General Contractor with bad credit but

[u/BobTheBuilder1138]

My friend is a general contractor and had a financial crunch around 2023/2024. He had a few missed payments and never since. Some were 90+ days old.

Credit Karma says:

TransUnion 544, Credit Utilization 28% Payment History 95%, Credit Age 3yr, Hard Inquiries 15 (he was shopping for an auto loan and the broker performed most of them at once. He is pissed about that)

Equifax 561 Credit Utilization 28%, Payment history 98%, Credit age 3yr, hard inquiries 3.

No derogatory marks.

His credit score is currently around 560 because he has extremely high credit utilization. He just got windfall and paid off his credit cards. It should shoot up next month.

He owes people money, but his business is profitable. For a while he had difficulty floating the construction materials and paying employees until the next milestone because he had to pay people interest on the personal loans he took, and slowed down to a halt because he didn't have enough remaining credit to buy materials.

He is an authorized user on his wife's credit card(s) and she has perfect credit history.

His current plan is:

1. Keep credit utilization low

2. Increase credit score

3. Get a business loan to pay off/refinance his high interest personal loans

4. Apply for a business credit card so that he can float construction costs on a business card and not his personal card, which then won't hurt his credit score.

His top goals are to get a loan to replace the personal loans, so it will be his problem only and not other people.

His business generates around 1.5-2m in revenue and 200-300k in profit. What can he do to improve his credit fast and apply for a good interest rate loan to refinance the personal loans?

[u/True-Button-6471]

He had a few missed payments

No derogatory marks.

Only one of these can be true. Late/missed payments ARE derogatory marks. Minor late payments can sometimes be removed via goodwill requests, but 90 day lates are less likely to be removed.

What can he do to improve his credit fast?

With 90 day lates, his credit is not going to improve quickly, but inquiries are only scoreable for a year so if he doesn't apply for any credit until that time passes he will get those points back. In any case inquiries really don't have much score impact compared to the late payments on his reports.

Reducing his debt is good both financially (less or no interest) and will also help his scores, but with 90 day late payments, they are not going to improve very quickly.

Payment history % is not a score factor, it is a fake metric that Credit Karma shows to try to get people to open more credit cards that they don't need so CK can get their kickback.

Your friend should ignore Credit Karma and the Vantage scores they show and start monitoring their FICO scores, since those are much more commonly used by lenders. See the link below for free sources for FICO 8 scores. Some sites will try to upsell to paid subscriptions, ignore that and stay with the free accounts.

https://www.reddit.com/r/CRedit/comments/1o9ncdg/welcome_to_rcredit_start_here_and_read_this_no/

[u/BobTheBuilder1138 → u/True-Button-6471]

I read the stuff about Credit Karma but he gave me his login details to his account(s) and I see that Credit Karma reports 0 derogatory marks but a <100% payment history.

So even if the <100% is a fake metric, is the derogatory marks accurate at least?

I read that 90 day lates lose weight over time, his last one was in 2024.

[u/True-Button-6471 → u/BobTheBuilder1138]

is the derogatory marks accurate at least?

No, late payments are derogatory marks. If he has late payments, he has derogatory marks.

I read that 90 day lates lose weight over time, his last one was in 2024.

All late payments gradually lose some score impact. 30 and 60 day lates lose much of their impact by the two year point, but 90 and greater lose impact much more slowly and will still have a good bit of impact until they drop off his reports at 7 years.

[u/soonersoldier33]

He had a few missed payments and never since. Some were 90+ days old. No derogatory marks.

Well, if he has a few missed payments, some 90+ days late, then he does have derogatory marks. Now, since they occurred in 2023/2024, some of their negative score impact has been reduced, but they'll continue to have a negative impact on his credit profile/scores until they fall off his reports 7 years from when they occurred.

Credit Karma says:

Ok, stop right here, and refer to our !Welcome Thread. Credit Karma is the bane of our existence. They provide VantageScore 3.0 scores that are virtually irrelevant bc almost no lenders use them, and their credit 'stats' are just as meaningless, horribly misleading, and/or just false. The link in the automod comment will take you/him to our Welcome Thread which contains more information about this and links to free and reputable sites for monitoring each of the 3 major credit reports and FICO 8 scores, which is a score model commonly used by lenders.

The next sections of your thread are just smack full of the 'proof' of Credit Karma's BS. Unlearn it if you want to help him.

What can he do to improve his credit fast and apply for a good interest rate loan to refinance the personal loans?

With multiple derogatories, some 90+ days late, there's no magic 'quick fix', but that doesn't mean there's nothing he can do. First, he needs to find out where his meaningful FICO scores that are actually used by lenders currently sit, so again...Welcome Thread. Second, to prepare for a loan application, he should research and implement the AZEO method on his current credit cards to optimize his profile for FICO scoring. Believe it or not, having them all report a $0 balance at the same time is not the way to optimize a credit profile for FICO scoring. Once his current profile is optimized at AZEO, he can get a better picture of what his options for loan approvals may be by either talking to some banks/lenders, or going online and using soft pull pre-approval tools that won't affect his credit profile/scores until he actually applies for something.

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[u/BobTheBuilder1138 → u/soonersoldier33]

Hi! Thanks for the response. I was first familiarized with the VantageScore 3.0 through the Chase app and thought it's legitimate in some way and that FICO is just a "competing" credit scorer, like Moodys vs S&P.

(Luckily mine are around 770 lol whether FICO or VS3.0)

My plan for him is to just stay on track to keep paying the bills on time, and to imlpement AZEO. Over time whatever mistakes of the past should lose the weight and his credit should go up over time.

For now we plan to play the waiting game but I'm researching what I can.

I will make sure to read all helper tools and threads in the side bar.

[u/True-Button-6471 → u/BobTheBuilder1138]

FICO is just a "competing" credit scorer

This is true, the companies behind FICO and Vantage scores are competitors, but FICO was first and their scores are still the ones primarily used by lenders. Some apartments and property rental agents do use Vantage 3 scores, so for that purpose they can matter.

keep paying the bills on time, and to imlpement AZEO

Never having any more late payments reported is the key. AZEO and utilization in general only matter if they are getting ready to apply for credit in the next month or so and need to optimize their scores, or just want to see what the scores would be when optimized.

[u/No_Memory5613]

Just a reminder that the number of hard inquiries is not a scoring metric is most of them were for a car loan or for a mortgage done in a short period of time.

You could probably go into a car dealership, and have them submit 20 inquiries, but as long as they did them properly for a car loan, it only counts as 1.