I keep reading about how crucial a good credit score is to get into REI if you don’t have lots of cash. Is a FICO somewhere between 660 690 good? I just looked at my credit report and saw 2 negative marks against me. One was from a credit card opened in 2001 in which I was 30 days late making a payment. The card was paid off and closed in 2004. It says it will be on my record until 2011. How do I get rid of this?
To my utter shock, there is a medical bill that is in collections status since 2004. I thought I had taken care of it years ago! It says it will be in collections status until July 2008 or should I contact them and try to pay it off after all these years? If I wait until July, will it be removed for good? The balance is not even $300. Should I just be proactive and pay it although if I recall, my insurance company messed up big time and I told them they better take care of it back in 2004 but obviously, they didn’t.
I have opened and closed numerous credit cards over the years and they all say “Never late” I also got a new car last spring and have never been late with that payment. I have about 6 active credit cards open right now (3 of them were for zero interst balance transfers) and about 4 more from department stores I never use and have never been delinquent on.
I want to improve my credit score as much as possible. In order to do this, do I close any and all accounts that are not being used??? Do I pay off the cards with the small balances as soon as possible?
In today’s deteriorating credit envir., what is a realistic credit score to access financing if you know you can’t put more than 10-15% down on a $200K house and want to get the best rate possible?
The credit rules are changing, and to be honest even if you make all the right moves something can creep up and change your score.
One thing I would tell you is this:
If the bad stuff is there and accurate forget about it, and wait for it to fall off.
Keep all your accounts open and current for as long as you can (I just heard that its impossible to get a perfect credit score unless you have a credit account that’s 20 years old).
Keep your balances below 30% on each card/account. I lost 25 points on my credit score because I let the balances go above 50%. Nothing was paid late, just the balances going up caused the decrease in my Fico.
Keep everything current and don’t borrow money unless you KNOW you can pay it back.
You should be in decent shape creditwise. If you can have a FICO at or above 700, you'll be in good shape. Pay off the medical bill and settle up with insurance CO. If you owe a debt PAY IT. It may stay on your report for longer that 4 yrs. If you have an outstanding debt it stays on for 7 yrs. after you/settle it. Keep the othe oldest accounts. Make sure your revolvng debt stays below 30% of your available balance. Better yet, pay them all off if you can.
So are you saying that the collection accounts stay on your credit for more than 7 years if you don’t pay them? If that’s so then I would pay them. Otherwise I would just let them fall off…
Can the company that is owed the money keep making postings onto your credit report as long as that debt is owed?
In my experience, the 7 yrs. does not start from the beginning of the late pmts. Its when the company charged it off. If it takes them 2 yrs. to charge it off, it can stay on for a total of 9 yrs. It depends on the creditor. Paying off the debt is more about doing what’s right and not the best way to save your neck. Would you rather lend money to someone who took forever to pay or not at all? If you skip out on $300, what are you gonna do when the times get tough in RE? That’s what lenders will see? Reputation is very very important. That is how how you earn respect and integrity.
I understand that its about integrity. What I wanted to understand are the rules. ie, I don’t want to make things worse for myself by paying off the loan.
lets say you just find out about an account in collections that’s two years old. What happens if you:
Pay it off now. Is the account on your record for 7 years as of today or 5 years as of the notice?
Don’t pay it off. Is it on your credit for the remaining 5 of the 7 years OR can the creditor contiue to report the deliquency, thereby extending the time its on your record.
I want the derogatory credit off as fast as possible, so which is the best avenue to take?
In my experience, it’s been 7 yrs. after they charge it off as bad debt or you pay them off. Paying debts you even when you’re not expected to goes into the integrity category. ALWAYS your debts… No matter what. You can never hurt yourself by paying what you owe. Never. Do the right thing. Even when you don’t have to or want to… Trust me. You’ll be a better man for it.
Collections for medical bills and utilities are funny now. It stays for 7yrs from time of last payment, not chage off like credit cards. If you pay the bill it will restart usually. Also when the 7yrs are up, they account may get resold prior to it and be around again.
Call the collector up and offer to pay them 25cents on dollar (they bought the debt for about 2-3cents on dollar most likely) and that you require a hard deletion letter upon payoff. Offer to give them a check or credit card by phone. ONce you pay off and get your hard deletion letter, order your credit reports and do a dispute as not mine. Summit the letter with the dispute so you need to do it by mail and do not loose the letter.
As for the late payments. Your account is closed and old. Keep disputing it as never late and it should be wiped out in a few tries most likely as the bank probably wont care since you do not have an active account with thm.
For credit score to stay high. Keep balances like mentioned under 25-30% of limit, dont go over 50% of limit. Request credit line increases at times to keep limit higher. The inquires are g enerally soft inquires and do not count on you when they review your file.
The older a bad debt becomes the higher your score gets. If you pay on a bad debt that is old your score will drop. it will drop because you tried to do the right thing. Let sleeping dogs lie, do not pay that old debt.
When you ask what about my intergrety? Think about using that increase in your score to help a family by providing them with a nice safe place to live. That is integrity also.
A single $300 medical bill will most likely not sway your credit report more than 10 points in either direction, especially if you already have a mortgage. You are permitted a 100 word explanation next to each entry. Pay the $300 if you owe it, and assuming you can’t get it marked as “paid as agreed” (which should be easy to negotiate, as you did not know of it’s existence and they can’t prove otherwise from what you’ve said), submit a short explantion to the three credit agencies explaining that you thought it was paid, but found out about it’s existence when reviewing your credit, and paid it immediately once you verified it’s accuracy.
