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jdman

How do I turn my credit around?

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I have a bunch of collections/medical collections on my credit. I am going to take the time the next few months and pay off all my collections/medical collections. I have several negatives on my car loans being 30-59 days late probably 10 times over the last 3 years on each car loan. I have had 5 surgeries and a heart attack which has caused a lot of this. What is the best strategy going forward to have positive credit and build my credit? I have a loan with Conn's for a washer/dryer which is almost paid off and 2 auto loans which are current. I appreciate any help. 

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There are a lot of threads about this.  

I don’t know your situation, but here are the first few steps.  

1. Triage.  

Get your payments into categories:

a. What has to be paid.  Housing, car payments, food, etc.  

b. High priority stuff.  Such as things that can be repossessed or things which are current in payments and you don’t want to get behind.  This can also include those debts which will quickly lead to law suits. 

c. Lower priority stuff.  This is bills already in collection but not in danger of immediate lawsuits, debts which can be negotiated, etc.  

 

2.  Budget. 

Set aside money for category a.  If money is left over, pay off category b.  Whatever is left over goes to category c.  

 

3. Strategy.  Figure out how you will pay off your category c debts.  Each situation is unique.  It may be you pay just enough not to get sued.  Or, you save up money to negotiate a settlement (which is a bigger hit to your credit rating, but not that much bigger). Some concentrate on the higher interest loans.  Others start with the small loans first to get them out of the way.  

4.  Time. Your credit score will take a hit, but eventually it will recover.   It may take years, maybe up to 7 years.   The thing is to manage your debt first, not your credit rating.  

You might consider reading some of Dave Ramsey’s books.  Or not. Your choice.  

 

The point is, you are not in a situation to really improve your credit rating when you have debt in collections.  If you can get out of debt and pay off all your bills at the end of the month, the 700s will come. 

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It took a couple years to get your credit down this much, so expect a couple years to also get it back up.  Reducing balances to $0 is the biggest thing to start.  Every time you have a $0 instead of any positive amount showing for a balance owed on a collection account, it is a positive increase on your credit.

There is nothing much you can do about the scattered late payment showing up short of finding any inaccuracies within that account listing somewhere and then disputing it in hopes that they just remove the whole thing.

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Before deciding on what terms lenders will offer you on a loan (which they base on the “risk” to them), they want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score. I advise you to turn to professionals like  https://www.boostcredit101.com/.

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