Suggestions needed to improve credit profile

First of all, I want to say that this site is a gift to all persons with any type of credit. These posts have answered so many questions for me and I now feel better prepared to handle my credit situation.

Here's the situation. Up until fall of 2004, I had excellent credit, with a score of around 750. Then, we have a medical emergency and incur about $5000 in bills which, somehow, we are able to pay all but $450 of on time. But paying the $4550 put a very serious strain on our finances, so early this year, we began missing credit card payments on cards that we had ALWAYS paid on time in the past.

By May 2005, we had the remaining $450 med. bill in collections, a 120 late pay on Credit Card 1(in collections), a 60 day late pay on Credit Card 2(in collections), and a 30 day late pay on Credit Card 3.

Still, as of about two weeks ago, we paid the $450 med. bill, paid off one credit card completely, and and brought the other two cards current, paying down the balances as well. So now everything is caught up and current. I might also mention that we have two mortgages that we've never been late with, two cars that are paid off, past credit card accounts that were in good standing and a credit union personal loan that we've never been late with.

BUT, my FICO score is now a 547 (the scores from the other two agencies are 521 and 580). Frustrating that we get no credit for being able to pay $4550 in medical bills, but the $450 of it sent to collections shoots holes in our score. And frustrating that we have years of perfect credit and excellent mortgage and loan histories, but a few months of hard times with credit cards are really the only things considered when calculating a score.

My husband is interested in changing jobs in the next six months, but is afraid that the new credit score will prevent him from getting a job in his industry and prevent us from relocating and obtaining a new mortgage. I feel very fortunate that we were able bring all these accounts current, but am very concerned that this "hiccup" in our credit history will have a serious, lasting, negative impact. Now that everything is either paid off or current, when can I expect to see improvement in my score and how much improvement might there be? Is there anything I can do to improve our credit profile quickly? Answers to these questions and any advice will be most appreciated.

Hi kimb515

Good to hear from you back again

I will like to thank you for appreciating the hard work of this site. We all have been continually extending our best efforts to erase the debt problems of the community by offering help in as many ways we can.

Looking into your post, I find that you have been very punctual in paying your debts until there was an emergency. Your credit rating was good till the time your account was not sent to the collections. The credit rating is severely affected if the account is sent to the collections or if filed for bankruptcy, foreclosures etc. Even late payments particularly if lateness was frequent, recent, or severe also cause the same harm. Once the consumers have been categorized under the following heads, the credit rating declines from best to worst, depending upon their propensity to pay their debt.

So, when you complete your payments sent to collections, it is best to get agreement in writing and negotiate that they delete trade line listing for payment in full. That way, they can't come back after you for any remaining amounts, or sell the account over to any other collection agencies.

It will be better in long run to have said items removed, then to just have them updated to show collection paid.

Collection agencies are usually more willing to delete if you pay them in full.

Just try your best to get written confirmation that they agree to remove from credit report though.

Regards
Roxette

Thanks so much, once again, Roxette. I have a couple of questions though. I'm not familiar with the term "trade line listing". How can I convince the creditors to do this(how should I proceed)? Should I submit a written request? Also, though two of the accounts were in collections, they were still owned and being reported by the credit card companies themselves. So should I ask them, or the CA's to do this?

Is it standard to have these things deleted? And if they refuse, how soon will my credit score increase now that the accounts are current? Sorry for all the questions!

Thanks again,

Kimb515

Hi kimb515

A trade line listing includes all the details of your name, address, date of birth, telephone number, Social Security number, account type, opening date of account, credit limit, account status, and payment history. All the information will get updated with the bureaus.

You can send a written notice to the creditor as well as the collection agency for updating your information. I have drafted one letter for your convenience.

After your accounts are paid in full and your entries updated, you are most likely to see the change in your score by ordering a copy from the three bureaus each.

Will be waiting to hear from you

Regards
Roxette

Thanks Roxette. You're awesome!

Kim

I am glad you were able to find the information that you needed from this site. Your satisfaction gives us satisfaction for the hard work that we do.

Concerning your post, I got the impression that your family is very responsible with credit. You only recently hit a ruff patch. But now, it seems as if you have recovered and you are close to being debt free. This is a feat that very few are able to accomplish. So, you should be happy with that at the least.

