Credit meltdown and rebuilding- looking for advice

Credit meltdown and rebuilding- looking for advice
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Not going to get into details, but I’ve probably got one of the lowest credit scores that has posted here in the last few years or so. Had a few issues on the personal front, got help with that (going slow as it is a certain goverment agency,) and looking to try to rebuild my credit.

Basic facts:
6 derogatory on my credit report (1-2k, 5- 1400 combined)
3 on-time and ongoing reporters to credit report (Telenet)
Very low credit score

1 derogatory- not sure what I can do as the debt is truly invalid, but the situation is messed up as I was withdrawn from classes due to medical issues, that was accepted by the school at the time due to the severity of the issue, then 3 years later they’re trying to say I was never medically withdrawn even though the student loan handler and the goverment agencies job retraining program have me marked as medically withdrawn and their paperwork shows accepted by facility but no paperwork from that facility acknowledging it.

5 derogatorily- valid debt as they happened during my medical issues, but was unable to pay. The goverment agency that is treating me has placed me on pension due to not being able to work and is in the process of a disability review for both them and SSDI. Not sure how to go about paying them as the companies were extremely hostile to me when I tried to contact them as they wanted full information and payment on the spot which can’t happen at the moment. I don’t have the mental or physical ability to put up with their abuse if I have to contact them again. I’d like to set them up on payment arrangements (preferred) or pay them off. I saw advice on here to get them to promise (in writing) to remove the report when payment is made, but not sure if that will happen based on my previous attempt to contact them.

3 on time payment reports- payments actually deferred by Telenet due to medical and financial issues and they have worked with me on filing student loan forgiveness with federal goverment and awaiting decision.

Pretty much all the items showing up on my credit report that I can see on the summary that I pulled up here. Haven’t been able to pull up my annual free credit reports as it errors out on security questions.

My tentative plans for now:

Try to figure out a way to work with the 5 derogatory collection agencies- not sure how based on the last time I contacted them. I expected maybe 1 or two hostile at most, but all 5 was not something I expected…

Take out 1 or 2 secured credit cards for $200 each, spend around $200 a month (split between the cards) and pay off half to maintain a balance but keep the amount I owe at low level. If there is any better advice, please share as trying to rebuild credit is new to me.

Person I’m currently renting apartment from is willing to sell me a car at 0% interest, and as he has a used car dealership as well as his rental units, is willing to “direct finance” the vehicle and report it to all 3 credit agencies as he and his wife have been helping me through my issues. It won’t be an expensive vehicle, but as I do work for him (on his properties as I’m not allowed to work) with light duties, he made the offer that I continue to do that in lieu of payment.


Not working at the moment and can’t get hired as my previous employer still has me listed as on medical leave and won’t allow me to work until the goverment agency overseeing my medical care releases me to go back to work. Got released to go back twice and both times I ended up in worse shape. Other companies won’t hire because of that medical leave issue. And I can’t quit as the goverment agency tells me I would have to reapply for pension and possibly re-pay the previous pension payments before it is approved… So earning $1,097 a month on pension and it is being raised to the full $1,300 a month in January.


Welcome to the NerdWallet community, pacrat100.

I hope others will weigh in as well, but I wanted to suggest you tweak the way you are considering using secured credit cards. Secured credit cards, paid on time, are a great way to rebuild. But the amount of credit you are thinking of using is unlikely to produce the results you want. Spending $200 with a total limit of $400 is a credit utilization of about 50% — that is considered extremely high. Many credit experts recommend going no higher than 25% or 30%. The best scores go to people with credit utilization below 10%.

A car loan, reported as being paid on time, should help.

Paying your debt to collection agencies does not affect the most commonly used credit scores, but it will remove the threat of being sued and having a judgment against you.

You can request your free credit reports by mail, using this form, to avoid having to answer the security questions that tripped you up.

Here are some resources that may be useful to you:

Good luck to you. Your very best strategy going forward is to pay on time, every time, and to keep balances on credit cards low.


Hi there! :wave:

I second what Bev says about credit utilization; regular, responsible use of a credit card is one of the quickest and most effective ways to rebuild your credit. I’d suggest keeping balances very low (less than 10% of your credit limit is ideal,) and pay them off monthly.

