There are a few non-US based leofinance readers who are just flabbergasted by the US Credit system. I enjoy those questions, and am using them to formulate a "tell all" post where I explain where these "credit traps" come from, and show that the problem goes beyond "people who live beyond their means". Please keep asking questions.
I have been working on increasing my credit score.
Fourteen days ago, I was already celebrating an 8 point credit increase. I didn't know exactly what happened to raise my score by 8 points, but I felt that it had to do with erasing addresses and phone numbers that were no longer relevant.
I disputed collection accounts that I were not mine.
I also saw a collection account that 100% belonged to me, but was so old, that it was ready to fall off my report.
All of the collections from my credit report have cleared
By simply logging on to the credit bureaus, and pressing the "dispute" button. I was able to get two collections off my account.
The process is that simple for me, but goes deeper than pressing a button.
After I press the button, I tell them why I think the information is wrong. The credit report companies then send an email to the creditors who are saying I owe them money, and it is up to the creditor to prove that the money is paid. They have 30 days to respond.
The third collection happened to be planned to fall off my credit report in March 2021. It is now gone.
My score has increased by another 39 points. A 47 point total increase.
ooooh, look I qualify for credit cards with no annual fee. and ooooooooh look at those ridiculous APR's
In the US, the credit scores can range from 300 - 850.
There are four tiers you can qualify under. Poor, Fair, Good, and Excellent.
I am now in the "fair" range.
A "fair" credit rating means that I can now, if I wanted, get an apartment on my credit, get an ok car loan, and be approved for dozens of credit cards.
I will be getting NONE of those things.
I am still working on my score
I have a pesky student loan that has ballooned. I now owe more on the loan than I did when I got the loan, even though I have paid thousands of dollars towards paying it off.
I am diligently working on getting the loan back under the original loan amount.
This should give my credit score a healthy increase.
I am considering getting another credit line
But WHY? Why would I get myself in more debt?
Well, in the US credit is kind of like "use it or lose it." I only have three credit lines open (all student loans). It is suggested that you have at least 5 credit lines open to have the best score possible.
Since my ultimate goal is to use my credit to buy a plot of land, I need about 99 more points to be at my destination.
I do not know if paying down my loan will get me there.
I don't know if cleaning up some late payments will be enough to get me there.
I know I will have a mortgage again in the next 3 - 5 months.
And I will still need one more credit trade line to be at the suggested level of credit usage.
This is the tricky bit.
Where do I get my next trade line from?
I could ask for a title loan on my car for a few thousand dollars. If I take the money and invest it in an interest earning crypto account that pays more than what I am charged I will be in the green.
I can also get a small credit card and run it up $100 USD at a time, and pay it off.
Either way, I am not deciding or making any moves now.
I will continue to negotiate old late payments off my credit. And I will pay down that loan.
Once I do those things, I will look at where I stand and make a decision from there.