Just went thru a very tough season the past 18 months - divorce after 26 yrs, my mom passed away from ovarian cancer, my teenage daughter was sexually assaulted and hospitalized. All this to say that I have always had a healthy credit score (760+) and at this point it has taken a huge hit due to late payments and medical bills. I have been able to get debt free except for a $375 car payment, but my score is sitting at 580 and I cant qualify for a mortgage or credit card. I know the general theory is that it takes time to rebuild, but is there anything I can do to help speed along the process and get the score healthy again faster?

Much thanks in advance.

1) Wow. Sorry for all of that.
2) Make payments on time from here on out and open new accounts when you can.

Hopefully someone can confirm or deny this, but I remember reading that having a more diverse set of open accounts helps too, i.e., having loans and credit in different sectors like credit cards, car, house, etc.

Get a secured credit card. Basically the issuing bank requires you to collateralize your card by buying a certificate of deposit up front. That basically erases the risk of default so they'll issue cards to people with poorer credit.

This seems to list a bunch and summarize the features.
https://www.creditcards.com/secured/

Trying to make lemonade out of lemons.

Why don't you try to use this tough time as a good excuse to totally revamp your financial habits and try to live without credit or debt to the best of your ability.

There are some banks that will manually underwrite you. If you have 50k saved towards a 200k house I am pretty sure you will be able to find a bank that will lend you the rest without a credit check. Especially if you have the income to support it.

I'm saying this as someone that used to be really worried about my bad score. Then i borrowed and improved my score and now I'm actively working towards not having a credit score at all by paying off all debt.

There are some portions of your score that just take time unfortunately. Late payments and # of credit inquiries.

There are other things that are just looking at the last month. Credit utilization, overall debt load, etc.

What that practically means is...

1) Do not close credit card accounts! You want to have a lot of available credit, but very low balance to make sure your utilization is low.
2) Do you try to open new accounts unless you are sure to use it/need it.
3) It will take a few years to recover from delinquencies, but it will go faster than you think

I disagree. I've done it both ways and I believe the best way to live is the debt free life. Less stress and allows you to invest more since no payments to other people. With very few exceptions all of the wealthy people that I know have zero or limited debt.

nactownag said:

---

I disagree. I've done it both ways and I believe the best way to live is the debt free life. Less stress and allows you to invest more since no payments to other people. With very few exceptions all of the wealthy people that I know have zero or limited debt.

---

If you pay 30k for a car up front instead of paying for it over 5-6 years, you do not have more money to invest. And reasonable amounts of debt should not be a source of major stress.

nm

Your income is the best way to build wealth. Me not having a $500/mo car payment allows me to invest more each month

Will do. Thank you!

Quote:

---

Me not having a $500/mo car payment allows me to invest more each month

---

Can you not see that you don't have to pay $500/month because you spent it all up front?

We both have 20 grand in our accounts and need new cars. You pay cash for your car while I finance mine and invest the 20k. Yes, you have a few hundred extra per month to invest, but I'm already 20k ahead of you, and if I invest in a decent mutual fund, I'm going to continue to pull away (with respect to that 20k. Obviously other elements of our lives will affect overall savings).

The only good reasons to completely swear off debt are 1) you have a spending addiction and truly can't control your behavior, 2) you don't want to deal with the math, or 3) you're unreasonably risk averse. Now, you definitely need to use debt intelligently. But if you and your rich friends avoided it the last ~10 years, all of you without a doubt left money on the table (likely quite a bit).

DTJ - I don't even share that I use debt to invest (except for TA), because so many people react so strongly to the idea.

A) If someone is making the baseline decision to take-on-debt-and-invest versus no-debt-and-no-investment, I think the answer boils down to math/expected return.

B) If someone is using debt to finance a lifestyle above their means, then debt aversion makes a ton of sense.

I think a lot of the Dave-Ramsey vs debt-is-a-tool debate comes down to B vs A.

Set every debt payment you have to pay at least the minimum every single month as a safety net to late/no payments.

Everyone should be doing this in this day and age regardless of socio-economic status or credit score. It's just too easy to prevent what is perhaps the most impacting negative thing that can happen to you outside of BK and court judgments.