How to repair bad credit scores
In 2011, I was hospitalized for several months, and in physical therapy for several more. This resulted in the depletion of all my savings and the loss of my job. In 2013, I finally got back on my feet, and I am just now in the position to attempt to fix my credit.
The last time I checked my actual FICO score, a few months ago, it was 545. I have 9 collection accounts - four from credit cards, one from an unpaid utility bill, and four from medical providers. I have a single remaining credit card that is in good standing and active, with a $500 limit, and that is only because it did not have a balance on it before all this happened.
I do not have a mortgage or a car loan. There are a few older accounts that were always paid as agreed, but those will drop off soon and I worry that will make my score go down even more.
The advice I have seen for rebuilding credit sounds like good advice, but I really can't use any of it. For example, here are some of the things I have seen, from this site and others:
1. Pay your bills on time. I do this, now that I can. But with the exception of a $500 credit card, none of my bills (rent, electric, water, insurance, etc.) are reported to bureaus.
2. Fix any errors on your credit reports. My credit reports don't seem to have any substantive errors. They are all really my accounts, and I really did let them fall way behind and go into collections.
3. Open new accounts, and use
them responsibly. I'd love to do this, but no one (even subprime lending types) are willing to extend credit to me. Even the secured card offers I have received come with huge fees and high interest rates.
4. Pay down your debts. I don't have any current debts to pay down, besides the $500 credit card, and it usually has less than a $25 balance. Of course, I do have the collection accounts, but I have been advised that paying these will not help my credit score at all (and might actually hurt it), and will only minimally help my overall credit worthiness.
Another piece of advice I have come across is a blog post here on myFico, which claims that only two factors are considered when evaluating the impact of a collection account on a credit score: the amount of the debt, and the age of the debt. But it does not explain the extent to which each of these factors is considered. The total of all the collection accounts is about $3,000, which is not a whole lot of money, relatively speaking. And the age of them is probably 3 years.
If I just keep paying my bills on time, and wait, what will happen? Will my FICO score go up overnight when the collection accounts drop off in a few more years? Or will my FICO score rise gradually as the collection accounts get older? Or is it just going to stay at 545 unless I do something else? Am I really just supposed to wait around and do nothing? I am kind of at a loss here on how to proceed, and any advice particular to my situation would be appreciated.Source: ficoforums.myfico.com