As I emerge from my misspent youth, I am waking up to the fact that you “are” your credit score! I am a slow learner, it has taken me a little bit of time to catch on, and what a revelation! I’m not liking it down here in the 500’s, either.
I thought I had a great plan to substantially improve my credit score over two years’ time. I am going to make regular payments on the most damaging item, a $2000 judgement from an eviction seven years ago. Concurrent with that, I had planned to get a secure credit card and use it to make all my small purchases. I thought it was such a great plan, but, lo and behold, my bank just informed me that those cards are only for people who have NO credit, not BAD credit. She said to go to credit counseling.
Well, I’ve been to credit counseling, CCS of the Delaware Valley in Philadelphia, and they just kinda went over my monthly spending and suggested a budget. Their special debt repair program is limited to people who have credit card debt. I’ve never had a credit card. My debt is this judgement, a couple utility bills <$200, and a student loan from 10 years ago, not in default, for about $3000 w/$400 interest accrued on it. That’s about it.
When I graduate from school in "13 and begin job hunting, and they run my credit, I want it to be a lot better than it is now!
Please, advise! And thanks.
I was told by a finance person, that your credit score can go up by 3 points per month for on time payment of big ticket items. Big ticket items are car loans, etc. The first step is keeping it from declining further. Deal with creditors, and keep paying off what you owe. Bad credit typically drops from your record after 3 years, but some things hang around much longer. It takes time.
THanks Morgenstern. The biggest ticket item I’m gonna be paying off is all this debt! Wonder what else is a “big ticket” item…got a car already…3 points a month isn’t too shabby though…that alone, if it worked out as you describe, could up a credit score by 72 points in two years.
When I moved to the US and started building my credit history, the first card I got was a secured card from Orchard Bank. I don’t remember a requirement for no credit instead of bad credit so you may want to give them a shot.
You may want to talk your bank again or another bank, but I don’t think you need either bad or no credit to get a secured credit card.
But, entering secured credit card into google spat back as the first result the capitalone secured card. Looks like you send in your deposit and you are good to go. Granted, I did not research it heavily but why should they care if your credit is good or bad for a secured card.
I assume you want the credit card so you can repay it and get a better score based on that? Is there anyway you could just not ever use credit cards?
They’re a hole and often a trap, and if you have no credit card debt now, you’d be in a great place to be the kind of person who never has credit card debt ever. That is truly a great place to be.
I highly encourage you to research a debt snowball plan to pay what you owe, get completely out of debt and never incur any more. I wish I’d had the same advice when I was just starting out.
You don’t have to go into debt to use a credit card. Assuming you have the self-discipline to not go on a spending spree, using a credit card and not carrying a balance is an easy and cheap way to establish good credit history.
I must not be reading for comprehension. It sounds like the only negative you have is a 7 year old judgment. Although a judgment is a huge credit hit, one that is 7 years old shouldn’t be hurting you this bad. It sounds like the company is reaging that debt as they are reporting it. You have qualified for a car loan in the interem?
You should at least qualify for a crappy credit card ($500 limit, $59 annual fee), and that judgment should be off of your record after 10 years. How much do you still owe on it? I’m sure that you could borrow enough to make a lump sum payment on it so that you can negotiate with the company to remove the trade line.
Barring that, challenge it will the reporting agencies as a duplicate. See when those negative lines are scheduled to come off.
Get regular credit card, at the lowest interest rate possible, and pay off the judgement with the credit card. Aggressively pay down the balance on the credit card. Don’t charge anything else on the credit card (until you have a handle on it). This accomplishes 2 things, it retires the judgement debt and accelerates getting it off your credit score, and it establishes you as a “good credit risk”.
Having the credit card shows the world you can play their game their way. I disagree with the posting advocating no credit card evah’ - that sends a signal to the world that you don’t want to play their game. You want to play in the real world.
Another thing you can do: when you get a tax return or other chunk of money, buy a cd–say, for $500, or whatever you can afford. Then you can borrow that amount against the cd as a secured loan, which you will make payments on. I believe it doesn’t increase your score as quickly as the other types of loans/debts do, but your payments will get reported and it will eventually help your score.
Also make sure to get whatever utilities you can in your name and pay them on time. I don’t know how much it will affect your score, but it will help you establish “alternate credit” should you ever need it. (When I bought my house, I didn’t have a lot of credit, so I needed to document all those utility payments as a form of credit.)
It takes time and patience, but you just have to hang in there EVERY MONTH and it does pay off. Good luck.
Well, I’m against playing any game. I prefer just paying cash for everything. It’s a good way to live your financial life, and being in the position to start from scratch and build your life that way…I’m envious.
YMMV
In my experience, and from what I’ve heard, Capital One would send a card to your dog if they thought it was legal. When my credit was sour, they were the first ones to start sending me credit offers again as I was paying things down. Keep paying down your debt and you should get an offer from them soon enough. I’m not saying just grab the offer, of course – read it and the terms & conditions.
Yes, yes. Pay cash, or at least carry no debt. But to have no credit is to fail to plan. One of the better pieces of financial advice I got was to get a home equity line of credit on my home now, not when I needed it. Most people think the equity in their home will help them, but when they are in distress is when the bank will be least likely to extend credit. This translates to get credit, but don’t use it. I have a credit card, no annual fee, with an available balance of 50,000. The world comes crashing down on me and the family, that is the last resort. Sure you don’t want credit card debt, but it might be the choice between losing the house for the want of a little more time. Besides if I am in that much trouble, I am buying only necessities and probably looking at bankruptcy, so a little more debt ain’t a problem.
