Wednesday, October 20, 2010
FICO = Confusing Voodoo Numbers
Since I'm going to be job and apartment hunting soon, I decided it was time to check on my credit score. Ack!
I have a bunch of charged off accounts. According to Suze Ormann, " If the state statute of limitations hasn't yet run out, paying something on your charged-off accounts will not help clear up your credit report and may start the collection agencies' clock ticking anew, so once again, think hard before you do this. Only time will repair your credit report-specifically, the seven years it takes until the credit bureau must, by law, remove the debt notation." So, paying off these debts will not improve my score. http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=MD012&SRCN=aoedetails&GnavID=84&SnavID=20&TnavID=&AreasofExpertiseID=19 I should have sued my ex for child support much sooner instead of letting him bully me and using credit cards to bridge the gap.
Also, I should have kept at least one or two of my credit card accounts active. I have on time payments for 2 cars, but that's not enough. I need to have a credit card account to improve my score, but I don't qualify for a good rate on an unsecured card and I refuse to pay the ridiculous annual fees and interest the others charge. I decided to apply for a secured card instead. I started with my own bank, half expecting to be denied since one of my charged off accounts is with them. Surprise! I'm approved. Using this card will improve my score since, unlike prepaid cards, it is reported to the credit bureaus.
Lesson learned: Whether you've gotten into financial trouble or done the good deed and paid off all of your cards, keep the one you've had the longest open with a small balance which you pay on time.