Can I just write a check and be done with it?
February 10, 2012 8:48 AM   Subscribe

What's the best way to improve my credit score now that I'm employed?

I have a lot of debt that falls into the following categories:
1) Small medical bills (probably no more than $50 each but they're numerous)
2) Student account balance from college
3) Bank overdraft fees/write offs
4) Student loans (don't think these count?)

The last time I was denied credit for something it said my income to debt ratio was too high.

I don't have any loans or credit cards out other than student loans. My cellphone is non-contract based so that isn't helping. I haven't qualified for any credit card I've applied for. I'd like to do a secured card but I want to pay off some debt first.

I'd like to just start paying it off, but I heard that can actually be detrimental? What should I pay off first? Is there anywhere I can go to get a list of the specific things I owe and the amount? I tried but for some reason it wants me to mail in an application.
posted by biochemist to Work & Money (6 answers total) 4 users marked this as a favorite
Your student loans are actually going to help quite a bit here, once you start making payments. They're credit accounts, they've been open for a while, and a history of on-time payments will absolutely show up.

The medical bills actually may or may not show up, as they're likely not actual credit accounts, i.e. the hospital didn't actually loan you money as such, they're just not being jerks about requiring you to pay all at once and right now. Your college account may not show up either, as again, it's a fee for service rather than a loan per se.

Once you get a job and start paying your bills, your credit score will come around soon enough.
posted by valkyryn at 8:54 AM on February 10, 2012

Assuming that you are able to pay bills on time and spend responsibly, purchase everything on the credit card you eventually get. $1000 HDTV at Best Buy? Credit card. $3.75 for a Slurpee and a hot dog at 7/11? Credit card. Then you pay off the card in full every single month. That's the kicker. You need to make sure you never spend more than you can pay off at the end. If you can handle it, make that the way you spend money from now on.

This is what my mom told me to do to build credit. I've been doing it and I've got good credit so I can only assume it is working. If I am wrong it would be great if someone could correct me.
posted by griphus at 9:00 AM on February 10, 2012

Go here and get a credit report (you don't have to get all three all at once). That will tell you whether you have any adverse items (the ones that hurt your score). If you do, take care of them first. Once they are paid it will take a while (a year or more) to come off your report, but the sooner the clock starts the sooner they come off.
posted by oddman at 9:13 AM on February 10, 2012 [2 favorites]

If you do choose to charge everything and pay off your credit card each month, be sure you know when your credit card reports your balance.

When paying off any items currently being reported negatively, please be smart about it. Remember that your credit report should be a reflection of your current credit-worthiness. While you are responsible for the things you did as a student, that doesn't mean those errors reflect who you are now. Be willing to be your strongest advocate and understand the line between meeting your obligations and being a doormat.

Always try to go back to the original creditor to settle the debt. It is possible to request settlement for below value, request they rescind the debt from a collection agency, and even agree to remove the account from your credit report. While they have to accurately report anything they submit to the reporting agencies, they do not have the duty to report anything.

Your success will vary, and there are many forums out there that will let you decide how passive or aggressive you want to be. None of it is a substitute for legal advice, so keep that in mind before making any decisions.
posted by politikitty at 1:26 PM on February 10, 2012

Boilerplate answer: Read and understand the advice at Credit Boards. You are not the first person to be in this situation, nor are you the last. Take advantage of the massive volume of information available there about what has worked for other people.

Also, oddman is incorrect in that just because you pay an account (for anything but medical collections), it doesn't come off. In fact, paying extends the length of time an account can remain. That's why it's so important to negotiate a deletion of the account from your reports in exchange for payment. Most accounts can only be reported for seven years from the date of last activity, which is basically the last time you charged a credit card, paid a payment, used a given doctor or hospital's services, or made a promise to make a payment in part or in full.

The exceptions to that rule are medical collections, which are only supposed to be reported if they're outstanding, and cases where creditors refuse to update the status of the account on your report to reflect your having paid the debt. When you complain about their inaccurate reporting, they will likely just fix it. However, if they don't you can sue them in small claims court and use the statutory damages as leverage to get them to remove the item from your report.

Never pay, never promise to pay, and never call debt collectors. The closest thing to a promise to pay you ever give them should be your written offer to pay the debt in exchange for their removing the item from your report. And you should not pay until you have a written acceptance of that offer.
posted by wierdo at 5:03 PM on February 10, 2012

Also, is free and lets you continuously pull your credit scores and tells you what it's changing.
posted by Brian Puccio at 10:06 AM on February 11, 2012

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