Credit Score Question

December 12, 2004 11:35 AM

CreditFilter: Two years ago, not really understanding the importance of good credit behavior, I let a department store card slide for 180 days, twice (I KNOW!). This impacted my credit history greatly. I had previously had 4 years of good payment on two credit cards. Over the past year, to help recover and instill good habits, I pay my credit cards in full every month (read: no personal debt) and added a paid off car loan to my reports (15K). My CC limits have slowly increased but my score has remained somewhat the same (10 pt increase).

What can I do to get out of this rut? Some collegues I know have a sizable CC debt (around 15-20K) with less income than me but have great scores and could buy a house tommorrow with no problems. What am I missing and no, credit-fixing agencies are NOT an option.
posted by anonymous to work & money (11 comments total)

https://www.annualcreditreport.com/cra/index.jsp is probably as good a place to start as any if you are American.
posted by billsaysthis at 11:51 AM on December 12, 2004

I was fooling with one of the credit sites that show how certain things effect your credit scores. From this I ascertained that nothing can be really done about credit scores in less than 10 years of good behavior.
posted by geoff. at 12:00 PM on December 12, 2004

When I had a problem, I remember people telling me that paying off your credit card in full each month is not what they are looking for. I was told to keep some debt but always pay at least the minimum balance. Some idiotic thing about being able to handle debt. I rarely know what I am talking about financially and shouldn't even be posting in this thread but maybe check out that aspect of things.
posted by CunningLinguist at 1:09 PM on December 12, 2004

nothing can be really done about credit scores in less than 10 years of good behavior

If it was only some really small but really late payments, I'd expect that those lines on the report would age off a bit quicker than 10 years. If they were sent to an outside agency for collection, if there was a court judgment or bad checks involved, they'll stick around.

If they were never sent out to collection, if they never went to court, if you never wrote a bad check, if they weren't included in a bankruptcy...in other words, if the only bad thing is that you were really late...you could take a chance on contacting the department stores directly and asking them to cut you some slack and not report it anymore. The chances of this succeeding are not good--you'd have to be able to identify a real decision-maker within the corporate hierarchy at each department store, and you might need a convincing sob story (medical excuses, if real, are the best bet). The general tone is "please be nice to me, I've turned my life around, I'll never let it happen again, etc. etc.".

This is somewhat more likely to work the longer ago the slowness was. For example, if the department store normally reports a two-year history, and the slowness was resolved six months ago, they'd have to stop reporting on you completely in order to accomplish what you want, and they may be prevented from doing that. They're not going to lie on your behalf by reporting you as a prompt-paying customer during the time you were slow. However, if they normally report a two-year history, and the slowness was resolved three years ago, they could just report your account as inactive over the last two years--which is, technically, true.

The worst they can do to you is say "no", and then you're back where you started. The cost to you is in stamps, phone calls, and the time you spent drafting communications and doing research.

You could also try disputing the slow lines on your credit report at the credit bureaus. Note that in this situation you would be essentially telling a lie, so in the almost inevitable event that each department store confirms that you were in fact late, you'll have established yourself as an annoyance in their eyes, and chances of you successfully asking them for mercy as above will evaporate. Not recommended.

(You may see advice in various places that you should dispute correct reporting of slowness--the theory being that the reporting company will be sloppy or make a mistake or "be afraid of you suing them" and stop reporting you as slow. I don't buy it.)
posted by gimonca at 2:13 PM on December 12, 2004

With all due respect, carrying credit card balances isn't going to help your credit score, and it could be quite costly. (As discusssed in another thread, average balance information isn't available to credit scoring agencies or credit-granting companies.) What high balances might do (positively) is to encourage a credit card company to raise your credit limit. But if you want that outcome, you'd be better off accepting one of the low interest rate offers (e.g., 3% interest for 12 months, or whatever) - write a check (and pay the balance fee - see the fine print) and then stick the money in the bank until the interest rate on the card is about to increase, and avoid other traps (see the prior-cited threads).

In general, the best way to get improve your credit, up to a certain point, is to have more credit (and to pay what is due on time). So getting the $15K car loan on you credit history was good (but better if the lender reports it directly - so don't use this lender again if you can help it). You should definitely not pay all cash for your next car (but probably you'd be best off borrow from a bank or credit union, not using the car dealer for financing).

Consider getting a couple more credit cards with no annual fees, if you can, and once a year or so, run up the balance on each to perhaps 80% of the maximum (so this shows on your credit report as a high balance), then pay it off immediately (so you don't pay interest).

