I am trying to rebuild credit after many years of terrible. I started with financing a truck in may 2017 because i drive for a living and have to have a very reliable vehicle. i had saved 15k and financed a f150 at a very high interest rate. I now owe 22k on vehicle and have never been late or missed pymt. I then went and financed furniture from conns march 2018 for 1800.00 at a very high interest rate and am down to 1300.00 and never late never missed pymt. I just decided to get a secured credit card about 2 weeks ago. I thought I was doing good. had ky score up to i believe 630. i pulled my credit at time of getting card and I have 2 bad hits on my credit that i can see. One from 2017 for 1300.00 a trip to hospital and another was from january of 2019 which i didnt even know i owed for 100.00 (my sons therapist). I thought paying off old debts would be smart so I paid off the 100.00. Boom credit dropped to 588 for closing a account. So now im not sure what to do. when i spoke tonthe creditor for then 100.00 andntold them i was working on my credit they said since i contacted them and paid it off they would take it off sounded like it wouldnt hurt but maybe improve my score. Well it didnt. So again not knowing what to do. I have enough money to pay off the conns acct but wonder if i should since this happend. I also have some money put away that could really lower what i owe on my truck but right now i just keep that money as a emergency fund kind of thing because for some reason inhave in my head making on time payments is better than low debt. i could be completely wrong. Any advice on how to try to get my score back to where it was. Any other general advice in particular. Your answers and thoughts are much appreciated.
Hi @mailbypigeon, and welcome to the NerdWallet community. Credit can seem illogical and frustrating at times, and I’m sorry you are having difficulty rebuilding. I am surprised at that big a drop from simply repaying a credit account. Paying off a debt CAN result in a lower score, not because you paid off a debt, but because it may result in fewer credit accounts.
It sounds as if all your accounts are installment loans (the kind where you have even payments over a set amount of time). Is that correct?
Credit scores reward having different types of accounts (like both a credit card and an installment loan). A credit card (secured or unsecured) can help IF you pay on time and use only a small portion of your credit limit. Credit experts recommend going no higher than 30%, and lower is better. If you are able to get a secured card AND to keep the balance ultralow compared to your limit (and stay on top of your other payments), I believe you’ll see improvement. Here are some NerdWallet resources that may be useful:
- How to Rebuild Credit
- What Is a Secured Credit Card?
- Why Did My Credit Score Drop After Paying Off Debt?
Please let us know if we can help further.
@mailbypigeon also to a credit builder loan can help bring up your score. I’m not one of the financial advisors here, I’m just another person trying to repair my credit and bring up my credit score. Credit Builder loans are good for people that have bad or thin credit. Here’s an article that explains credit builder loans:
I hope this helps you out. If, it doesn’t apply to your circumstances, I understand.
I am wondering as well. I have nothing in collections I have an auto loan payment which has never been late. I have 2 credit cards which right now have zero balances. I have ben told to use them a little. Buy a tank of gas and then pay it off and that will help increase my score. I am doing that and my eqifax score dropped 32 points-showing that was the only change. This was on Kredit Karma-it will say good job, you are keeping your card usuage below 10% and then my score drops. What am I doing wrong?
Hi @cindy.armistead. That’s super-frustrating.
Is your score going down with all three bureaus? Or just Equifax? I would first check credit reports, if you have not done so already. If someone has tried to use your credit, that could account for it. So could a mistake in which some information was entered incorrectly or some other type of mixup. If it were me, I would pull all three credit reports and check them carefully for clues.