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Credit Inquiry

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Started 2 years ago by swan
Latest reply from dru

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swan
London
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Hello,

Does anybody know a good way (or maybe the best way) to raise your credit score rather quickly? I'll outline my situation and you can lend any input you see fit.

So I've just been accepted to arguably the best graduate school in the world for my profession, and I don't have any trepidations with accruing a significant amount of student loan debt for a great education.

I checked my credit score and I have quite a few outstanding debts from college. There were probably 10 or 15 listed that were medical expenses (that I was completely unaware I had outstanding) that vary in expense from $7 to $50 and a few that were a couple hundred dollars. My credit score is in the "high risk" range and I'd like to bump it up about 20 or 30 points to achieve a lower interest rate on the loans i'm going to require for school. (I don't even know if this is possible, I know very little about credit etc)

I don't have a car payment, I have paid off all of my credit cards and I diligently pay my student loans every month. I'd like to receive the loans without have to ask my parents to co-sign on them.

I know the easy answer is pay off your outstanding debts, but is it better to pay off the multiple ones that have very little monetary value? or one or two of the larger amounts?

Any input is appreciated, but I'd also prefer if anyone who replies is knowledgeable on the subject and isn't just speculating on a common sense answer. This is very important for me!

Thanks in advance!

Posted 2 years ago #
Core_Models
Columbus
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For the medical debts, pay them off in full at one time...BUT...don't just pay them off, as it sounds like their collections. First, contact the agencies or whoever you owe it to and negotiate with them to assure that they'll delete the account off the credit reporting agencies if you do pay it off. Revolving accounts actually do better if they are active, so having a small balance and making timely payments to pay it off each month isn't a bad thing.

Posted 2 years ago #
somertimeoh
Harrison West
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Check your facebook messages!!

Posted 2 years ago #
Roland
Clintonville
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Reducing your credit utilization ratio will better your score. If you can't pay down existing balances, maybe you can increase your available credit.

Posted 2 years ago #
lisathewaitress
SoHud
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if he has room on credit cards, would it behoove him to put his medical bills on the cards so that they are no longer in collections?

Not too much, though - you really only want your credit cards about 50% full. Another good thing is to buy something you have the money for, but finance it anyway (like a computer - sometime rather expensive), and then pay it off in a few months.

Also, find a good banker. A banker might be able to help you get a loan by advising you on clearing up your credit. I know lots of people who were in similar situations when they went to buy a house, and had to write a lot of letters and stuff to clear things up, but their banker helped them know what to do.

Some schools offer financing, also.

And of course, apply for every type of federal loan and grant you can find.

I think it takes like 90 days or something before you start to see improvement.

Do you own anything you could put up? even a car will help you secure a loan (if you own it outright)

good luck! that is awesome news!!

Posted 2 years ago #
columbusfoodie
West Side
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Without knowing you age, profession, the cost of tuition, etc. here is the best info I can provide.

In any case, if you're using federally guaranteed student loans (Stafford, etc) they don't base it on credit worthiness. The only determination they'll look at when they give you the loans is whether or not you defaulted on previous educational loans, and your income (or your parents income, if you're not an independent student) for the basis of determining whether those loans will be subsidized or unsubsidized while you're in school. Also, be sure to look into any fellowships or other stipends that the school offers to those in your program area.

In some cases, federal loans may not cover the full cost of your education. This is where private loans come in, and trust me when I say that 20-30 points will not make any difference in your interest rate, especially in an economy like the current one where consumer credit has been tightened. It still doesn't hurt to work on improving your credit score, for other reasons. We went through this process in 2003 when we were gearing up toward buying a house after a bankruptcy two years prior.

First things first - order copies of all three credit reports, as the information on each may be different. Make sure all of the information listed on them is valid (i.e. all the debts are actually yours, that your credit history hasn't been mixed up with someone else who has a similar name, etc). If there's anything there that isn't yours or accurate, challenge it by writing a letter to the creditor (cc:ing the credit reporting agency) asking that they provide evidence that the debt is valid, and if they cannot do so, demand that they remove the information pursuant to the Fair Credit Reporting Act (make sure you word it in that way). If they are able to validate it, or you see outstanding debts that are valid, make arrangements (in writing) with the creditors or collection agencies that they will report the information as "paid as agreed" or "paid in full" on that particular debt. However, don't do this for any information more than a few years old, as what this will do is re-age the debt and negatively impact your credit score rather than improve it. Bear in mind, also, that if you settle a debt, the difference between what you owed originally and what you settled it for will be reported as income to the IRS and taxed accordingly.

Try to keep open at least 3-5 consumer (revolving accounts) and one installment account (like a car, mortgage, or furniture loan), and don't ever let the balance on your revolving accounts exceed 50% of the limit (30% is preferable). No matter what, do not miss a payment. If, even after that warning, you miss a deadline, do not ever let it get to the 30-day late point, as it will be reported, and will prompt other creditors to lower your limits and raise your interest rates consequently.

Using these hints, we raised our credit score 105 points in about 6 months (from the high 500's to almost 700) and were able to get an Alt-A loan with a 5.75% fixed rate, which was pretty decent for the time we got it (2004).

