I saw your advice in debt consolidation and figured you could give me some good advice too. I'm 24 live in FL. My credit score is 566 on Experian and Equifax, and 608 on Transunion. I have 3 collections totaling $399. On my previous credit I have two car loans, paid off in full before any credit was built (less then one year). There have been tons of inquiries on my credit also. All my bills, everything I buy, all of it has been paid with cash pretty much and I have never had a credit card. I never ever really considered that I would need credit. Now I'm trying to buy a house and the Florida lenders are not so easy anymore. 100% financing is practically impossible down here.

The lender I am speaking with said I could be approved for a loan up to $230,000.00 based on my salary if I had good credit with only 5% down. She suggested I pay off the loans and ask for them to write letters stating the collections were noted by error. She also suggested I immediately get two or three credit cards and keep them at about spending 40-50% of their max limit for three months paying them off immediately of course.

Now here's my problems with what she suggested. First none of these places will send me a letter stating that the notes were made on my credit by error. Not a big deal, really because I can still pay them off immediately and get a full payment made letter/receipt within 72 hours from each. Thats not quite as good but not sure I can do anything else. The bigger issue is the second issue, I can not get approved for any cards. I don't have much time to go out applying, I have no time really. I do however have time to go on the internet and apply because I'm an office jockey by day.

Do you have any suggestions you can give me for sure ways to raise my credit given the inability to get approved or any suggestions of who would approve me with my credit history?

 

Wow... first things first: I will offer advice, but it's not professional at all and only relates to my experiences. No liability can be held for you listening to my ideas and acting on them.

Pay off ANYTHING that is out for collections or late immediately. There are levels of severity with your credit:
Anything past due by 30 days is bad.
Anything past due by 60 days is bad.
Anything past due by 90 days is very bad.
Anything past due by 120 days, you're screwed.

I don't think they even look at the amounts so much, just the number of deliquencies and amount of time past due.

Pay SOMETHING on anything that's past due, and pay it off if AT ALL possible. Do whatever it takes to get those fixed. That's what's hurting you.

The three credit reporting companies you mentioned are VERY secretive about how credit is calculated. They don't want people beating the system, so their secrets are heavily guarded.

HERE'S MY DISAGREEMENT WITH WHAT YOU WERE TOLD:
I'm about 90% sure that getting 3 credit cards right away would DROP your score!! Don't do it!. I would suggest getting one credit card, and keeping it open for the rest of your life (or at least the next 5-6 years). Applying for several credit cards in a short period of time would almost shoot yourself in the foot as far as being approved for a home loan.

Also, I wouldn't run up 40-50% of your credit!! I keep mine at 10-20% used, but pay it off every month. Make sure you don't pay it off until a statement is issued, so they report the balance and it shows activity. Paying it off before the statement period ends will show a 0 balance and look inactive.

I don't know what home values are around your area, but here in Nashville $230,000 could be a very nice home.

Unfortunately, TIME is a huge factor in your credit score. It doesn't change very often, unless it's for the bad. I have been monitoring mine (750's) and my wife's (650ish) for over a year and have seen very minimal changes (even after opening 4 credit cards and buying a house within a year). The things that will drop your score are being late and past due on payments. My wife was screwed over by Sallie Mae - she was hospitalized and had to drop out of college, and they told her she'd have an extended grace period because she was unable to work. We didn't find out til later they marked her as 120 days past due on her student loan payments. They totally screwed her over and there was nothing she could do about it. Unfortunately, I've been unsuccessful in raising her credit score. She didn't have any credit cards, so I got her one and we'll keep it open for a few years to build her credit. Not much we can do except wait.

There's not much you can do except wait, and prevent any other negatives from hitting your credit.

Summary:

-- I would open ONE major credit card. If they give you a $2,000 balance, only put $400 on it and leave it alone (20%). Pick a credit card that gives you something in return (CitiCards.com has a cash back and frequent flyer that earns miles on AA. Discover also does cash back). I've been warned to stay away from Capital One, but I don't have any experiences with them. Opening CC might hurt you initially, but benefit you in the long run. I've opened 4 cards in the last year, about 3-6 months apart, and it says that it's negatively affecting my score on Experian, but my points haven't really dropped (I have good credit though).

-- I would pay $12.95/mo. and monitor your credit on Experian's website (freecreditreport.com - it's free the first month). You can run an unlimited number of credit reports and it will give you reasons for the low score and ways to help. It has a few good features, it'll show you open accounts and balances, and you can check it and verify that everything's legit.

-- I would tell that mortgage lady to stuff it. Opening several credit cards in a short amount of time is bad enough, but charging 40-50% of your limit is HORRIBLE! I think the national average is charging 22-30%.

