Improving Credit Score?

[annemayer]

Working on repairing damage we've done to our credit,and I've noticed something I didn't anticipate. I've been negotiating lower settlement amounts and paying off debts,only to find when I pull the credit,it simply says PAID,it isn't actually removed. I guess I just assumed that was how it works,and now these items,although paid now,are still in the negative section of the report.I really thought by paying these off it would give the score a boost but it is not budging. Am I doing something wrong? A mortgage broker told me that paying a lower amount to settle wouldn't hurt,and even those I paid in full aren't doing anything to improve it. I'm not looking for a quick fix necessarily,but I don't want to spend money paying off debt only to find we have the same scores still...I could have ridden it out and been no worse off it seems. Also,if items are set to come off the report in one to two years,is it best to wait?

 

[ProfMoneyWise]

There are two things in play here. Your Credit Report and your Credit Score.

First, your Credit Report. Your Credit Report is basically a "what are they saying about me" report. These (there are 3 main one's) are compiled by Equifax, Experian and TransUnion and while many get mad at these companies for what is on there they are nothing more than the reporting points. Their data is fed to them by the creditor. It is up to us to ensure that data is correct.

It appears from your post that what is on your report are debts you have not been current on as you have been negotiating settlements. Therefore these debts have been shown as past due correct? Now that you are negotiating settlements you are paying less than you owe to the creditor, but you are paying and you need to be complimented for that.

However do not expect these items to show much more than "paid." In fact if that is all they show you may be ahead of the game as many will show words to the effect that the debt was settled for less and for someone looking at your report to consider you for whatever they are checking your report for about you the negativity that comes with settling is still there. As for how long these items stay there it is years. Even an account closed in good standing stays on there for up to seven years I believe. The Fair Debt Collection Practices Act (FDCPA) spells out the rules of the road for you if you are so inclined.

Your Credit Score is a number put together by FICO. There is one out there by Vantage that is gaining some traction but FICO seems to be the score of favor. The FICO score is a "how am I at borrowing money and paying it back" score. I refuse to worship at the altar of FICO as I am for spending money that one has and not borrowing. myFICO | Check Your FICO Credit Score and Credit Report Online will show you all you need to know about the score but suffice it to say it is made up of your payment history (which in your case is not perfect), amounts owed, length of history, new credit and types. Nowhere are their points for living on less than you make, having a plan, not spending what you do not have and letting your wallet be your guide.

Again, I'm not a good proponent for the score and have found there are many myth's about what a good score will do for you.

You do want to get out of debt however your motivation is not to get out to get a high score. Your motivation is to no longer get up to an alarm you hate, to wear rented clothes, to drive someone else's car to a job to make money to give to people to pay for things you have already done. You think you like payday now? Try it when you can keep the money you make and the only items you pay for are choices. Choices? Yes, you choose to have running water, electricity, TV and food.

Ok, lecture over, but you asked. I recommend you read The Total Money Makeover by Dave Ramsey. Happen to your money instead of letting your money happen to you.

 

[ProfMoneyWise]

As for the settlement you seem to be doing please get in writing from the creditors that the amount you agree to is the amount that will settle the account in full with no further recourse. If you do not get this in writing do not pay. Any payment you make send via certified check, return reciept requested. Do not let them have electronic access to your account.

These are not your friends. They play on emotions. They push buttons. If it is not the original creditor it is a collector that bought the debt for pennies on the dollar.

And while there is a Statute of Limitations on how long they have to sue you there is no Statute of Limitations on how long then can try to collect.

 

[annemayer]

I was hoping you would chime in...thanks for all the info,very informative.One more question,though. Is it then more harmful,or equivalent to show an item as being paid as a settlement,as it is to have it unpaid? I ask because the score stays the same,the only thing changing is the status of the accounts.

 

[ProfMoneyWise]

I was hoping you would chime in...thanks for all the info,very informative.One more question,though. Is it then more harmful,or equivalent to show an item as being paid as a settlement,as it is to have it unpaid? I ask because the score stays the same,the only thing changing is the status of the accounts.

Paying what you owe, even if less than you owe, is the right thing to do regardless of the score.

And to the best of my knowledge your score is not updated/reviewed constantly so any change to the good or bad will be delayed I would suspect.

