jut3235,
Credit reporting agencies determine credit ratings based on an
extremely complex formula that considers a large list of variables,
including number of credit accounts open, the credit limit and the
current balance on those accounts, whether and how many past due
payments have been made, and whether any debts are in default (not
paid according to the original agreement).
I am guessing that the two accounts you reference were defaulted on,
because companies will only usually accept partial settlements once
the accounts are way overdue and it does not appear likely that they
will ever receive full payment.
The fact that you settled the accounts with these companies by giving
them the partial payments is not the main cause of your low credit
rating. The reason your credit rating is so low right now is because
those accounts were defaulted on before final arrangements were made
with the companies.
While full payment of the debt might have kept your credit rating from
being slightly less low than it is, the difference is very small
compared to the effect the defaults themselves are having on your
credit rating. Even if you go back and pay the rest of the amount now,
it is not going to change the fact that the defaults happened.
Unfortunately, now that they have happened, there is no way to erase
these defaults from your record.
The Bad News: The law allows credit reporting agencies to use data
from the last 7 years in your report. At this point, you can only move
forward and wait for the 7 years to elapse, so that these negative
incidents drop off your credit report.
The Good News: What you CAN do, in the meantime, is improve your
credit rating gradually by doing as many of the following things as
possible:
- Pay EVERY bill on time: pay them as soon as you get them, if you
can. This is one of the BEST ways to make yourself look like a better
credit risk to a lender if you try to get a mortgage, loan, or credit
card.
- As far as credit cards, pay them in full every month if you can. If
you can't, pay as much as you can every month, not just the minimum
payment. (If you don't charge any more, and you only pay the minimum
payment on a debt of several thousand dollars, it will take you more
than 40 years to pay it off!)
- Better yet, don't charge anything. Spend money only if you have it
in your bank account.
- You should never have more than a couple of active credit card
accounts. Pick the two that are most useful or important, then cut up
the other cards, and write to those companies, asking them to close
your accounts (you need to put this in writing, and save copies of
your letters).
- If for any reason, you ever have a catastrophic month or period when
you are unable to pay all or part of your bills, CALL ALL YOUR
CREDITORS IMMEDIATELY to let them know you are having a problem, and
asking them if they will be willing to lower or waive your monthly
payments for a short time. You will be surprised about how willing
companies will be to work with you if take this approach. The worst
thing you can ever do is just not pay a bill because you don't have
the money -- this will absolutely trash your credit rating, in
addition to possibly getting your accounts declared in default and
sent to collection agencies.
Many, many years ago I got into bad credit trouble by paying bills
late. I learned my lesson, and it took awhile, but by following these
guidelines I have been able to get my credit rating up so far now that
it is considered stellar.
One final note: DO NOT EVER be taken in by companies promising to
"fix" or "repair" your credit rating. They can NOT erase bad debts or
other "black marks" for you, and if they tell you otherwise, they are
lying. These so-called credit-repair companies are, at best, companies
who are charging you for doing what you can do for yourself, and at
worst, they are total scams.
Hang in there, be patient, and follow the guidelines. Eventually, you
will see it pay off in an improved credit rating.
Good luck!
aceresearcher |
Clarification of Answer by
aceresearcher-ga
on
29 Oct 2002 00:20 PST
jut3235,
thekirklands has made a good, valid point, so I should add a
clarification.
Not using credit at all will NOT get you a good credit rating. A good
credit rating is only obtained by showing a history of using credit
responsibly.
IF you have all your outstanding debts cleared up now, you should
continue to charge items occasionally, and then pay them off
immediately. This will indeed help to improve your credit rating as
time goes by.
If, however, you still have hundreds, or thousands, of dollars in
debt, YOU SHOULD NOT CONTINUE TO CHARGE anything until you have these
debts all paid off. Making regular, on-time payments on these
outstanding amounts will improve your credit rating as time goes by.
You should not resume using your charge cards until you have these
debts all paid off; after that, use your charge cards only sparingly,
and pay off the balances immediately.
Before Rating my Answer, if you have further questions, please post a
Request For Clarification, and I will do what I can to assist you.
I hope this information has been of assistance to you!
Regards,
aceresearcher
|
Clarification of Answer by
aceresearcher-ga
on
29 Oct 2002 11:43 PST
jut3235,
Unfortunately, you are probably the only person who can really decide
that. However -- although I am not an expert -- I can offer some
thoughts:
- If you have all these loans, and you have been making regular,
on-time payments for the last 2 years, you have probably been making
really good progress toward repairing your credit, without having a
credit card.
- If you feel that you can have a credit card without the danger of
getting in over your head, you might try to get one. If you do this, I
would recommend SPECIFICALLY asking for only a $500 credit line.
INSIST that they give you no more than that. Companies always try to
give customers **way** more credit than they need, in hopes that they
will max out their card. They make all their profits on those sky-high
interest rates, late charges, and overlimit fees.
- While there is a possibility you might be turned down because of the
two "hits" on your record, I have seen people with far worse credit
history be granted credit cards (go figure). Just be aware that every
time you apply for a card with a different company within a short
period of time, it knocks your credit score down exponentially. One
application -- a slight drop. Two applications -- a fair drop. Three
or more applications -- a serious drop. This is because they figure
that if you are trying this hard to get a card, it must mean that you
are (or are on the verge of being) in over your head and you are
trying to "rob Peter to pay Paul" (i.e., charge items you usually pay
for outright, so that you can use the money to make payments you are
going to have trouble making). If you get turned down by one or two
companies, don't apply to any more companies. Wait a year and try
again.
- If you do end up getting a card, don't charge much on it, and pay it
off in full every month. If you feel yourself getting in over your
head, cut the card in half and stop charging.
I hope you feel this information has fulfilled your needs!
Good Luck, and best wishes --
aceresearcher
|
