Your credit score is something that will open the door to many things in your life. A good credit score can give you the opportunity to own a home, get a good job, drive a new car, or even get credit in the first place. Your credit score is decided by 5 different factors: payment history, amounts owed, new credit, length of credit history and types of credit. There are some things I have been doing that has caused my score to go up. However, there are also things I’ve done that has caused a drop in my credit score. So what’s right and wrong with my credit?
What Am I Doing Right?
- On time payments: I have never been late on a payment to my creditors. Late usually means 30 days or more when it comes to being reported on your credit report. There have been days where my due date fell on a weekend and I didn’t make the necessary adjustments to pay ahead of time. In those cases where I was a few days late, I unfortunately suffered a late fee, but thankfully, the creditors did not report this to the credit bureau. I am current on all of my payments, which makes me look like a reliable person to lend to. Lenders know they will receive their money on time.
- No bad marks: Because I’ve always paid my bills on time, I have no derogatory marks on my credit report. Nothing has gone into collections due to me not paying on time, I have not filed for bankruptcy, and there are no civil judgments or liens on my report. This is further showing lenders that I can be trusted when it comes to lending me money. They won’t have to bombard me with phone calls or take legal action.
- Total and variety of accounts: I have 8 accounts open, and they’re not all the same. Some are credit cards, some are charge cards. One is short term loan, and another is a car lease. This can go as a positive or negative, but it shows that I’m not looking for just one type of credit. Having a good mix of credit reflects on your score.
What Am I Doing Wrong?
- Using too much credit: As far as credit utilization, this is where I’m doing the worst. I am using 95% of my credit available. This means most of my cards are near the maximum amount of my credit limit. I don’t have much room to grow. In a way, I see this as a blessings because I can’t get any further in debt. I have to dig myself out first. As a result, my credit score is negatively impacted. This has been a result of mindless and irresponsible spending mixed with emergencies with no emergency fund.
- Hard credit inquiries: During my quest of independence (moving in with my now husband, getting a new job, etc.) I searched for creditors to deem me worthy of them lending me money. I applied for several credit card offers, which showed as a “hard inquiry” on my credit score. When too many people pull your credit report, your score goes down. My credit was also pulled when we moved into our first apartment, as part of a background check. Unfortunately, during my car search, I was falsely informed on how many times my report would be pulled. This brought my score down lower as well. Therefore, I will not be applying for any new credit any time soon.
- Debt to income ratio: When I was working full time, this wasn’t an issue. I was bringing home a decent amount of money that showed I could afford to pay my bills. When I was laid off, however, obviously the income dropped drastically, causing my debt to income ratio to raise. Yes, we’re living off my husband’s income mostly, but if I want to get out of debt any time soon, I have to work on increasing my income as soon as possible.
I’ve checked my Credit Report Card using CreditKarma, as they give each of these things a letter grade and an explanation on why you earned it, including how your score ranks overall. It’s free, and can give you a better idea of where you stand when it comes to your credit profile.
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Hi Sandra,
The first step I’d suggest is to make sure everything on your credit report is accurate. If the accounts in collections are there because of you, make sure you’re now currently in good standing with the company. Make the necessary payments and try to make the rest on time. Next, come up with a payment plan. Call all companies you owe money to and see if you can work something out with them. Then, throw all the money you can towards debt. The best way to repair your credit is to make on time payments and pay more than the minimum. Good luck!
Sandra,
In November of last year, I was where you are now. Take a deep breath, get a copy of all your credit reports, and figure out exactly where you are. Sit down and get an idea of what you can pay each month, then try to figure out how much on each account. Focus on open accounts to try and keep them open if you can. Once you know what you can pay, start calling your creditors. I was terrified of that, but found most of them to be pleasant and respectful, and they mostly worked with me to get my debts paid. I now have one more payment left on all that old debt, and am moving forward with much better credit, even now.
You can do it! And you’ll feel so much better after you make those calls.
Whether or not you pay the charge offs or let them age off your credit report is a tough decision. You need to determine if the creditors can still successfully sue you in the state where you currently live. You’ll want to find out what the statue of limitations (SOL) is for the various types of accounts, and research how to determine the SOL for your accounts.
For me, I paid all but one of my charge off accounts. The other one has an SOL that expires in just under a year. If they decide to sue me before it expires, I have the ability to quickly pay it off.
Paying off a charged off account may or may not affect your FICO score. A paid charge off is still a charge off. That said, most of my charge offs were credit cards, so the balances were affecting my utilization rate, which is about 30-35% of your FICO score. My score did go up when I paid them off because the collection agencies removed their tradelines, which decreased the number of charge offs appearing on my report, and the credit in use decreased. The original creditor trade lines remain, and are accurately reported. As they get older they will affect my score less and less. Additionally, I now have positive tradelines reporting, not having paid anything late since I started rebuilding. Some people will tell you to dispute negative items on your credit report, but I have an ethical issue with this. If a creditor reports something wrong, I’m going to be upset and make them correct it: I want it reported correctly. That goes both ways. If I know that negative information is accurate, I won’t dispute it. I got myself into the mess, and I have to face the consequences.
When it comes to credit scores, note that there are many different types out there. In my experience, creditors almost always use a FICO score. If you’re wondering what your scores are, get a FICO score, not something else. Generally, if a website doesn’t say it gives you FICO scores, then it doesn’t.
(Moderator: you can send Sandra my email address if she wants to contact me directly)
@Christopher I would love to speak with you directly,(moderator it is okay to give him my email address).As I mentioned in an earlier post, the things that are really hindering me on my credit report are charged off medical bills, utility bills, cell phone, the credit cards I used to have, have since fallen off. I understood what you said about the statue of limitations but I’m still confused as to if I pay those debts will it help me, will it free up my debt-to-income ratio and increase my score. I have items ranging from $25(yes, really) to $6000.00. I guess thats my biggest question how in the world can I increase my score, being that I cant obtain new credit to do this, although I have one credit card that is a credit rebuilding card with First Premier that I have not been late on. At the limit but not late, at least noot 30 days(I know thats just as bad) thats my question, would it help me better to pay the card off every month and then reuse it or just stay below that percentage (?) that they recommend? Oh so confused!