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Patience is key to credit score repair

Your score won't raise overnight after you pay off bad debt

By Todd Ossenfort

The Credit Guy
'The Credit Guy,' columnist Todd Ossenfort
The Credit Guy, Todd Ossenfort, is a credit expert and answers readers' questions about credit, counseling and debt issues.

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Question for the CreditCards.com expert

Dear Credit Guy,
I have paid off all my credit cards except one, which I brought up to date and will have it paid off in a couple of weeks. But the ones I paid off still show up paid in full and show a bad credit history on my credit report. Also, I have not seen my score go up at all. So what's their problem? When someone makes good on a debt, they still whack on us for seven years or more, while some people don't ever pay their debt and it comes off in seven years anyway. So, why when a person pays the debt they made in full -- no settlement -- are they punished right along with the people who just ride out their seven years? -- Patricia

Answer for the CreditCards.com expert

Dear Patricia,
Congratulations for paying off your credit card debt! I hope that you have learned from the experience of having too much debt and have put a spending plan in place to avoid unwanted credit card debt in the future. Moving forward, the best way to avoid adding to credit card balances is to have an emergency savings fund in place to help cover unexpected expenses, such as needing to replace an old appliance or some other emergency that all families experience. An account with a minimum of three months' worth of living expenses is usually sufficient.

From your letter it seems you are upset that your credit score did not increase when you paid off your balances. Although I agree that it is great that you have made good on your promises to your creditors, the fact remains that you did not pay your accounts as agreed. Your accounts will continue to show the negative information regarding your accounts for seven years from the time the accounts became delinquent. When it comes to getting an increase on your credit score, it takes patience and a fair amount of time. Remember that for the well-known FICO score, 35 percent of your score is calculated based on past payment history.

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One thing I believe you have overlooked is that from the time you brought them current and paid off what you owed moving forward, those accounts that are still active and open will be reported each month as a positive or paid as agreed notation on your credit report, thus helping to increase your score. All you need is a little patience to give the positive information on your accounts some time to outweigh the older negative information. As your credit history continues to have positive information added, with new accounts paid on time, etc., your credit score will improve.

Another thing to keep in mind is that while what you say about negative information falling off your credit report even if it is never paid is true; people who take that route don't have it easy. In fact, most experience harassment from bill collectors and many that owe large amounts of money are taken to court where the creditor can be issued a judgment that can be used to place a lien on property or even garnish your wages.

In addition, those who choose not to pay off their past due accounts are much less likely to qualify for a mortgage, car loan or other needed credit while the accounts are still listed on their reports, particularly in this current economic cycle. Even if they are able to qualify for a loan, the interest rate charged will be significantly higher than it could have been if they had paid their balances as agreed. By contrast, even though your score has not yet improved as much as you would like, you will likely qualify for a loan because you have shown you were willing to meet your obligations, albeit not as quickly as you should have. Hang in there, your credit score didn't decrease overnight, and at the same time, it won't increase overnight either. Patience and time, Patricia; patience and time.

Take care of your credit!

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See related: Help for bad credit

Published: September 2, 2008


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Updated: 09-30-2016


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