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Rebuild Your Credit While Paying Off Debt

Written by Hannah Locklear

Hannah Locklear

Editor

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

See full bio

Last updated on May 13, 2026

Summary: You can rebuild credit while paying off debt by focusing on credit utilization below 30%, using credit builder products, and communicating with creditors before missing payments. Solo can help you respond to debt lawsuits properly, and innovative fintech solutions like Remynt are transforming debt resolution into credit-building opportunities.

Dealing with debt feels overwhelming enough without watching your credit score tank in the process. But what if we told you that paying off debt and rebuilding credit don't have to be separate journeys?

In fact, with the right strategy, you can actually use your debt resolution process to improve your credit score faster than you might think.

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Most people face a broken debt collection system that destroys credit

Traditional debt collection creates a vicious cycle. When you fall behind on payments, your credit score plummets. When debt collectors start calling, the fear and shame make you want to avoid the problem entirely. Meanwhile, your credit continues to suffer, making it even harder to get back on track.

Gwyneth Borden, founder and CEO of fintech company Remynt, experienced this firsthand. After falling behind on bills, she assumed that paying off her collection accounts would automatically improve her credit score. She was wrong:

"I was finding that my credit was not improving. I didn't realize that paying off collections does not improve credit scores because credit scores are based on open accounts.”

This revelation sparked her mission to transform debt resolution, and her insights can help you rebuild credit while paying off debt more effectively.

Credit utilization is the most important factor for rebuilding your score

If you're trying to rebuild credit while paying off debt, understanding credit utilization is crucial. Credit utilization—the percentage of available credit you're using—accounts for about 30% of your credit score, making it the most impactful factor you can control. Gwyneth explains:

"Utilization is the number one thing that really affects credit scores. If you can in any way look across all of your cards and get to no more than 30% being utilized at any given time, that will start to see your score creep up pretty significantly."

Even better? Aim for 10% utilization if possible. While 30% is the commonly cited threshold, keeping your utilization in the single digits can boost your score even more.

Let's consider an example.

Example: Marcus was laid off during COVID and missed several credit card payments. He's now working two jobs with $6,000 total credit card debt across three cards with $10,000 in combined credit limits. His 60% utilization is killing his credit score. By aggressively paying down balances to get under $3,000 total debt (30% utilization), Marcus could see his score improve by 50-100 points within a few months, even while still carrying debt.

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Opening a new credit card can actually help rebuild your credit

Here's something that might surprise you: sometimes opening a new credit card can help you rebuild credit while paying off debt. Before you panic, hear us out.

If you have $6,000 in debt across cards with $10,000 in total credit limits, you're at 60% utilization. But if you open another card with a $5,000 limit (bringing your total available credit to $15,000), suddenly you're at 40% utilization without paying off a single penny.

The key is discipline. Open the new card, put it in your freezer or safe, and don't use it. Focus on paying down your existing balances while benefiting from the improved utilization ratio.

Respond to debt collection lawsuits fast with Solo.

Credit builder products let you improve your score without taking on debt

One of the most effective strategies involves credit builder products that establish positive payment history without traditional debt.

"For $10 a month, you can build your credit," Gwyneth notes. "There are also savings programs where you can basically save money and then pay to get credit building."

Credit builder loans work by holding your "loan" amount in a savings account while you make monthly payments. Once paid off, you get the money back—plus months of positive payment history.

Other credit-building opportunities include rent reporting services, utility payment reporting, and secured credit cards that require a deposit but function like regular credit cards.

Example: Trina went through a messy divorce and was left with joint credit cards in her name. While working to pay down $8,000 in balances, she also signed up for a $10 monthly credit builder loan and had her rent payments added to her credit report. These positive tradelines helped offset the negative impact of her high credit card balances, allowing her score to improve even before she finished paying off her debt.

You actually have multiple credit scores for different purposes

Many people don't realize there isn't just one credit score. You have multiple scores depending on the scoring model and type of credit you're seeking.

"There's a credit score for each different product," Gwyneth explains. "There's a bank card credit score, a mortgage credit score, and an auto credit score."

Additionally, newer scoring models treat paid collections differently than older models. Newer FICO models don't penalize collections paid in full, while older models still count any collection negatively.

Understanding your rights under the Fair Debt Collection Practices Act (FDCPA) helps you negotiate from strength. According to 15 U.S. Code § 1692f, debt collectors cannot use "unfair or unconscionable means" to collect debts, including:

Using or threatening to use violence or other criminal means to harm the physical person, reputation, or property of any person.

Choose the snowball method for faster psychological wins

When rebuilding credit while paying off debt, the order matters both financially and psychologically.

The avalanche method targets highest-interest debt first, saving money over time. The snowball method focuses on smallest balances first, creating quick wins.

