Credit score of 610, can I increase it to 675 in 6months, if not how long will it take?

Question

I want to buy my first home in about 6months time. Is it possible to increse my score from 610 to 675 in 6months? I only have two credit cards and using only 20% of my available credit. I don't have any loans. I had a collection 1year 2months ago that has been paid off for college parking tickets. I also had an old credit card charged off as bad debt 2 and a half years ago. I had a car loan three years ago but paid it off to quick, it was paid in 1.5 years. All I have now is my two credit cards to increase my score? Should I also pay my charge off, I was told this will do nothing to my score! Thanks

Should I pay the charge off since this will do nothing to improve my credit score and secondly if you don't think my score will improve to 675 in 6 months what realistic score do you think I can acheive in this time? thanks

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Answer 1

No you can't increase your score from 610 to 675 in 6 months even if you have ten (10) credit accounts.
You are still qualified to buy a house but at a highest rate. Can't you wait to buy in 12 months?
If yes, I'd suggest you to apply for two or three more credit cards, charge them (each) $20 or $30 per month to build your credit, after 11 months, you'll have the credit score that you need to buy the house.


I'll start by explaining what a charge-off is NOT. Because the term includes the word "charge," many people mistakenly think it has to do with cancellation of the account by the creditor. In other words, you can't "charge" anything on your credit card anymore. But it's not the same thing at all, and most banks will revoke charging privileges around 2-3 months before the deadline we're talking about here.

What banks and bill collectors call a "charge-off" is the point at which the creditor writes off the account balance as a "bad debt." It usually happens after six months of non-payment. After that, they no longer count it on their books as an asset. You still owe the money, of course. And they will certainly make continued attempts to collect it from you. But the creditor has been forced by the rules of accounting to zero out the debt on their financial ledgers. For causing this loss, they will punish you by placing a derogatory mark on your credit report. A "charge-off" is a serious negative mark, to be sure, but it is not the financial ruination that debt collectors would like to have you believe it is.

Should charge-offs be avoided if possible? Certainly. Does the prospect of a charge-off mean you should panic if you have no way to pay the bill? No! Is it the end of the world if the account has already charged off? No! Too often, bill collectors make a charge-off sound so bad, and they apply so much pressure, that people cave in and make payment commitments they cannot keep. Collectors usually demand payment via post-dated checks, and this frequently leads to bounced checks and even worse financial problems. Most of us are brainwashed by the banks and media on the subject of credit. Sure, good credit is important. But committing to payments you really can't afford just to preserve your credit is like watering the lawn while your house is burning down.

Here are a few simple rules to follow when trying to avoid a charge-off that hasn't happened yet:

* Don’t be intimidated or threatened by pre-charge-off collection tactics. Keep a cool head and don't take it personally when collectors try to get under your skin.

* Call your creditor to find out the minimum payment necessary to avoid the charge-off, and subsequent payments to keep the account current going forward. Don't commit to this payment (or series of payments) unless you're sure you can follow through.

* Negotiate a lump-sum settlement at 50% or less if you have the resources, or a workout plan for monthly payments that you can live with.

* Do not allow bill collectors to talk you into using post-dated checks, or providing your checking account details over the telephone. Instead, make payments via cashier's check or money order.

* Do not make payments based on a verbal arrangement. Get the deal in writing and signed by a creditor representative who has authority to approve the workout plan.

What should you do if you simply don't have the money to rescue the account from charge-off, or if the account has already been charged off by the creditor?

* Take a deep breath and relax; the sky won't fall on your head just because you had a charge-off.

* Realize that you still have an opportunity to resolve the matter by dealing with the original creditor or the collection agency assigned to the account.

* Negotiate a lump-sum settlement with the creditor or collection agency. Again, aim for 50% or less, and ask for the charge-off to be deleted from your credit report as a condition of the settlement. (Most creditors will not agree to this, but it's worth asking anyway. Do be sure that they will update your credit report to show that the matter has been resolved and the account has been satisfied.)

* If you can't work out a deal with the collection agency assigned to your account, then wait until it goes to another agency! Eventually, it will either be assigned or sold to an outfit that you can deal with to get the matter cleared up.

To sum up, a charge-off is not the end of the world. It should certainly be avoided if possible, but not at the risk of making things worse by committing to payments you're not sure you can keep up with. Just remember that the creditor doesn't want to see a charge-off any more than you do, so use that knowledge to your advantage in working out a mutually acceptable arrangement. Get everything in writing, don't disclose your checking account details, and follow up to make sure the creditor reports the matter correctly on your credit report. You'll find that it's easier than you think to resolve a charge-off situation before it happens, or clean it up if it's already taken place.

Answer 2

You are correct in saying that paying off a collection account will not help your score. The damage has already been done. But that is a good thing because the only direction your score can go is up from this point. I don’t think you will be able to get your score up to that number in such a short amount of time with only two revolving accounts reporting current. A 610 score is not too terribly bad. I have seen scores in the low 500’s.

