Improving Your Credit Rating

Strategies for building, repairing, or improving one's credit score which enables the consumer to negotiate better interest rates on loans.

5,534 Questions

How can you repair your credit after a car repossession?

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What should a letter to close a credit card account include?

Actually, I wouldn't recommend closing your credit card account, closed accounts impact your score and do nothing to help improve it. If you zero balance the card just put it in your sock draw get gas or pay a bill with it once a month and then P.I.F. it when you get the bill, that way your not paying any interest, the credit card companies hate when you do that! LOL It makes you look good it fakes up your score and your utilization of your credit limit is well below the recommended 35%.

From what I understand, if you are closing an account in good standing, it is important to include in your letter a request, stated clearly and in no uncertain terms, that your credit record show YOU were the one to request that your account be closed and NOT your credit card company.

This way in the future anyone needing to check your credit will see this and know that the account was not closed for other reasons that could reflect poorly on your rating.

It might not hurt, as a follow up, to check your credit record. I know sometimes it's recommended to check your credit record yearly in order to check for errors and mistakes.

However, I've also read that you shouldn't check it TOO often because this can adversely affect your record or score.

AnswerFirst, checking your credit score counts as a SOFT inquiry, which has a remotely adverse affect on your credit after like 100 times. And when I say remotely, I mean 1 point. You don't need to write out a letter, just call them and tell them you would like to close the account. Wait 60 days and check your credit report, if it was closed "by credit issuer" according to the credit report, then just call up the company. If you were in good standing, you'll be fine. AnswerA better question is, why do you want to close your account? If you aren't using the card, that doesn't mean you should close the account; in fact, doing so can hurt your credit score (i.e., the score that tells companies whether you are a good candidate to loan money to). These companies, when they look at your credit report, want to see a few things:

1) Do you have a history of credit being extended to you? They want to see a long history, which is why you should NEVER close the account for the credit card you've had the longest, even if you never plan to use it again (unless, perhaps, you're paying a yearly fee, but--even then--call them to see if they'll waive the fee; tell them you're thinking of closing your account otherwise): keeping the account open keeps it on your credit history, showing that you've have credit for a while.

2) Do you have multiple types of credit (credit cards, mortgage, car loan, cell phone, student loan, etc.)? They like to see a mix.

3) How much of your credit do you use? They like to see that you use no more than around 30% of the credit available to you. For example, let's say you have two credit cards--one with a $10000 limit, one with a $20000 limit--and so, you have $30000 of available credit. You owe $5000 on the card with a $10000 limit and $0 on the $20000 card. That means you're using about 17% of your available credit ($5000 of $30000). That's fine. But let's say you close your $20000 card. Now, all of a sudden, you're using $5000 of $10000 in available credit--50%. That looks horrible--like you are living beyond your means, getting by on credit, even though you owe THE EXACT SAME AMOUNT OF MONEY as you did when you had $30000 of available credit. But, by closing the account, you jacked up your debt ratio past 30%, making you look like a poor manager of credit. People will be less likely to offer you credit now, and they'll offer you worse interest rates when they do.

So--if you want to close the account, make sure it's for the right reason, such as it's costing you an annual fee. Otherwise, if you can hang on to the card, do it. If you are worried you'll use it when you shouldn't, put it in a bag of water and put the bag in the freezer. That way you'll have to wait for it to thaw before you can use it, which will cut down your impulse purchases.

How do you repair bad credit?

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Does Lexington Law work to repair credit?

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Does paying off collection accounts help your credit score?

