I Have Bad Credit And I Want Good Credit. – Jamie

“Dear Steve,

I’m a 22 year old new grad from nursing school. Throughout my 4 yr college career, I acquired my debts including closed credit card accounts and a delinquent checking account from about 5 years ago, which were all eventually sent to collections agencies. Now that I have graduated and am making a pretty good living, I am looking to buy a new car and maybe a small home. I went to a car dealership & found the perfect car for the perfect price, however, no bank would finance me even with my salary. My plan is to put myself on a strict budget & pay off all of my debt (about $2,500 worth) in about 1 month so that I can get a new car soon.

Should I try to use debt validation or debt negotiations in hopes of saving some money or just save the time and paper and pay everything off? Furthermore, even if I pay everything off in a month, how long will it take for it to show up on my credit report & raise my score? Lastly, since all of my credit card accounts are closed, will it still hurt my credit to have no open accounts besides my car note?


Dear Jamie,

You don’t get to wave a magic wand and make it all better instantly. Even if you paid off all the negative items on your credit report, it will still take 30 to 60 days for them to update on your credit report. Even then, while closing the chapter on your past credit transgressions, you can’t build new credit unless you get back in the credit game with something more than a car note.

Car financing seems to not carry as much credit score weight as an unsecured credit card does. Lenders know that people will generally pay their car and mortgage payments first so looking at unsecured credit card performance seems to be the primary focus.

Avoid getting a store card but with your bad credit you can get a secured credit card that will report to the credit bureaus. Look here. One of those will help to rebuild your credit, but it will take some time. Once you pay off your bad debts, the more time that passes, and the new credit card, will help to bring your score back up.

I’d suggest that you get a copy of this consolidated credit report and make sure you know all of the negative accounts being reported about you from all the credit bureaus. If you are going to tackle this, try to get it all taken care of at the same time.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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