220 People Helped
Member Since: July 2013
Can you pay cash for the new car? Buy an inexpensive "beater" to drive until you're in a better place?"
Do you have to buy? With your score you should be approved for a rental. Perhaps renting is a good solution for the time being?
You need to follow up with the bank regarding the identity theft. You should not have been held liable for it. If you have proof that it wasn't you then you can contact the CRB and have it removed from your report. The credit hits should go away in a year or two.
Make sure you're paying your bills every month, at least the minimums. If you need quick cash, consider a second job, and selling things (yard sale, craigs list).
SD4480's response was:
It's hard to say, because every person's credit profile is different. A personal loan is a different kind of credit, so it will diversify your history. That's a good thing. It also will increase the total credit available, which will have a positive impact on your utilization rate. You will get dinged for the hard pull of your report while applying, though. Generally speaking, if you can get a good interest rate and you commit to paying off the loan and not putting anything back on the credit cards, then it might be a good idea for you.
It goes without saying, you should limit the use of your credit cards moving forward. Try to keep your utilization under 20% of the credit limit(s) available and make sure you pay all bills on time and for the agreed upon amount.
In the accounts in collections section the comment will be removed upon payment IF the creditor agrees to do it (you should get this in writing).
Any comment in the main negative section of your report will remain for 7 years unless the creditor elects to change it- for example, changing defaulted status to closed for payment less than balance owed. You could request that they remove the specific information, but they don't have to.
Find a way to pay down your credit cards. Your utilzation rate is based off of all revolving credit and all available credit, so it doesn't matter if you pay one or a little on all. What matters is that you decreased the amount of debt you carry. Personally, I'd start with the highest interest rate, but some people like the positive reinforcement you get from paying off small debts first.
Some general guidelines are:
-Consistently pay your bills as agreed upon every month. Make sure you're NEVER late. Change your billing dates if they currently hit at inconvenient times of the month.
-Pay down your revolving balances so you're at <20% overall (add ALL of your balances together and calculate 20%. This is your goal balance to carry. You can carry $0 balances on all cards but 1 with 20% or les on it. Or you can spread the 20% across all cards).
-Review your credit reports from all three bureaus (www.freecreditreport.com will give you one from each every year). Make sure there are no errors or inconsistencies and contact the bureaus individually to dispute errors.
-Do not apply for new credit cards or lines of credit (car loans, cell phones, mortgages, anything that requires an inquiry)
-Do not close any cards once the balance is $0, or if you do close cards, leave the one with the highest limit and the oldest one
-Review your accounts in collections section, if they're newer (not close to 7 years old), can you pay the debt? If so, contact the creditor and ask for a debt verification letter. If the debt is yours, ask for a payment plan and ask to have them remove the derogatory mark after.
-Give it time. While you can do major damage to your score in a short amount of time, it takes a lot longer to fix it.
You can likely raise your score a few points in three months, but don't expect a major shift. Repairing credit takes time and a lot of effort, whereas destroying credit can happen overnight or with the click of a button. Start with reviewing your reports from all three bureaus. Dispute any errors or issues that you see. This is often an easy score win. Then make a budget and assess how much extra money you have each month to pay off your debt. Then list your debts (CC, liens, loans, etc) smallest to largest (include recent accounts in collections). Pay the minimum on everything and put anything extra you can towards the smallest debt. When that's paid off take that money and add it to the minimum of the second debt on your list. By the time you get to the end of your list you'll be throwing significant amounts toward your debts. This is a concept called debt "snowballing", and it really works.
Don't approach any "in collection" debts for repayment without first requesting a debt verification letter from the creditor. If they fail to provide this then you can dispute the derrogatory mark with the CRB. If they provide verification and it is, in fact yours, then call them about repayment. Ask them how much they'll take to settle today. Let them throw a number out to you. If you can't pay that amount today, tell them you can pay X (make it slightly lower than what you can actually pay). If they balk at that and say they can't do it, then say I can pay X today and pay the rest monthly. Make sure you get this agreement in writing and ask them for an agreement to take the delinquency off of your report as well. Only do this for relatively recent accounts. Accounts are removed after 7 years and contacting the creditors can reset the statute of limitations, so only approach the creditors you're ready to pay and start with the most recent delinquency, then work back into the older ones.
Make sure moving forward that you pay all of your bills on time every month. Pay the minimums if you can't pay the balance. For medical bills and such, send them $5. They wont send you to collections if they're getting some good faith effort from you.
The accounts will be changed from actively in collections to just negative not paid as agreed upon records. They wont all together go away until the SOL ends (likely 7 years). You might get a little lift from not having them listed as in collections and because the accounts are paid in full. The important thing moving forward is to make sure you make all payments on time and to carry only a small revolving balance on your credit cards. Less than 20% is what's recommended around these parts.
Good job taking care of all of this!
30% of your credit score comes from utilization. That is your debt to available credit ratio. If you close a card then you lose that $ amount from your available credit, thus your utilization rate increases.
A debt unpaid is a debt unpaid. Of course they can hold medical bills against you! However, most medical practices will not send your account into collections if they're recieving something every month. That means you could send them $5/month and you wouldn't go into collections. The good news is that with medical bills, in my experience, once you pay the past due amount the collections agency will remove it from your report. None of mine have every appeared anywhere but the "accounts in collections" section of my report. So you could see a quick improvement by fixing these problems. Just make sure you're paying at least the the minimums on all of your bills every month.
Insurance rates can fluctuate based on any number of things. Did you ever report the accident to your previous insurance? What's your driving record like? Did you contact your old insurance company? Usually people don't totally cancel their policies when they store cars, you can change your policy to reflect that the car isn't on the road.
How are your emergency and retirement savings? If the interest rates on your SLs are lower than 3-4%, then I'd personally continue to pay the minimum and put everything else towards your retirement. It's better to save a TON earlier so you have more years of compounding and you'll make more money in interest from saving it in a ROTH/401K than you'll save paying off your SL.
Call them back and ask them to confirm the status they're reporting every month. If they're reporting incorrectly they should fix it. If not then you need to dispute it with the credit reporting bureau. You can find directions for doing this on the websites for each bureau (Transunion, Equifax, Experian).