Q. I just paid off a closed account with a $2160 balance this month. Will this have a positive affect on my credit score? The account has been closed for years. This was my last debt (other than student loans). I have no other loans, no collections, all other debts were paid in full, and I am an authorized user on a card and I’ve kept utilization for that card under 30%. My vantage scores 3.0 are in the 600s, My FICO 8 and 9 scores range from 550-low 600s. I really want to be able to rent an apartment, will this help?

Dear Reader,

Congratulations on paying your last debt. It’s certainly an accomplishment and one of the main steps you needed to take to continue rebuilding your credit. The FICO and VantageScore scoring models look at the same primary factors to calculate your score; they just consider them differently. That’s why your scores vary with each scoring model. You’ll find that your VantageScore is typically higher than your FICO score. So, focusing on boosting one score will help you with the other. I suggest you focus first on increasing your FICO score since it’s the score most widely used by lenders.

The most important factor influencing your score is your account history, which includes your record of payments. Even after you pay your collections, you will still be dealing with their negative effects for a while. The good news is that their negative impact lessens over time, making it crucial that you continue to make timely payments on your credit card and student loans. Another important factor is your credit utilization ratio, which you already know to keep below 30%. Then, you have to look at how long you’ve had credit, your credit mix (how many different types of credit you have), and how often you ask for new credit. Too many new credit inquiries in a short time will lower your score. Yet, I suggest you get another credit card or credit building loan to add more positive activity to your credit report. You have to be strategic and only apply for credit cards you are likely to get. You can get a secured credit card or a credit card from the same bank that issued your current credit card, even if you are only an authorized user. Before you apply, review the creditor’s requirements to be sure you meet their criteria. Once you get your new card, continue to pay on time, and keep the utilization ratio low.

A quick way to boost your score is to work with rent/utility reporting services. For a monthly fee, these companies report your rent and utility payments to the credit bureaus. A free alternative is Experian Boost, which works similarly, but only reports your data to Experian and does not influence all credit score versions. Another often overlooked method to boost credit scores is to make sure the credit reports are error-free. Get a copy of your reports at www.annualcreditreport.com and review them carefully. If you find any mistakes, dispute them directly with each credit bureau online.

Now, if your primary concern is to improve your score to rent an apartment, you may have other options to do so with your current score. Offering several months up-front, working with a private lender instead of an association, submitting recommendation letters, and signing your lease with a co-signer are some strategies that could help you rent an apartment without stellar credit. You just need to show the landlord you are a reliable tenant.

The road to rebuilding credit is not the same for everybody. So, if you want a personalized strategy to boost your score and get rent-ready, feel free to reach out to an NFCC certified financial counselor. They can review your overall financial situation and credit reports to help you meet your goals. Good luck!

Sincerely,

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

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