My credit score sucks...what do I do?

[oscamaya]

So I just learned tonite while at school that it is going to be virtually impossible for me to get a job in the field I am going into with my credit score being about as low as it can go. I think it should be illegal to send 18 year olds who just graduated high school credit cards.

Me like a lot of people I know screwed it up. I did really well until I ended up jobless, homeless and pregnant a few years ago. I am not trying to pass blame off on anyone else, I know it was my poor decisions that put me in this place. But I am here. And I need to know how to fix it.

I have read the tackling debt threads and I am going to start there. I probably only owe about $3000, but my debt has been sold so many times over the last 3 years that I wouldn't even know where to send payment. I completely jumped ship on my credit card bills and some old bills that I couldn't pay when I ended up homeless.

Also, once I do pay them off how will that affect my score? Does paying off my debt clean up my credit score? I don't know anything about it, and if I did know about it I probably wouldn't be where I am.

I am set to graduate in December 09. Right now my bad credit score is probably equivalent to having multiple violent felonies on my record. I am only 24 years old and already bad financial decisions are coming back to haunt me. On the plus side, I have never defaulted on my student loans. On the downside, I am a SAHM who does a little bit of work on the internet for cash so $3000 seems like a million right now.

I am not worried about the money, I know I will earn it and pay it back. I just want to know how this credit score stuff works. Any finance or debt gurus out there that can help me?

[Cynthiabutterfly]

You need to get a copy of your credit report. You are entitled to one free copy from each credit bureau per year at www.annualcreditreport.com

Your credit report will have information on who holds your debts that have gone to collections.

The site I reccomend is www.myfico.com which is reccomended by Suze Orman. I have used this site for many years, and the few dollars I spent there were well worth it. It will tell you why your score is low, and give you steps to take to improve it.

A basic first step is to make sure that you are paying your bills on time, and you have a bank account in good standing. The good news is that any bad stuff you have on it now will be ancient history in a few years.

[derketchup]

From this point forward, always pay your bills on time. Never hold more than 30% debt on any one credit card (once you get straightened out). Always try to keep at least 1 thing on your credit report that is reported every month.

My husband had pretty bad credit (around 550ish) when we got married. Two years later, he has a score of 703 -- higher than mine!

[tuckyrn]

Don't close your credit card accounts after you pay them off, just cut up the cards..
it shows you to have more credit available.. which helps you get lower rates on loans and things in the future!

[queenofthehivemomof5]

Totally have been there done that, with credit cards when I was 16 and just got worse from there.

Only recently did I get this all turned around.

First thing is to pull your credit reports and make a list of what you owe and to whom and how old the debt it.

I suggest that you start by paying off the higest interest rate credit cards first. If they are closed and no longer accuring balances, then pay off the most recent ones first as they are the ones that hurt your credit more. The older the debt is the less impact it has on your FICO score.

Call each creditor one at a time as see if you can setlle the debt for less. Offer them a immediate payment via check (dont do it over the phone or wire them money, don't give them access to your bank account) tell them that you can send them $xyz TODAY if they can settle this debt for less. I offered my debtors 30% on the dollar and was able to settle just about all of them at that price. Some might be willing to do that some might we willing to settle higher or not at all, but you never know until you ASK. I settled my repoed car for $3000. It was the biggest burden I had.

[oscamaya]

Thanks for the information guys! I pulled my credit report and all of the debts say "written off" and have no balances. What does that mean? There is one that says like $600 written off and $1000 past due as of Sept 08.

I have 4 accounts in good standing (all are student loans, one is a federal student loan). Does that make any difference? My credit cards are LOOOONG gone. My bank account is in good standing (the bank itself is another story LOL).

All 3 accounts that are in bad standing are from the exact same time. I have had nothing bad since then.

Der, last time I checked my score, I would have been happy to have a 550!

[purplefdu]

The credit cards may be off your report but if you have not paid them off n full or settled they can continue to try and collect forever. Just be aware if you no longer have information as to what they were. Don't be surprised if you get a collection attempt on them.

Written off means they assumed they would never get the money and counted it as a loss on their balance sheets if I remember correctly. It doesn't mean they didn't sell it off to a collection agency, which would be shown based on the original debt on a collections entry.

Go over each entry for accurate information. There should be a part at the end that explains the terms used to help. The ones listed in the negatives are the most important to wipe out. Most should also list when they will drop off your report.

[Mothernature]

Originally Posted by oscamaya Thanks for the information guys! I pulled my credit report and all of the debts say "written off" and have no balances. What does that mean? There is one that says like $600 written off and $1000 past due as of Sept 08

It means the company wrote off the debt as bad for their books. You no longer owe this debt.

I have 4 accounts in good standing (all are student loans, one is a federal student loan). Does that make any difference? My credit cards are LOOOONG gone. My bank account is in good standing (the bank itself is another story LOL).

FICO considers all accounts, history, and payment. You will have to wait out the time until the bad credit falls off of your credit report. It is 7-10 years (dependent on the state). As the debts age, they will have less impact on your overall credit score.

Many careers do not care about credit scores. My husband is a CPA and had his credit pulled once in 14 years.

Originally Posted by purplefdu The credit cards may be off your report but if you have not paid them off n full or settled they can continue to try and collect forever.

This is incorrect. Each state has a statue of limitation on debts. If one does not restart the clock (i.e. contacting the collection agency or creditor), the debt is noncollectable.

Check your SOL: Statute of Limitations for debts, judgments & taxes: Find out if your debt has expired

To improve your credit score it is good to pay your bills in time each month. Some people habitually submit late payments. You can register for automatic billpay if you cannot keep track of due dates.

[couponmom2008]

I am currently in the process of trying to clean my credit at this very moment. I did order a credit report from all 3 Bureaus. My score is a little over 550. It is a process and can get annoying calling collection agencies.
The one biggest thing that I found on my credit report is that once my accounts were sold off to other collection agencies over a period of some years the previous collection agency information stays on your report making it look pretty bad. So I had to track down which accounts of mine belonged to which collection agency and then call the collection agencies that didn't have them no longer and request to have them removed.

Some things I was told would not come off until 7 years (from the charge off date).
Like my car account. I defaulted and had my car repossed and I used the money that was given to my husband (from his mother) to pay the settlement of $4000. I found out that the collection agency never reported it to my original lender and they are still on my report so now I have to dispute it (along with many others).

I was told that it helps to make payment arrangements with the collection agencies as opposed to paying them off immediately (unless they settle) and have them report it to the agency as paying as agreed.