FICO Score

[Crown Royal]

The last several months have been a bit tough financially. I was a college student, and I have had, for a bit over a year, a job at Starbucks parttime.

I came from insurance before that to come back to school - I was making 30K/year (not bad for someone who wasn't yet 21) and was about to get a promo that would have payed 45K. I walked away to live the college life.

Not only am I a bad student, but apparently, I was poor at managing my finances when my income dropped by around 75% (because retail pays in peanuts). Anyhow, it was getting very, very bad over the last few months, and finally, a month ago, I had to go to the Old Man for help. I borrowed about 4K from him to get myself out of the hole I had dug.

Apparently, though, it was too little too late. For at least a year before I went back to school, my FICO credit score hovered between 680 and 730, never dropping below the 680 score. Since about, oh, April, I hadn't checked it once. I just did today - and it was 456. My jaw dropped to the gound. Right now, I feel sick. I knew it wasn't going to be pretty, but I never imagined my credit could be so low.

A lot of you know my plans to go into the military. After a summer of thought, I have reconsidered substantially. I still think I want to do it, but it hit me that, for the job I would want, I would be in until I am 28 years old (6 year commitment). So I am weighing other options, some of which include going back to work in the business world, a world in which I excel.

But for you financial gurus - HOW DO I GET MY FICO BACK UP!? Am I screwed for 7 years? Or are there measures I can take to get back on track. I don't like the idea of bad credit - looks bad to creditors, employers, and it just feels wrong. My credit is important to me, and it is unfortunate that the last few months had to give me such a kick.

Thanks all!

 

[Hoov]

First get a copy of your credit report and make sure there are no errors. You would be suprised how easily they mess things up. If there are mistakes you will need to contact by mail the reporting agency that made the mistake, and explain what the mistake was (i think you also have to put your social on the letter or they wont even look at it).

Also, when you get a detailed copy of your report, talk to someone about it, someone that can go over it step by step with you, there are probably some simple things you can do to make a difference. Ive actually gotten a lot of conflicting information from different sources about how many credit accounts you should have open, and what drives your number up or down so i dont want to comment on that.

 

[royhitshard]

You definitely want to check all three credit bureau's to make sure there is not an error on there like Hoov said. You can go to https://www.annualcreditreport.com/cra/index.jsp and see if you can get all three bureaus free. They don't always have the same info, so check them all if you haven't already. Things you can do to get it back is to lower your ratio of debt to credit limits. It only takes one card to be maxed to hurt your score, even if 3 have no balance, the maxed one will hurt you. As for the number of cards, 5 is the general rule, but most will consider up to 8. The more you have, the lower your score, even if there is a zero balance on them. You can also dispute anything on your bureau online by going to their website. They will send to all three bureau's so you only have to do it once. Good luck and I hope you get back on your feet. If you do it the right way, it shouldn't stick with you for 7 years.

 

[MapleLeaf]

But for you financial gurus - HOW DO I GET MY FICO BACK UP!? Am I screwed for 7 years? Or are there measures I can take to get back on track. I don't like the idea of bad credit - looks bad to creditors, employers, and it just feels wrong. My credit is important to me, and it is unfortunate that the last few months had to give me such a kick.

Thanks all!

...but you have to be honest with yourself when doing this.

1. Get an actual credit report stating the incidents associated with yourself. Get more than one agency's report to ensure that events are correct.

2. If there are errors research them out with a representative of the agency putting out the incorrect report and have them reverse the situation. Need proper Ident. and proof positive the event is not related to you.

3. If a credit event is correctly assigned to you, then find out what is the status. If it states unsettled, but you have paid off the credit, then have the vendor send you a letter of satisfaction. You can use this with a creditor to show ability to settle debts. If the event is unsettled, pay it off and get a letter to support the satisfaction.

4. Last review the most recent history you have with your banks, accounts, revolving credit, etc. Have you been a good boy? If so, gather all the supporting documentation to that regard and present it to any institutional lender. Take a small catch up loan for something, such as a 401K, and faithfully pay that credit off. Develop some positive credit history.

