Credit Score

How to “Dilute” Your Bad Credit for a Higher Score

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Is it possible to dilute your bad credit with good to boost your score? The Credit.com News & Advice Blog recently received the following comments from one of our readers:

I had a lot of medical collection accounts from an illness about 1 1/2 years ago. I disputed all of the accounts and a couple of the accounts were deleted by all 3 credit reporting agencies. I also have a secured credit card with over a year of good payment history. I’ve never missed a single payment. However, my score didn’t go up a single point when the accounts were deleted. Nothing, just the same old score I had before I disputed anything. I don’t get it. They were serious enough to drag my score into the gutter when they appeared, but now that they’re gone… nothing. It just seems so unfair that we don’t even know how the scores are calculated. It’s like we’re walking around in a giant room in the dark with a blindfold, trying to find a needle in a haystack.

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While common sense may tell you that having fewer collection accounts should lead to a higher score, you may want to leave common sense at the door in this case.  Rather than being like a report card, where a higher proportion of good grades results in a higher GPA, positive changes to credit reports don’t necessarily translate into higher scores.  Credit scores represent “creditworthiness,” which may or may not change with the addition or removal of one or two pieces credit information.

When credit scores evaluate collections, the length of time since the debt went into default tends to carry more importance than the number of collection accounts on the credit report.  So, if the two collections that were removed from your credit report were not significantly more recent than the ones remaining, then it’s not surprising you didn’t see a quick score increase upon their removal.

Check Your Credit For FreeThat said, you should not take this to mean that the removal of negative information will never improve your credit score.  As with all credit scoring calculations, the magnitude of any score change and the time needed for your score to recover will depend on the various components of your credit profile, including your overall payment history, the length of time you’ve been using credit, the number of credit accounts you have, and other factors.

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Since you appear to have had a relatively short credit history and only one credit card in your name, it may take longer for your score to return to it’s pre-collection levels than a score belonging to someone with a longer history and more positive accounts on file.

To help with your score’s recovery, my recommendation is that you start adding positive information to your credit report and not worry about trying to get the remaining collections removed (unless they truly don’t belong to you).  You can do this by obtaining another secured credit card or two, or by being added as an authorized user on the credit card account of someone you trust.

Once you’ve begun to “dilute” those collections with a few doses of good credit, continue to make all payments on time, keep your credit card balances under 25 percent of your credit limits, and when done diluting, only apply for any additional new accounts very sparingly.

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Image: marc falardeau, via Flickr

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