I think that your husband's advice is very sound. It is true that jobs are more focused on the credit scores of employees (especially in the financial industry). And also, if you do move and you need a new mortgage, you will have difficult obtaining a sound deal on a mortgage. If your score is very low, you may have trouble finding a mortgage period.

So, I would suggest that you stay in your current residence if possible. You need to distance yourself from this ruff period in your credit history before you make any more serious moves.

One way you can recuperate your credit is very predictable. Continue to stay on time with all of your payments. You need to build a steady history of on time payments to show creditors that the ruff period is now over and you are now capable of repaying your debts on time. Within 2 years, you should see some improvement in your score.

There are other ways that you can increase your credit score quickly. You should keep in mind that you need to project the image of a fiscally responsible borrower to all of the credit bureaus. in order to do this, you should keep account balances low and never take out credit when you don't need it.

You already took another step that is recommended for credit repair. You payed down all of your credit cards. This could increase your score by as much as 20 points.

But the important thing to not is that you should not close your unused accounts after you pay for them. Because, it changes your utilization ratio (which is the amount of your total debt divided by your total available credit).

You do not want to tinker with the calculation that creditors use to determine your creditworthiness. Considering that it wont hurt you if you keep it open, don't close the credit accounts after you pay for them.

If you do close some of your unused accounts, keep the oldest ones open. Because if you sloe the older accounts, it would give creditors the false impression that you are new borrower. So maintaining your credit history is paramount.

Also, obtain a credit report and check for any errors. After you remove all errors. This does not count for legitimate negative information involving late payments etc. Afterwords, ask the credit bureau for a credit re-scoring. this will allow them to rescore you and you will receive a new score within 60 days.

good luck.

Thanks once again for all the great advice. Some of the accounts we've recently made current have already showed up on our report and we've seen an immediate rise of 10 points in our scores. So I think that within the next 30 days, when all the other accounts we made current have been reported, it sould go up some more.

However, I guess what the most frustrating thing for me, is that we've had YEARS of excellent credit, yet a few bad months destroys everything we've built. And it will take up to two years to recover from the few bad months. Doesn't seem fair somehow. I can only hope that if we're put into a situation where we have to change jobs or apply for a mortgage soon, the person looking at our report will take all that into account as I know we will definitely have to move within the next two years.

I did make the mistake of closing one of the accounts we paid off and saw a slight drop in MY score. Should I attempt to reopen the account or will that further injure my credit report?

Thanks again for all the good advice - it's been very helpful. Later today I'm going to post a couple of experiences I had with a collector - at the time I was uneducated in the credit area and made some mistakes that could have been easily avoided if I had known what I was doing. Hopefull they'll help someone.

Kim

Hi kim

Welcome to the forums. Please do not open your closed account as it will further lower your credit score. The creditor might be willing to open your account but on your part, your score will be further reduced as it will be reported as a new account.

Regards
Roxette

Wow, I am glad to finally hear some good news from somebody. 10 points, wow, that is great. I am glad to see that you are finally seeing results. It is a slow rise to get to the point of where you would like to be credit wise. In the meantime, you will have to work through cosigners if you ever need a loan that you cannot obtain based on your own credit record.

No, I would not recommend reopening your closed account. Just keep this guideline in mind. The amount of credit you owe contributes up to 35% of your credit score. So, it would be in your best interest to have a lot of available credit (only if you are responsible enough to handle it).

And when you close older accounts, it makes your credit history look shorter than it really is. And since the length of the history of your credit accounts for potentially 15% of your score, closing these accounts could hurt you.

But just keep this in mind for the future. You did the intuitive thing with closing those accounts. It seems like credit scoring operates a bit counter intuitively. At least you will have inside knowledge on how to improve your credit score in the future.

Thanks for your participation in the forum. I am sure that many people will indeed benefit from your posts with experience with creditors. So, we look forward to your participation.

I have outstanding debts that has gone to collection. However, I would like to reconcile the debt with the original creditors. What can I do?

Call your creditor and know if they still have your file with them. You should be able to make them work on your plan if the CA is just hired for collections. But if the account is sold off, you will have to deal with the CA only. Get the debt validated by the CA to confirm their collections are legitimate. They need to send you the latest standing of the debt in writing received from your creditor.