does guido talk to the credit bureau
April 25, 2005 7:02 PM   Subscribe

When you're getting yourself out of debt, how can you be sure that your credit is actually improving?

In other words: How do you know that various entities who might hypothetically want to be repaid, like phone companies, collection agencies, and former landlords...will report your payments to the same credit bureaus that they reported your delinquencies to? Are there steps that can be taken to increase the chances that they will?
posted by bingo to Work & Money (18 answers total)
The core of your question seems to be, now that I've got a ding on my credit history, how can I make sure it actually goes away when I pay my bills? The answer to that, unfortunately, is that it's very, very difficult. In one instance, I was in collections for almost 2 years on a very small account (I never saw the bills, but that's another story), and when I finally realized it, I paid the account off completely. Even 3 years later it was still marked as "delinquent" by at least one of the big 3 credit agencies. So unfortunately it's nothing like automatic.

What I would recommend is that you get a letter from each collection agency stating that you've paid your bill (after you have, obviously), get a copy of your credit report from EACH agency (Experian, Trans Union, and Equifax) for a total cost of about $60, and send a copy of each letter to each agency. The reason you should order copies beforehand is so that you can put in a summary sheet with each package: "Regarding lines A, B, and C of my credit report #12345, the enclosed letters show that these accounts are now paid in full." Something like that.

Then, to actually improve your credit, stop applying for new cards and pay all of your bills on time. Those are the two main things.
posted by rkent at 7:16 PM on April 25, 2005

I'm not sure about the bill collectors and such, but I do know that keeping your credit cards accounts open (but stop using them) is a good way to maintain a good credit score. That is, when you pay off a card, don't cut it up and close the account. Leave the account open because it demonstrates you can manage it responsibly.

Also, the three credit reporting agencies, Equifax, Experian, and Trans-Union, have FAQs and other useful information on their sites that you will want to check out. Each company has a different mechanism for computing a score, but there are many similarities between them.

If your credit history is less than stellar, it seems to me you will just have to be patient while the negative marks work their way off the report.
posted by knave at 7:17 PM on April 25, 2005

Have you ever gotten copies of your credit reports? If not, order one from each of these companies: Equifax, Experian and Transunion. Depending on what state you live in, the reports may be free.

These reports will list your debts, and your payment status on each debt. If you see something inaccurate, you can dispute that in writing. I would get your credits reports, make some payments, then maybe six months later get another copy from each agency, and check the status of each debt.

On preview, what rkent said.
posted by Fat Guy at 7:18 PM on April 25, 2005

Your credit history shows, among other things, (a) the current status of your accounts (such as credit cards), (b) dates when you were behind, and by how much (for example, 60 days behind in payments, 04/2004), and (c) collections, writeoffs, bankruptcies, etc.

If you pay off old debts and are current on your credit cards and other debts, then the first [(a)] will change, but the second and third will NOT. They are history. Credit scores do take into account the age of problems - something three years old (say) isn't as important as something three months old, and being current in payments will certainly help your score.

The best that you can hope for with entities that don't regularly report to credit bureaus (like landlords and phone companies, as opposed to credit card companies) is that they will report that a problem account (with you) has been paid in full. [As noted above, you should verify this.] They won't, ever, report that you are paying, currently, because they don't do that for ANYONE. Presumably credit scores do assume that if you're not being reported as a problem, you're not (any longer), and are still receiving phone service and renting an apartment.

Eventually (seven years or so, I believe), credit reports "fall off" your credit history (and score) because they are so old. Until then, unfortunately, they can still hurt you. When you next need a loan (or a credit card), consider a (small-to-medium-sized) credit union - they often look at you as an individual rather than a set of numbers to be crunched to come up with a probability.
posted by WestCoaster at 7:58 PM on April 25, 2005

Also beware that paying an old debt can "reset the clock" with respect to it disappearing from the report entirely. e.g., if you have a 3 year old collection, normally it would disappear from your report in 4 more years, paid or not. But if you pay it, and it gets marked "paid in full", the date is reset and it's now 7 years until that entry disappears entirely. So, unfortunately, the system is designed so that you may be making things worse for yourself by trying to go back and settle something from the past.
posted by mcguirk at 8:25 PM on April 25, 2005

When I first checked my credit report a few years ago, I saw a credit card that didn't belong there. After six months of investigations and repeated phone calls, both the card company and the credit reporters agreed that I never opened the account.

My advice is if there is something on your record that you want fixed, fix it, and then hound the agencies to update your report. I doubt one or two fixes will change your score dramatically, but having an accurate credit report is always useful.
posted by SeizeTheDay at 8:50 PM on April 25, 2005

Oh, more on the accuracy thing: when I was browsing one of my credit reports, it said that I had an impeccable history on a Sears store card since 1972, reporting elsewhere on the page (correctly) that I was born in 1978. I don't know how anyone relies on these reports.
posted by rkent at 8:53 PM on April 25, 2005

Do utilities (electric and telephone) report to credit report companies?
posted by drezdn at 9:07 PM on April 25, 2005

Nolo Press has a great book called Money Troubles. It explains how to negotiate a fair repayment amount, and arrange for their guarantee that the account will be reported as "paid satisfied" upon receipt of the agreed-upon amount. The key is to negotiate before you pay; once they have a check, you've surrendered your only leverage.