A popular and effective strategy is to put the card on auto-pay and use only for a small, recurring monthly bill like Netflix.)

Have you tried disputing the one derogatory mark that you feel is invalid?


I apologize as I phrased that wrong. I was going to spend $100 per card then pay off $50 per card leaving a balance of $50 per card. A VA counselor suggested that I should pay the the requested payment for the card (the regular monthly payment) then add a second payment 2 weeks later to have 2 payments a month showing up to improve faster; but I’m not too sure about that. Another issue is if I end up paying it completely, then put another balance on it- does it actually help rebuild credit faster or does it mess it up?


I tried to dispute it, but as I don’t have any paperwork other then the VA stating that there was an agreement to medically drop me from classes, the credit agencies won’t allow a dispute without something from the college saying that they agreed to it. Ended up calling all 3 credit agencies on the phone and asking.


A balance of $50 per card (with a limit of $200) is still on the high side. There is no downside to paying the full balance every month. There is a fairly persistent myth that you cannot build credit without carrying a balance, but that is simply not true.

Cori’s idea of putting a small, recurring charge on the card and automating payment is a good one. You don’t even need to carry the card in that case — but do monitor your card and score to make sure all is well. And hopefully, after you establish a good track record, you can qualify for an unsecured card.


I will do that then. I guess I got suckered into the myth and was thinking that have a 1/4 usage would help out on the credit score. If paying it off doesn’t penalize me, I’ll probably go with the small item and pay it off as I don’t have many reoccurring bills at the moment. So I will find something to put a small balance on then pay it off monthly.


Good. I hope you’ll keep in touch and let us know how things are going.


That I will do. It may take some time though before it starts showing though. :slight_smile:


One month in. Paid off 2 of the derogatory reports, only 1 showing up on the report and it raised my rate by 1 point. Took out 1 $500 secured card, used it to pay off the two derogatory reports then paid off the balance the next day. The card showed up on my credit report giving my 65 points though it is showing my credit usage as 60% (it shows the card and credit but not that I paid the balance off.) Took out another $500 secured card but hasn’t shown up on the report yet though I don’t think it’ll arrive till after the 25th and not on my credit report until January.

Going good so far. Merry Christmas.



Hi Pacrat100 —

When trying to improve credit, it’s crucial to not allow the balance on any card to exceed 30% (and that’s just a rule of thumb — lower is better). People with the highest scores keep credit utilization under 10%. Even if you pay it off in full, your credit utilization is reported by your card issuer once a month. If your utilization is higher the day it’s reported, that’s the number used to calculate your score until it is reported again. Also, credit utilization is reported both on a per-card and overall basis.

When you say you paid off “derogatory reports,” what do you mean?


If you only show a balance of $10 a month on one card and 0 on the other, it will really help your scores. There’s always a space in your credit reports under accounts that shows highest amount ever charged. So other lenders will be able to see that. It would be optimal to have one card report a zero balance even though used and the other at $10-20 for the best scores possible. You can always rotate which one shows a balance on your credit report each month.

As for the valid debts, what you’re thinking of are PFD’s (pay for deletes). They are achievable but dealing with aggressive creditors on the phone is usually a very tough route to get them. I also think having a paper trail is always better for record keeping anyway. I started out with my scores at around 450 4 years ago and had multiple derogatories. I was lucky enough to get all of mine deleted for payment. I did NOT deny the debts were mine but I also did NOT confirm they were mine. I simply stated I had pulled up my credit reports and found said debt on it and found it very upsetting to see whatever this was marring my credit. I offered to pay the debt in full immediately if they could help me clean up my credit by then removing it from my file after fully paid. Every single company, including one credit card did so. It is NOT their duty to remove it - law states it can stay on for 7 years. But the law does NOT state that it must remain for 7 years so it’s a grey area, at least in my state. Whatever you do, one way or another, don’t let them bully you into payment - only you know what you can handle at once right now. And also remember that as long as that debt is outstanding, they are the ones that want something from you. Once they have received the monies, you have no leverage or say so to work with. Food for thought. Good luck!


