Expert: Gary Lambert - 12/2/2009

Question
Mr Lambert - I recently obtained my credit score. It is 480, "ouch" My wife and I are working on repairing our credit by paying off charge offs and settling with collection agencies. Once we complete paying off all the bad debts,and not acquire more, how long can we expect before our credit score starts going up?  another question - can we combine both our scores for a purchase like a mortgage? Any advice on raising our score?

thank you  

Answer
Hi Andy,

Thanks for asking the questions, and congrats on making the effort to work on your credit.  The credit system is slow to accept change, but it is changing.  As best as I know, this is how the system currently functions:

As you enter into negotiations with collection agencies, the subsequent credit entries that result will initially lower your score, simply because of the activity happening on your profile.  So, do not be surprised when your score drops after your payments have been applied to your accounts.  Within a quarterly cycle after your debts are reported as paid, the score should move up.  That means it could take as little as a month or as much as four months, possibly longer, for your score to go up after the debt is reported as paid in full.  How much the score is increased is determined by the algorithms in use by that credit reporting agency.  Rest assured that the moves you are making are good ones, and will pay off in a higher credit score eventually.  

Regarding the second question, your scores are always individual, even if you have joint credit.  Mortgage lenders typically take the three scores of each of you and then use the lower of the two middle ones.  The advice here is to fix both of your credit scores before applying for a mortgage.  

Advice on raising your score...hmmm...there's not quite enough info here for me to advise you effectively.  Standard rules are to keep at least three open accounts, preferably four, keep an ongoing balance on your revolving credit cards set at a maximum of 25-30% of the available balance, pay all bills before the due date.  Try to get a "month ahead" mentality going.  I believe that if you are a month ahead in your budgeting you'll NEVER have a late payment again!  

Thanks for asking your questions and please rate these answers.  If you need more info, please provide more detail.  I am here to help!  Thanks.  Gary