Following this you will have fufilled what most creditors look for. First, ability to deal with your past. Second a willingness to tie up loose ends. Third, a recent history supporting a higher "beacon" or "FICO" score than what is officially assigned to you. (This happens alot.) And last, a recent ability to service a debt vehicle.

If your credit history is a landmine field. Do steps 1-3 and unfortunately give the creditors some time and keep your nose clean. Usually about two years of incident free finances with a healthy balance sheet will garner you another kick at the can.

 

[Crown Royal]

Wow. Thank you all very much. I will do just that, though, I have to admit, I have a feeling that I will find very few, if any, inconsistencies. The last 3-4 months I was severely delinquent. The loan from my father has helped, and I am back on track. If anything, I can hope that by being settled with each of my creditors, I will regain a bit.

My credit history up until about January is nearly pristine - it was around 680-730 because of high revolving balances, which I no longer have. It dipped due to delinquent payments. I hope it doesn't take two years to recover, but I am young (22 in a week), so I will take this as a learning experience. Perhaps it is a blessing - for a while it will be harder to secure credit, hopefully giving me time to mature, as far as my finances are concerned.

David - thank you especially - it seems you might do this for a living or something. I would offer to pay you consulting fees...but, well....the topic of the thread explains why I cannot. :biggrin:

 

[MapleLeaf]

Wow. Thank you all very much. I will do just that, though, I have to admit, I have a feeling that I will find very few, if any, inconsistencies. The last 3-4 months I was severely delinquent. The loan from my father has helped, and I am back on track. If anything, I can hope that by being settled with each of my creditors, I will regain a bit.

My credit history up until about January is nearly pristine - it was around 680-730 because of high revolving balances, which I no longer have. It dipped due to delinquent payments. I hope it doesn't take two years to recover, but I am young (22 in a week), so I will take this as a learning experience. Perhaps it is a blessing - for a while it will be harder to secure credit, hopefully giving me time to mature, as far as my finances are concerned.

David - thank you especially - it seems you might do this for a living or something. I would offer to pay you consulting fees...but, well....the topic of the thread explains why I cannot. :biggrin:

...I provide taxation and financial advice to elderly and single income families for free. The stories are all different, but the problems very similar. Tax season I hardly get out of my office which doubles as my consulting centre. I often only get home after midnight and yes alot of stuff still comes in a shoebox.

As a bit of advice, revolving credit is to be used as a tool. If you play your cards right a very small amount of revolving credit can be utilized for a big home run. I call it the "Trump" maneuver after ole Mr. Plastic Hair himself.

If you want to get in the good with your creditors, go in with an open book and a plan. This is how much I am paid, these are my liabilities on such and such a day I will execute these transfers and here is the expected date of retirement. If you can hit your markers you will be surprised at what written responses you will get as a reference to your account. BTW, employeres are not the only people who give references. Account managers will also, if you come clean and work in earnest to make their hassles go away.

Good luck, and with a little determination this will be but only a speed bump along the road.

Strong caution on monitoring your FICO score. Be careful about applying for credit or asking a bank to examine your credit history. Everytime a member institution inquires on your behalf your FICO score will go down. People who have a constant need to apply for credit or check out their credit history regularily are downgraded.

If you need to check it on your own due to an overwhelming curiosity, pay for the service on the net with companies like Equifax and whatever counterparts there are in the U.S.

Credit is like wedding rings. You don't propose to every girl on the street. :

 

[cowboyfan4life_mark]

Be careful about applying for credit or asking a bank to examine your credit history. Everytime a member institution inquires on your behalf your FICO score will go down. People who have a constant need to apply for credit or check out their credit history regularily are downgraded.

Very true. Say you apply for a car, sometimes that one inquiry can create several inquiry "hits" on your credit.

I have seen companies like Sears or Penny's offer a free 2 liter of soda or an ink pen for people to fill out a credit application. Some people think they won't put all of their correct information on the app. just so that they can get the "freebie". If you put your real SSN and nothing else, the company of course will decline you for "not enough information". On the surface of your credit report, it will only show a declined inquiry. That will bring down your overall score also.

David, doesn't an inquiry hit stay on your credit report for 6 months?