  • Why payoff collections when you have a bona-fide chance in getting the collection deleted by disputing it with the bureaus that are reporting it, as per "The Fair Credit Reporting Act". The original creditor already wrote it off as a loss on their taxes anyway and in most cases sold the debt to a collection agency for 15 to 20 percent.
  • Last resort is to settle on the debt. Make sure you write a restrictive endorsement on the front of the check:"By cashing this check Payee agrees to accept this check in full payment of the account as agreed and agrees to remove all derogatory information from Remitter's Credit Reports."
  • Now you have a canceled photo of your check in your bank statement as proof incase the bureaus don't adjust your report accordingly. Also make sure to mention your account number in the memo section.
  • I agree with Bob in the next answer--since I am a mortgage loan officer--I would be recommending the same. Pay the collection at the closing of the purchase/refinance of the home--not right before. Your scores will not improve for a good 2 months or more as you just gave a bad account a newer date. I like to call it "new history". Now if you are just cleaning up your credit and not applying for any type of loan for at least 2 months, then by all means -- pay the amt due or settle on an amount. Either way get it in writing and keep your originals--for a LONG TIME. Send copies when sending the payoff/settlement. Act as a "collector" would, and call consistently when you are waiting for confirmation via fax with the original being mailed to you until you get it. Make sure you have names and extensions when you try to re-reach the person you talked to as you will more than likely end up talking to someone else.
  • The reason for this is because, among other factors used to determine a credit score, the "date last active" will change on these collection accounts once they have been paid. It simply means the date the account (regardless of type) had any activity on it, whether it be a credit, debit, transfer, etc. Pretty straight-forward.
  • So let me try to explain: Let's say you have a collection from a long-forgotten medical bill (probably the most common collection), with a last active date of 08/99, with a $500 balance. Because this is such an old, inactive collection, it's effect on your credit score has been greatly diluted by more recently active credit (such as your current mortgage, car loan, active credit cards, etc.), and is likely only lowering your score slightly. If you were to pay that collection off in an attempt to gain points, your efforts will have an opposite effect in the short-term. By paying off the collection, you will bring the last active date of the collection to the current month (now would be 10/03), and although it will now reflect a $0 balance, the fact that you have a recently active collection on your credit report is more derogatory than an old collection with a balance.
  • My advice to you is, if you are applying for a mortgage or other large loan, do NOT pay off collections before hand! Usually, lenders will require these debts to be paid at CLOSING, and this is highly recommended.
  • Now, after about 6 months, your scores will have recovered (depending on the number of collections you had to pay off), and in the long term, will be much higher than had you left the unpaid collections on your credit report. It's just the initial hit that hurts.
  • I appreciate the above. But I want to emphasis it highlights that you *will* have to pay off the old debt anyway. Moreover, as noted that craziness in official scoring is true for maybe 6 months. And it is happening in what might be the more junior and mechanical part of the process of actually approving a loan... many more things will actually go into it.
  • So, let's see, if I was a lender, now and 6 months (or even 5+ years)in the future, how trustworthy do you think I would comparatively rate these two, or desire them as customers:

1) He has not made payments on his previous promises. He still owes others money that he doesn't seem able to, or interested in, paying. He expects to pay me with his future wages. Other creditors want to get repaid, and will have a right to an amount that will continue to grow with fees and interest charges, so his past due balances are actually higher than he's telling me. I can require he pay off those old debts, but if he uses my money to pay those off, do I really want to be in the shoes of those he isn't paying now?

2) He seems to have had a tough period and missed payment obligations for some reason, (but that was XX ago / there is an explanation in credit file). Gotta' say s/he really wanted to stay responsible/honorable and worked through it, made good on his promise overall and paid them. He doesn't seem to owe others now, at least not more than he seems able to pay on what he's making....

  • To be certain of how ill informed and absurd some of the above is...when saying that "The original creditor already wrote it off as a loss on their taxes anyway...", well maybe in a way. They wrote it off on their financial books too...they had reported an asset a receivable, (income they already reported and expected to receive), that wasn't real...they paid taxes on that income previously (when they originally made/recorded it)...both their books and tax accounting now get adjusted to show they won't receive it...the tax they get is tax BACK that they paid already on the income they aren't going to receive. You don't really think the IRS gives money back for something else do you?
  • Can paid charges help your credit score. It can increase your credit score by paying off a charge off on your credit report.

UPDATE: In 2007, Fair Isaac agreed with debt collectors that a debtor should not be penalized for paying off old debt accounts. While it is true that renewed account activity could reset the date of last activity on a collection account, it does not change the date of last activity for the original debt. Furthermore, Fair Isaac claims that adjustments have been made in credit scoring that allow for a debtor to pay an old debt without any negative movement in their credit scores.

This settles a decades old argument that paying off an old liability demonstrates financial responsibility. What we do not know is whether the actual change to risk scoring models was made in 2007, or if it is part of the FICO 08 scoring update. Either way, by late 2008 debtors will not be penalized for paying off an old debt account. With this in mind debtors can pay off older accounts without fear of a negative credit score reaction. This is true for lump sum payoffs. Making a series of payments on an old debt is still not advisable. Still though, debtors should focus on newer debts, since older accounts may drop off their credit report before they get a chance to repay them.

