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My credit has been really poor for a lot of years. I really want to be able to have better credit but everything I do does not help. Can anyone give me any insight on how to fix it up?

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    What is everything I do that doesn't help? – littleadv Dec 10 '13 at 6:15
  • I have disputed many items on my credit report. – mbc3223 Dec 10 '13 at 16:21
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    Budget, earn more, and don't borrow money. How about trying that? What you have done so far has not worked for you. – Pete B. Dec 11 '13 at 10:48
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I'm sorry, but there really is no silver bullet and the answer is fairly obvious. You need to find people who will extend credit to you, even if the terms aren't ideal, and establish a record of always paying your bills on time.

It may take a while, but eventually your credit will start to recover.

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There are a few items that you can work on that will be helpful if you understand the factors that go into the score, but the biggest factor will be your patience in demonstrating that you are a good credit risk. Only many years of good credit history will raise your score up to the 750+ target that will give you access to the lowest rates. Until then, if you have someone close to you who does have a good credit score to cosign a loan, you may be able to get good terms of credit while you rebuild your credit history. A cosigner is fully liable the account and will have their own credit history negatively impacted if payments are missed, so it's not something anyone should take lightly.

Credit card utilization

You should only be using between 1-20% of your available credit card balances. If you pay the cards in full each month your credit report will still show a balance if you are using the cards each month. Try to keep your running balances down to a small percentage of your totals. You may decide to keep credit cards with high available balances open but unused to help with this number.

Payment history

Pay 100% of your bills on time. Even a few late payments will hurt your credit history. The best way I've found to make sure that I never miss a payment is to set them up so they are automatic. I also keep a month's reserve of income in my checking account so that if my employer misses payroll there will be money for all of my regular bills. If you do miss a payment, get it payed within 30 days, because the effect on your score is greater for each 30 day period that an account is overdue.

Average age of open accounts

Closing credit cards as soon as they are paid off is not always helpful to the credit score. Even if the account is inactive, an older account will increase the average age as long as it stays open. I have a credit card with my credit union that I almost never use, and I have a line of credit for overdraft protection on my checking account. Both of these will remain open indefinitely, and they also help with the utilization number described above.

Credit inquiries

When you apply for credit such as an auto loan or a mortgage, the bank can report that you applied for credit. Someone who is suddenly applying for multiple loans can be a credit risk, but the inquiries are removed from your account after a year. If you are talking to multiple mortgage brokers, don't give them all your SSN to check your credit. You can tell your credit score and have them verify the score only after you settle on the one that will give you the best rate so that there is only one inquiry from the process.

Derogatory marks

Accounts in collections, leins, bankruptcies, civil judgments, etc. can take 7-15 years to be removed from your credit report if you get them. The best solution is to avoid them by settling with your creditors rather than making them resort to the legal system to collect their debts. This can mean using a mediator or arbitrator in the case of civil suits, or it can be as simple as a phone call to avoid an account going to collections.

  • Feel free to ask follow-up questions if there are areas that I didn't explain in enough depth. – NL - Apologize to Monica Dec 10 '13 at 16:31
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Any bureau that refuses to remove a negative tradeline past the time limit is liable, depending upon the state, for $1,000 per all violations or per violation for violating the FCRA. A lawyer will happily accept a valid case without prepayment or guarantee of payment since an offending bureau is also liable for all legal fees due to such a case.

Creditors are willing to extend credit once all outstanding balances due to negative tradelines have been paid in any form, and solicitations will commence from those a debtor has no previous negative relationship with. Creditors who have violated the FDCPA are also liable for similar penalties described above and are likely to go as far as to forgive the debt, remove the tradeline, and sign an NDA barring them from communicating the bad debt if the potential penalties relative to the size of the debt is large enough.

As more time passes without negative incident with current creditors, interest rates offered will fall.

Past creditors will demand balances settled for less than full to be paid in full before establishing new relationships.

  • An interesting set of responses here. Can you substantiate any of this? For example, what is the time limit? Those that settled probably sold the debt for pennies on the dollar, which is why the buyer was happy to settle for less than the full dollar. The original lender is usually unaware of the final deal. Can you cite sources for these bits of information? – JTP - Apologise to Monica Dec 10 '13 at 12:46
  • +1 for adding in the citations. (I am not the downvote, by the way.) – JTP - Apologise to Monica Dec 11 '13 at 0:26
  • A word of warning though. If you make even a partial payment on one of those old bad debts, the clock restarts on when they go off your record. – JohnFx Dec 11 '13 at 16:26

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