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I am a dummy and now probably have bad credit.
Trowizilla
Registered User regular
Registered User regular
Due to a stupid mixup (my fault), my credit card bill went to collections. It wasn't insanely high and I'll be done paying it off completely in a couple months. According to the internets, I should've negotiated with the collections agency to get the debt taken off my credit history as soon as I paid it off, but I didn't know that at the time, so that's out.
What should I be doing to offset this besides paying off the debt? The credit card was my very first, meant to build good credit. Oh, the irony! Please explain in small words, as apparently I am the biggest dummy on the planet.
What should I be doing to offset this besides paying off the debt? The credit card was my very first, meant to build good credit. Oh, the irony! Please explain in small words, as apparently I am the biggest dummy on the planet.
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Well, I'm no expert on credit, but start off small. Chances are that if you have a cell phone, car payment, house payment, and other bills like that, they are reporting to the credit agency and if you're never late, you should be just fine.
One thing a friend of mine is doing is buying gas on a credit card then paying it off each month so the balance is always 0 and never gets interest since he pays it off before it hits. Looks really good. Just do stuff like this and it should start to build it up.
You might be okay if you're paying it and haven't defaulted yet. However I have a late payment on my record for a credit card 5 years ago that's still affecting my new credit requests.
When you say it went to collections did the account get closed? If not, keep it open as having an account go bad and then rehabilitating it is better than having an account go bad, get closed and then openning a new account.
Otherwise it's just boring regular timely payments to your obligations. If the CC account got closed, once you pay it off you can apply for another unsecured credit card (don't let it get late obviously) to start generating a credit history on a new account.
It's really bad when I have trouble but someone who had went bankrupt can get a car and a loan (albeit with a 20% interest rate). But bankruptcy fucks you up in so much more ways than getting new loans, especially if you have a lot of equity to your name.
That doesn't help as much as people think it does. From my understanding of it, many places give a credit score on some sort of debt to credit ratio, so having a balance of 0 at the end of each month doesn't help too much. Whereas if you make a purchase of say $200 and then pay it off in $50 amounts over 4-5 months you give the credit company good reason to give you a decent credit score.
As for the debt to credit ratio, that does not involve revolving debt (credit card). Paying ANY credit card interest is bad for your credit score, because it gives the signal that you're unable to pay your monthly bills. GOOD debt/credit is student loans, car loans, and so on -- debt with some purpose behind it.
For revolving debt, your credit score is affected more by the average maximums you hit each month. If you regularly go into the thousands and pay them off in full each month, then it's assumed you're able to handle a large debt with few problems.
If you have a small purchase and can only pay half of it? That reeks of financial incompetence.
No, that's not actually true.
The amount you pay off each month has no direct bearing on your credit score. That is a myth. You can pay off the full amount each month or you can pay off a partial amount, it doesn't really matter.
What does affect your credit score is the ratio of your credit card debt to your available credit, and the area you want to be in is 10%-40%. Having a 0% balance actually hurts you a little, but not by much.
Even then, that only affects your score right now. If I spent all of 2007 with my credit cards at 90% utilized, and then paid them all down to 10% in September 2008, I would have the same credit score as somebody who maintained a 10% balance through 2007 to September 2008.
The reason you want to pay off your balance in full each month is because you don't want to get charged interest. That's all.
the "no true scotch man" fallacy.
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Things to note:
- be careful about what credit you apply for in the future, generally less is better but anything you're looking to finance will probably come with a higher interest rate (car, credit card, etc.)
- monitor your credit rating regularly (at least once a year, preferably more often), specifically your FICO score and your credit reports to ensure what the collections agency reports (if anything) is accurate across all three reporting agencies
- credit scores are calculated using some mystical formula that uses both your payment history and things like your income to debt ratio, so keeping your balances low/nonexistant is important, as is not carrying fifteen credit cards around even if their balances are zero
- if you can, keep this credit card active as another variable in the mystical formula is length and consistency of credit history, i.e. if you've had the same credit card a long time, that's a good thing. It might be a pain or impossible to keep this one, but in ten years it will pay off.
Kind of. I moved and was having a hard time getting the credit card company to change my address; the bills kept going back to my old place (parent's house). My mom offered to pay the bill and let me pay her back later, but we had a miscommunication where I thought she said she'd going to pay off the balance (which wasn't too high) and she thought I understood she was going to make the minimum payment. I didn't use the card after that because I'm planning on moving again soon and trying to get the address changed wasn't working, so I thought I had a zero balance and didn't worry about it. The credit card company tried to notify me by mail, which was just going back to my old house. It wasn't until the collections agency contacted me by phone that I found out about the whole thing.
Basically, it's my fault for not checking with my mom. It was a dumb mistake, but I can't go back and fix it.
If the account that got sent to corrections is still open, I should keep it. I actually don't know if it still is; didn't know that accounts that got sent to collections even could stay open. Calling the company would probably be good; I'll do that tomorrow.