"I personally found the snowball method to be better," Gwyneth shares. "Instead of paying five bills a month, now you're paying four bills a month. It just makes things easier."

The psychological benefits often outweigh the mathematical advantages. When you're stressed about debt, those quick wins provide crucial motivation to stick with your plan.

Communicating with creditors before missing payments protects your credit

Perhaps the most important strategy for rebuilding credit while paying off debt is proactive communication with your creditors. Most people avoid their creditors when they're struggling, but this approach usually backfires.

"If you owe $50 but you pay $25, you're considered late still because you didn't pay the minimum," Gwyneth warns. "So it's important to pay something. If you're in that situation, reach out to your creditor and see if they will, out of goodwill, not report it late."

Many creditors will work with you if you contact them before missing a payment.

They might:

Accept a partial payment without reporting you late
Offer a temporary payment reduction
Provide a forbearance period during financial hardship

Example: Bobby noticed he could only afford $75 of his $150 minimum credit card payment after his hours were cut at work. Instead of just paying $75 and accepting the late payment, he called his credit card company. The customer service representative offered a three-month hardship program that reduced his minimum payment to $50 with no late fees or credit reporting penalties.

Debt settlement affects your credit differently than paying in full

If you're considering debt settlement as part of your strategy to rebuild credit while paying off debt, understand the credit implications. Newer credit scoring models don't penalize paid-in-full collections, but settled debts may still impact your score negatively.

However, settlement can still make sense in certain situations, especially if you're facing a debt lawsuit or can't afford to pay the full balance.

Settle your debt for less with SoloSettle.

If you do settle a debt, try to negotiate for a "pay for delete" agreement where the creditor removes the negative mark from your credit report entirely. While creditors aren't required to agree to this, many will, especially if you're offering a reasonable settlement amount.

Credit rebuilding follows a predictable timeline with consistent effort

Rebuilding credit while paying off debt takes time, but follows predictable patterns.

"It really can take one to three years depending on other factors on your credit report," Gwyneth explains. "But with a year of really good on-time payments and paying more than the minimum really does help significantly."

Here's a realistic timeline:

Months 1-3: Get current on all accounts and reduce utilization below 30%

Months 4-6: Add credit builder products and alternative credit reporting

Months 7-12: Continue debt paydown while maintaining perfect payment history

Year 2+: Optimize accounts and consider strategic moves

Mortgage lenders may require you to pay old debts that fell off your credit

Even if you successfully rebuild credit while paying off debt, there's one scenario that catches many people off guard: applying for a mortgage. Gwyneth warns:

"Even though a debt may have fallen off your credit reports, theoretically it still exists. A lot of mortgage companies will find old debts that you haven't paid and basically tell you if you don't repay that debt, they won't give you the preferred interest rate."

This is why completely resolving debts—rather than just waiting for them to fall off your credit report—often makes sense for long-term financial planning. The difference between a 3% and 6% mortgage interest rate on a $300,000 home is approximately $300,000 over the life of the loan.

Professional debt resolution services can accelerate credit rebuilding

While you can rebuild credit while paying off debt independently, professional help sometimes accelerates the process. Debt resolution credit building companies like Remynt pioneer approaches that combine debt resolution with active credit building.

Traditional debt settlement companies focus solely on reducing what you owe. Newer fintech solutions partner directly with creditors to create scenarios where you resolve debt while building positive credit history.

The key is finding solutions that prioritize your financial wellness over fear-based collection tactics.

4 steps to rebuild your credit while paying off debt that you can start now

Rebuilding credit while paying off debt requires strategy, patience, and consistent action. Here's your immediate action plan:

First, calculate your current credit utilization across all cards and create a plan to get below 30%. Consider whether opening a new account might help your utilization ratio.
Second, set up automatic minimum payments on all accounts to ensure you never miss a payment moving forward. Even if you can only afford minimums right now, perfect payment history is crucial for credit recovery.
Third, explore credit builder products that can establish positive tradelines while you're working on debt reduction. Look for options that report to all three credit bureaus for maximum impact.
Fourth, if you're being sued for debt or receiving collection calls, don't ignore the situation.

Use tools like Solo to respond properly to lawsuits and SoloSettle to negotiate directly with collectors without the stress of phone calls. Communicate proactively with creditors if you're struggling. Most would rather work with you than chase you through collections or litigation.

Remember: debt doesn't define you, but how you handle it shapes your financial future. With the right strategy, you can turn your debt resolution journey into a credit-building opportunity that sets you up for long-term success.

