Personal Finance

Collections - low credit score - debts paid- where do I go from here?

  • Last Updated:
  • Feb 15th, 2019 6:04 pm
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote

Collections - low credit score - debts paid- where do I go from here?

I went through a rough patch in the last few years and tried to keep my head above water. I had a LOC and a credit card with CIBC.
I also own my own home. I couldn't keep up and my payment history went to shit and then the LOC and credit card went into arrears and then collections.
I was able to pay it in full ASAP. So, I have worked with someone and completely changed my finances and prioritized things and I am in a much better place. I actually have an emergency account and personal savings.
This all occurred within the last 5 months.

My score is the lowest I have ever seen it (535 on Credit Karma. 543 on Borrowell) and I want to get it back. My payments haven't reported yet.

I thought a credit card would help me rebuild my credit card but I am afraid to apply. I figured I should wait until the credit bureaus are updated and then take a chance. I don't particularly want a secured credit card because that means I have to use cash up front and that will be difficult with my new budget situation. I probably don't have a choice. To be honest, I am a bit surprised that CIBC closed it. I know someone who went through consumer proposal and he still has his credit card.

Will my score go up a bit once the payment shows up at the bureaus?

CIBC says I have an R9 but I am pretty sure that will change once they recognize my payment, right?
I know it won't fall off for 7 years but it's not going to say my debt is unpaid forever, is it?

Any recommendations to help me get my credit situation in order?
I don't have any other credit cards or loans. My cell phone bill is up to date with a few late payments in the past.
14 replies
Deal Addict
Jan 15, 2017
1941 posts
1365 upvotes
Unfortunately, no, the R9 will not change when your credit report is updated. As the account went to collections, the R9 is an accurate coding. (R9 is coded for collections, bankruptcy, written off as bad debt). As you have made the payment, it will update to PAID, but the R9 will not change. The account will also show as Closed by Credit Grantor.

Do you have any other credit cards? If not, the most efficient way to improve your credit profile is to use credit cards, preferably 2 different cards. As your credit score is low, I would not recommend that you apply for an unsecured card. Your best choice is to apply for a secured credit card and proceed from there.

Just know this - there are no magic instant fixes to improving your credit score. Credit scores improve over time as you demonstrate responsible use of credit over the long haul.

Best of luck. And congratulations for clearing up the situation that you were in.
Deal Fanatic
User avatar
Mar 23, 2008
7970 posts
4715 upvotes
Edmonton
Your credit situation didn't go down the sewer overnight, and it's not going to get fixed overnight, either. It will probably take longer to fix than it took to destroy, though.

I'd wait till your payments get processed and reported. That would be step one.

Second, decide how important it is to you to try to fix your credit "right now". Are you trying to get more credit? Why?

Third, after the dust settles for a month or two, figure out where you're at. At that point, you can make an informed decision about applying for a secured card or not. I believe Cap1 will let you apply for an unsecured card, but if that doesn't go through, may offer you a secured card option. It might be a $75 deposit for $300 credit limit, so the impact to your budget should be minimal.

Fourth, check out this thread with regards to the R9 account:
r9-credit-rating-what-do-808965/
Paying it off doesn't mean that you didn't have an account that went to collections, unfortunately. Your credit history reports things that happened, and your account going to R9 status happened. It will fall off in 7 years.

C
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote
Thanks. It actually feels really good to have savings and be debt free. I will celebrate again in 7 years when my bureau is back to 737(that’s where I started Face With Rolling Eyes)

I am prepared for the time it will take. I just want to start as soon as possible.
My plan was to get a low limit card and spend my monthly budget on it and then make payments. Basically, use the credit card instead of my debit and then pay it off right away.

I don’t have any other credit cards or debt except my mortgage (I have never been late or missed a payment.) I have been doing a lot of reading and I think I understand utilization but I am not sure why 2 credit cards would be better. Can you explain?
Newbie
Mar 4, 2016
51 posts
16 upvotes
Been there myself ... get a capital one guaranteed card pay it off monthly and watch your score work it’s way upward it will take e Time but it will creep up
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote
I don’t have any credit right now so it’s really about trying to improve my payment history. I just want to proving myself as soon as possible.

Why are 2 credit cards better than one? Right now it says my utilization is 75%. The payments haven’t been removed from my credit bureaus. Once they are updated I am assuming it going to drop to almost nothing considering I don’t have any credit at all. Both scenarios are undesirable.

