How do you improve credit?

[alli_esq]

Hi, smarties!!

I just ran my FH and my credit reports yesterday...no surprises, since I knew I had excellent credit and FH has terrible credit...

Now, before you flame me for marrying a guy with awful credit--I will say that my fiance had absolutely NO help from his family for college or after college, and was kicked out of his parents'' house when he tried to move there after college to save some money (long story there, and quite a lot of the reason I have some ill will toward my future in-laws...but that''s for another day)...

He freelanced, doing everything he could, but his loan payments were too high and especially after 9/11 (he graduated in 1999), there were very few resources available for him in the job market.

In any case, his credit score is really low (he can''t even get a credit card), and I''d love for him to be able to try to build it back up as much as possible before we think about buying a house. He has paid off all his old credit cards and all he has left debt-wise are his student loans, which he pays every month on time.

Any suggestions? Thanks in advance!!

 

[jet2ks]

Keep up the on time payments. Try to get one credit card when possible (as long as the terms are decent) and use it on a limited basis ($100 or so) each month, paying it off in full every month. A lot of banks offer guaranteed cards for people with poor credit--they issue a credit line equal to the amount deposited in an account. (i.e. you open an account with $500 and they issue a card with a $500 limit.)

You probably already know this, but keep your credit stuff separate until his score comes up. That way if you need to take out a loan for something like a car, you can get a better rate by applying in your name only.

 

[musey]

Yep, it will take quite awhile. He needs to just keep chugging like he already is!

Here are some tips from MyFico: Improving your FICO® credit score

Good for him for getting his credit card debt paid down!

That is a huge hurdle for many people.

 

[MichelleCarmen]

Your FH can get a credit card. He can get a secured Visa or Mastercard. Before doing so, be sure he researches them. Most have super high fees to begin with so, say he gets a card with a $300 limit, the card will have fees making the card already maxed out. He'll need a bit of cash set aside to build credit with one of those cards.

Also, he can go through and write debt validation letters and get all his bad debt removed from his credit report. There is a 7 year statute of limitations.

When I was in my early 20s, I had messed up - began getting CCs at 18 and over charged, but eventually repaired my credit. I cannot recall my FICO at that time, but after writing all the debt validation letters and all that, my score was up to 730 (that was still when I was in my 20s). I never did the secured credit cards because I still had a visa that I paid on and never was late on that. I also had the Macy's card I posted about in the other post. I've had that since 1991 (when I turned 18!).

 

[luvthemstrawberries]

Date: 5/13/2009 1:26:04 PM
Author: jet2ks
Keep up the on time payments. Try to get one credit card when possible (as long as the terms are decent) and use it on a limited basis ($100 or so) each month, paying it off in full every month. A lot of banks offer guaranteed cards for people with poor credit--they issue a credit line equal to the amount deposited in an account.

You probably already know this, but keep your credit stuff separate until his score comes up. That way if you need to take out a loan for something like a car, you can get a better rate by applying in your name only.

Good advice here.

Try creditcards.com and look under the Bad Credit section. Get one with lowest % possible and no annual fee. Then use it sparingly - it's good to charge something, like $50, and pay it off in 2 months - to show you can make payments.

Also, enrolling in something like Equifax's Score Watch is good - you can monitor the score, and it sends you alerts whenever something changes. $9.95 a month - I like it a lot. It's especially encouraging when the score actually goes up!!

An alternative, if he hasn't closed his old credit cards, is just to use one of them to do this. It could possibly lower his score even more to have another credit check run to get another card. So if he has one with an ok %, just use it for the constant payments. And he doesn't always have to have a balance either. Charge $100 one month, and pay it off half in that month and half in the next. Then wait a month or two and do it again.

ETA - dang you people type fast!

 

[Italiahaircolor]

Continue on with the payments...even paying more if he can above the minimum payment will show intent.

Also, if you add him to any of your bills which are paid on time will help boost his credit. Even simple things like the phone or cable will help.

