hi all - my first post here. i'm a 25 year old guy trying to get my credit back in decent shape. recently i paid off a total of $1300 in c.c. debt (setting both cards to zero), as well as a couple medical collections that appeared on my report. after doing all this, my credit score slipped from about 620 - 560. how could this be? does this happen often? any advice is appreciated. thanks! keith
I got Identity Monitor from Citi bank and they have a simulator, it shows how paying off a balance will impact your credit score and breaks it down as much as the payment. I was thinking about paying off everything until I noticed the effect you noted. Payment history seems to be the name of the game, paying off your balance in sums of say $300-500 would have increased your score dramatically. Paying it off in full hurts it although on citi it wasn't as bad as the hit you took. If you sill have the card it should help you out because your debt to available credit will be real nice. If you have the discipline to use it like a debit card and pay it off that would help even more. So as long as those cards are still open you should be able to make it up easily assuming you don't build up the debt again which is real easy.
What "score" was this? Was it a FICO score, or another model? Are you sure nothing else hit your reports?
Paying things off can often up the date of last activity and thereby, make the account appear more recent in the eyes of scoring models. Try to dispute them off.
it sounds like the collection account got re-aged so it looks more recent than it should giving it a much more weight. This just falls into the "No good deed goes unpunished" category. However, you might dispute it in a month or two to see if it goes away.
well i learned that there was a credit inquiry from renting a car through budget last week, plus another credit report requested myself. could that lower the score? i'm new to the idea of disputing credit items, i should read up on that. otherwise i've been trying to use the cards here and there, having them paid nearly back to zero by the end of the month. that should help, right? thanks all!
A hard pull to rent a car can hurt ... hard pulls are especially costly when your credit isn't very good. One of the reasons paying a bad debt hurts is that the FICO models basically assume that a person will order their affairs to put bad debts ahead of other priorities (like having savings in reserve), so if you paid a bad debt FICO sort of assumes that you either borrowed the amount (which would adversely affect your debt ratios) in a way that FICO can't see, or that you saved up just enough to pay the debt, and now that cushion is gone. That's one of the reasons PFD is so important, if you can get it.
after a couple of years a collection is reported, it doesnt affect your credit as much, however paying off collections, updates them and is considered " new negative activity" thats why your score when down so much. the next time you settle a collection, ask for a deletion letter to remove it completely from your credit report.
thanks ok thanks for all the advice - one or two last questions 1- should i even bother then, paying off old collections and 2- "using credit cards like bank card" - so if i use the card more or less daily and pay back to ~~ $0 every month, the credit score will increase? will i have a better chance of getting credit line increased? sorry if this is a redundant post, hence the "newbie" tag. thanks
