Julie M: How can I build my credit while paying off my debts?
I am currently paying off my debts but I don’t have any open loans or credit cards or anything on my credit report. What is the best way to rebuild my credit as I’m repairing it. I have a horrible credit score so I don’t know what to do.
Answers and Views:
Answer by bdancer222
If the debts you are paying off are defaulted accounts on your credit report, paying them won’t help your score at all. The damage is done and will remain for the balance of the 7 year reporting period, whether paid, settled, or unpaid. You may as well settle them for as little as you can.
Depending on how old the defaulted debt, you might be able to settle for 25% to 50%. Get any settlement agreement in writing and don’t give collectors direct access to your bank account.
You will still have to rebuild your credit. Get a credit card, even if you have to get a secured card. Use the card for small purchases and pay in full every month. This will give you good payment history. You will need at least 24 months of consistent, on time payment history to see any improvement in your score.
Answer by inforseeker2008
take out secure loans that you can pay back one at a time work with those past accounts that will work with you and forget for now those past accounts that wont work with you. dont miss anymore payment and in time all your bad marks on your credit report will come off. in 1999 i almost filed for bankruptcy, but i changed my mind and 2001 my credit was still bad but today 11 years later my avg credit score is 770 and i have nothing left on my report from my past. good luck
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Answer by Bills.comHere are four steps to improve a credit rating:
1. Pay off all debts and keep revolving lines below 25% utilization. Do not “max out” any loans or cards.
2. Diversify you credit portfolio. If, for example, you have only a Visa, MasterCard, or Discover card, get a department store credit card or card from a gasoline retailer. Make your payments every month. Leave a small balance every once in a while to show that you are able to handle debt on more than one account.
3. Keep your oldest credit account active. Remember point number three “Length of positive credit history” discussed above.
4. Pull your credit report and contest any inaccurate information so that it can be corrected by the credit bureaus. Go to the Bills.com debt self-help center for sample dispute letters. The credit bureaus must follow the rules set forth by Congress in the Fair Credit Reporting Act (FCRA).
If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the wealth of material offered by the Bills.com credit information page.
Below I will explain the factors that impact your credit score.
1. Payment history
Payment history counts for approximately 35% of a score. It is the most heavily weighted factor used in calculating your credit score. Consistently paying your bills on time has a positive influence on your score, while late or missed payments will hurt you in this area.
If you have delinquent payments, the older the delinquency the less the negative impact on your score will be. Collection accounts and bankruptcy filings are also taken into consideration when analyzing your payment history.
2. Total debt and total available credit
Total debt and total available credit counts for about 30%. This section looks at how much debt you have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred.
If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently.
Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt-to-credit limit ratio low.
3. Length of positive credit history
Length of positive credit history counts for about 15%. The longer you maintain accounts in good standing, the better your score will be. This shows that you are able to make a long-term commitment to a creditor and are consistently responsible about making your payments.
4. Mix of types of credit
Mix of types of credit counts for approximately 10%. Having several different types of credit, such a credit cards, consumer loans, and secured debt, will have a positive influence on your credit score. Having too much of one type of credit can have a negative impact.
5. New credit applications
The number of new credit applications you have recently completed accounts for about 10% of your score. Applying for too much new credit in a short time period makes indicates that you could be credit risk, as you may be desperately trying to keep your head above water. The models make an exception for people who are shopping around for a loan, so if you are simply applying to see who can give you the best rate on a new loan, you need not worry too much about damaging your credit score.
While you cannot calculate your own credit score accurately, you can review your credit report for on the five factors named above to get an idea of whether the accounts listed on your credit report are hurting or helping your credit score. You can then take action to improve any potential problems, such as paying down your balances or paying off collection items.
I hope this information helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Paying the debts won’t remove them from your credit history if they were already marked as late. They will stay listed on your history until their Statute of Limitations is up… usually seven years.
During that time, they will negatively affect your credit score.
The good news is You can repair your own credit!
Every year you are entitled to one free copy of your credit report from each of the major bureaus. You should order your free report from https://www.annualcreditreport.com and check for inaccuracies.
Dispute the inaccuracies directly with the credit bureau, and according to the Fair Credit Reporting Act they have to verify the item. If the reporting company doesn’t respond in 30 days, or sufficiently prove the item should be there, it will be removed, which should raise your credit score.
If the item comes back verified, you’ll have a chance to contact the reporting party and try to negotiate a settlement or payment.
For items you did not dispute, you can be proactive and contact the debtor listed on your credit report. Look into requesting a “Pay For Delete” where you’ll settle for a percentage, or pay the whole debt and they’ll remove the listing from your credit report.
“Pay For Delete” is very important, because if you just pay the debt the creditor can continue to list it as a delinquent account, which will keep hurting your score. This “Pay For Delete” requires a new agreement between you and the lender, but many are willing to consider it in exchange for payments.
Lastly, look into ways to build “positive” credit to keep your credit history fresh and growing.
And remember, everything a credit repair agency or lawyer can do to repair your credit, you can do yourself. Find a good credit repair guide, and get to work!
I used the one at and it really worked for me. It came with sample letters I could use to make arrangements and file disputes.
The best part is, it also taught me how credit scores work, and what I can do to raise my score. It really saved my credit.
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