It also has lots of good tips about exercising your rights, such as the simple 2-3 sentence letter that forces a collection agency to stop making all those obnoxious phone calls.

If the debt have already been paid, their Credit Repair book is a good reference on the legit methods available for getting the errors fixed and minimizing the damage of accurate negatives. Prepare for a long slow trek back to good credit.

Also beware that paying an old debt can "reset the clock" with respect to it disappearing from the report entirely.

The news can be even worse for old debts. After X number of years (varies by state), an old debt exceeds the statute of limitations. It's still on your credit report, but the creditor is no longer entitled (if you call their bluff by citing the SOL...) to get a court judgement to garnish wages or property. Essentially the debt becomes "uncollectable", UNLESS you open negotiations or make even a token payment in which case the clock gets reset and they're free to take you to court for the full amount plus legal fees. Ouch. So if the debt is more than 2 years old, always check on the applicable SOL before making contact or writing a check. Because potentially it's extra leverage for getting them to deliver a positive report in exchange for any reasonable settlement you can offer.

Eventually (seven years or so, I believe), credit reports "fall off" your credit history (and score) because they are so old.

For the most part, yes, but even the stuff that "falls off" can "fall back on" to the report under certain circumstances.
Q. How long can a CRA report negative information?
A. Seven years. There are certain exceptions:
* Bankruptcy information may be reported for 10 years.
* Information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
* Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
* Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
So for some people, even an ancient negative could theoretically affect their mortgage rate eligibility or employability indefinitely.

(IANAL, so do get expert verification...)
posted by nakedcodemonkey at 9:43 PM on April 25, 2005

Remember, thanks to the Fair Credit Reporting Act, you're entitled to a free yearly credit report from each of the big three credit reporting agencies. Those in the western and midwest states can already get their reports; the south and northeastern states must wait until June and September, respectively.
posted by zsazsa at 9:49 PM on April 25, 2005

Regarding getting your credit report:

Surprised no one has mentioned this yet --

New law states that the three major credit companies (Equifax, Experian and Transunion) must allow you to access your report for free once a year. It's government mandated. And above is the web site that lets you do look them up.

Experian is the one you want to get your FICO score from, which is $6.50 extra, but worth it. But the site said mine was inaccessible. So when I called so see what gives, the really helpful guy said that I would either have to wait and call during business hours, or that for $10, I can get the FICO score as well as use their FICO calculator tool, which ranks for you the most detrimental aspects of your credit report. Also, you can change factors (such as how much "rotating", aka credit card money, you owe) and see the estimated effect it will have on your FICO score.

That may be overkill for some, but I found it helpful, and at the time it was the only way I could get my FICO score. And the guy answered my questions really well.

What I learned, and I have heard this from others as well:

1) Apparently, credit card companies *can* see if you're using a credit card (even though I couldn't see that on my reports). He said using a card, even something small such as for a gas payment, then preferably paying it off right away to save you money, will help your credit score more than not using the card, whether it carries a balance or not (it will go "dormant" without you making purchases).

2) The ideal percentage of your credit cards to be using is around 10-20% of your total credit limit.
posted by parma at 10:22 PM on April 25, 2005

zsazsa, you beat me to it.
posted by parma at 10:24 PM on April 25, 2005

If you have a credit card from Providian, you can also get your current FICO score for free online (though Though I'm also checking my credit reports and such, I've found charting how the number is rising very helpful (and motivational) as I attempt to fix my credit.
posted by occhiblu at 7:52 AM on April 26, 2005

I'm not sure about the bill collectors and such, but I do know that keeping your credit cards accounts open (but stop using them) is a good way to maintain a good credit score.

My coworker just bought a house. He had a number of old credit card accounts open, lying around unused for years. Closing 6 of them changed his loan from "not approved" to "approved."

However, I don't know whether having them open all those years improved his credit score. I'm inclined to doubt it.
posted by ikkyu2 at 8:58 AM on April 26, 2005

If you really want to keep a constant check on your credit score, perhaps this service from is what you'd like.

Seems pricey at $80 a year. Whether that's better than the $10 one time fee depends on how often you want to monitor it, obviously.
posted by de void at 9:54 AM on April 26, 2005

For a small fee, EverydayWealth will run you a monthly credit report that doesn't drag down your credit rating (normally, repeated requests on your credit report is taken as a sign that you're shopping around for multiple loans, and it hurts your score). They also provide planning tools that may be useful for you.
posted by gd779 at 10:37 AM on April 26, 2005

If you request a copy of your own report, it doesn't change your score. Just FYI.
posted by occhiblu at 11:00 AM on April 26, 2005

This subject is way too complicated to get enough information about here. Occhiblu is right that pulling your own report doesn't change your score (it's a soft pull not a hard pull), except to the extent that s/he is wrong (based on the phenomenon of 'bumpage'). Those free reports are a great deal, except to the extent that they are not (if you challege based on information on them the reporting bureau has 45 days to respond rather than 30 if you mail and pay. Thank your congresscritter)

Etc etc. If you really want to see the nitty gritty underbelly of credit you should go over to Art of Credit and start reading the discussion forums. The Essentials section has information on maximizing your scores and specific assitance can be had on the General forum.

You can do just a little or it can turn into a full obsession. If you're working on getting a mortgage is can be a justified one - those FICO digits work out to be real money in interest rates.
posted by phearlez at 2:33 PM on April 26, 2005

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