How to get past my FICO plateau?

[keitheii]

I used to have excellent credit (830s) but a few rounds of layoffs during bad economic times with long term unemployment forced me into BK in 2002 (chapter 7, discharged the debt) and again in 2015 but negotiated my own settlements and dismissed the BK but still have the stinging on the report from filing the BK.

Some of the credit information services I use (like CreditWise) shows my available credit ($13K) as "average". Everything else shows "excellent" and "good". I plan on buying a new car next year, and want to get my score up as I want to start looking for my first home in 1.5 years. What's a good way to help bump the credit score up other than the obvious time, low utilization ratio, and responsible payment history?

[justbroke]

There is no way. You will have a theoretical ceiling for your FICO until the public record (bankruptcy) falls off the report in 2022. However, if you're not already around a FICO 8 of 740, then there are other factors -- other than the public record -- pulling you down. One of the largest contributors to the FICO (35% of score) is utilization. Keeping utilization below 10% (reporting 9% or less), along with no late payments reporting at all, will get you near the highest FICO scores (based on other factors such as presence of public records and/or inquiries).

The other factor is credit type. If you don't have a currently reporting "installment" loan, it's good to have one on there. So purchasing a new car will help, but purchasing it so close to buying a home could be problematic (DTI issues plus the "freshness" of the new trade line with near 100% balance).

As for a good installment loan, some have found success opening an account with PenFed, then taking about $2,000 in savings and obtaining one of their secured installment loans. Wait for it to report once, then pay it down to 9%. The next payment date on that thrift savings secured loan should jump far into the future. You can then have that line reporting for a long time with just about $175 of your money "tied" up. (PenFed releases the holds on the $$$ in the share savings account as you pay down the loan.) This open installment line "hack" has been known to raise credit scores by as much as 40 points (FICO 8 model). (If you hit the theoretical FICO score with that bankruptcy reporting, the hack may not raise it 40 points.)

That's all I know!

[keitheii]

There is no way. You will have a theoretical ceiling for your FICO until the public record (bankruptcy) falls off the report in 2022. However, if you're not already around a FICO 8 of 740, then there are other factors -- other than the public record -- pulling you down. One of the largest contributors to the FICO (35% of score) is utilization. Keeping utilization below 10% (reporting 9% or less), along with no late payments reporting at all, will get you near the highest FICO scores (based on other factors such as presence of public records and/or inquiries).

The other factor is credit type. If you don't have a currently reporting "installment" loan, it's good to have one on there. So purchasing a new car will help, but purchasing it so close to buying a home could be problematic (DTI issues plus the "freshness" of the new trade line with near 100% balance).

As for a good installment loan, some have found success opening an account with PenFed, then taking about $2,000 in savings and obtaining one of their secured installment loans. Wait for it to report once, then pay it down to 9%. The next payment date on that thrift savings secured loan should jump far into the future. You can then have that line reporting for a long time with just about $175 of your money "tied" up. (PenFed releases the holds on the $$$ in the share savings account as you pay down the loan.) This open installment line "hack" has been known to raise credit scores by as much as 40 points (FICO 8 model). (If you hit the theoretical FICO score with that bankruptcy reporting, the hack may not raise it 40 points.)

That's all I know!

That's awesome, I never knew about that hack. I assume there's a hard pull involved in getting that secured loan? My Amex application I just did will have me reported at 2 inquiries in the last year, one of those should drop off next month or so, but not sure how having 2 hard pulls (if I do the PenFed loan) will affect my application for car financing next year. So the BK will fall off in 2022 and not 2025? I thought only chapter 13 stayed on the report for 7 years and chapter 7 for 10?
Thanks again, very helpful info!

[justbroke]

That's awesome, I never knew about that hack. I assume there's a hard pull involved in getting that secured loan? My Amex application I just did will have me reported at 2 inquiries in the last year, one of those should drop off next month or so, but not sure how having 2 hard pulls (if I do the PenFed loan) will affect my application for car financing next year. So the BK will fall off in 2022 and not 2025? I thought only chapter 13 stayed on the report for 7 years and chapter 7 for 10?

There is no credit check for the secured loan. The hack is from the MyFICO forums. While there may be other credit unions where the hack will work, this one definitely works as paying down 90% of the debt, is like making payments in advance and it resets the next payment due far into the future!

If you want the tradeline for 5 years, make sure you get a 5 year loan. I did a 2 year one and paid it down. Then I accidentally paid it off and my score decreased by 20 points! FICO apparently likes to see an "open" installment... but then gets upset if you have more than 2 open installments.

[keitheii]

Got it, thanks I'll check it out for sure. And the BK falling off in 2022? A ch7 will fall off in 7 years?

[justbroke]

Got it, thanks I'll check it out for sure. And the BK falling off in 2022? A ch7 will fall off in 7 years?

Chapter 7 is 10 years from filing. I was so focused on your first date of 2002, that I read 2012, and then wrote 2022! It would be 10 years from the 2015 filing; that would we 2025.