Also, my experience is that credit unions (particularly the smaller ones) will give you a more personalized look than large banks. So when you really want to borrow money, look around, and be truthful.

Quite frankly, while what you did was a bit irrational (and lenders don't like irrational behavior - they worry it could happen again), it sounds like you have a lot of other positive things to point to. You could probably get a home loan (if that's what you want) with a down payment of 20%, provided you had a good job history (e.g., with the same employer for at least 2 or 3 years), though you'd pay a bit more for a mortgage rate. (Even that isn't final - you cna always refinance in a few years, when your credit history is even better, and lower the rate, assuming interest rates don't soar; and of course you shouldn't take out a mortgage that you can't prepay without penalty.)
posted by WestCoaster at 2:21 PM on December 12, 2004

Everything other than a bankruptcy (which lasts 10 years) is only supposed to stay on your credit report for 7 years. So you only have 5 years left, which may seem like a long time, but those years are going to pass one way or another, probably quicker than you think. Just make sure you make the best decisions you can during that time. You can probably buy a house anyway--you'll just get a bad interest rate. So you just need to decide whether it makes sense to pay a few hundred bucks a month more on a mortgage (and then refinance it), or just to keep renting for that period of time.
posted by mcguirk at 2:33 PM on December 12, 2004

I disagree with gimonca - I have seen disputing late payments work magic in this area. It's not due to sloppiness or a fear of being sued - it is motivated by profit (explained below).

Now as gimonca said, this definitely goes into the ethical gray area (you're basically lying to your creditor), so take from it what you will. But this has worked for several friends, and with several different creditors. I'd only recommend it as a last resort, if a "young and stupid" mistake on your credit is preventing you from getting a mortgage or something.

Step one: pay off and cancel the card immediately. Hopefully you did this long ago, that will make step two more likely to work.

Step two: call the creditor and dispute the late payments.

This can work because the creditor wants to make money from you, not have you cost them money. If you're no longer a customer, they have less of a vested interest in ensuring your credit report is 100% accurate. Because a dispute involves account research, that costs them time and money. If your account has been cancelled for a long time already, that makes the research even more expensive, because they probably have your account archived somewhere. Many times they'll just drop the late payments from your record - especially if it's only two, they're small, and this is the first dispute you've filed.

Like I said - not recommending except as a last resort, but I have seen it work. I'd be interested to hear some insight on this from someone who works at a credit-granting company though.
posted by chundo at 2:48 PM on December 12, 2004

What am I missing and no, credit-fixing agencies are NOT an option.

I've actually heard that visiting a credit counselor can reflect well on you for creditors.

Of course, I also think it won't matter -- the reason you're not getting a higher limits isn't because the credit agencies think you're a bad risk, the reason is because, as you say, you pay all your bills on time.

This isn't tin-foil hat conspiracy, by the way. They have a term for people who only pay their minimum monthly balances and keep owing the card issuers money: they're called revolvers. You're not a revolver, you're what they call a freeloader. They don't make any money off of you. You're asking them for more money without demonstrating that you're willing to overspend and thus get "in the hole".

You are not their target client. Do not be surprised, in fact, if the card company looks at your one or two late payments and justifies it as an excuse to raise your interest rates. You do know they have the right to do this, right? In fact, if you miss any payments, even ones not associated with the agency in question, they can raise your rates. Read the fine print if you're up for some horror.

If you really want to raise your limits, call up the credit company and tell them that you want a higher limit, or you will be cancelling your credit cards. That's it. A or B, their choice. There are so many credit card issuers out there these days that they'll likely balk.
posted by Civil_Disobedient at 2:58 PM on December 12, 2004

You could probably get a home loan (if that's what you want) with a down payment of 20%

That's not saying much; an unemployed gambler with a crack habit could get a home loan with a down payment that big.
posted by Mars Saxman at 4:43 PM on December 12, 2004

Do what chundo said. Dispute dispute dispute. The credit card company then has 30 days to validate. The one time your dispute falls through the cracks, that thing will fall off of your credit report. It takes time, and patience, and persistence. but it works.
posted by glenwood at 5:40 PM on December 12, 2004

You might find something like Everyday Wealth useful. You put in your information, and it will generate advice and a monthly plan to get your credit score up and pay off your debt. They'll also pull monthly credit reports for you, without having it impact your credit score. It's not free, but maybe it would be worth it for you, I don't know.
posted by gd779 at 8:16 PM on December 12, 2004