A word of advice, becareful when getting involved in the credit card thing as a means to boost a credit score...some places don''t report to your credit report...so if this is something he''s very interested, make sure you research it carefully.

 

[alli_esq]

Thank you all for the advice!!! I know really nothing about this...I''ve always paid my bills on time (but then, I''ve always been able to because my parents always helped me in rough times), so I really never knew what to do. Thank you all for the ideas!!

So a few questions:
1. Is it really better to pay off the credit card each month, or is it better to leave a small balance (of course paying at least the minimum payment)? And does the size of the balance matter?

2. MC, what do you mean by debt validation letters? I read a little bit about it, but how does that help exactly? He knows (and has always known) where he has to pay his debts...sorry, I''m a little slow (or maybe a lot--I''m super tired today!)

3. Luvthemstrawberries--I will definitely look into that listing and the Equifax score watch! Thank you!!

4. Italia--so if I put more than one person on the cable bill it would help him? I didn''t know that!! Thank you so much!

 

[luvthemstrawberries]

I got a credit card for a vacation we went on - only in my name. Then added my FI as a second card holder. It initially put a dent in his credit when they ran it, but it's helping his score a little bit as payments are made and they report to the credit bureaus. That may not be something you want to do yet though - something to think about though.

I thought utilities don't count towards your credit. My phone, cable, power, and water - none of them are on my credit report.

Alli - you also get 2 free credit reports when you do that Score Watch. I realize you just did one, so you could use those 2 down the road. I used my first one because I'd never gotten a full report of mine before. But after that, it's easy to keep up with what's on your report through that Score Watch, because it'll tell you when a balance is reported as increased or decreased, the amounts, and will alert you when your score changes above/below your "goal." You can set a score goal, or what I do is set my "goal" to the current score, then it'll tell you whenever there's a change at all. (Also, the Score Watch is an automatic withdrawal - I just linked it to my bank account and it comes out every month.)

The creditcards.com is very helpful - it'll give you a table to compare the features of different cards, and you can apply to many of them directly through that website.

RE #1: It helps some to pay in multiple payments instead of just paying it off in full every single time. Not that that's bad, but it helps to show you can make steady payments if you leave a little balance and pay it off the next month. It's just a big ol' GAME of theirs that you have to play. And the balance does make a difference. They use the ratio of your balance to the total limit. So if the card is almost maxed out, it'll negatively affect the credit score. A good rule of thumb is to not exceed 50% of the limit on the card. It's ok to, but pay it down quickly. So if he gets a card with a $300 limit, try not to exceed $150 on it.

 

[D&T]

Hi Alli
here is a site that offers you free report yearly https://www.annualcreditreport.com, true there are others, but this has no strings attach, you get all three credit bureaus. Check your personal information, any variations dispute, any incorrect address dispute, you can do this automatically over the phone the customer service is awesome if you need to chat with any of the credit bureaus, Don''t open too many inquiries in one year (any that you do drops off after two years) keep some revolving credit, usually 30/70 is key but don''t go over the 30% debt to limit ratio, paying off your card monthly doesn''t really help boost your credit rating - i know sounds weird but it really does help to carry a small balance as to show your ability to maintain credit and resist your urge to over charge that you can''t pay off, Again do this yearly and open up disputes on personal information variations. Hope this somewhat helps. I know it has helped us.

 

[MichelleCarmen]

Date: 5/13/2009 1:53:24 PM
Author: alli_esq


2. MC, what do you mean by debt validation letters? I read a little bit about it, but how does that help exactly? He knows (and has always known) where he has to pay his debts...sorry, I'm a little slow (or maybe a lot--I'm super tired today!)

oops, I think I missed part. So he didn't default on any credit cards or loans? Everything is paid off? Debt Validation Letters are for those who default on a loan and then the debt gets sold to a collection agency. When the first agency cannot collect, the debt gets passed down to another agency and so-on and so-on. Eventually, whoever the current "junk debt" collection agency is cannot even prove that the debtor owes the money or how much it should be for. That is when a debt validation letter is written to the agency saying basically, "unless you prove the money is owed, you have to remove any negative stuff from all three credit agencies."

