Sometimes you get so close to a goal that you’re not even disappointed. In fact, you’re inspired to keep going because of all the progress you’ve made.
That would describe CredEvolv client John S.
John came to us with a credit score of 554. He needed to improve it to 620 to qualify for a mortgage, but set a personal goal of 650. He paid down his credit card balances and his counselor had some collections accounts removed from his credit report.
Eight months later, he ended up with a 94-point credit score increase. That put him on the verge of achieving his goal with a 648 score!
Why are high credit card balances so bad?
Having a high utilization ratio can hurt your credit scores – even when you make the minimum required payments on time every month. It also makes it increasingly difficult to qualify for more credit. In addition to the impact on your credit score, high credit card balances can increase your debt-to-income ratio (DTI).
Lenders look at your DTI ratio to gauge how much of your income is already tied up in debt payments. A lower DTI signals to lenders that you have room in your budget to take on more debt without overextending yourself. On the other hand, a higher DTI might raise red flags, suggesting you could struggle to manage additional monthly payments.
In general:
- A DTI below 36% is considered good and indicates you have a manageable level of debt.
- A DTI between 36-49% is acceptable but may make it harder to qualify for some loans or the best interest rates.
- A DTI above 50% could limit your borrowing options and indicate that you’re at risk of becoming overwhelmed by debt.
What can and can’t be removed from my credit report?
As we discussed in one of our Credit Education blogs, it’s important to know what can legally come off your credit report and what must remain. Here’s the truth: Better credit is not about erasing your financial past. It’s about correcting inaccuracies and improving your credit going forward.
There’s a lot of misinformation out there. Some so-called credit repair companies claim they can remove all derogatory information from your credit report. But this simply isn’t true. In fact, it’s illegal to remove accurate information, even if it’s negative.
Under the Fair Credit Reporting Act (FCRA), credit reporting agencies are required to report accurate, verifiable information. If you missed a payment or defaulted on a loan, for instance, that information can legally stay on your report for up to seven years. Bankruptcies can remain for up to 10 years.
At CredEvolv, we want to set the record straight: no one can legally remove accurate, negative information from your credit report. What the certified, nonprofit counselors on our platform can do, however, is help you dispute any inaccuracies or outdated information that may be hurting your score unfairly. They are trained to spot errors and unfair practices on your report. This gives you the best chance of improving your credit by removing anything that doesn’t belong.
In John’s case, collection removals and a lower DTI put him two points away from his personal goal when he started on the CredEvolv platform. That’s what we call a winning combination!
Read more credit success stories here.