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Better Credit scores

What is the quickest way to improve credit scores? I divorced 2 yrs ago and paid off all debt with retirement. But instead of improving, it hurt my scores??? Now paying $2100 an month rent and am totally confused as to why no one would consider me till scores improve.
  • April 19 2010 - Midland
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Answers (7)

Re-establish credit.   Paying everything off is step one, but you need to continue to utlilize and manage credit respsonsibly for scores to improve.

Whatever accounts you use to re-establish, always keep you balance at 20% or less of the credit limit for ideal results.
  • April 19 2010
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Profile picture for wetdawgs
Credit scores come from responsible use of credit.   So, if you have no debts and aren't using credit, scores tend to decline.   It isn't just a measurement of how much debt you have.

Ours are declining also as our mortgage is paid off  and we only occasionally use our one credit card.   No negatives on our file, just not using enough credit to make them happy with us!
  • April 19 2010
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Hi,

That is very frustrating when the credit system is set up like that.

Did you try to talk to the loan officer directly and explain your situation?

I recall reading somewhere in my studies, that when you apply for credit they feed the basic info into a program.

That program will then give a basic recommendation to the lender based heavily on your credit score and debt/income.

But, it is not the final word (easy way for some people to reduce workload...). You might want to consider to go to different lenders and ask for an more experienced officer, that can take your situation into consideration.

Also, if you have not missed any rent payment, bring it up as a positive that you handle your obligations well. And pay off any car loans, or loans that are used to support your living.

Good luck.
  • April 19 2010
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You need to establish credit in your name.  If you are unable to get a standard unsecured credit card I would go to a bank and open up a secured credit card.  You can do this by essentially opening a CD for say $500 to $1000 or more.  That money is held by the bank and they issue you a secured credit card with the same limit.

The card reports to the credit bureaus and after a year or so you will be able to get an unsecured card from the bank and other creditors.

While rebuilding your credit make certain to not go over 40% of the available limit.  So if you open up the card with a $1000 limit do not spend more than $400.  It does not matter if you pay it off in full every month as that is not calculated in your credit scores.  But the balance of revolving credit (credit card) debt in proportion to the unused balance is a major calculation in your credit scores.  Second only to paying on time which goes without saying.

I am also a mortgage broker so I have seen many people with maxed out credit cards paid perfectly and their scores were in the mid to low 600 range because of this.  So make sure you keep the balances low.

Good luck to you.
  • April 19 2010
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Profile picture for Erez Cohen
It appears that you not only paid off the debt but you also closed accounts-  That may be the reason for the drop in scores.  I would right away get some tradelines going.  If you do have tradelines-  (credit cards)- then your score might be low because the balances on the cards are above 30% of the cards limits.
  • April 20 2010
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Everyone has provided great advice. while paying off old collections or judgments is the right thing to do, it will hurt your credit in the near term because it updates the date of last activity on a negative account. Just open new credit and NEVER use more than 30% of the available credit line throughout the month.
  • April 20 2010
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Profile picture for tiffdelgado
We get questions like this all the time, so you're not alone. I would agree with Jeffrey Smith in that there have been a lot of great answers, so I won't beat the dead horse. One thing that's important to remember is that credit works in YOUR NAME, so whether it's right now, or your previous marriage, make sure all your ducks are in a row. Good luck!
  • April 20 2010
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