I don't know *anything* about student loans and highly doubt that the validation letters would be applicable to such outstanding loans.

 

[DivaDiamond007]

Date: 5/13/2009 2:28:15 PM
Author: D&T
Hi Alli
here is a site that offers you free report yearly https://www.annualcreditreport.com, true there are others, but this has no strings attach, you get all three credit bureaus. Check your personal information, any variations dispute, any incorrect address dispute, you can do this automatically over the phone the customer service is awesome if you need to chat with any of the credit bureaus, Don''t open too many inquiries in one year (any that you do drops off after two years) keep some revolving credit, usually 30/70 is key but don''t go over the 30% debt to limit ratio, paying off your card monthly doesn''t really help boost your credit rating - i know sounds weird but it really does help to carry a small balance as to show your ability to maintain credit and resist your urge to over charge that you can''t pay off, Again do this yearly and open up disputes on personal information variations. Hope this somewhat helps. I know it has helped us.

+1

You''ll want to dispute any inaccuracies via Certified U.S. Mail, return receipt requested - do NOT do it over the phone because you need a paper trail. Check out creditboards.com for more info on how to do this successfully. Getting personal information corrected is like pulling teeth.

Also, the 30/70 split is key. It shows that you can make payments while still carrying a small balance and that should raise your score.

A good credit card to start rebuilding with is from Orchard Bank (issued by HSBC). There is usually an annual fee and they''ll probably start him with a $200.00 limit but they''ll take just about anybody.

Most utility companies do not report to the CRA''s and cell phone companies generally only report bad credit.

Finally, the best way to build (or rebuild) your credit is to pay on time, every time. Even if it''s the minimum amount due.

 

[mirre]

I haven''t gotten a chance to read all of the replies yet. I am currently trying to bring my credit score up also. Mine''s not bad just not as good as I''d like (stupid moves on my part, too many inquiries).

I enrolled in Citi Identity Monitor (citiidentitymonitor.com) it''s $12.95 a month and you get an updated credit report and score each month from all three credit bureaus. They monitor your credit 24/7 and if any activity comes up they let you know about it, through email (I think you can even have them call or text you if you choose those options but I haven''t so I don''t know for sure). Or you can choose to just get one report from Experian which is $6.95 a month. It comes in very handy! At first I hated that my Sears MasterCard through Citi talked me into it because I was in college and BROKE! But now that I''m out I am glad that I have it.

Also I know many have said you may not want to get him a credit card and I fully understand that but a friend of mine is going through this very thing with her husband. She has good credit her DH doesn''t. They got him a Citi card (not sure exactly what it was) but it has a small limit on it and they are actually helping him with repairing his credit.

(I am trying to refinance my car to get a lower interest rate, mine it through the roof not from bad credit but because they saw me as a credit "risk" since I didn''t have any major purchases on my credit, and the inquiries are hurting mine. Since I have the identity monitor and get an updated credit report and score every month before I go to another bank and refinance I''m going to ask them if I can bring my most recent report for them to look at so they aren''t pulling and harming my credit anymore. I know friends who have done this and it could be an option for you and your SO as well?)

The identity monitor also has a senerio feature that lets you put in different things you can do and will show you how it will affect your credit: a month, two months, 6 months, a year, etc. down the road. Gives tips on repairing. It''s informative about your credit and what things mean. One of the things it says is the best at helping your credit is just as others have said paying bills on time every month. One of the things that hurts is several credit inquiries because it looks as though you are desparate to get credit. (If you enroll online you''ll have to sign up for the 12.95 but call them and switch it if you want to do the 6.95 for one)

Best of luck to you and your SO!