Paying off a collection will update the account as more recent which will hurt your credit score, but it will also improve your debt to limit ratio which will increase your credit score. More importantly you can negotiate to remove the credit report listing upon final payment. You can also try to dispute the collection with the credit bureau and this becomes much easier once you have paid off the debt.

It is completely and utterly untrue that writing "this pays this debt in full" on a check is legally binding. Why wouldn't one do that on the first mortgage payment? I can write anything in the memo of a check, it means nothing. Please do not follow that advice. I worked for a bank for over a decade, this is a horrible myth.

Is 575 a good credit score?

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What will happen if you do not pay your credit cards?

  • The question of what "will" happen is not one that can be answered because there are numerous avenues a creditor can take. However, we can say what is likely to happen. First, they will report your late payments to the credit agencies and damage your credit rating (in addition to their late fees of course). Then, when the delinquency reaches a certain point (180 days is common) their GAP accounting rules require that they realize the loss and charge the debt off. This charge off also goes on your credit. A charge off essentially means they have tried to get their money back but have exhausted reasonable attempts. At this point they can take you to court to sue you for a judgment and maybe garnish your wages, or simply send you to a collection agency who will hound you. Court time costs money, so you're more likely to see option number 2. Many states have time limits on debt collection, you may want to check the laws in your area. If these consequences don't sound so good, call the card company and negotiate a lower rate and payment, offer to settle the account for a partial amount (you may have to borrow from friends or family to get the cash to do this) or meet with a bankruptcy lawyer to discuss chapter 7 or 13 protection.
  • Adding to the above answer: 1. When a lender sues a consumer for a defaulted credit card or loan, they may also seek compensation through the judgment for their attorney fees and associated court costs to be paid for by the consumer. So, in that context, it would not expensive for the lender to take the consumer to court. 2. There are no "time limits on debt collections". HOWEVER, there ARE "statutes of limitation" laws but these pertain to the how long a creditor has (in years) to SUE a consumer for the unpaid debt. If the statute in your state is 6 years, and you haven't paid on the debt in 7 years, you may still be contacted to pay the bill but the creditor can take no action if you do not. Also important to note is that the statue term BEGINS with the date of the LAST PAYMENT the consumer made, not the date that the line of credit was first opened. Certainly, it would seem rather stupid for a lender or debt purchaser to attempt to collect on a debt that is no longer showing up on a credit report and for which the lender has no power to force repayment via the courts, but it does happen. 3. Finally, laws vary state to state on the number of years before a statue expires as well as what specific action a lender may take, if any, to force repayment of a debt through a civil judgment. 4. "Written-off" and "charged-off" are not the same thing and it is helpful to know the difference. Charged-off means the account has gone 180 days (approx. 6 months) without a payment, the account will have been closed down and, most likely, the balance is now due in full to the lender. While it is still possible to negotiate a monthly repayment of the debt, the lender is not legally required to do so and can demand the full outstanding balance be paid immediately. Written-off accounts have been reported as a loss for the lender as unrecoverable. If an account is written-off by the lender, they may report this to the IRS and you may become responsible for taxes on the unpaid balance. Finally, I am not an attorney and am not offering legal advice. While there is helpful information on line, the best thing to do is to consult with a LOCAL attorney in your area (and I stress local to you...not a debt negotiation company who happens to have an attorney affiliated with them).

What does a 649 credit score mean?

It means you have okay credit. Not great, not terrible. You'd probably qualify for a loan but wouldn't get the best terms.

When in bankruptcy is it hard to rent an apartment or house due to the bad credit rating?

It can be but I have found that if you have good rental history you should be able to rent. My husband and I filed bankruptcy about a year ago. He then left and I lost everything, now trying to start over with a recent bankruptcy is challenging. I have found no one that will rent to me and I have good rental history.There should be a law, I do not believe that credit should reflect on the rental of a house. Good luck to all that are trying. After filing bankruptcy it is very hard to obtain housing in an upscale area. Some places will not rent to you until seven years post bankruptcy. I have learned that if you maintain a good rental history and aren't deliquent on any of your accounts, then you may be able to rent a house/apartment through a lowerscale or private owner. * i would agree that it is hard but i also think that you can get help and try to get some money back

Is 591 credit score bad?

