douglashicks

Everything is at least 3-5 years old...Will paying help?

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Hey guys, Ive been lurking for awhile...reading up as much as I can. My credit scores are horrible (530-560 range), and Ive never cared about it until now. Id like to buy a house.

You hear so much about credit scores...its hard to know what to believe. I make good money now...as opposed to when I was 18 and just absolutely destroyed my credit. Ive devised a budget plan to have all 7338$ I owe to about 10 different companies paid off in a matter of months. Is this a stupid plan?

All but a few of the things on my credit report were opened in 2004 or before...and I havent made any sort of payment WHATSOEVER on these bad accounts since the very end of 2004. I moved...and stopped caring. Is it going to affect me negatively if I start calling these people on my credit report...and giving them their money back? Is my scored going to go down like I heard it can? Also...if this is a decent plan...do I start with the charged off accounts first?

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I think if you contact any of these people with the intention of paying something off over a period of months, you may not get the response you're looking for. You know they are all going to want it NOW. Are you prepared to deal with that?

I don't like advising people how to spend their money, but just know that paying these old accounts may not give you the credit boost you're looking for.

I was in a similar position and used the $$ for a larger down-payment on my house. Biggest bang for the buck at the time.

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Be careful Doug....

SOL in TX is 4 years and you are not there on all your accts. You may inadvertently wake a sleeping beast who decides to sue you. Unless you have accumulated to payoff $ first, I would wait on negotiations. (JMHO)

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Paying will likely NOT increase your score unless you can get a PFD. Good look on the PFD. I and plenty others have not been able to negotiate a single one, unless it's with small CA's. You're best best it to read a little bit more and find a solid plan of action.

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Focus on your goals. It's great that you wish to pay your debts. But if your priority is to obtain a mortgage loan, paying MAY put you farther away, not closer.

Only you can decide what's most important. As indicated, there are other factors to consider (SOL, getting sued once a mortgage loan is added to your CR, higher interest rates) before you act. My recommendation is to gather all the info you need first, then base your decision on what works best for you.

If buying a house is really what you want, you can always pay off bad debts at closing or later on when you are safe and warm in your new home.

BTW, we don't KNOW what will happen to your score, specifically. We DO have general data on scoring and lots of emphirical evidence.

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I'm with BigJon and others here -- be very careful. I paid off a National City last year and am still fighting to get them to stop reporting lates and charge-offs through this years.

I contacted Citibank to offer a payment plan it turned into a nightmare -- let's just say I'm making payments much higher than I should have to and if I miss even one, it's garnishment city.

I did have great luck with a medical collector. But that's one out of three....

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As the other have said, paying them off won't do anything for your score and might do more harm than good. You can still purchase a home but it all depends on where you go to get financing and having a sizeable down payment

What you should focus on first is trying to get your score up. That can be done by opening up a few secured credit cards. That will will give you some points. When the SOL is up, have those items removed and that will bring your score up as well.

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Be careful Doug....

SOL in TX is 4 years and you are not there on all your accts. You may inadvertently wake a sleeping beast who decides to sue you. Unless you have accumulated to payoff $ first, I would wait on negotiations. (JMHO)

I agree with mom.

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first get a copy of your credit report from each burea, use myfico.com. Then find a mortgage broker or a loan officer at your bank who will sit down and go over your report with you. Let someone who in the lending industry point out the good and the bad on your report.

I will say this if the creditors arent hounding you dont do anything. What you need to work on is getting your score up and paying off creditors doesnt boost your score it makes it go down.

The only way i will pay off anything is if I enter in a pay for deletion agreement with the said creditor.

Now if you have like a year or so b4 you want to buy then get a secured card, and slowly build your history to a positive desitination.

However, i just bought my home for 78k 100% financing with seller paying all closing costs. My interest rate is 6.5% on a 30 year fixed loan. I currently have 9 badies on my report when i closed on my home 3 days ago. My ficos

were ex 663, tu 642, eq 579. I was able to obtain an expanded level 1 mortgage, if I would have had more time i could have gotten a few baddies deleted and obtained a conforming loan.

the moral of my loan drawn out point is this: The higher your credit score the better your chances of becoming a homeowner. I had a good broker who told me to not touch my credit report that the middle score is the only thing that matters and in my case he was right.

Am I in any shape to secure high lines of credit! No, i do not care about credit cards. Im driven by credit score and score only. I was sitting in a car dealership on saturday and while talking to the finance manager I was able to read the credit score guidelines in their file book.

From what I read if pertaining to this particluar dealership 700++ score mean 8% financing across the board no matter the the months 24,36,48, 54,,etc.

660-699 9-12% 620-660 12-14%. less than 620 15-24%.