I recommend reading The Total Money Makeover by Dave and if you come over to our side of things you will care less about your score once you stop borrowing money.

 

[ProfMoneyWise]

And be advised. The difference between what you owe and the settlement amount will show up on a 1099 as income for the year. In other words if you owe $2,000 and you reach an agreement to settle in full for $1,000 a 1099 will arrive on your doorstep early next year and will need to be counted (and Fed and State Tax paid upon) as income.

 

[annemayer]

And be advised. The difference between what you owe and the settlement amount will show up on a 1099 as income for the year. In other words if you owe $2,000 and you reach an agreement to settle in full for $1,000 a 1099 will arrive on your doorstep early next year and will need to be counted (and Fed and State Tax paid upon) as income.

Wasn't aware of that. As for borrowing money,our only current debt is our car payment,we no longer use credit cards AT ALL. But,we are cleaning up the mess from a few years ago.Thanks for the info!

 

[annemayer]

Oh,and I agree with you,I don't give a damn about the score,but unfortunately the rest of the world does,and that number has made life really hard for us these past few months looking for a rental,so I've learned my lesson and am diligently fixing it.

 

[ProfMoneyWise]

Part of FICO's marketing is impressing upon all that a credit score is needed at all. What is needed is a "clean" credit report. I have polled (unofficially) rental companies, insurance and lenders and have found that while a credit score may be pulled it is but one of the things that are looked at when you are being considered for whatever the service or product is in play.

There are many that have no debt, don't use credit of any kind, but have plenty of money that have no score at all. These individuals are not penalized as much as FICO would have you think and I have found that if they are to be penalized by a provider these individuals will take their business elsewhere.

A lender once remarked to me, "If you walk in to me with no debt, a 20% downpayment on a house, a fully funded emergency fund of 3 - 6 months of living expenses, a stable income and can show/provide me with anything else I may ask for I will take that over a high credit score anyday."

My insurance agent also told me, "if anything you are looking at a few dollars a month difference between a high and low FICO score but the score is but one thing looked at. And if you have a low to no score just because you don't owe anyone anything call your agent and it should be discounted entirely. Where the problem comes is when you don't have anyone you can call."

In your case though you have both working against you at present it seems. I'm assuming the rental agency is not working with you? I spoke to one landlord awhile back that said a higher deposit can be put in play for those who need to overcome some unfortunate credit issues in the past.

Good job on taking this on by the way. I know people who have quit smoking that still think of a cigarette and those who have lost weight still like chocolate. But I have not met one person who got out of debt that said they want to go back.

Good job!

 

[kwillia]

Your Credit Score is a number put together by FICO. There is one out there by Vantage that is gaining some traction but FICO seems to be the score of favor. The FICO score is a "how am I at borrowing money and paying it back" score. I refuse to worship at the altar of FICO as I am for spending money that one has and not borrowing. myFICO | Check Your FICO Credit Score and Credit Report Online will show you all you need to know about the score but suffice it to say it is made up of your payment history (which in your case is not perfect), amounts owed, length of history, new credit and types. Nowhere are their points for living on less than you make, having a plan, not spending what you do not have and letting your wallet be your guide.

I am leary about entering my personal info online... how do you determine a specific website is safe?

 

[lovinmaryland]

When you pay off a collection item not only does it list the item as "paid" but it will also bring that items date up to the current date. It is best to pay off more recent items first.

 

[ProfMoneyWise]

I am leary about entering my personal info online... how do you determine a specific website is safe?

I provided the myfico.com site as a place to research what goes into a FICO score not to advocate providing your personal information. The computer types will have to chime in on how best to determine what sites are safe. I have certain sites I have used and have confidence in but again it is up to the individual.

 

[Chasey_Lane]

I am leary about entering my personal info online... how do you determine a specific website is safe?

Usually websites with an "s" after "http" are considered secure.

 

[annemayer]

When you pay off a collection item not only does it list the item as "paid" but it will also bring that items date up to the current date. It is best to pay off more recent items first.

Ok,I get the part about paying most recent debt first,but what is the importance of bringing the paid items up to date?