If it's not, I should get a new credit card and pay it off every month. I'll do that as soon as I move so there's no more change-of-address silliness. Any recommendations for companies that are likely to let me open an account? I'll probably have to suck it up with interest rates and soforth, which shouldn't be too much of a problem if I'm just buying gas and paying it off right away.
I need to get at least annual credit reports. Is there a specific website I should use to do this? freecreditreport.com advertises all the freaking time on tv, but is there a better one?
And I should be even more careful with paying off my other bills on time; right now, that's just the cell phone. That's quite doable.
Did I miss anything, guys? Thanks, everyone, for being so helpful.
Do you have any records of trying to change your address? For example, when I moved, I changed it online and printed the page showing that was and did change my address on the specific date. That could help in negotiating that down.
What you might want to do is finish paying off the card then pull your credit report to see if it's actually affected your credit score. It will also depend on your overall credit history. If you've had other debts in the past that were paid off with no snafus like a car loan, it won't affect it as much.
You could also try to open another credit card. This was recommended to me by a financial advisor that I worked for at one time. He said to have the one credit card that you use for the normal stuff (like gas payments, which I saw mentioned earlier) and have a second card open and just sitting there, maybe charging a pair of pants to them once every six months then paying it off. It will help build a stronger credit history, especially if this card is the only thing showing up on your credit report. I got slightly screwed by this before since I didn't have a well established history when I went to buy my car, and the financing company was somewhat limited in the interest rates they were able to offer me because of my limited history.
EDIT: I don't know about freecreditreport.com, since I've never used them. While a little more of a hassle, you may want to go straight to the horse's mouth and get your report from the actual reporting companies, being Experian, Equifax, and Transunion.
I've already got a payment plan and will be done paying it off pretty soon. It wasn't that much money; if not for Giant Stupid Mistake, I wouldn't have had a problem paying it off to begin with. Sadly, it looks like I would've had to negotiate with the collections agency to get it removed from my credit report before I started paying it off, but I'll call them and make sure.
It's a government mandated thing, you can get one copy of your report from each of the big three.
However, they don't provide a credit score. Just the report itself.
Also, if you want to be sneaky, you can spread the report getting from that site out , get the Experian now, Equifax in four months, then four later Transunion, and sudo monitor your credit report thru the year, then repeat. The downside to this is that it is possible for a bad entry to occur on just one of the companies radars, and you wouldn't know for months about that.
Freecreditreport.com is, if I remember correctly, actually Transunion. When you sign up for that, they pull a report for you from Experian and Equifax, and give you theirs... then you get billed monthly for their credit monitoring stuff if you don't cancel. So read the fine print if you go that way.
Edit: I do not remember correctly, freecreditreport.com is Experian.
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Never hurts to try. A lot of times they'll work with you if you're paying it off.
I don't have any records because all contact with the credit card company from my end was over the phone. I called them maybe 5-6 over the course of several months trying to get my address changed; each time, they assured me they'd changed it, but the bills kept going to the old address.
I've never had a car loan or a school loan; I bought my car outright and went through school on scholarships. The whole point of getting the card was to build up a credit history; obviously I screwed up.
Yeah, I'm planning on getting another credit card and watching it like a hawk. Any recommendations for where to look?
Do I have to pay to get credit reports from the reporting companies?
Some of that is true, some is not. If you have a house payment or car payment, it is reporting to credit companies; if you have a cell phone payment or cable payment, it is not unless you are delinquent, at which time it will show up as a collections account. IE it can only hurt you, not help you.
If you have multiple lines open and a five year history, you're going to have a score in the upper range of the 700's. If you make a 30-day late on a credit card, you'll end up getting knocked down 70-80 points, but it will go back up gradually after two or three months have passed. So if you had a 780, you'd drop to 700, then 705, 710, 715, and so on...
His score is very likely in the low 600-high 500 range over this, if that's his only credit line. If he were to try buying a house even BEFORE this he'd have a hard time getting approved; banks are looking for ESTABLISHED credit history, which means 4 trade lines open for 12 months or more.
My advice here is to 1. KEEP THE CARD OPEN KEEP THE CARD OPEN YOU WILL LOCK YOURSELF OUT OF THE HOUSE OF CREDIT IF YOU CLOSE THE CARD
2. Go back to the collections agency, explain your plight, to two or three people if need be, and hopefully someone will take mercy on you and take it off
3. Get your credit scores (not now, no point, they're going to be awful) in about 4-6 months. Have bank accounts in your name. Get added as an authorized user on an account of someone with good credit (say, your mom, you don't even need the card, cut it up, just be on it) Then cautiously apply for more credit, like a store card; someone with low credit standards (you'll need to be inquiring in advance on this one as to what minimum score they accept.
If 2. fails, try filing a dispute directly with the three agencies, many companies are lazy and will not contest the dispute and if they fail to within 60 days, it will come off.