The item entries are there for a reason… use them. Also, I agree with others about keeping available credit to 30%, and about getting the $300 medical bill re-aged to reflect “paid as agreed” (get it in writing before giving them their money).
I would also dispute the 30-day late on the credit card. Chances are that they won’t respond within the required 30-days for an account that was late once for 30-days and is now closed.
A quicker way to add some points to your score (as it will take a minimum of 60-90 days to finalize the 30-day late dispute and getting the $300 paid and “marked as paid”) is to take out a 12-month $1000 personal loan, with autopay, and open an interest bearing account (to offset the expense of the loan) to put the $1000 in and autopay the loan from (do not use this money), and in addition to the autopayments each month, add $75 and it will paid off in 6-7 months, leaving you with $450 in the account to use to pay the $75 prepayment each month towards the next 12 month $1000 loan. Do this every six months and watch your credit score grow.
As a side note, I think it’s ridiculous that a person who pays their balances off in full each month gets dinged on their credit versus someone who carries a 30% balance on their open lines. Goes to show that it’s not just the ability to pay that gets rewarded, but the ability for the creditor to make the money (which, IMHO is skewed considering it is published and ingrained in the public that a credit report is SUPPOSED to be for creditors to determine ability to pay)…
My point of paying off the debt has absolutely nothing to do with wether or not the FICO goes up or down. It’s about being an adult and taking responsibility for your actions. I would pay the debt even if my score was lowered. If you’re gonna change, there’s only one way. If you skip out now you’ll skip out later if things get tough because you’ll have no integrity or sense of responsibilty. I hope you choose the right path. I know from experience. Good luck. :beer
That really does not work to increase your score when you have established credit. it will lower your score since your effectiing your DTI ration and opening a new tradeline. Also if the loan is secured it will have a negative effect oppose to position.
Other negatives on a credit tradeline are the types of credit and financial institutues you obatined credit from. Store cards have a low rating and can hurt more than help but do not close them now. Getting a car loan from the manufacuter financing like Ford Motor Credit gives less points than Chase Manahattn Bank. A bank ending in N.A will have a higher reporting ratio oppose t smaller banks that are not N.A.
Also over 75% of your score is based on the last 24 months of credit history which is why established credit is a 24month old account. A collection account dollar amount means nothing, $100 or 10000, can have same affect. it has to do with how the collector can report the account and the symbols on there tradelines. Some agencies only hit you for 10 or 15 points, others are set up to hit you for 30-40points.
Try to avoid opening new store credit cards and stay with main banks. I know you get teased with the 10-15% discount when first opening the account but in long run it can hurt your scores and the interest rates are higher generally. Many tmes over 25% where you can get a Chase for 7-10% rate.
Also watch your inquires, they add up… a few inquires are ok but dont go nuts. Mortgage inquires only count as 1 over a 30 day period so you can go out and have 30 done and its one on your score, but the credit card companies use a different formula and those 30 inquires will not allow you to obtain credit even with a 700 FICO because of the score system they use. You can remove any inquire from Equifax by calling and saying you do not know about it. You can give them as many as 20 in 1 shot and will create a seperate file for each block of 5 or 10 when you call, but will be removed within 2 business days and within 7 business days you will get a credit report reflecting removed. Others agencies are tough to get removed.
Thanks for all your good advice! I am just trying to do whatever I can right now to raise my credit score. My experian score is 691 right now which is considered fair. I just need to lower my personal debt which is around $9k right now. It is a mixed bag, RE prices are falling which is good but then on the flip side, credit is tightening and for someone like me who has decent credit and very little cash, it can be challenging. I am looking for a SFR to buy and hold and rent. I have decent credit and a budget of about $20K for EVERYTHING from start to finish. I will keep my fingers crossed! Thanks again everyone!
When the bank looks at your credit scores, they take all 3 and throw out the highest and lowest score so what you need to do is work on raising your middle score to over 700 if you have another over 700. When I started out I had 2 scores over 700 and one was under 650 for an odd reason but all data was the same.
As for buying your first home. You mention little cash but want to buy and hold and rent out. Well I do not recommend buying unless you have 6 months of mortgage reserves in the bank. Buying an investment property to hold is like buying a personal home. You need to have a good 6 months reserves in case of emergencies. Think, it may take 2 months to get a tenat in if vacant because you find them and they want to move in the 1st which is 2 or 3 weeks away so your waiting. If they are not paying you then you file for eviction which can take 4-8 weeks depending on state plus the week to 10days you let it slide before you broke down and started the process. Then you need 1 week or more to prep the property for new tenant and get a new tenant. So easily you can go several months without rent collected and you do not want to destory your credit over your 1st or any property really.
This is just my advice from someone who is experienced and went down those roads… And now, on the 4th day I post my 5 day to vacate letter and on the 3rd day I pay the attorney which now makes it the renters responsiblity to pay that fee and then paperwork is ready for court on the 5th day. I do not give anyone a chance and do not take post date checks. Pay or leave. I tell them this when they sign lease and even have a stipulation they sign which outlines the foreclosure process, cost and tenant/landlord responsibilities and what happens to security deposit.
You may be able to find some hard money lenders who’ll finance you based on the deal you bring to the. I did my first foreclosure and flip by running an ad in the paper saying that I can get good deals but I need a cash or credit partner.
I basically did all of the work as far as finding the deal, over-looking the rehab and then the flip. The partner simply got the deal financed, ended up with 60% of the profits and I got the other 40% of the profit in the end.
That may be an option for you. You can make money by doing all of the work, use your cut of the profits to fix your credit situation and in time, you’ll be able to do the deals yourself.