According to

"Scores above 700 indicate a relatively low credit risk, according to Fair Isaac, while scores below 600 indicate relatively high risk and may result in credit denial or elevated interest rates."

Will declined credit card transaction affect your credit rating?

How embarrassing! It is more like a red flag (to you) that you have an issue with the credit card company. It could be in error, but it may also mean that you have met or exceeded your limit. Contact the credit card company as soon as possible to solve the issue.

What are investigative consumer reports?

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Does cancelling a credit card you haven't used in a while lower your credit rating?

The length you've had a card does help your credit score. That's why they say to keep the old ones. Plus your ratio of available credit to your balance is important.

What if you are denied credit?

Denied CreditIf you are denied credit, federal law requires that the creditor give you a notice that tells you the specific reasons your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific. Acceptable reasons include: "Your income was low" or "You haven't been employed long enough." Unacceptable reasons include: "You didn't meet our minimum standards" or "You didn't receive enough points on our credit scoring system."

If a creditor says you were denied because you are too near your limits on your credit cards or you have too many charge card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time.

Sometimes you can be denied because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down. The reporting agency can tell you what's in your report, but only the creditor can tell you why your application was denied.

If you've been denied, or didn't get the rate or terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you are approved, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your report, be sure to dispute the inaccurate information in your credit report.

If you have been denied credit entirely (often because of the Catch-22 situation where lenders don't want to offer credit to anyone without a credit history--but how do you get a credit history without credit?), you can apply for secured credit cards, which essentially allows you to deposit a sum of money (say, $500) and then "charge" purchases, up to $500. By using this card responsibly (such as by not going over the limit--even better, creditors like it if you use no more than 30% of your available credit, as it shows you aren't likely to incur debts you can't pay--and by paying your bill on time--never late, even by a minute), you build a credit history. This record of good credit usage will help you get other kinds of credit--a car loan, a mortgage, etc.

How many points on your credit score is paying off a judgment worth?

Paying off a JudgmentSettling judgments will have only a slight effect (if any) on your credit score. What it WILL effect is your ability to attain further credit - you may be denied credit due to an outstanding judgment or tax lien, regardless of what your FICO score is.

Paying off collections, especially older collections, will drop your FICO score initially. In the long term, of course, your score will be much better off, and some collection companies may even delete their trade line all together once payment is received, but do not count on this. If you need points in a hurry (applying for a home/car loan), do NOT start paying collections off. You will be doing yourself a grave disservice. Wait until the deal is done and pay these off either at closing or after the transaction is completed.

Finally, one recent 30 day late will drop a FICO score by approx. 50 points - a considerable sum, regardless of account type. Most people make the common mistake of refinancing their mortgage and skipping their last payment, thinking the deal will be done before anyone will notice the delinquency and saving themselves a mortgage payment. THIS IS A MISTAKE! I have seen many people lose their approvals (and thus their loans) because of this, and the results are quite devastating.

More Information:

  • PAYING a judgment will have no impact on your credit score. Getting the legal disposition (in this case a satisfaction), having that recorded, and informing the credit bureaus of this CAN impact your score, but only marginally, per the previous answer to this question. Exact scoring models are a closely guarded trade secret. Information about scores is mainly empirical and comes from trial and error. The reason that paying off collection accounts or getting the disposition to a legal item recorded and properly notated on your credit report affects your score so slightly is that 35% of your score is calculated from recent activity, such as late payments, payments on collection accounts (even payment in full), etc. This is why paying off derogatory items right before a purchase might not impact your scores in the way you anticipate. If possible, pay off or settle those collections and charge offs now, get dispositions recorded for any outstanding legal items, pay all accounts in a timely this for a full year, and THEN you will see significant improvement in your credit score.

Will bankruptcy hurt your spouse's credit rating?

I'm not a lawyer and I can't give you anything close to a definitive answer, but I do know that your credit rating will be affected if your spouse includes a joint debt in her bankruptcy. That is, if you owe back taxes or have a joint loan and this debt is included in the filing it will end up included in your credit record as well as hers.