Good luck. :)

Posted 2 years ago #
DonnaTate

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If you're looking for a quick fix to bump your score 20 or 30 points, here's a suggestion a banker gave me in he past: Dispute everything negative on your credit report. You can do this yourself by going to annualcreditreport.com, where you get a free copy of your credit report. You don't get the score without paying money though. You're taken to each of the 3 bureau's websites and it shows everything on your report. Each website should have an option to dispute by line item. Companies have 30 days to respond to your disputes. If they don't, the negative item is deleted from your credit report.
When I purchased a home, I did this and my score jumped up 60 points.

Posted 2 years ago #
gramarye
In Exile
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lisathewaitress wrote >>
Not too much, though - you really only want your credit cards about 50% full. Another good thing is to buy something you have the money for, but finance it anyway (like a computer - sometime rather expensive), and then pay it off in a few months.

I've heard mixed things about this strategy; some people (and some Web sites) have told me that these things really have minimal effect, and that you really want your credit cards no more than 15% full.

Posted 2 years ago #
gramarye
In Exile
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swan wrote >>
Hello,
Does anybody know a good way (or maybe the best way) to raise your credit score rather quickly? I'll outline my situation and you can lend any input you see fit.
So I've just been accepted to arguably the best graduate school in the world for my profession, and I don't have any trepidations with accruing a significant amount of student loan debt for a great education.
I checked my credit score and I have quite a few outstanding debts from college. There were probably 10 or 15 listed that were medical expenses (that I was completely unaware I had outstanding) that vary in expense from $7 to $50 and a few that were a couple hundred dollars. My credit score is in the "high risk" range and I'd like to bump it up about 20 or 30 points to achieve a lower interest rate on the loans i'm going to require for school. (I don't even know if this is possible, I know very little about credit etc)
I don't have a car payment, I have paid off all of my credit cards and I diligently pay my student loans every month. I'd like to receive the loans without have to ask my parents to co-sign on them.
I know the easy answer is pay off your outstanding debts, but is it better to pay off the multiple ones that have very little monetary value? or one or two of the larger amounts?
Any input is appreciated, but I'd also prefer if anyone who replies is knowledgeable on the subject and isn't just speculating on a common sense answer. This is very important for me!
Thanks in advance!

Unfortunately, my experience with trying to have a negative credit event removed from my history was disappointingly negative. I had an eerily similar experience to you: I had a medical bill that was supposed to be covered by my insurance, but because of mishandled paperwork on the insurer's end, never was. The account was sent to collection without my knowledge; I never knew until years later. Even after I got the insurer to cover the debt, the negative event remained on my credit history. I tried on several occasions to file complaints about the events; the process was maddeningly opaque, as I was never allowed to view the collection agency's documents or present my case in anything more than something like 1000 characters on a Web site. I had to wait seven years for the debt to clear from my credit history. When it did, my credit score jumped almost 100 points.

I wish I could offer better words of wisdom. Perhaps your experience will be more pleasant and productive than mine, if you decide to try to contest some of the negative credit events on your record.

It may actually be too late for paying off the bad debts to increase your score much. At least, when the insurance company finally paid mine off (three years later, when I joined a credit reporting service and discovered the ugly red boxes), I didn't notice any difference in my score because the collection accounts were not removed from my records.

Now, of course, my credit is nearly spotless--when it barely matters anymore, except insofar as it keeps my credit card companies from canceling on me. (It still hasn't stopped them from jacking up my rate and curtailing my rewards.) My loans are already taken out (and several years into repayment), and I don't plan on getting a mortgage anytime soon.

The bottom line, much as you don't want to hear it, is:

(1) Yes, those small delinquent accounts are probably seriously damaging your score;
(2) It is extremely difficult to do anything about them; and
(3) They don't go away on their own until seven years after the debts were incurred.

Posted 2 years ago #
Core_Models
Columbus
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Gram, that experience is exactly why I say negotiate with the debt holder directly and before making payment to clear the debt. If you've already paid it, they have no incentive to go through the hassle of removing it from your report...so make it conditional instead.

The thing about seven years is a bit of a misunderstood issue as well, as its seven years from the last activity...meaning if the debt holder sends you a letter once a year, your seven years will never actually pass.

Posted 2 years ago #
Patch
Schumacher Place
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Core_Models wrote >>
Gram, that experience is exactly why I say negotiate with the debt holder directly and before making payment to clear the debt. If you've already paid it, they have no incentive to go through the hassle of removing it from your report...so make it conditional instead.
The thing about seven years is a bit of a misunderstood issue as well, as its seven years from the last activity...meaning if the debt holder sends you a letter once a year, your seven years will never actually pass.

Very interesting about the seven years item Core, thank you.

Does anyone know where you can get your credit score for free? I know about getting the credit reports, but don't recall if we are supposed to get our credit score for free as well.

