Credit score question. I'm trying to help a friend and don't know the answer to this.

[Midlodemocrat]

They got into some mildly serious credit card debt and are refinancing their house. Because their credit isn't the best, 570 or thereabouts, they didn't get the best rate, but they're going through with it to get the debt behind them and try to get back on track.

She asked me how quickly this would reflect positively in their credit scores and I had no idea. Don't know that much about credit scores and how they work other than the basics.

Do any of you guys know how quickly a positive re-payment schedule of the 'new mortgage' would get their scores back up? A year? Two? More?

TIA.

[flvegan]

1. My mortgage took 3 payments to even show up on my report

Rule of thumb is that it takes a solid year of timely payments to have a real, solid showing on your credit score.

[Midlodemocrat]

3. They are planning to pay off everything with the mortgage, so there

won't be any outstanding debt at all. They will keep one credit card to use for extremely small purchases and pay it off every month. That's the advice the financial planner gave them and it sounded good to me, but when she asked me the question about the credit score, I had no idea.

Thanks, love.

[flvegan]

5. Another rule of thumb (one I got burned by)

is to keep a small balance on a credit card and NOT pay it off every month. When I went to buy my house, I was shocked to find I had been hurt by living debt free. Because I paid my plastic every month, there was no record of "credit". Yeah, and I was a finance major.

[Midlodemocrat]

6. I had the same problem the first time I went to buy a car.

The only credit card I had at the time was an Amex, which is technically NOT a credit card. By paying off the amounts every month, there was no record of 'credit' like you say, so I had to get my dad to co-sign the loan.

I 'think' that has changed because Amex shows up on my credit report, but, boy for someone finally out and on their own it was kind of a cruel blow.

[IronLionZion]

7. What would be the minimum amount you would suggest?

I pay if off every month, but should probably start building credit.

[flvegan]

8. I don't think the amount matters as much

as long as there's a constant, steady flow of monthly payments and a balance.

[CreekDog]

11. i have over 800 FICO and haven't carried a CC balance in a few years

in fact, my FICO went up after I stopped carrying any balances (they were small and always paid on time anyway). i'm sure that avoiding any CC balances didn't make my score go up, i'm just saying that it certainly didn't hurt my score.

[flvegan]

14. Wanna cosign a loan for me?

[CreekDog]

15. um sure

brb :yoiks:




















:hide:

[mainegreen]

2. Depends entirely on what the negatives bringing the score down are.

Expect at least a year or two though to break into 700's.

[Midlodemocrat]

4. AFAIK, it was overextended and then late payments due to same.

Good people, just had a very bad run of luck. Job issues, illness. You get the drift. Fortunately, the house had a lot of equity and they didn't owe much on the first mortgage.

My friend actually has a bit of spring in her step again. Financial worries can really create such problems, it's a shame we allow money to have so much power. Not just them, I mean, me, too. I let money have WAY too much power.

Thanks for the advice.

[TheCentepedeShoes]

9. We refinanced a couple of months ago

Our credit scores were in the 750-760 range despite having WAY too much credit card debt, but no late payments on anything, and got a good rate. I've reduced my cc down to abouut $500 to keep a payment history going, and have substantially reduced hubby's and we're working on getting it down further. I put the kibosh on the riding lawnmower he wanted, which means I'm cutting grass for the next several months due to his bad back. Decidedly not my favorite thing to do, so I must be serious about this.
Sounds like your friends are started on the right track.
Best of luck to them.
:)

[China_cat]

10. We've paid off everything

Kept one gas card to keep a credit line...use it once a month and pay it off every month.

Everything's been paid off almost 4 years now and in that time no late payments, no defaults, nothing bad. Our credit score hasn't moved at all. Still sitting where your friends' is.

Edited to add that we do have a mortgage that still has a good balance on it for keeping a credit line. We got into trouble when my husband was out of work for 2 years and I was unable to work.

[Mrs.Matcom]

12. Are they going to close any of the CC's??

Don't want to have too much open debt either. Have them look at their oldest card, the one they have had the longest. Keep that one, but don't use it if it has a high interest rate. Use the ONE that has the lowest, and like the other poster said, keep a low balance on it to keep the credit reporting. Then close any and all cards that are just 'extras'. My sister ran into a problem once because she had five cards that had no balance on them, but were still open. The mortgage company didn't want to give her a lower rate because she could go and max them out. She closed all but two and the mortgage company gave her the lower rate. They will want to pull another credit report in a few months to make sure that all the cards have been close and reported as "Closed per consumer's request". You can also ask the credit card companies to send you a letter stating that the consumer asked for the card to be closed. This is VERY important! You do not want it stating that the credit card company closed the account.

Good luck! :loveya:

[Wcross]

13. Here is a free calculator for FICO scores.

http://www.bankrate.com/gookeyword/fico/calc.asp?lpid=BKRATE29

It is totally free, does NOT ASK for any e-mail address or personal information. I have used it many times without any problem.

BTW- I am shooting for a FICO score of "Zero" myself. I am going to live debt free from this point forward, I just paid off my house & all my credit cards in the past few months. I even "froze" my credit so no new credit can be established. (it can be unfrozen if I contact the three bureaus)
No more debt slavery for me.