AnswerYes, It can affect your spouses credit, I filed chapter 13, My wife cosined a lone for a motorcycle for me. I filed 13, she did not, but somehow it shows up on her creidit report. AnswerThat is because as a co-signor, you are guaranteeing the repayment of the loan. Therefore, when a principal debtor defaults on a loan, the same negative nonpayments are reported to U.S. Credit reporting aggencies against a principal debtor AS WELL AS the 0guarantor (i.e., co-signor of a loan). In other words, DO NOT CO-SIGN A LOAN UNLESS YOU KNOW FOR A FACT YOU CAN REPAY THE ENTIRE AMOUNT YOURSELF WHEN YOUR FRIEND OR LOVED ONE BECOMES A DEADBEAT, OR DO NOT CO-SIGN A LOAN--PERIOD. Answer By MinaziUnless your husband or wife does not involve himself/herself in the matter, He/ She is safe. Your bankruptcy can not affect your spouse in any way. But in community properties, your spouse can be liable with you although your spouse did not even sign any document.

Can you buy a home with a credit score of 518?

Yes. there are several ways to buy a home with bad credit. one of them is to homeowner financing, you can find deals on the newspapers, craigslist, and many other sources of information.Also, through an real estate investor, the real estate investor qualifies you as long as you have enough money for the downpayment, expect higher interest rate than the convencional loans, and as long as you pay your new mortgage for some time (about two years), on time you can renegotiate, refinance, through a financial institution other than the investor. either you are ready or not to buy a house the smart thing to do is to fix your Fico score. Learn everything you can about creative financing, real estate vocabulary, contact a real estate agent and ask for advise. Remember the more informed you are, the more likely you will get a better deal.

What are quick ways to repair your credit?

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How do you stop random credit card inquiries like the ones who send credit card applications in the mail saying 'you've been pre-approved based on your credit rating'?

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How does the credit card refund process work?

Many credit card companies have in their terms that they have the right to take 3 to 4 weeks to credit your account with a refunded amount. So the merchant may have processed the refund but your credit card company will take 3 - 4 weeks to accept it. This is so they can hit you with balance charges.

What is District Credit Plan?

This a document prepared by the Lead Bank (every bank one bank is given the responsibility of Lead Bank by the RBI for promoting banking services in the district) of the district in coordination with the other banks. The plan contains the business potential (loan and deposits) of the district for next financial year. The planned targets are divided among the banks in the districts to achieved the credit growth to the priority sectors and other sectors in the district.

How do you get started building a credit history?

Building a Credit HistoryOn your first attempt to get a loan or credit card, you may face a common frustration: you don't have a credit history. Some creditors will look only at your salary and job and the other financial information that you put on the application. But most also want to know about your track record in handling money, specifically, how reliably you've repaid past debts. They turn to the records kept by bureaus or reporting agencies whose business is to collect, store, and report information about borrowers that is routinely supplied by many lenders. These records include the amount of credit you have received and how faithfully you've repaid. Here are several ways you can begin to build a good credit history:
  • Open a checking account or a savings account or both. These do not begin your credit history but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show that you pay utilities or rent bills regularly, a sign of reliability.
  • Apply for a department store charge card. Repaying charge card bills on time is a plus in your credit history.
  • Ask whether you may deposit funds with a financial institution to serve as collateral for a charge card; some institutions will issue a charge card with a limit usually no greater than the amount on deposit.
  • If you're new in town, write for a summary of any credit record kept by a bureau in your former town (Ask the bank or department store in your old hometown for the name of the agency it reports to).
  • If you don't qualify on the basis of your own standing, offer to have someone cosign your application.
  • If you're turned down, find out why and try to resolve any misunderstandings.
  • I recommend approaching a small community bank or local credit union. Be honest and forthright, explaining your situation, either you have no credit, or bad credit. Request a "secured credit card" and open a savings or checking account there with a debit card. If you are refused, ask what steps you need to take to get both types of cards. For a secured credit card, you will have to make a deposit equal to the amount of your credit limit. Offer to have automatic deduction from the bank account to pay for your purchases. After a period of time, 6 months to a year, you can request that the funds securing the cards be released and its' status changed to a regular credit card.

I agree with this answer but I would also add that the chances of you getting any type of credit in this market are very low. I would advise you skip applying around because you'll lose points with each request. About 50% of credit unions and banks offer secured cards. I would check that route first.

After you have your secured card (s) about 6 months, you will see a rise in your credit score. After 12 months, it will be even better and the lender should review your account and convert to unsecured (if you've handled it well).

The last thing is keep all of your balances under 30% of your credit limit. Within 12 months, you will be sitting very nice.