiries made during the time you shop for rates will not have any effect on your score. - All inquiries for Mortgage, Student or Auto loans made in a defined period of time count as just one inquiry.
This insures that even after you finish shopping for the best loan you can get, it will have minimal effect on your credit score.In the old version of Fico, that time period was 14 days. The new version allows for a 30 days rate-shopping period.
See rate-shopping-and-credit-scores.html for more information.
Yes you can
Adding your daughter as an authorized user to your existing credit cards will build her credit.
The accounts will show on her credit report and will cont in her credit score.This kind of practice is called Credit Piggybacking. It is fairly common with parents who want to give their children a credit jump-start, and it can certainly be done under 18.
As to getting better rates on her college loans – I wouldn’t get my hopes to high. Score is only small part of the lending decision and what’s on her credit report is much more important. Having only authorized user accounts may not be enough to satisfy lenders.
- Your current Fico score doesn’t consider inquiries made in the previous 30 days.