-- If you've spent more than a year at any apartment or anything where you were paying rent, get something from them saying you paid timely and for XXX number of months. Mortgage people like to see you paying rent somewhere for at least 12 months.

-- it's easier to get 90% or 95% financing than 100%. You're already having hard times financially, DON'T buy more than you can afford, even if you "qualify" for it. Get a small house that's cheap and stay there for a few years to establish your credit. Pay off all your late payments before they're reported to credit agencies, then save up at least 5% downpayment for a house. It's much easier to get 95% than 100% financing.

-- look for a cheaper part of town. $230,000 is a lot of money, try finding something half that price. You don't want to get in over your head with a mortgage you can't pay, and end up foreclosing on it. When you finally buy a house, DON'T get an ARM! Fixed Rate no matter what - that's why so many people are foreclosing across the county - their ARM rates went sky high and they couldn't pay them.

You won't be able to do anything FAST about your credit score. Unfortunately, it doesn't move fast (especially in the positive direction). I believe past due / deliquent accounts stay on your credit history for 3 years on average... 7 years for bankruptcy. I could be wrong, but that's what I'm thinking off the top of my head. Those are murder on your credit.

I will write an article within the next week or so with my view on credit cards, but since I like to travel, I have a Citicard that earns me 1 mile for every $1 I spend. I have a high limit, so I put EVERYTHING I spend on my credit card and pay it off at the end of the month. It only takes up about 10-20% of the limit though. Plus, you get 20,000 bonus miles just for signing up. 25,000 miles gets you a free roundtrip ticket. They also have cash back rewards cards that give you 2% or 5% cash back at the end of the month, depending on where you shopped. That's also a good bonus. IF you're going to get a credit card, look for something that rewards you at the same time. I also have a Marriott Rewards credit card that earns me Marriott Points everytime I stay at a Marriott, and gives me points for every $1 I spend. Since I travel for work sometimes, I try to stay at Marriott's to earn more points (150,000 points gets you a week FREE at a NICE resort in the Carribbean (Curacao, Jamaica, Aruba), plus free roundtrip airfare for 2).

If you're going to get a credit card, get something that gives back. These types of cards DO have high interest rates, but there's no interest charged if you pay it off. You said you pay everything with cash anyways, might as well put it on a CC and get something in return. Watch out for my thread in the next week when I get around to typing that novel... it should be helpful for you.

If anyone else has anything they want to add, or correct me on, PLEASE feel free to post. Give this guy some guidance!

I found this on About.com


Here's an look at credit scores among the US population in 2003:

Up to 499: 1%
500 - 549: 5%
550 - 599: 7%
600 - 649: 11%
650 - 699: 16%
700 - 749: 20%
750 - 799: 29%
Over 800: 11%

About.com states: "Don't open new accounts just to have several accounts or attempt a better mix of credit"
http://homebuying.about.com/cs/yourcreditr...prove_score.htm

 

Though you say its not professional your advice is definately valued. I'm really stuck on this issue and need all the advice I can get. I wanna state a couple minor notes to give you an better idea on how I sit with things.
First off, everything on my credit is old, screwed old.
Second I was thinking using less of the max limit on the cards then what she stated as well, but I may get a low limit IF I can even get approved. I plan to use the card to pay for bills that I would already spend in cash and I make good dough so paying off on time is no problem.
Third $230,000 would be a great home where I am looking but I'm trying to stay in the 150-175k range. That shouldn't be a problem for me to find and it will still be a great house.
Fourth Everyone is denying me for a credit card...this is werein lies the real problem. How does one establish or raise credit if he cannot find someone to approve him??

I've pissed away a lot of money, and I always said to myself its ok cause I would always make enough that one paycheck could solve all my immediate problems. While this has been true I totally screwed myself as far as credit goes. I will not get a cosigner by the way, this has got to be all me all on my own.

 

Quick question. Say I want to go straight from my parents home into a house of my own. I really do not want to mess around with an apartment. You said get a letter stating that you have paid rent timely and all that. Would that work if you were (or maybe werent but act like it) paying rent to your family?

 

I don't think it would Eric, but it's definitely worth a shot. I'd start now, and just start writing a check every month to your parents and having them deposit it, then turning around and giving you cash. The mortgage company would want to see proof since it's your parents, and if you can show $500 every month in checks written to your parents, WITH "Rent" WRITTEN ON THE MEMO LINE then you might be able to pull it off, but start as soon as possible if you wanna pull that off.

