My particular situation (old debts/info removal)

[Boris Badenov]

I've done a fairly exhaustive read on the stickies, but nothing I've read seems to address the situation in which I find myself (perhaps there is no remedy, I don't know). I'm also fairly new to the terminology so I might be overlooking the answers. Any help is most appreciated.

In brief, I lived off credit cards for the last part of college due to extreme and unexpected expenses/loss of income in the family. Upon graduation I was in no position to pay, so I (not having learned much, obviously) just ignored the situation entirely. These debts, not surprisingly, wound up chargeoffs. I also stupidly allowed one of many individual students loans to go 120 days late before I consolidated it, and on one of the two reports I have (transunion, I think) it shows two others that I let get to 90 days (but not, curiously, on equifax).

Now, the good news is that all of this happened over five years ago, and 5 years is the SOL in Missouri, as I understand it. One of the credit cards still has an outstanding balance of $650 or so, the other was settled for less than the full amount years ago. Both show as "closed" on the MyFICO report. However, my report also shows the collection action on one of the cards which happened just 2 and a half years ago (guess it took them awhile to get around to it).

Everything else is good...debt/income, last late payment is 4 years and 10 months ago, etc etc. My only open credit is my student loans which I have paid on time every time since 2005.

However, these late payments/chargeoffs (and I suppose the collection) have my transunion at 666 and my equifax at 661. I'd really like to see 700 as I think that is more or less the threshold for substantially improving my odds at a home loan. Is this a realistic goal? I know everything but the collection *should* drop off in the next two years, but i'd love to see 700 by, say, next year. Is there any way to "prod" the process? Again, any help much appreciated.

PS. Great resource, thanks for hosting it.

[Lian]

While it is not possible to make any score projections without viewing an entire CR, the presence of major derogs retains you in a negative scoring category until major derogs have been removed. Major derogs include 60+ lates, charge-offs, collections, and public records. Even the drop of one major derog wont have significant effect if others still remain.

Payment history reflects 35% of your FICO score, and thus the major derogs appear to be the essential factor to address in order to reach higher scoring levels.

Remember that FICO does not score payment or non-payment of debt, so the payment status is not a FICO factor. However, it will most likely be a factor of consideration for future potential lenders, and the showing of unpaid debt is usually a serious negative in decisions to grant new credit. It is not all based on FICO scoring.

So, in general, it does not appear to me that substantial improvement can be expected until the major derogs begin to fall, either due to their old age, or efforts such as PFDs, have addressed them.

With that in mind, I noticed one other aspect of your credit file. Even with old major derogs under control, then FICO falls to the next major category of scoring, which is utilization of existing credit. The major type of credit that helps you in building a higher FICO score is the presence of revolving credit. FICO places high emphasis on your showing of proper utilization of discretionary, revolving credit. That is a big risk evaluation criteria in the scoring algorithm. You apparently have no open revolving credit, so now might be the appropriate time to bite the bullet and take a short-time hit by applying for one or two revolving credit cards. It will be hard, especially with derogs on your credit file, to build a solid 700+ score in the future without showing effective utilization of revolving credit.

For the above reasons, I dont see any major movement in your FICO score in the short term.

[Boris Badenov]

Exactly the sort of information I was looking for, thanks for taking the time. I may hold off on the revolving credit until I determine whether I can squeeze under the gate for an FHA home loan (probably early next year). If I can't, I suppose I'll keep renting and try to obtain the credit you recommend. Thanks again.

[Hal Jordan]

I would recommend not holding off on the revolving credit... Even if you have to get secured credit I would do it.. Just so you can get your credit to debt utilization factoring on your fico (Make sure you keep it under 20%)

Your fico should be high enough though for a simple capital one card.. Get it use it rarely for small purchases and pay it off each month. It will be one of the best things you can do to help your score.

[Lian]

I agree with Hal.

Provided your score is presently high enough to obtain at least a secured credit card, and that is the "if," now would be the ideal time to begin to build a history of revolving credit. If you aren't going to apply for other new credit in the near future, such as a mortgage, the short-term hit for the credit inquiries needed to get the new card wont matter. The sooner you get the new CC, the earlier will be its date opened, and thus the less will be its impact on your average age of accounts. And, as Hal has said, you can begin to take advantage of its CL in your % util calculation.

From a purely FICO planning perspective, the sooner the better. But it is kinda a catch-22. You need a good FICO score to score now to secure what you need for later building. I would suggest that you do some serious pre-investigation of they types and sources of new CCs that are likely to obtain approval at your current score level, and try to keep the number of new inquiries to a minimum. You don't want those new inquiries popping up in your CR just before you apply for a mortgage.