As far as purchasing a home, unless you need to go stated (in other words not show any proof of income to the lender and only “state” how much income you make within a reasonable amount to your profession. In other words, you can not tell a lender you make $120,000/yr as a cashier), you should have no problems qualifying for an FHA loan. Also, FHA does not use your credit score as underwriting criteria http://homebuying.about.com/od/financingadvice/qt/FHALoansAreBack.htm

The underwriter does look over your credit report with a fine tooth comb. So, as far as your collections, you need to have a written statement of how the occurrence took place and what you have done to improve your credit along with what you plan to do in the future to keep your credit in good standing. This is a requirement from FHA, not the lender.

Here are some of the requirements needed to qualify:

•you must have been current on all open credit obligations for the last 12 months
•All collections must be paid at close (There is a grant program call HEART that will pay the collections off for you at close. Check with your mortgage broker about this. If the person says there isn’t such a program, leave! That is a good indication the person is not abreast in their industry.
•Any Bankruptcies have to be discharged for a minimum of 2 years.
•Any previous Foreclosures have to be at a minimum of 3 years old. (That’s right, you can foreclose on your home and become another homeowner in 3 years).

As you can see, the requirements are not too stringent AND FHA loans offer the better interest rates because they are not credit score driven!

I hope this information helps. After becoming a homeowner for about 6 months…your score will be where you want it to be….670-690 range! Check your score in a year…if you keep current on everything, you should be in the 700’s

Good Luck!

Answer 3

Hello - I believe Sal is wrong. A charge off is a closed account and paying anything will reage the account and depress your score with current bad activity. The risk is that it will be sold to a 3rd party collector. Then you have a different situation. Sortore... is obviously a mortgage lender or at least closely related to the industry. There's good info there.

Neither previous responder told you how to jump your score up in the next 6 months. 1st - go over your 3 bureau reports with a fine tooth comb and make sure everything on them is correct. Next, you do not want a new credit line within 2 years of looking for the mortgage loan but there is another way to rapidly raise your score. Become a co-debtor on existing credit. You need one more current credit reference (3 are the best). If you have someone you completely trust that trusts you, become a co-debtor on an existing trade line, use the card once and pay if off. Give the card back to the person who helped you. Within 2 - 3 months all the credit associated with that card shows up on your report. This is similar to the way a co-signer gets your credit too. Good luck.

Answer 4

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Answer 5

Nothing but time will help your credit score. FICO scoring uses a complicated algorithm and no one can say for sure just what can improve your score. Some things improve it, others hurt it.

One thing we do know is that revolving credit cards plays a large role. Not only your balances but how many accounts are at zero. So keep these as near to zero as possible. The lower the better.

You might be able to raise your score 10-20 points in 6 months, but 50 might be asking a bit much. Pay your bills on time and see where that leads you.

Answer 6

If you are looking for a quick fix, credit restoration is the only thing you can do for an increase in 6 months. Of course no credit restoration company can legally make the claim that they can do the work that fast. It is against the law to do so. But that doesn't mean that they can't make it happen that quickly.

If you go the longer, more traditional way (the one that everyone seems to think you HAVE to go), it will take much more than 6 months. Every year the negative line items are on your credit report they will have less and less impact on your score and your score will slowly start to rise.

Of course you made the debts, you are obligated to pay them off. But, consider this, is it worth it. A charge off is the absolute worst thing you can have on your credit report. Bankruptcy drops your score more, but a charge off shows a lender irresponsibility. With a bankruptcy you are at least admitting that you tried but failed. It is hoped that you learned something through the process. But a charge-off shows a lender that you just flat out didn't pay. You don't care that you didn't pay. One charge off, according to a lender I work very closely with, is enough for a lender to refuse you a loan or mortgage. You will want to satisfy this.
Problem is, it will still show on your credit report as a charge off. Myth tells us that you can negotiate to have the collection agency or the granting company remove the item from your credit report. If you are successful with that, let me know. I know of ABSOLUTELY NOBODY who has ever had success with that. It is a tactic used by bill collectors to get you to pay them money. Remember this if you remember nothing else the rest of your life, ALL BILL COLLECTORS LIE ALL THE TIME.
So even if you satisfy your charge off, it will do you no good. You will have to wait a certain amount of time for the line item to have a less serioius impact on your score.

You made a mistake by paying your car loan off so early. That is doing nothing for your credit. If you had taken at least three years to pay off the loan, it would look better on your report. The fact that you can show responsible debt payment OVER TIME is important to creditors. They like to see at least three years of payment history on a loan.

If you were one of my clients and you came to me with this scenario, I would refer you to the credit restoration company I prefer. I think in your case it is the best option.

If you have any questions regarding your credit issues you may email me at [e-mail]

Answer 7

Your charge off will have to be taken care of. A mortgage company most likely will not grant a mortgage until you do so.

Other than that continue as your are now. Make sure you pay all your bills on time all the time, use only a part of your available credit and don't apply for new credit.

But until the charge off is cleared, you will have a problem.

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