26yr old Army soldier trying to fix credit after a messy divorce a few years back. I was deployed, she decided to leave, and stopped paying on just about everything that was in my name without my knowledge.
Upon my return, I joined “freecreditreport.com” to continuously monitor my credit and my debts, and I contacted and paid and/or settled many of my delinquent accounts.
My credit score has gone up slowly, but it has now peaked at 605. I still have two major collection/charge off accounts on my credit (totaling $12,000 between the car she had repossessed and a bank of america credit that my parents put on me then didn’t help pay), then my college loans that are in good standing with less than $2,000 owed, and as of last year a “retail” credit card through the military that is in good standing with only $100 of the available $1,200 limit being used.
My question is, how can I go about getting my credit better?
I still can not get even a small auto loan ($5,000) to even jump start the credit help.
The Bank of America card is about 5yrs ago, and the car repo was from 2009. Should I try and settle those accounts, or let them “fall off” after 7years?
What are the benefits to each?
I plan to pay the rest of my college loans in one sum of money with myself being deployed again, as well as the Military Star card that I have.
Eliminating those leaves me with only the car and the credit card debt as any money that I owe.
So I’d like to know what I should do about those. I’ve read from you before that a secured credit card is also another good way to help rebuild credit. Is this something I should do as well, even if I was just denied a loan for $5,000 for a car?
Thank you for reaching out and asking your question. And thank you for serving in the military.
So let’s tackle your situation.
I understand what happened and how you returned to the mess. It is sadly not uncommon in the world of people that come to me for help.
Monitoring your credit is a smart thing to do when you’ve had those kind of surprises. And it is especially helpful if you are stationed far from home. It let’s you keep your eye on your credit while you are off doing more important things.
I’m not sure what the cost of the freecreditreport.com program you signed up with but there are some less expensive options if you want to save money on it. At this point monitoring all three bureaus might not be needed since the mess has been uncovered and identified.
FreeCreditReport.com says their program costs $19.99 a month. However to monitor your credit score and watch for any drops or changes is something you can do for free. Credit.com Credit Score monitoring and CreditKarma.com both offer free monitoring with a one bureau credit score.
Regarding the old accounts. I’m a big fan of finding a resolution to debt rather than just letting it linger unresolved. My feeling is it is better to close the door on the old debt and never have to worry about it again.
As long as a debt remains unresolved in some way you face potentially being sued as long as it it within the statute of limitations or facing collection on the account forever.
Most people are under the wrong impression that when a debt falls off your credit report or is outside the statute of limitation it is no longer collectible. That is not true. The collector or debt buyer can continue to try and collect but just can’t sue you over it.
When you are on active duty, the Servicemembers Civil Relief Act provides you with some protection from creditors.
The better way to jumpstart your credit and get your score moving up again is going to be with having several credit cards in your name which report to the major credit bureaus. The easiest way to do this is to get a secured credit card. With a secured card you put down a deposit and your credit limit is determined by the amount of the deposit.
But you need to make sure you increase your limits on these cards to $1,000 or more over time. The lower the credit limit, the less it helps boost your score.
Student loans, car loans have much less power to boost your score. While your on-time payment history is positive they are not major credit cards which have more power to raise your score.
The issue you are facing is one I see often. Your credit history essentially ended on a dig downer and there has been little good stuff to pull it up.
While the collection accounts will impact you less and less as they get older, the fact remains you have little current good stuff being reported about you.
Think about it like a report card in school. If you want to bring up your D average you need to get some higher grades.
I can’t see how getting a car loan now would be helpful to accomplish your goal. You appear to be ready to be deployed again soon and I’d rather come up with a plan that can be executed long distance and give you the least worry and biggest benefit upon your return.
So to do that I think the first order of business is to address the two outstanding debt in some organized way. Since you are in the military I know of some groups that might assist you with that for a reduced cost.
Maybe you can let me know the balance of the individual accounts in collections, post them in the comments below, and we can see if settling those now makes sense.