What should I pay off of my credit first? HELP!!!?
After being such an irresponsible teenager and young adult, at the age of 32 I am not thinking about buying a house very soon and have started the process of cleaning my credit. I am thinking about buying a house in Indianapolis sometime in August or September of this year. Currently my FICO score is 530. I’m having trouble understanding why my score is so low when I only have in my opinion a few things on there. Currently I have 3 very deliquent credit cards on there, 3 old cell phone companies, 2 old cable companies, 1 line of credit for a dental proceedure for k, a k loan, car not, 2 student loans, and a joint shared credit card I have w/my mom. Currently what’s in good standing is my k loan, my car note, my joint credit card w/mom and student loan. So far, I have paid off 1 deliquent credit card, which leaves 2 more still on there and 1 cell phone company. What do you suggest I pay first? Should I do the credit card debt because it is very deliquent and higher or should I pay off the small stuff like the cell phones/cable companies? Do you think if I seriously tackle this credit issue it can be paid off by August and I can have a 675+ score? When buying a house are finance companies looking at the stuff like cell phone charges or more on the credit card and loans I have out. Please advise!!!
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5 comments
Bill on January 28, 2010 at 6:19 pm
I think I can answer your question better than anyone. I’m going through the same thing you are, only I”ve fixed my credit problems an am already pre-approved. FHA used to lend to people with a score of 580 and that was the cutoff point for many years. They just changed it to 600. So that’s where you need to be fast. Don’t worry about paying anything off that is in good standing. You need to call the companies that are either delinquent or in collections and plead with them. Find an excuse why you were late and tell them you’ll pay it off now if they’ll report to the credit bureaus that the account is "payed in full" or "payed as agreed" You need to get all the negative stuff off your report that you can so the next step is to get your report from all 3 companies. Not your online report, and DO NOT go to freecreditreport.com, it’s a scam. You’ll be charged for the triple advantage crap even if you cancel. Write the credit bureaus and ask for a printed copy. It’s more complete and current. Find anything that can be disputed and write them a letter telling them that the information is incorrect and needs to be removed. They have to complete an investigation within 30 days and will probably contact the creditor, tell you the information is correct and close the investigation. Simply write them back and tell them the same thing, possibly change it a little. If it’s a small matter, they will eventually get tired of you and remove it. It costs them money to do the investigation. Send everything certified mail and make sure that when they send you their reply, you revise your letters and send them right back. Do a google search to find the credit bureaus actual addresses and search for letter templates. You want to be concise and complete. Photocopy your ID too. In the meantime, pay all your revolving debt down below 30%. I improved my score by 30 points in a couple months, and it keeps going up. It takes some time, but it’s the only way instead of waiting for the credit fairy.
src50 on January 28, 2010 at 6:19 pm
You call that list "a few thing"? You’re lucky your score isn’t in the 400s. You will not be getting a mortgage loan this year.
Reena on January 28, 2010 at 6:19 pm
Paying off the delinquent accounts will help…. a little.
The negative entries will remain on your credit until they fall off.
7 years after first entry… They don’t get much better just because you finally decided to pay them off. If they are very old… at least having the remark "paid in full" will show a prospective lender that you have cleaned up your act.
To improve your FICO score work on the accounts that are in good standing. Especially the Credit Card Accounts. Each credit card account must not have been charged up past 30% of the cards credit limit. That means pay them off, keep them paid off and only make small charges that you pay in full every month. That will increase your score.
9 "bad" accounts and only 4 accounts in good standing…
What do you think a prospective lender will think about this?
You can’t "fix" a credit score over night or within a couple of months.
Just as it took you years to amass this "bad" info it will take years of timely payments and responsible use of credit to proof that you have changed your ways.
Pay off the credit card accounts with the high outstanding balances first then round off with the small cell phone companies, etc.
Tackle your dentist loan and pay off the car if you can. (At least make larger payments… it will reduce the principal and you will own the car earlier).
DAS on January 28, 2010 at 6:19 pm
Okay here goes, credit is credit, each account is important, some more important than others, but if debt is negative, it’s negative. Once you have an account in negative standing it stays there for 7 years from the date of last activity until it either falls off your report after the 7 years or it’s deleted off. So even if you pay these accounts, it doesn’t mean that it will affect your credit history positively, because the damage is already done. You need some major intervention now, and you should find someone that can help you with understanding this process. Also you said in your opinion, your opinion says/thinks that you only have a small minimal problem, when in fact you have listed more than 3 delinquent accounts. And even if you only had three, if they are all in the negatives and delinquent, then this is the reason for the low score. But have no fear, you can tackle this, but it won’t be easy, nor fast. So, you might want to wait on trying to purchase a home. Wait until you understand the value of money, credit, money management, budgeting etc. Wait until you have a good down payment, and wait until your scores are higher, so that you can get a great interest rate etc.. Good luck !!
Marissa P on January 28, 2010 at 6:19 pm
First of all, finance instutions look at your whole credit report.
I’m sorry to tell you but with a credit score of 530 it is going to be hard to get it back up but I would recommend paying off the deliquent first. If you only have a few things on there and they are deliquent that is bad. It shows that you can’t manage your money. Every month you are deliquent is what makes your credit score go lower. The faster you can get current on ALL your bills the score will go up but it will take time. For every month you are deliquent your score will still continue to stay low and will show on your credit report. Your credit report also shows if you are current on your bills. The finance companies look at your fixed payments that you have each month and compare it to your income. If your fixed expenses are over that certain percentage than you will be declined. I would recommend getting your old credit taken care of before getting new credit (house). It only gets worse in a house because there are alot of expenses that go along with that and it sounds like you are having a hard time already. If you run too many credit reports in a certain time your credit report score goes down a little bit. You have to be able to show on your credit report that you are changing your spending habits and learning how to manage your money properly otherwise nobody will give you a home loan. I know with rates low I would like to buy a home also but sometimes a person just has to wait. Get your debt paid down first. I hope I helped answer your question.