bad credit history...need improvement

[masumbuko]

Hello every one..
I have a very bad credit history due to old credit cards in collection and otehr negative credit history...as of now my score is 498. and i was looking for a way to increase it. last month i applyed for a secure credit card from bank of america with limit of 500$, and today i receive another credit one bank with the limit of 400$. I payed my first balance with bank of america in full. and the other card has 0 balance too.

Now how should i use those cards so that i can get a higher score?
and how soon will my credit score take to come back to an average score of (620) ?

And is there other stuff i could do to help?

Thank you all

[noppenbd]

You should charge a little to each card every month or two (no more than $20-30) and pay them off promptly before the due date. Do this for a few years and you will see some improvement.

Bankrate has a calculator that will allow you to project how much your score will improve as you establish a clean history on the new cards.

Credit Score Calculator | Improve FICO Score

[masumbuko]

Thankx...

you sayin to only charge put to $30 each month?
i hear that i could use it but just try to keep the balance low. 30% of limit.

also i have closed accounts and accounts in collection...will paying my bills for my new credit cards help even though i have accounts in collections and closed accounts?

[maat55]

Thankx...

you sayin to only charge put to $30 each month?
i hear that i could use it but just try to keep the balance low. 30% of limit.

also i have closed accounts and accounts in collection...will paying my bills for my new credit cards help even though i have accounts in collections and closed accounts?

If it were me, I would get on a tight budget, get a second job and make arrangements to pay the remaining debts as quickly as possible. After I would save as much money as possible. You can use your secured cards to about 50%, but pay in full each month.

Managing your money better will increase your score naturally. Do not look at credit as a must to survive. Having a high credit score and a lot of debt is not better than having a lower score with no debt and money in the bank.

[noppenbd]

For someone who has a history of problems with credit I would advise using the cards as little as possible so you do not get into trouble again. That is why I suggested only charging $20-30 every month or two as it will be just enough to keep the accounts active and you should have no trouble paying it in full. More than that is unnecessary if you are just looking to improve your score. You are not going to get any rewards from these type of cards so why would you want to charge more than that anyway?

[masumbuko]

that is really true....but i hear that even if i pay off the negative accounts, they will still showin up on my report....wouldnt it better to just take control of the 2 new cards i have now a make payments on time...then the old negative accounts wont have big impact after a while..


P.S: and i also have school loan that i open of my report.
they are not due until 6 months after i graduate.
do you t think those accounts also affect my credit score?

[noppenbd]

The accounts that were written off will stay on your report for 7 years I think. The only thing you can do is start paying routinely on your current cards and the school loan, on time, every month. Your score should improve. You should also follow the advice to get on a budget so you know where your money is going. There are other threads that address exactly how to do this.

[masumbuko]

but my school loan are not due now...they show as "payment differed" meaning i have to start paying after i graduate.

[maat55]

I wouldn't worry about the student loans until they come due. You should only use your new CC's for necessary reasons and PIF each month. Do not buy anything you do not need to survive. Work extra and apply all extra money to existing debts.

You also need to save up a small emergency fund for only emergencies. You have to want to change your financial life. Sacrificing and paying off debt, then saving money is the only way to have financial freedom.

[masumbuko]

Thanks alot guys...that really help...

[Cylenchar]

As said above, the derogatory credit will stay on your report for 7 years, even if you close the accounts. I would STRONGLY advise against cancelling/closing all of the accounts with negative credit if you can avoid it, (with some being in collections, this may not be an option).

This is for three reasons: 1. the lenghth of time that accounts have been open will affect your score greatly. You want to be able to have an accounts with at least a six year history on them. (I know this sounds arbitrary, but I pulled my own credit report last week, and was told my score got dinged because the longest one I have is 5 years) 2. As you move farther away from the derogatories, as long as you remain current, your credit score will improve, and 3. you want a higher available balance. Ex: if you have 4 cards with $500 limit, 2 maxed out, 2 empty, so available balance is $1000, or 50%, if you closed the two with no balance, your available balance would drop to $0, or 100% maxed out.

As to your student loans, these will help your credit report as long as you remain current on them, because they will be counted from the date you took them out, not the date you begin payment, so the deferment can buy you some time and good credit.

As to what available balance you want to maintain, your score gets dinged by a significant amount for every 25% of available credit you use. So for tour two cards, you will want to remain below $125 on the one, and $100 on the other. HOWEVER Unless you cannot avoid it, do not charge more than you can pay off in a month.

[masumbuko]

Thanks alot...that was very clear...

[jIM_Ohio]

First- if you are in debt, pay off the debt
second- a credit score shows a persons ability to manage debt. So charge a little each month and pay in full each month.
third- a credit score reflects how you value money and what your spending habits are. If you do not correct your habits, your score will go lower.

[skruggie]

check out creditboards.com - there is a wealth of information there.

[masumbuko]

My friend as a positive credit history for about 3 year. for 3 years i has been paying is credit card on time and he said if he put me as an authorizer user then that would reflect on my account and improve my score.

Is that true?