 

[lovinmaryland]

Ok,I get the part about paying most recent debt first,but what is the importance of bringing the paid items up to date?

basically the less activity something has on your report (negative wise) the better. if you have a collection on there from say 2006 and the last time it has been update by the collection agency was 2008 that shows 2 years of no activity. if you pay it now it will show last activity 9-2010 making it more active & current, actually bumping your credit a notch.

Did you know that it makes no difference if the collection account is listed as paid or owed it is scored the same way. So your best bet would be to contact the original creditor and try to make arrangements with them to pay the bill (whether it be a credit card, medical bill, etc) if in return they remove everything from your report (sometimes they do it sometimes they dont, but it doesnt hurt to ask) If they do remove it, then you can dispute the collection item and the collection agencies will have to remove it from your report

 

[annemayer]

Off topic,but that house for rent right next to you on Lady Baltimore was nuts.The lady actually stood outside and pointed out where all "the blacks" live. Yikes. And I think ginwoman has you beat for Red Robin!

 

[lovinmaryland]

Off topic,but that house for rent right next to you on Lady Baltimore was nuts.The lady actually stood outside and pointed out where all "the blacks" live. Yikes. And I think ginwoman has you beat for Red Robin!

There are two house behind me so I wasnt 100% sure which one owned the house. Sounds like it is the older lady. She yelled at my kids one day for playing army men in our ditch infront of our house because it was near her mailbox I told the bag to shut the hell up and get off my property She must not be too hard to rent from though because the people who lived in that house have lived there even before I moved in. I actually thought they owned the house :shrug: I think there are only 2 black families in the whole neighborhood so not sure what she is all up in arms about either.

 

[annemayer]

It is the old lady. The deal is,this is the first time that house is for rent. The people living in it were her daughter and her husband. They are getting divorced,and now the daughter is renting it out to cover the mortgage. She can't get it rented because her mom can't back off - I showed up to see the house to find 6 people waiting for me,and the lady who owns the place just sitting off to the side while her mom showed the place. Everything I asked her was met with either outright hostility - like how dare I want to remove her Snoopy border from one bedroom,when it is brand new?! - or she would say to talke to her daughter. Ok,so then I would try to only to have Mom completely take over again. Best part? The mom lives RIGHT BEHIND the rental. No way. And as we were leaving she points out to me where the black people live,making a total ass of herself. Personally,it wouldn't matter to me if the entire neighborhood was black,she would have no reason to be "all up in arms" even if it were more than 2. Told her no,and then on the way out suggested to the daughter that she would have better luck finding a renter if an overbearing bigot wasn't her property manager.

 

[lovinmaryland]

It is the old lady. The deal is,this is the first time that house is for rent. The people living in it were her daughter and her husband. They are getting divorced,and now the daughter is renting it out to cover the mortgage. She can't get it rented because her mom can't back off - I showed up to see the house to find 6 people waiting for me,and the lady who owns the place just sitting off to the side while her mom showed the place. Everything I asked her was met with either outright hostility - like how dare I want to remove her Snoopy border from one bedroom,when it is brand new?! - or she would say to talke to her daughter. Ok,so then I would try to only to have Mom completely take over again. Best part? The mom lives RIGHT BEHIND the rental. No way. And as we were leaving she points out to me where the black people live,making a total ass of herself. Personally,it wouldn't matter to me if the entire neighborhood was black,she would have no reason to be "all up in arms" even if it were more than 2. Told her no,and then on the way out suggested to the daughter that she would have better luck finding a renter if an overbearing bigot wasn't her property manager.

Oh yeah then that is the lady! She is seriously off her rocker. She was like I am going to call the police if your kids dont get away from my mail box... I said go ahead and call them I want to laugh in your face when they tell you it is my property and to go pound sand you old bag

Really I had no clue they were getting divorced wow they just had a baby not too long ago too. That sucks.

Ok so the daughter owns the property, but the mother is the landlord BAD IDEA! What was her response when you said that to her about the mother? Everyone is all related back in there it is kinda So we stick to ourselves most of the time unless we are at the pier.

 

[annemayer]

She literally hung her head and nodded,but kept quiet,as mom was coming right up the hall behind me. I don't know these people,or what's behind the divorce,but you can bet a mother in law like that would drive me nuts. I couldn't stay with a family like that. This woman was beyond controlling or difficult - she'll never get that place rented unless they find someone truly on the verge of homelessness.