Tracy Winters
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Paying off delinquent accounts doesn’t improve your score
Paying off collection and charge off accounts does nothing to your credit score. The damage is done and paying of the debt will not improve your score or erase the negative credit history.
Delinquent account age off your credit report 7.5 years from date of first delinquency. This is per the FACT Act. However, since Fico score are 90% based on the previous 24 months credit activity, by the time the items age off your report they hardly have any effect on your score.
The fact that you have a score around the 600 mark means that the items’ effect on your score diminishes.
To improve your score you need to re-establish good credit. This means 24 months of timely payments. If you have a credit card, start using it for regular purchases, wait for the statement and pay the balance in full every month.
If you currently don’t have an active card, you won’t be able to get a regular card. Apply for a secured credit card, and start using it moderately.
This doesn’t mean that you did anything wrong. Collections companied tend to sue just before the statue of limitation. In many cases they get a judgment, and then the damage is much worse.
Another good reason to pay/settle collection accounts is that when potential creditors look at your report, they want to see that all past problems have resolved. A paid/settled account looks much better than an un-settled collection.
Lastly, paying collection in monthly installments is particularly bad. They can re-sell your account after you’ve made a few payments and you’ll need to negotiate a new settlement. Much better to pay a lump sum.
Re: Free credit bureau score
It’s true. 99% of the sites that advertise “free credit score” only give you a seven day free trial, and you must give them your credit card details to enroll. And let me tell you something else – you won’t find anywhere in their site how to cancel that “free trial”. In the end you’ll be charged. My advice – stay away from any site that requires your credit card details for anything free.
B.T.W., all these sites don’t even sell you a real Fico score. They don’t disclose it, but third party credit scores are only an estimate. They’re also known as FAKKO Score, fake scores or educational scores and are practically useless.
Unfortunately, as per the FACT Act, you are only entitled to get free credit reports. Free credit scores are not included. They are a product, and as such cost money.
Having that said, there is one website that DOES provide completely free credit score – Credit Karma. They provide absolutely free credit score as well as free credit monitoring, free Fico simulator and more.
The score Credit Karma provides for free is based on your TransUnion’s credit report. It’s very close to your real FICO score (within 50 points of it) and is highly correlated to it.
Their free credit monitoring is also based on you TransUnion’s file. It’s not full proof, but much better than having no monitoring service at all.
See free-annual-credit-score.html and free-fico-credit-score.html for more information.
You CANNOT take them off
There are three big misconceptions among people:
- Paid accounts fall of your report
- Paying off old debts raise your score
- Disputing items removes them from your report
A credit report is a reflection of your credit history. You had a few derogatory accounts in the past. That fact is not going to change, and therefore the accounts will remain on your report for 7.5 years.
Their status will update to “Paid” or “Settled”, but they won’t go off. Disputing them won’t do any good either. Disputing an item is like telling the credit bureaus “This item is doesn’t belong to me”. But it does, and this why it won’t go away.
Your credit score is just a reflection of your credit report, and so it too will not go up because you’ve paid all or part of your delinquent accounts. Your score is impacted because you’ve had delinquent accounts in the past.
With time the effect of these derogatory accounts is reduced. Assuming that you create a steady stream of timely payments your score will recover.
So why pay off these old accounts if it doesn’t help your score?
For three good reasons:- Your credit status is much more than just your credit score. Lenders do actually go over your report when they review your applications. A “Paid” or “Settled” account looks much better than a charge-off or default account. Mortgage companies, for example will not even consider your application with un-resolved delinquent account, regardless of your score.
- Old debt are usually sold to collection companies that tend to file a law suit right before the statue of limitation expires. You’ll end up with a judgment or lien against you. That judgment/lien will also appear on your credit report, further damaging it. Not to mention that you will end up paying.
- There is of course the moral aspect of paying your debts.
My advice – keep paying these debts. Keep building good payment history and your score & credit will rebound.
Good luck.
Probably not
To start with, prepaid credit cards are not an extension of credit, and as such aren’t reported to the credit bureaus and have absolutely no effect on your credit.
Even if you would pay the web hosting site with a regular credit card it wouldn’t matter. What the credit card companies report is whether you pay your statements on time.
The website hosting company probably does not report to any of the credit bureaus. It’s expensive to subscribe and would have no value to them.
If you continue to hold further payments, they could turn the debt over to a collection agency who would report the defaulted debt to the credit bureaus. It also depends on what your contract with them.
I doubt if they bother with such small debts. More likely, they will just terminate your service. If you plan to continue using their services, simply pay the fee.
You don’t Fix bad Credit. You re-establish good credit
You need to understand how credit rating systems work. Your credit report contains your credit history and your current credit standing. Your credit score is the output of a complex algorithm (Fico) that runs on your credit report.
Two major things affect the output of this algorithm (i.e. your Fico score):
- Positive information such as stream of timely payments, low credit utilization, credit diversity and age of credit file increase your credit score.
- Negative information such as late payments, charge offs, defaults, liens etc lowers your credit score.
According to the FACT Act, credit reporting agencies are allowed to include information (both positive & negative) in your file, on the condition that it is correct and accurate.