$75 deposit isn’t horrible. I assumed it would be a lot more and that would cut into bi weekly budget. My plan is to use the credit card for everything and then pay it off immediately. Is it better to pay at the end of the month or pay the bill immediately after the purchase?
Member
User avatar
Aug 21, 2004
213 posts
289 upvotes
Moncton
I had a similar situation. Unfortunately one of my CCs that went to collections was with Capitol One so they wouldnt approve an unsecured card with them for at least another year. I was able to get a card from Canadian Tire Bank. You might have similar luck. Might be worth a shot to try something like PC financial also? Not sure how strict they are though.
Member
Sep 17, 2016
255 posts
89 upvotes
I had a credit score around 550 ... I still got approved for a Walmart MC and Capital One Costco MC so try those when applying. They even increased my limit from $1000 to $2500 as soon as the score went up tp 580

As far as I know, you are far better off not paying at all your debt once it went into collections, since the note on your credit report will stay there for 6 years since the date of the last payment received ...
Deal Fanatic
User avatar
Mar 23, 2008
7970 posts
4715 upvotes
Edmonton
PriceMatchMe wrote:
Feb 9th, 2019 9:48 am
I don’t have any credit right now so it’s really about trying to improve my payment history. I just want to proving myself as soon as possible.

Why are 2 credit cards better than one? Right now it says my utilization is 75%. The payments haven’t been removed from my credit bureaus. Once they are updated I am assuming it going to drop to almost nothing considering I don’t have any credit at all. Both scenarios are undesirable.

$75 deposit isn’t horrible. I assumed it would be a lot more and that would cut into bi weekly budget. My plan is to use the credit card for everything and then pay it off immediately. Is it better to pay at the end of the month or pay the bill immediately after the purchase?
There’s a whole thread in here on improving your credit score. But the best way is to pay it just before your statement is generated, so low utilization is reported. If you rack it up so your statement balance is high, that’s likely going to be what’s reported, which will adversely affect your score.

Some CC companies don’t report on the statement date, so watch that. But all mine do.

C
Sr. Member
Sep 24, 2018
731 posts
353 upvotes
Capital One Secured Card, thats about all youll be able to do with those scores and with an R9 showing in the last two years.

It will take awhile to rebuild, at least a min of a year of payments.

I had a rough patch, took two years to recover to the point where I'm IA'd for everything, but I was cash healthy so I didnt miss it, just some inconveniences along the way
Newbie
Aug 2, 2018
63 posts
60 upvotes
Takes two years for the derogatory info to go stale. In the meantime, have a saving plan and build up your assets.
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote
Techiedude wrote:
Feb 11th, 2019 2:03 pm
Capital One Secured Card, thats about all youll be able to do with those scores and with an R9 showing in the last two years.

It will take awhile to rebuild, at least a min of a year of payments.

I had a rough patch, took two years to recover to the point where I'm IA'd for everything, but I was cash healthy so I didnt miss it, just some inconveniences along the way

What does IA mean?
Sr. Member
Sep 24, 2018
731 posts
353 upvotes
PriceMatchMe wrote:
Feb 11th, 2019 7:59 pm
What does IA mean?
Instant Approvals

Get yourself the Capital 1 Secured Card, they may even give you one without a deposit. Many started here, we all know it works, then move onto other cards
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote
I received a letter in the mail inviting me to apply for the Guaranteed Capital One Mastercard. 2 options...Gold or Secured. They couldn’t tell me if my score would put me in the secured deposit category. Is that considered an IA?

These companies are tracking credit bureaus. When I was dealing with paying off my debt I received countless offers for loans from Mogo and Fairstone. They were relentless.

Thanks for all the advice. I am anxious to get moving on this...the next update on my credit bureau is February 15 according to Borrowell.
[OP]
Newbie
Jan 25, 2019
5 posts
1 upvote
Update:

I just wanted to let anyone that is interested know that my credit karma (Transunion) jumped 58 points today. I paid off an outstanding Rogers bill in full and the bureau was updated.

58 points to 596!
I am hoping that I am over 600 when the CIBC payments are updated on the bureaus.

I don’t know why Equifax hasn’t updated yet. If I am over 600 I might try for a Simplii Financial credit card since I have almost 12k in my accounts there. However that is CIBC so they may say no way. Maybe they will look at that and take pity on me with a small limit?

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