Eric:
My situation was similar. I was away at college, but always had 9-month terms on my apartments and I moved back home for the summer. I have excellent credit, and was putting almost 10% down payment on my first home purchase. Different loans will require different requirements. I tried getting an FHA loan and wasn't able to because A. I didn't have a year of rent elsewhere to back me up, B. I was still in college and working part time in my job, and C. my wife had just started her job 2 months prior and had been out of work for over a year before that. We had no income stream to back us up, no rent history, and not a lot of money in the bank (they do check your bank accounts to see how much money you have liquid). There was another type of loan we did, I don't know if it had a certain name or not. I bought a new construction home and got a huge discount if I went with their mortgage company, so I was doing anything I could to go with them.

capn tibs:
I spoke with a coworker briefly about your situation, and I have a few more ideas; some you may like some you may not.

Down Payment:
If you're doing okay financially at the moment, do whatever you can to put a hefty down payment on your house. If you can put 20% down, you could probably get a mortgage from anyone. I don't assume that'd be very possible, not many people can save up $35,000 to put down on a house. However, 10% would be good also, 5% would probably be required. It's much easier to get 90% financing than 100%.

Co-Sign:
I know you already threw it out, but seriously consider it and try to find someone with excellent credit just to co-sign. My grandmother co-signed for me since I was unable to get the loan on my own (even with A level credit). They looked at both my assets and my grandmother's, as well as both of our credit histories. She had perfect credit and had plenty of money in the bank from recently selling her house and moving in with my parents. I got the loan without ANY problem. The house would be in your name as well as the co-signer, keep that in mind, but an $85 fee to an attorney to draw up a quitclaim can put the house in your name alone.

Loans:
Putting a long-term loan on your credit history is one way to help boost your score. Again, it takes time, but this is one step you can take if you're willing. There's a website my coworker has been a member of since April of this year. www.prosper.com. The purpose of the site is for people to loan other people money at high interest. The members are people like my coworker who have extra cash and want to invest it in giving out loans. I believe the loans are 3-year terms, and you can pay it back as fast as you want. The interest rates vary depending on your risk level assessed by the members on the site. My coworker has invested about $1,200 in giving people small loans and has earned on average 24% return.

What you do is post up your history, why you need the loan (to build credit), your income, your credit ratings, and all other information. Request a small loan for $500 or $1,000 or whatever, and numerous people will decide to loan you money. They'll usually do $50 increments until you get 100% of your loan, then you get the money in full. After a month you start making monthly payments with interest built in and the website automatically disburses it to those who loaned you the money. It's pretty neat the way they have it set up, and the website will report it to the credit agencies showing that you have a long term loan outstanding and you're making payments on it. The individuals loaning money determine how risky you are. They may charge as much as 35% interest, because if you default on their loan, they lose all of their money - it's risky for them, so they charge higher interest rates.

Again, this is money you might not need right now, and it will cost you an extra $100 or so over the next three years in interest, but it may help build your credit. I've never done anything with that website, but it's an option if you're willing to take a few extra risks to help build your credit. I'm not promoting it and saying you should definitely do it, I'm just trying to provide you with the most options I can to help you make the right decision for you.

 

good information. I'm gonna be looking into buying a house within the next 3 years too so this is a big help. One question, I have a bank account that has overdraft protection, and I pulled money out of it so now I am in negative numbers. Will that affect my credit? Also, I have a student loan that is not yet due, say I start paying it off in large sums (like maybe $1000 at a time) will that be good for my credit?

 

TC - I don't think they pay attention to bank accounts as much, but it may have an effect. I believe the bank would have to report it to the credit agencies for it to show up, and they might only report balances once a month if that... so get it fixed fast and you should be okay.

in the past, I would have said paying it off fast and in large sums would look good, but I don't believe that anymore. I think they'd look favorably on a long history of paying it off over 10 years. I would suggest paying it down as fast as possible, and keeping a few hundred dollars on it so you can make payments for at least a year or two. Remember, mortgage companies and other places will be looking for a HISTORY of positive credit marks. Having student loans looks very favorable I believe, because they're fixed payment amounts that you will make over a long term (installment loans might be the right wording). Having accounts open for 3 years or more is favorable to your credit score, so if you don't have a credit card or two already TC, I'd suggest getting one soon and just put small purchases on it and pay it off as soon as the statement comes out. By the time you go for the house, it would have affected your score positively. Too few credit cards is bad, and too many is bad... but I think having 3 or 4 for an extended period of time would help in the long run. And don't get GAP or Old Navy credit cards, get one from CHASE or CitiCards, one of the big companies that's more reputable, or a credit card through a major bank (Bank of America) might be good. Make it a Visa or MasterCard or Discover, not an American Eagle store card.