Posted 2 years ago #
dru
IV
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@swampkitty makes a very important point. your first stop for loans to pay for this program should be Federal Title IV Aid. Stafford loans (also referred to as FFELP or FDSLP) require no credit check. There are 2 types: subsidized loans (government covers interest while you are enrolled) are income contingent, unsubsidized loans (interest accrues during enrollment but payments are deferred) are not tied to income and Graduate students are eligible.

another positive feature of these loans is that they have fixed interest rates - 6.8% for any at the graduate level. the payments are deferred until 6 months after graduation and there are multiple avenues for income based extensions or deferrals. one limit is they currently cannot be absolved in bankruptcy.

currently over the life of the grad program you can take out up to
$138,500 in combined loans (minus any existing undergraduate loan debt)

http://www.finaid.org/loans/studentloan.phtml

Your university's Financial Aid office should be able to process this for you by completing a FAFSA form.

Thereafter, it is still a great idea to work on the credit issues you have. But this might give you some time during grad school to get those corrected and allow enough time for those to shake off your credit report.

Posted 2 years ago #
somertimeoh
Harrison West
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Dru, does the fed pay if you attend school overseas? That might be the issue we've got here.

Posted 2 years ago #
somertimeoh
Harrison West
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Patch wrote >>

Core_Models wrote >>
Gram, that experience is exactly why I say negotiate with the debt holder directly and before making payment to clear the debt. If you've already paid it, they have no incentive to go through the hassle of removing it from your report...so make it conditional instead.
The thing about seven years is a bit of a misunderstood issue as well, as its seven years from the last activity...meaning if the debt holder sends you a letter once a year, your seven years will never actually pass.

Very interesting about the seven years item Core, thank you.
Does anyone know where you can get your credit score for free? I know about getting the credit reports, but don't recall if we are supposed to get our credit score for free as well.

Only reports are free. I was advised to get all 3 reports and scores once a year. Should be around $20. Then get one of the 3 free reports each quarter after that and you can keep a pretty good eye on everything.

Posted 2 years ago #
dru
IV
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somertimeoh wrote >>
Dru, does the fed pay for you to attend school overseas? That might be the issue we've got here.

Overseas institutions can qualify to process and award Title IV Financial Aid for US citizens studying for full degrees there. Not every overseas institution does, but if they receive a decent percentage of US applicants they will. Currently I think roughly 7-800 foreign institutions have authorized codes.

As an example, here is the London School of Economics page on using Title IV aid with their school code included:
http://www.lse.ac.uk/collections/financeDivision/FeesandStudentFinance/Loans%20USA.htm

Posted 2 years ago #
somertimeoh
Harrison West
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dru wrote >>

somertimeoh wrote >>
Dru, does the fed pay for you to attend school overseas? That might be the issue we've got here.

Overseas institutions can qualify to process and award Title IV Financial Aid for US citizens studying for full degrees there. Not every overseas institution does, but if they receive a decent percentage of US applicants they will. Currently I think roughly 7-800 foreign institutions have authorized codes.
As an example, here is the London School of Economics page on using Title IV aid with their school code included:
http://www.lse.ac.uk/collections/financeDivision/FeesandStudentFinance/Loans%20USA.htm

Oh, very cool. Fingers crossed Shawn's school is one of them!! :)

Posted 2 years ago #
PodFive
Vic Village/Short North
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the AA sadly does not participate in Title IV FFELP loan program. He'd have to do a private loan.

Posted 2 years ago #
gramarye
In Exile
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Core_Models wrote >>
The thing about seven years is a bit of a misunderstood issue as well, as its seven years from the last activity...meaning if the debt holder sends you a letter once a year, your seven years will never actually pass.

This is interesting, because my experience was different, at least if I'm reading you right: This debt was incurred in 2002, referred to collection sometime between then and 2004 (maybe even 2005), appeared on my credit report then, was paid by my insurance company shortly thereafter (what I guess I'd have had to do to follow your advice would be to get my insurance company make the payment conditional on the debt holder removing the mark, but that would have been challenging, I think) and vanished in 2009--seven years from when it was originally incurred.

Posted 2 years ago #
swan
London
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PodFive wrote >>
the AA sadly does not participate in Title IV FFELP loan program. He'd have to do a private loan.

boooo! PodFive and Somer are correct, the school is in London. I haven't done my due diligence just yet, but does anyone know if federal subsidized or unsubsidized loans are applicable to an american student studying full-time overseas?

Per the schools website, which is what prompted this thread:

Funding for US Citizens: Sallie Mae Student Signature Loans
The Architectural Association School of Architecture no longer participates in the Title IV FFELP loans programme. Therefore instead of this support, we have secured a specific agreement with Sallie Mae to allow US citizens, who are attending the AA School as full-time students, for a Signature Loan to cover the annual costs of attendance. These loans are assessed, based on individual credit history, so the funds are not guaranteed. Some students may require a co-signer to secure the funding.

Posted 2 years ago #
dru
IV
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@swan - if AA doesn't have a FAFSA school code (which they apparently don't), it is highly unlikely. there is the random possibilty that you could find a school that they are aligned with here in the US that has an articulation agreement with them, and they could process the aid. But it it not a very likely scenario and there would be some fee attached as well.

Posted 2 years ago #