My point is good for the OP to be looking to build a better credit rating. Not only will it give more options in the future, it feels nice to clear that debt hanging over you.
Is there an advantage to paying it down aggressively? In my experience (750-780 credit score), the credit bureaus seem to prefer the demonstration that you can pay back over a period of time and not miss payments rather than that you can pay things back quickly.
One shows that you’re long-term responsible, and the other shows that you can just pay it off.
Ok, I am definately going to check this out.
Yeah, Sateryn, that is why, the only reason why, I wanted a secure credit card–to start building up a sound history of honoring financial obligations. Absolutely, I have no other use for one in daily life. Cash is the way to go.
Icarus’ advice to use a credit card to pay off the judgement, I don’t think would work for me…b/c I doubt I could get a card w/$2000 limit, and I would be limited on how much of a payment I could make monthly on it…I’m not in a position to aggressively pay off 2K at 7 or 10 or 20% interest at this time. Still, I like hearing the suggestions rolling in.
Because the OP has a low credit score, and probably can’t get a credit card with an APR less than 20%. Is it worth thousands of dollars in the near term just to qualify for slightly lower interest rates five years from now? In the long term, the OP can have “good credit” without spending a lot on interest rates that bump up the credit score in the short term.
ETA: OP beat me to it. I think you’ll do fine if you can stay disciplined.
The debt is to a landlord: $2,000.00. The car was a gift, so, no. I am gonna print up an Excel spreadsheet with monthly payments, ask the landlord to sign it every time I make a payment, and also ask him to sign an agreement that he will petition the courts to strike it from my record upon reciept of the total debt. This is my idea, anyway.
I have never tried to contact any of my creditors, but I am preparing myself to. Not my favorite sort of thing to do…but it’s got to be done. Sort of like wading through a river of s**t w/out rubbers.
Didn’t understand that last part though:
"Barring that, challenge it will the reporting agencies as a duplicate. See when those negative lines are scheduled to come off.
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Who can tell me that? The credit reporting agency? Can you actually talk to a real live human being?
Yeah, I have a lot to learn.
Not all employers run your credit report. I would go so far as to say that most do not. Unless you plan to work in the accounting or finance industry, or will otherwise be responsible for large amounts of money.
Anyway, it sounds to me like your low credit score has more to do with your lack of credit history, than anything particularly nasty. Even a judgement against you shouldn’t affect it that much if you’re making timely payments. But you’ve never had a credit card, and your student loans are in deferment. You don’t specify if you bought your car with a loan, but since you don’t list it as a debt, I’m assuming you either bought it with cash or have already paid off the loan.
You need credit to build credit. Apply for an unsecured credit card. Even if the interest rate is huge and the limit is low, accept whatever they give you (except if it has a monthly or yearly fee). You don’t have to spend on the card. Just put it in a drawer and never close that account, even if you don’t need it.
Then just keep paying off your debt as quickly as you can. Your score should go up just by virtue of not doing anything to make it go down.
I can’t tell you which is better, since I followed the “pay off all at once” when I had credit issues. I now have a score of 800, but about seven years ago or so, I had $7K of credit card debt ($2K over my limit) and four missed payments in a row before I took a personal loan from my family and paid the card down all it once. This did, in fact, drop my credit score about 20 points to something like 600. However, in about a month or two, this bounced back. I did not close any of my cards (in fact, I got an additional one to increase my available credit and to lower my credit utilization percentage. Even though I paid them off every month, depending on when the credit cards sent out their info to the agency, a balance would be reported.) Within about a year, my score had increased to 680-700. My strategy was to make purchases on the card, and pay them off every month to show I can rack up bills and pay them off on time. Once I got to the 700-720 range (a year later at most), the score stalled there for awhile, before inching up to 750. Now that the 7-year debts dropped off the report, it’s crystal clear and I have an 800 score.
If you are being charged a high rate of interest, I think it absolutely makes sense to pay off that loan as aggressively as possible, and then keep a low revolving balance on which you make constant payments on. Pay off all your cards at the end of the month, and try not to utilize more than, say, 20% of your total available credit.
I am not an expert in credit, but this is based on information I have read and explanations of the scoring system, and it worked positively for me. There may be more efficient and quicker ways of doing it, but if you’re getting screwed by paying a huge amount of interest on a $2000 outstanding loan, in my opinion, it’s better to aggressively pay that down and then start anew with zero-ed out balances, and keep them that way.
I’m a big proponent of using credit cards at every possible payment. They offer you more protection, most of the decent ones have rewards programs which translate into cash back of about 1%, plus it builds your credit score which, unfortunately, is important for professional and financial reasons down the line (for most people). Of course, if you can’t manage it responsibly and are too tempted by the availability of credit, this may not be the best idea for you. If you treat it is as a deluxe checking account, they’re awesome.
Papergirl: also will look into that. I’ll have a small sum this September to work with. Very well MAY do your suggestion. I really hope I can swing this! I will keep hanging in there…thanks!
Howye: yes. That’s my long-term goal. HAVE good credit, w/o needing to actually USE it.
Bump: I am gonna take it easy paying it off…stick to a payment plan. Really don’t have much choice. Does it feel nice to have 780? (smile)
Friedo, Jophiel, jtgain, and lazybratchs, thanks for your replies. Things are looking up some just from this afternoon. Even as we speak, there are ads for credit repair companies and credit cards for people with bad credit. One says 7% APR. I am going to LOOK. No hasty decisions. And I WILL be disciplined about it if I get one. Oh, you betcha.
Can anyone say anything about credit counseling?