TC, don't hesitate, you get a free credit report from each of the three agencies. Go to www.FreeCreditReport.com and find out what your score is now, and what things are negatively affecting it, and work on building it up. You can run the report as much as you want, but cancel it after 27 days so you don't get charged $12.95. Unfortunately, the score probably won't budge at all within a 6 month period.

 

cool, thanks! I don't shop at any of those stores anyway, lol. thanks again!

 

Whoaa! Ok, I only read the first few posts cause they started to get VERY long and I don't have the time to read everything. But the credit thing is where I feel I have a TON of experience.
I'm a member of Creditboards.com
That board has a TON of info on it, and if you wanted to check it out, then feel free, but you are not gonna even learn half of what's there in under a month. There's just too much info.

However, I'll answer your questions if you keep them relatively short and not like a book as above. lol

First of all, like Majik said, you can drop your score 100 points with 1 late, or a charge-off, etc. But building it up 100 points takes MONTHS!!! So, if you're wanting to buy a house in the next 6 months, then don't expect your scores to rise that much. A year, however is plenty of time to raise it 100 points, depending on where you're at now (ex. 350-550)

There are two sides to boosting credit scores: Get credit, and remove derogitories.


Getting the credit:
The board I mentioned above has a "Credit Pull Database". This will tell you what cards might approve you based on others experiences. Just enter your score, and the name of the creditor, and you'll see who's been denied and who's been approved, sometimes telling you their debts.
Hooters, Macy's, Target, Walmart, HSBC, Jared's, and Kay's, are all good "starter" cards for people looking to rebuild their low scores. These creditors have low requirements, report to all 3 burueas every month, and only pull 1 of your reports. Stay away from Capital One! They are the worst bank these days, giving you low limits, and pull all 3 of your reports, giving you 3 inquiries instead of just 1.
If you're not in a 6 month jam like the original poster, then get these cards. It is good to have a mix of store, bank, and loan credit. HSBC, and Hooters (Merrick) are banks, and the rest are "store" cards. They all add to your "available credit" but are couted in different categories in your scoring.
Your scores will most likely see a drop with new cards, but will start to bounce back up after 3 months, more after 6, then fully after 12. Again, the lower your credit, the more your scores are gonna rise from this. It'll hurt a higher score more. A person with a 400 score may not even see a drop, just because having a new positive credit line will improve their score much more than the inquiry hit will drop it.


Removing bads:
The approach you make depends on whether the payment is just late (30,60,90,120), or "Charged-off".
If the payment is just late, then PAY IT!!!!!! Do this now!!!! ASAP!!!!! Hurry! If you wait too long, then it will become "Charged-off", and that is the black plague of credit reports. You may be able to bring your account up to date and beg your bank to remove the lates. Or, you can dispute the lates through the reporting agency and hope that your bank doesn't reply back, therefore giving you the win and the deletion of the marks.

The Charge off: This is the worst mark on your credit report. This is when you've been severely late on payment and the bank declares the money gone for good and closes your account. This is their method of taking the money "you stole" and writing it off in the books for accounting records in a different category. Yes, you still owe them and your tradeline is still reported/updated, but your account is now closed and 99% of the time beyond repair. There are very few banks, if any anymore, that will reopen your account after this and forgive you.
You now have very few options left to fix it:
1. Ask them to delete the tradeline from your report in return for paying it off.
2. Dispute the account entirely and hope it gets deleted.
3. Wait 7 years for it to fall off.

Collection agencies: These people are the scum of the earth. They pay $0.02 for your $5000 debt information and try to collect the full amount. 99% of the time, they do not even have the right to collect on your debt. They use illegal tactics and harrass you just to make money. They mostly pose as "legal offices". They are regular Joes just like you. Do NOT pay them! Only pay your original creditor!

There's a lot more info on this and the procedures for doing so. So this really can't be explained entirely on this post. Your best way to get through this, if you are willing to stick to it and devote a LOT of time to it, is to go to creditboards.com and read, read, read.

 

I wanted to provide some input on Capital One. You will notice that if you have less than perfect credit the CO sends you pre-approved credit cards weekly. At one point I had THREE capital one credit cards. What they do is rather than give you a card with a 1500 credit limit they will give you three with 500 credit limits. Which causes you or tempts you to hold a high balance on the cards. If you are late with one, it is a $39 late fee, if you are over your balance because of that fee you owe another $39 for that. So now if you were late and everything on all three, rather than having an extra $80, you have an extra $240 you need to pay. I have just realized I am not rich and that I need to stop living like I am. I am working on paying off all my credit cards and loans, for the third time.