Even if you screwed up big time just once, you can still have a good credit score. And if you fix the mistake, it can be even better
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Dear Opening Credits,
Hi. My credit scores are 720, 720 and 659. I have no credit cards or debts. However, I do have a judgment pending in dispute dated from 2008. Would I be approved for a regular credit card or more likely for a secured one? Should I even apply and possibly drop my score? — Amy
You must have done something right in the past because your current scores aren’t bad at all. In fact, assuming these are FICO scores and not some others that have a different scale, they’re quite respectable.
FICO scores range from a low of 300 to a high of 850. What is considered poor, fair, good and excellent fluctuates. In general, though, those in the mid-600s to the mid-700s are deemed “good.” Higher than that and you’re in the “excellent” range.
Because your scores are nearly what most lenders, credit card companies and banks find attractive, it won’t take much to push them into the top tier. Here’s what you need to do:
Deal with your judgment. It’s 2012 now, which means that the matter ought to have been settled long ago. If the outcome of the dispute was in your favor, it should no longer be listed on your reports. Contact the bureaus to have it removed.
However, if the creditor did win the case and you do owe money to them, it will remain on your report for seven years from the date the judgment was filed. It is getting on the old side, so its impact is lessening, and sometime in 2015 it should drop off completely. Still, while they may not report it after that, they may be able to renew the judgment and come after you for the money. Paying it off will be to your benefit, both to get it off your shoulders and to improve your credit rating.
Apply for the right credit card. You can either jump in now or wait until after you’ve satisfied the judgment. Banks offer credit to people with scores ranging from poor on up. Mind you, though: They base their decisions on income as well as payment history. If you don’t have a job, they won’t feel confident that you’ll be able to repay what you borrow.
Presuming you are employed, check out the credit card deals that are available to people with the type of credit that you have today: good. Like what you see? Great. Apply to the most appealing one and only apply for one card. Shopping for credit is not like shopping for clothes, where you can buy a bunch of sweaters and return those that don’t fit with no repercussion. A mass of applications will reduce your score. Not by a tremendous amount, but since you are trying to boost your scores, go easy. If you get denied, move on to the next.
Oh, and you can get a secured account, but you probably won’t need to. In general, they are for people who have lower credit scores — either because they are new to credit or have already damaged it.
Charge to your advantage. Once you have a credit card, use it well. In theory this is easy, but in practice it can be a challenge. My best advice is for you to choose an expense to charge once a month, like groceries or gas, and then pay it off on time and in full.
When you’re comfortable, loosen up and charge other items, too, but continue to pay the balances off every month. Not only will you be establishing a great habit, but all that activity will be recorded in your credit files and your scores should rise.
Best of luck to you, Amy!