With that being said – you understand that there is no legal way to remove negative information from your file. This means that accurate negative information will continue to lower your credit report, and you cannot undo it.
The ONLY thing that you can do to improve your Fico score is by increasing the amount of positive information on your file (i.e. re-establishing good credit). Re establishing good credit is pretty much the same as Building Credit History.
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Luckily, 90% of your Fico score is determined by the previous 2 years activity. This means that although derogatory information remain on your file for 7-1/2 years, its impact on your Fico score will decrease, while the stream of positive information raise your score as time goes by.Another important thing to remember is that Fico score is not everything. When making lending decision creditors look at your actual credit report. Although paying your debts will not raise your score, potential creditors will have a more favorable attitude toward late-but-paid debts than to unpaid debts.
Re: What credit scores mean
Credit scores are just a grade for how you behave financially. Having a good grade means that you are responsible knows how to handle credit and can be trusted to return the money you lend. If you have good grade (i.e. good credit score) lenders will want to lend you money and will offer you their best terms.
Having a bad grade signals creditor that they can’t trust you to make payments on time, so chances are they will not approve you, and even if they do – you will get their worst terms because you pose a great risk to them.
The basic principle of credit scores is: credit history + credit present = good predictor of future.
There are three Consumer Reporting Agencies (Credit Bureaus) that collect financial data on consumer. They are Equifax, Experian and TransUnion. Each collects financial data on millions of consumers from numerous financial institutions.
All the financial data about you is collected in a single file, also known as your Credit Report. A mathematical algorithm is applied to the data contained in your report. The result is a single number – your Credit Score.
The one most commonly used credit score is FICO. Over 90% of all creditors use it to make landing decisions. When you apply for credit, the first thing a creditor does is to pull your credit reports and scores from the 3 major credit bureaus to process your application.
Because the importance of credit score and their high impact on consumers, the government has regulated this huge business by means of the Fair and Accurate Credit Transactions Act (FACT Act).
You have various rights under the FACT Act. One very important such right is that you are entitled to a free copy of your credit report from each of the 3 major credit bureaus every 12 months (See free-annual-credit-report.html for more information). You are also entitled to receive your credit score upon request, but not for free.
For more information on what credit scores mean see what-do-credit-scores-mean.html.
You need your statement to show more than $0
This may be lowering your utilization, but if your statement shows $0 then it won’t build credit for you.
In order to build good credit you need to actually use your credit card. Getting a statement with $0 has the same effect as not using the card.
Credit card companies report to the credit bureaus once a month, usually at the closing date. So in most cases, what they report to the credit bureaus is what appears on your statement.
If you go online and pay the balance before the closing date, your statement and the credit report will both show $0 balance. So it is true that your utilization will be low (0% for this card), but it won’t build credit for you.
Better to wait for the statement and then pay it in full, or, if you prefer go online befor the closing date but pay just some of the balance, so that your statement won’t show $0.
Good luck.
Tenant credit history reporting agencies
You will not find a record of eviction on your credit report. However, your guess is right – there are many private credit reporting agencies that collect, manage and sell tenant credit history to landlords or property companies who want to protect themselves from tenants that don’t pay rent or utility bills on time.
Any private landlord or property company that wants to perform a tenant credit check (also called Tenant Screening services) needs to obtain your signed permission in order to run the check. Credit reporting agencies must require proof of this permission.
‘ SafeRent ‘ is actually CoreLogic SafeRent, which is a Credit Reporting Agency (CRA) that deals with renters data. Since they are classified as a CRA (like Equifax, Experian & TransUnion), you are eligible to receive free copy of your report from them. This is per the FACT ACT.
Further more – anyone the uses your consumer report information to deny your application– must inform you and provide you the name, address and phone number of the agency that provided the information (this is called adverse action notice).
You also have the right to dispute any wrong information that is on your report.
If this eviction doesn’t belong to you than you should dispute it with the CRA. Start by asking the renting agency that declined your application for that information, and then dispute the item with them.Re: Whats a good credit score
People would probably reply with “above 700” to your question. Any score above 700 indicates that your credit management is good, and with such a score you’re likely to get approved for most credit cards and loans, with very good terms.
This, of course relates to Fico, which is in the scale of 300-850. Fico is the only score that counts because 90% of all creditors use it for making decisions.
However, Fico scores (or any other credit score) are not everything. Your actual credit report is much more important, and most creditors will examine it before making a lending decision.
For example, you won’t be able to get a Mortgage these days without a clean credit report regardless of your credit score.
Your Fico score is also use to determine the terms you’re likely to get on a loan, as can be seen in this table. With most lenders, a Fico score of 760+ will get you the best terms. A credit score between 700 – 759 will get you good terms.
However, since there’s no singe “score cutoff” used by all lenders, it’s difficult to say whats a good credit score outside the context of a particular lending decision. For example, one creditor may offer lower interest rates to people with FICO scores of 680+, while another may use 720+ for these rates.