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Also, don't ever agree to pay anything for a credit report. All the companies will offer you little unnecessary extras to try and mill you for a few bucks. Don't do this.
You don't need to pay if it's just the report (no score), so you can check your history. They're required by law to provide it once per year at your request, as Jobastion mentioned. Be sure that you only get it once from each company. There was a problem a few years ago with a client (when I was a loan processor, many moons ago) for whom the bank pulled his report repeatedly because whoever was doing it thought it wasn't going through properly and it screwed up his credit really badly. This is because they keep track of when and how many times the report is being pulled because it should usually only be pulled if you are try to get credit or a loan, which looks bad to happen repeatedly in a short time.
For another card, what card do you have now, and who is it with? Most banks offer credit card also, so if you have a bank account already and don't have your credit card through them, I would check there. If you're a Costco member, they offer American Express cards with an annual rebate based on how much you spend each year at certain venues.
In early 2007, my credit scores were low to mid 700's. I had an account with Sprint, that after several attempts to try to negotiate the balance down they sent it to collections. On FIRST contact with the collection company I told them I would pay off the entire balance as long as they did not report anything to the credit bureaus. I took down a name and extension number, as well as a payment confirmation number.
Fast forward to January of this year, I tried to purchase a home with my wife. Now, as I said above, I had paid off the account with the assurance it would not be reported. I foolishly believed that, and when I tried to apply for a home loan my mid score was a 560. The only negative account on my report? A collection account that showed PAID from my Sprint account.
Anything I could get approved for with that score was not worth it, so I ended up resigning a lease to stay in my apartment. I disputed the collection with each bureau individually, stating much as I did above (Collection Agency stated it would not report if I paid in full). It was removed from all of my accounts and my score instantaneously jumped 100 points.
Credit is definitely not something to take lightly. Volunteer to pay, demand they don't report it, document everything.
So, while it is true that there is a lot of automation in the verification process, once you've actually paid a collection agency, you can still get it removed (usually) without too much trouble. The key is to dispute something they didn't report correctly. If you dispute as not yours, the automated system will sort that out in no time. But if they're reporting something incorrectly that means a human will have to research it. The law is absolutely on your side on this matter, too. The FCRA and FDCPA govern how credit reporting agencies and collection agencies have to behave and report, including requiring accurate reporting. Since they're legally required to accurately report if an inaccuracy is discovered, they find it easier to just delete than go to the trouble of researching it.
You should also remember that the burden of proof is on the data provider, not you. It is never in your best interest to send any documents to a credit reporting company. They'll store that thing forever and if you ever have to dispute anything in the future, you can bet they'll use it against you. The creditors have to prove that they're reporting correctly, don't do their job for them.
Always do everything in writing, no exceptions. You want a paper trail to prove what you said, what the creditor said, and what (if any) resolution you reached. That way, on the off chance they continue to report incorrectly, you can take them to court if needed. That, and it is easier to be calm, cool, and collected when you're writing a letter instead of being yelled at on the phone to pay some money.
One other thing, there's a lot of good info in this thread (especially Feral's post), but there's also a lot of misinformation. The most often repeated is probably the part about debt to income being a factor in your credit score. That's simply not true. It does factor into loan decisions, but that's different from a credit score. A credit score is determined based upon information in your credit report. Since your income isn't stated anywhere on your credit report, it can't be a factor in that particular calculation.
the "no true scotch man" fallacy.
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They cannot legally report the activity to a credit agency until they've sent you a written notice and given you 30 days to respond.
the "no true scotch man" fallacy.
Awesome thank you.
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There's also some dude who used my phone number or something to buy a car and I have collections people call me sometimes (who never look to see who owns the line), and I argue with them, and they also give me the "or else" speech, like they're some kind of leg-breaker or some shit. I told them I was recording them and they told me to stop. I asked "or else?"
This isn't necessarily true. Some states offer that protection, but not all of them and it isn't part of the federal laws. It actually isn't uncommon for a collection agency to put something on your credit report and then not send you anything, letting them add on (almost always) bogus charges and interest.
While this is against their agreements with the credit reporting agencies, it is most certainly not against any law. Like you said, the law states they have to report accurate information, but that's only if they choose to report. There isn't anything in the law that says they even have to report, they only do that because it is leverage to get you to pay. So yeah, the credit report companies don't like it, but many collection agencies will be all too happy to delete if it means they get paid. Just make sure to get it in writing first.
you've decided to pay it off (which is quite nice of you), but make sure it's cleared off your report when you finish... in many cases you can just deluge the credit bureaus and collection agency with error correction requests, and get even accurate info removed
I double-checked this, and we're both a little wrong as it turns out.
The Fair Credit Reporting Act says that a collector must send written notice of the collection no later than 30 days after the information has been reported to credit agencies.
So, yeah, they can ding your credit score first, and then let you know afterwards. But they still have to let you know.
the "no true scotch man" fallacy.