Sorry I took so long to reply, had a slight “bad” spell with the VA. On my credit report, from all 3, I had a total of 4 derogatory reports. I paid off 2 of the derogatory reports right off the bad (the two low balance ones) with one being reported a week later. The second one didn’t report as paid until Jan 31st. That leaves 2 reports on my credit. 1 that is my debt and going to get paid this month and the second which isn’t but I have no real way to challenge it as the paperwork I have has no information showing the school agreeing to medically withdraw me from classes due to being in the hospital. I’ve got the VA side of the paperwork but the VA social worker didn’t include contacts, written agreements, or any paperwork showing an agreement from the school.

Status reports from the end of the month. Credit initially went up 79 points overall, but it dropped as I used the secure card to pay off 2 of the derogatory and put a balance on it. Though I paid off the balance the day after I put the charges on (on the first card,) it is still showing up with a high available credit usage. I’m thinking that it will flip flop again when the secured card reports for the month but not holding my breath that it will show up immediately as the payment due date isn’t till the 14th even though there isn’t any balance on it right now.

I have 2 secured cards at the moment that I raised the secured balance to $500 each, but the second card still has not hit my credit report almost 2 months after I received it. It says that it reports monthly to the credit agencies but it hasn’t happened yet maybe because it is a new card. The first card, it reported 2 weeks after I opened it and it jumped my credit 64 points right off the bat. Paying the two derogatory reports, those dropped my score 6 points when it first reported at the beginning of January but then the report jumped 21 points when those reports hit the agencies as paid. Right when I hit that high mark though, the credit usage hit my score and it plummeted over 100 points. But I know the balance on both cards is 0 usage now. Probably have to wait until the statement date for the first card (Fed 14) for the new usage balance to hit the credit agencies.

Right now, trying to decide what route I should take now. Should I increase the available balance on the first card as it seems more responsive to changes and they report increases quicker? Or should I go for a third card to add more sources that I have credit available from?


I apologize to you as well for not responding quickly. I contacted those that had derogatory reports on my credit and they turned down the PFD right off the bat. One hung up on me when I mentioned it. But it was a pain to locate them as they were a “bottom feeder” level of collection agency due to the age of the debt. I didn’t admit the debts were mine, even though 3 of the 4 are, and pretty much took the route you suggested on saying I located the information by pulling up credit reports. The 2 derogatory reports that I did pay off, they reported it as payment in full and the “late payments” fell off as well. Not sure how that would look to other companies but it initially dropped my credit score then raised them more then they dropped at the end of the month.


Pacrat100 —

There are many, many versions of credit scores. The one NerdWallet offers, the VantageScore 3.0 is not the same one as the one typically used for underwriting. The FICO score version typically used for underwriting does not differentiate between paid and unpaid collections for scoring purposes. (The newest FICO and the VantageScore 3.0 both disregard paid collections. But I wanted to be sure you were aware there are many scores . . .and while they generally move in the same direction, some factors are weighted differently by various score versions.

Thanks for letting us know what happened. Sorry the PFD did not work out as you hoped.


Been keeping an eye on 2 versions but used the one here on Nerd Wallet as it is easily understandable as you know what goes into it. Both took a major hit (due to the payment of the debt of the card) though the debt was reported far quicker then the payoff. As to the PFD, you and several others had informed me before that it was a longshot. But had to at least make an effort at it. Now I’m just waiting for the debt to be reported as 0 on the first card and for the second account to show up at the credit agencies so will probably be fluctuating some more this month. Nerd wallet reported on the simulator that it predicts a 160 point rise if the credit usage drops to 0 (which is more then the 120 point drop when it was 3/4 usage.)

I use Nerd Wallet for a general idea of what will happen, but it closely resembled a “soft pull” that was done on my credit report by a VA home loan counselor (someone else who is advising me.) Nerd wallet predicted a 64 point rise in my credit score when I opened up the first secured card. When the soft pull was done by the counselor, the score he pulled was a 60 point rise for whatever version of Vantagescore they were using. So there isn’t enough difference between what he sees (mortgage brokers using the system he uses) and what Nerd Wallet reports that keeps me from using it for spot checks. And Nerd Wallet is a lot more accessible as it can take me weeks to get an appointment to see the VA home loan counselor in person.


Good. Glad it’s helping.