Another issue is the score itself. Mortgage lender uses a different version of Fico formula (called ‘Factual’) that is especially adapted to their needs. Car dealers have their own version called ‘Auto Enhanced’. The score that you can get as a consumer from myFico or any other paid service is a generic version of Fico (called ‘Standard’) and can be up to a 100 points off! (See Understanding FICO Scores for more information).
Lastly, many other factors come into effect when making a lending decision. These include length of loan, your employment status and salary, down payment, securities and many more.
See what-are-good-credit-scores.html for a more detailed explanation.Simply put – you can’t!
You have a bad credit score because you took advantage of a lender(s), and probably didn’t return your previous loan(s). How can you expect someone to lend you money if they know you didn’t pay your previous lenders back?
Would you lend your own money to yourself? Probably not… LOL
You pose a huge risk to lender, and if someone IS willing to lend you money, they will want that monstrous interest rate to compensate for that that risk.
Such interest rates will ruin you financially. Maybe it’s best for you if no one will lend you money.
You have earned the ability to be considered a dead beat borrower, and until you get your act together and can prove that you are trustworthy – no one has any reason to trust your money management skills again.
You must work hard to improve your credit! There is a lot of stuff in this site that can help you.
It means that you don’t have credit history…
All creditors pull your credit report when you apply for credit. They want to see that you know how to handle credit and pay your debts on time before approving you more credit.
So the fact that you have no credit history has the same effect as having bad credit. Since they don’t have positive information about you they have to assume the worst, and thus deny your application.
This is what “ your order failed our online credit validation” means. We checked your credit and can’t approve you because you have no positive information on your file.
Building credit is like catch 22. You can’t have new credit unless you already have credit. So how do you start?
Apply for a secured credit card or a secured loan. They are much easier to get because they are secured. After a year or so you will have reasonable credit and can switch to a regular credit card.
They are almost the same in all aspects
Neither is better or worse for the person with bad credit, and both are a liability for the person with good credit.
In a joint loan the loan is taken by both peoples. Both are the owners of the loan. A co-signer is someone who doesn’t own the loan, but guaranties to pay back the loan in case that the owner defaults.
Credit wise – there is no difference between the two. In both cases the loan will appear on both credit reports. So the loan builds (or ruins) both your credit and that of your co-signers.
This is why people are not reluctant to co sign, because co-signers (which usually have good credit) put themselves in a dangerous position when co-signing for someone with bad credit.
As to which is better with respect to getting approved, the decision of taking a joint loan or just having someone cosigning for you is actually not in your hand.
The lender will dictate what kind of loan you can get. While some lenders will dictate the loan is to be shared equally between the two persons, others will let the bad credit person to take out the loan on his name if the person with the good credit co signs the loan (i.e. guaranties that he will pay the loan in case that the owner defaults).
Wait for the statement
Best ways to handle credit cards and build good credit is to wait for the statements and pay the in full each month.
Credit card companies don’t like it when you make multiple payments each month. It cost them to process the large number o excess payments. I’ve even heard of people that got their credit card frozen by the credit card companies for this reason!
Another problem is that if you always pay your purchases before the due day, your statements will have $0 balance. This has the same effect on Fico formula as unused credit card. This means it won’t build credit for you.
Lastly – by paying before the due date you’re missing out one of the benefits of using credit cards – the interest-free grace period between the purchase date and the statement due date.
Good luck
You can RUIN your credit quickly. Repairing it takes time…
Repairing bad credit is like a diet. It requires time and diligence. You don’t repair bad credit. You re-establish good credit.
Your credit is actually two different things. You have a credit score, and you have a credit history. They are not the same.
If you have multiple derogatory items on your credit report – with time their impact on your credit score will diminish. Resolving them won’t raise your score. Never the less – you need to resolve them because no one will approve your applications for credit with unresolved derogatory items on your file, regardless of your score.
Establishing good credit requires time and diligence. You need at least 24 months of consistent timely payments. If you can’t get a regular credit card you’ll need to apply for a secured credit card.
The only “quick” thing that you can do is lower your balance to limit ration (credit utilization) below 35%. This should result in a 50 point raise in your Fico score, but other than that, you’re looking at a long period of time and hard work.
It means that your Fico score is impacted by too many inquiries.
The credit bureaus usually attach this statement to the explanation part of your credit report when the your Fico score took a hit because of to many inquiries, i.e. by you searching for new credit.
The reason for lowering your score and attaching the above statement is that researches have shown that opening several credit accounts in a short period of time represent greater risk.
Just how many is “too many“?
There is no straight answer. What Fico does is to profile people. For consumers with similar credit profile to yours, Fico formula has came up with a MAXIMUM number of hard inquiries that is considered tolerable.
As long as you keep your number of inquiries below this number – no harm is done.
Once you go over this threshold – your score is impacted and the “Too many recent inquiries in the last 12 months will appear on your report.It is important to note that the isn’t a single number. The maximum acceptable number of inquiries varies according to the different credit profiles people have. Different people will have different number of Maximum credit report inquiries that is tolerable.
As people change their credit habits and use more credit in – this number changes as well to reflect this reality.
See credit-report-inquiries.html for more information.