So as you can see by my example the credit score is the end all game.

mho with that and $1.00 you can buy coffee all across america\

h

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Thanks for all the responses, guys, Im really appreciative. Ive got my CR from all 3 branches. Ive got about 4 different note loans with a few local places. I could afford to pay off the entire balance with some of these places. Anyone think these people would be easier to coerce into getting a PFD?

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Again - you could wake a sleeping beast.

The advice on taking those credit reports to a loan officer and discussing your future moves is good advice. I refinanced my house in 2005 with recent charge offs on credit and they looked right past it. You have nothing to lose by speaking with a loan officer - they will help inform you better and information is knowledge and knowledge is power

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I tend to agree w/ everyone else.

The one thing I have learned is that it never "pays" to pay a debt that is 3+ yrs of age. It actually drops your FICO. The money is better used on debts under 3 yrs of age and with debt collectors likely to work with you, rather than against you.

If all of your debts are 4+ yrs old, there really is no positive to paying them other than clearing you conscience. And even that is rarely an issue because you aren't the same person NOW that you were THEN, I'm sure now you wouldn't dream of defaulting on anything. So, let yourself start fresh-forgive yourself, but put your money to better use. JMHO. The only way I'd ever pay a debt beyond SOL for my state would be if they agreed to delete it from my CR....and since that's hard to get, well...

Whatever the heck you do, don't pay the ones 6+ yrs old, they're due to drop off your CR's in the next year, year and a half.

Normally I'm all for squaring away our debts and paying them...but I am not all for getting screwed in the process. The years of bad credit, bad interest rates, and what not is PLENTY punishment--why endure more once you pay it and the acct appears newer than it is due to "new activity?" Just food for thought. Research carefully, but I agree--in the end, you must do what's right for you. I am currently working with a loan officer and I was told that debts beyond 4 yrs of age aren't worth bothering with. Also, folks here have said older accts don't have the bad effect on your credit that they did when they were newer.

Elyse

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I had 13 CCs (I know, I know) all maxed out...got into trouble (surprise!) and walked away more than four years ago...emerged from grad school with scores in mids 400s (yikes!) and began credit repair two years ago...LSSV have 8 accts reporting COs every month and 6 or so accts with mixed derog status even though that isn't what was agreed to...woke some sleeping giants trying to settle and have been sued once (Midland/Emerge)...most of my boost (now mid 500s) really came from getting/staying current on open accts...so my advice is take care of your current accts and maybe let the dogs lie...

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My friend and her husband, who was eligible for a VA loan, had the same issue after having declared bankruptcy. What they did was go to a mortgage broker who prequalified them by pulling their credit reports and discussing things with them. He told them to pay off the delinquent stuff they had outstanding since the bankruptcy, save the equivalent of a monthly mortgage payment for at least six months and then come back again. They were approved two years after they declared bankruptcy, six months after they paid a few collections and showed him their savings balance. I also think you could get "prequalified" on what your situation is by going to a housing/financial counselor, such as CCCS or like here in my town a non-profit that deals with helping people prepare for homeownership?

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I also think you could get "prequalified" on what your situation is by going to a housing/financial counselor, such as CCCS or like here in my town a non-profit that deals with helping people prepare for homeownership?

Not trying to bag on you, just want to throw my 2 cents in on the CCCS idea. I haven't used the service personally but, I've heard that when you are enrolled in that program you are not allowed to apply for credit. If you are trying to rebuild after credit failure, you need to be able to re-establish and the CCCS program is not friendly in that regards. Just what I've heard. The other ideas are good advice though.

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A loan officer will typically tell you not to do anything and then work their hardest to get you into that house, but that isn't necessarily the best thing to do. I don't know what your price range is, but with your current scores you are going to pay at least 1% more than someone with mid 600's.

On a $100,000 loan, that will cost you $23,000 over the life of the loan. In terms of lost retirement savings, that's about $80,000 you just lost by getting a loan with those scores.

Most LO's will say not to worry, they will just give you a "band-aid" loan to get you going until your scores improve and you can refi. But don't forget about the cost of a refinance and the direction of the housing market. There are thousands of Americans who thought they could do just that and now they are going into foreclosure.

My point is to be very careful if you are getting into a major loan with scores sub 600. Also, loan officers can be helpful, but many of them just want you to get a loan so they can get a commission on the deal. It's best to look out for number one and fix your credit first, then shop around to 2-3 mortgage brokers for the best deal.

Regarding your negative trades, you really need to look at each one individually to determine what action to take. I recommend taking a specific item on your report and then looking around this site for some info on the experiences others have had with that particular company. There is a wealth of information here at your fingertips.

Odds are that some of those 10 negatives are easy to remove, while others are to be avoided at all cost. You just need to determine which is which, then try to get the easy ones removed.

As others suggested, try to get some positive accounts as well. If you don't have any open credit, you are going to need to get some in order to generate positive payment history. The limits may be low, but so should be the balances.

You have done the best thing you could have already, you're planning ahead. Good luck!

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