How much of an impact can I have on my credit in 6 months?

Question

Currently my credit score is around 550 :(!
I have 5 credit cards that are maxed out totally $3000 - I have one credit card - joint with my mom - zero balance. I have past due bills on my credit totaling about $3000.
So my question is, if I pay all of the past due bills and pay the balances on my credit cards and for the next 6 months continue to charge little and pay the full balance and continue to pay my car payment on time? In 6 months - how much of an impact will this have on my credit score with no new credit inquiries?

Also once a bill is in collections and on your credit report - when you pay it, does it go away and not show on your credit report anymore?

Answer 1

Hi Amber,

Yes ... the 550 score isn't great ... but it could be worse ... and, the first step to making it better is realizing there is a problem and taking active steps to fix it. The good thing is ... $3,000 total debt (if I understood your question correctly) isn't all that much. It may seem like a lot now, but if you stop buying new things on credit and make a few simple life changes (brown bag your lunch instead of buying it, bring coffee in from home instead of getting it at the coffee shop, get a part time job, etc.) you should be able to pay that off fairly quickly.

Now ... to answer your questions ... unfortunately doing all the right things as you suggested won't impact your score very much for a while ... the reason is that the credit bureau's and lenders want to see a history of good behavior. If you've got past due balances (especially ones in excess of 90 days late) and you're maxed out on multiple cards your credit score is going to take a beating. (Credit score likes to see your debt to credit limit ratio at 30% or less ... 15% is better ... that means if you have a card with a $1,000 limit, you should carry no more than $300 on that card at any one time.) Those negative events will remain on your credit report for 7 years ... BUT ... the good thing is that after 2 - 3 years of good payment history they weigh those items less and your score will start to go up. Your score will not fully recover until they are completely off your credit report in 7 years. Same is true for a collection on your credit report ... once paid, it will be marked as "Paid" or "Satisfied" ... but the record that it went to collections will show up on the report for the next 7 years. Again, it holds less and less weight as time goes on ... but definitely get it paid off fast.

Don't let the negative stuff on your credit report discourage you .... keep on doing the right things. The sooner you start the better you'll be and trust me ... you can overcome this with patience and effort. Here are a couple of things to do ... contact all the creditors (including the collection agency) preferably in writing OR by both phone and writing if you prefer and tell them that you're going to start making good on your obligations. Then .... start paying all of them something every month ... even if it isn't the minimum due ... by paying something AND talking to them about it so they know that you're paying on it they should start marking the account as being paid rather than delinquent.

Try to pay the most on the collection account so that you get that paid off ... that is much worse than a late payment, so you need to get that off your credit report as soon as possible. After the collection agency is paid off ... switch to paying everything you can on the smallest debt and get that paid off quickly ... once that is paid off, go to the next smallest and put tons of money on that account and so on. This is called a debt snowball ... it helps you get your debt paid off quickly AND gives you a good feeling that you're getting your finances under control.

One final tip: You mentioned that you had 5 credit cards presumably with fairly low limits. If you can ... get 1 or 2 of the banks to combine those debts and credit limit into one account ... in other words 2 accounts with $500 limit into one account with a $1,000 limit. If you have several accounts with one bank ... they'll usually let you do this ... if they are with 5 separate banks .... you're probably out of luck with your credit history as it is now. The benefit of doing the combination is that it will lower your minimum payments and your stress level among other benefits.

You can do this .... Good Luck.

Answer 2

Get ready for a long battle. You're right, paying your current obligations on time is what you need to do...this will raise your score somewhat, maybe 5 points per month. Bring your revolving credit card balances down is probably the most important thing...this can reward you 50 points or more. Write the collection company and ask for a "pay for delete". You need the collection off your report, not just reporting as "paid".

Answer 3

not much. credit scoring is not based on what you do do so much as what you don't do. you need to catch up the payments but you need to call and get in writing a letter of credit correction. if they do not write the exact words, and will remove derogatory information, or restore the credit rating to paid as agreed, you are not getting anywhere fast. you also need to pull your free credit report from each of the agencies and see what has been reported already. a lot of people think that when they catch up the bills that it is reported. they love to ding you and keep you down. if you are in possession of capital one or providing cards pay them off and destroy them, this is why you will be in trouble, they like to give you multiple small balance cards instead of one high balance choice. you will also need to write a letter to each of the agencies challenging the information that is inaccurate, as well as delete inquiries. good luck. yes i have a credit restructuring department inside of my company so what i am stating is accurate.

Answer 4

When you pay a collection account it only shows as paid.

There are many legal tricks that you can use to your advantage to fix your credit and raise your score.

http://www.disputedemon.com