How to improve Credit Score from 600....

Question

I havent had a credit card since college 8 years ago, I am a renter, and my score is 600 at last check.  I don't really have any way for my credit to get better other than just wait it out.

How do I improve my score?  I want to buy a home one day is my intention.

Anthony S · Answer

If your primary intention at the present time is to improve you score, I would not suggest you pay off any debts that have gone to collection, unless they agree to also delete it from your file. A paid collection is no better than an unpaid collection in score modeling, and paying it without a promise for deletion from the creditor can actually hurt your score, as it will make the debt more 'current' regardless of when it was last delinquent. Also, negotiate directly with the original credit issuer. They are the only ones who can actually delete something from the report.

Now, I'm not suggesting you should skirt your responsibilities if you do in-fact have debts that have gone to collection, but am telling you the reality of the non-sensical fico model. J Scott had some very good other suggestions that will help improve your score. A huge factor is utilization, so the more credit you have available but aren't actively using, will help your score tremendously. That and time and no lates.

With that said, some(most?) lenders will require you to pay off those debts before issuing you a mortgage, but in the meantime I would concentrate on getting my score higher, and attaining higher limit cards.

Account Closed · Answer

I used to have 600 credit but 2 years later, I am at 720 or so. What I did was send "good will" letters to all the creditors I wronged (didn't pay) during my early college years. This included 2 paid collections. 2 years ago I had given up on my credit. I had returned to the straight and narrow, but these black marks were on my record and I thought I would have to wait 8 years for them to drop. I wrote the goodwill letters, I got 2 secured credit cards, and today I am a significantly more responsible person and am managing credit well. The goodwill letters basically asked in a really nice way to Chase, Att, etc., that i was stupid and please give me another chance and delete the negative account. And they did it! Today, I have 2 unsecured credit cards with 5 digit limits, not to mention the business lines of credit that I opened for the real estate biz. I am so happy for the 2nd chance the creditors gave me.
                    
                    The website that helped me infinitely was: http://www.myfico.com. They are have free forums and this is where I went for help. There are so many great resources there in the forums, its like bigger pockets for personal credit. Good luck.

J Scott · Answer

Some suggestions:

- Make sure you don't have any outstanding uncollected debts.  If you do, pay them off;

- Get a credit card (or two).

- If you can't get a credit card, get a secured card (one where you offer collateral in return for the line of credit).  Use the card at least once a month, and eventually the credit company will allow you to unsecure it.

- Get charge cards at any place where you commonly do business.  Use them instead of cash when you shop at those stores.

- MAKE SURE YOU PAY OFF ALL YOUR CARDS IN FULL EACH MONTH.

- Every few months, request a balance increase on your credit card(s).

Wade Munday · Answer

Casey,

How long has it been since you checked your credit?  The first thing I would do would be to order a tri-merge credit report with 3 credit scores to see what's on your file. The report should explain what is driving your scores and offer suggestions to improve your score.

Your credit score is made up of several components including: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and types of credit (10%).   It's possible to have a relatively low score and not have any late payments if you are using a high percentage of your available credit or if you have little credit, or a short credit history.  Check out the MyFICO (dot) com website and search for "What's in your FICO score" for an explanation of how credit scores are determined.

I think mortgage lenders want to see a minimum of 4 lines of credit, so you need to start establishing credit.  Gas cards and department store cards are fairly easy to get.  I've heard a couple of strategies here. One is to payoff your balance every month. The second is to leave a small balance and pay it off over several months. I don't know which method is the best. I think you want to maintain any balances under 30% of your available credit and never more than 50%.

It's possible to buy a house without using your credit or going to a bank.  You can buy using seller financing or you can buy "subject to" the existing financing.  So find yourself a motivated seller and see if they will carry back owner financing or if you can take over their payments.

There should be several articles/posts on BP about these methods of buying that don't require you to have good credit.

Good Luck!

wade

Eddie Ziv · Answer

Yes, but it will take some time. I'm not sure how long, but you can dispute the whole charge after certain amount of time. The way credit bureaus work is that they would send your dispute to the lender.The lender then need to respond within certain amount of time (Could be 30, 45 or 60 days). If the account is settled, most lender would not bother responding at all and therefor the item will be deleted. That how credit repair businesses operate, but you can do it yourself

Jamie Dzierwa · Answer

I have 2 collections on my credit report. One im in the process of paying, and the other one I paid through the collection agency. They told me it would come up on my credit as paid, but not removed. Is there anyway to get it totally removed off of my credit?

Deon C. · Answer

In addition to the previous posts. I dont know what exactly is on your credit report, but if you are looking to purchase a home in the near future; as a mortgage broker, you should:

1. Have open tradelines (3-4) or alternative tradelines with seasoning. 
2. Pay off collections,with notation from creditor stating, 'paid in full or as agreed,' if going FHA.

If you have student loans, make sure they are not in default. Also, if there are any judgements or leins against you it'll deter you, so its important to settle them.

Purchasing a home FHA can put you on the road to having good credit because they basically require applicants to settle most debt prior to submission.

hope this helps....

Ram Chandrasekaran · Answer

Hi Casey
I agree to most of the posts here except for one claim "Buying Department Store" Cards. Please stay away from them. Buy only credit cards through banks and the financial institutions. Apply thru www.creditcards.com - where they give options for Gasoline points, low interest rates, low balance transfer rates, etc. and also specify what kind of credit level is expected. For e.g. Discover XXX would require 'Good' credit as opposed to BofA AMEX YYY Card requiring 'Excellent' credit.

Also, please buy 'Credit Scores and Credit Reports' by Evan Hendricks. You will learn a lot about credit scores and consequences of not checking them often ;-). I hate to do this but my blogsite has a detailed post on credit scores - check it out - my profile should list the blogsite under 'my website', if not, IM me and I will send the website address...

Cheers
Ram

Paul Beauchemin · Answer

you should check to make sure that any information older than 3 years that is unfavorable is deleted from your credit report (except certain items like bankruptcies)

Applying too frequently for credit can also hurt your score

Todd Mims · Answer

All the above are excellent post, but I like what Wade says. My theory is to FIRST order your free annual credit report (myfico or annualcreditreport360)and DISPUTE anything that is not accurate and by law they have 30 days to get back with you or it must be deleted. Although, buy without credit and banks can be done we know how important "credit scores" are in our society.

So start with about 2 secured cards from your bank, pay them off monthly and in a few months apply for the unsecured ones and pay them off (I'd say not entirely every month, though), Dont go over 35% of avail credit and dont ever be late and you should be golden. Continously know whats on the report, you can't fix what you dont know.

How to improve Credit Score from 600....

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