 

[Crown Royal]

Oh dear. What if I apply for a job, and the employer does a credit check - will that count as an inquiry?

 

[MapleLeaf]

Very true. Say you apply for a car, sometimes that one inquiry can create several inquiry "hits" on your credit.

I have seen companies like Sears or Penny's offer a free 2 liter of soda or an ink pen for people to fill out a credit application. Some people think they won't put all of their correct information on the app. just so that they can get the "freebie". If you put your real SSN and nothing else, the company of course will decline you for "not enough information". On the surface of your credit report, it will only show a declined inquiry. That will bring down your overall score also.

David, doesn't an inquiry hit stay on your credit report for 6 months?

...it is up to one year.

 

[MapleLeaf]

Oh dear. What if I apply for a job, and the employer does a credit check - will that count as an inquiry?

...I'm not sure about. In Canada, credit checks are illegal as a clearance for employment based on the new privacy laws.

Now if a landlord has a credit reference as a part of his requirement for renting, then that would count as an inquiry. Any business or individual who meets the requirements of the credit bureaus can enroll as a member and make credit inquiries for fees.

 

[zagnut]

Wow. Thank you all very much. I will do just that, though, I have to admit, I have a feeling that I will find very few, if any, inconsistencies. The last 3-4 months I was severely delinquent. The loan from my father has helped, and I am back on track. If anything, I can hope that by being settled with each of my creditors, I will regain a bit.

My credit history up until about January is nearly pristine - it was around 680-730 because of high revolving balances, which I no longer have. It dipped due to delinquent payments. I hope it doesn't take two years to recover, but I am young (22 in a week), so I will take this as a learning experience. Perhaps it is a blessing - for a while it will be harder to secure credit, hopefully giving me time to mature, as far as my finances are concerned.

David - thank you especially - it seems you might do this for a living or something. I would offer to pay you consulting fees...but, well....the topic of the thread explains why I cannot. :biggrin:

I feel for you Crown. I was caught in a bad spot back in 1998 and quickly ended up $27,000 in debt with about half in credit cards. There was a tough year where I had to live like a monk, but I'm better and smarter for it now.

David gives some excellent advice. If it makes you feel any better, it's pretty unusual for a 22 year old to have good credit. It may be a while before you're at your past score, but you should be somewhere in the upper 500s to low 600s within a year if you display consistency with your lenders. 620 and up will deliver a reasonable interest rate on car or personal loans. Home loans will want to see you at at least 680, but even at 620+ you can do ok.

On your credit worthiness, simple and sometimes uncontrollable things like a job change, a lawsuit, an income change, moving to a new residence, applying for school aid (i think), a lender selling your account to another lender, a lender being bought by another lender, having your credit limit lowered, taking out a new loan, and making a large purchase on a card can all affect how you're viewed by lenders within the contecxt of FICO. It might not have been just the late payments.

The 2 major factors in your score are (1) making payments on time and (2) the percentage of outstanding balance to high credit limit. Make sure your balance is not greater than 80% of your credit limit. Sometimes, just moving money around to get balances below that 80% can improve your score 50 to 100 points.

Also, to clarify on something in your post, your prior high FICO score was not due to having high revolving balances ("high" being relative to income and credit limit). That made you attractive to credit card companies and you were probably sent plenty of card applications, but the revolving balances would become a problem in the eyes of other kinds of lenders if income and other things weren't up to snuff. The good score was due to making regular payments on time, which can be done with low balances too (of course). You likely might have had a higher score with a lower balance.

Lastly, it may seem the antithesis of what you'll want to do, but don't get rid of all your credit cards immediately or carry a $0 balance. It will help your score more if you keep a major credit card, one you have had for the longest and with a good payment history, and just pay it down to a very manageable level. Maybe even keep a second card where you can play them off on one another. Get rid of the gas cards, Target cards, Pep Boys cards, department store cards, cards from small lenders that might get bought up, etc. Keep the 1 or 2 main ones and keep them on a tight leash.

If you've rectified the delinquincy with your lenders and they haven't shut your cards down, you're not in as bad of shape as it feels -- though your Pops might hold it over your head for the rest of your life.