Transcript

Hannah (00:37):

Hello everybody and welcome to this episode of the Debt Hotline. We're super excited for today's topic and guest. Our topic for the day is how to rebuild your credit while Paying off Debt, and we're going to be having a Q and A with policy leader Gwyneth Borden. We're super excited to have her as a guest. She's also the founder and CEO of Remit, and I wanted to take a few minutes to introduce her and read about her, but I also wanted to say that my name is Hannah, I'm with Team Solo. We have these podcast episodes that we host each week where we go over real questions from real people about debt and how to resolve debt. And so yeah, I wanted to take a minute, like I said, to introduce our special guest Gwyneth today. Gwyneth Borden is the award-winning founder and CEO of Remit, which is a groundbreaking FinTech platform that empowers consumers to rebuild credit while they resolve their debt.

She's a solo founder with a bold vision and she's designed every aspect of Remynt from raising capital and building a consumer first product to managing partnerships with regulators like the CFPB and California's Department of Financial Protection and Innovation. Gwyneth has more than 15 years of leadership across public policy, tech and civic sectors, and she's worked with institutions like the US Senate, IBM and leading nonprofits. She's currently redefining what debt resolution can look like with Remynt and is trying to build a consumer focused, tech powered and credit positive tool for consumers. Gwyneth, can you tell us a little bit more about yourself and fill in any gaps that I might've missed?

Gwyneth (03:19):

Wow, I mean that was such a wonderful introduction to me, so thank you very much. Remynt is really my labor of love. I mean, I think my entire career I've followed things that I felt like actually also made the world a slightly better place. So I've always pursued policy and issues, whether it's affordable housing or transportation. I've always really been focused on the intersection and where business and public interest meets the issue around debt and dealing with debt and climbing out of debt and rebuilding credit is very personal. I built this product based on my own experience of climbing out of debt and rebuilding credit and how difficult it was and all the things you don't know in that process. And we all make those mistakes because I chose jobs often because of what they did for me in terms of the sense of value they provided.

I didn't choose the most highest paying jobs typically where you can live whatever life you want and obviously sometimes there's a gap between the life you can afford and the life that you want. Sometimes a gap because you lose your job or something changes in your life and you now are in a situation where you can't afford your bills. And I think society looks down on people who can't afford their debt. In fact, there was a study recently done that even said that higher income people were the most likely to lie about the amount of debt that they had. People don't like to talk to their partners about their debt or their credit score, and then the entire process of going through debt collection specifically is very much a fear and shame-based process in which you're made to feel like you're a terrible, horrible person.

You can't meet your financial obligations when you really are talking to commission salespeople whose job it is is to get you to pay. They're not really interested in your personal financial position, whether or not you're going through a hard time again, they have a quota sometimes daily, but definitely weekly and that's what they're most focused on, not your own personal wellness. I thought that there's a better way to do this. Unfortunately, debt collection isn't necessary evil because our financial system works because people repay their debts. When people start not repaying their debts, then lending becomes more expensive. It's harder to get loans if your score is not great or you're going to pay a lot more for those loans or you don't get loans at all and you only can choose really predatory products. So it is an important part of the ecosystem, but the way that it's been done has been done terribly.

And so Remynt is really about how do we give people what they need in that time of crisis? So we have a self-care platform where people can go online, resolve their debt with on their own terms. There's no preset repayment plans. People can start with this little $10 a month. They can do weekly, biweekly, monthly. They can pay with Venmo, PayPal, wherever their funds are. It's just about finding a place for people to get started. But the most important thing that we also offer is that by opting into a payment plan program on our platform, even with as little as $10 a month, people can rebuild their credit because we have a credit builder product which enables them to open us to open a credit builder line with a partner that we work with that allows every payment towards bad debt establish new positive credit on a new trade line, which is really novel because debt collectors typically have a debt collection line, which is very negative, and they do that because they want you to pay them.

And by having that negative trade line, they can really force you to try to take action quickly to have it removed from your credit report. That's not their approach. We want. Remynt is not about penalties or penalizing people. The fact that people get sued for debt is absolutely horrible. It's something we would never do. That's why we love what you are doing and support it wholesale. So we have on our platform the credit builder products, which is for free for people. We're paying their debt and you get your credit score insights. We even have personal financial management tools for people to create budgets and alerts, make debt repayment plans. In fact, within our tool is a debt repayment tool where you can choose the avalanche or the snowball method and see where that takes you. And then finally we have a community on Discorded where we do talk a bit about the psychological and emotional effects of debt because debt is difficult. There's a lot of trauma. The two things we all need in our life is money and health. If you don't have one of those things, your life is very difficult and often the effect of one has a big impact on the other.

Hannah (07:21):

So a couple things I love about what you just said. Number one is that there is a lot of shame that's kind of built into the debt narrative, especially in the United States. Even though we kind of work off of debt as a capitalist society, debt is just a necessary part of the ecosystem, the financial ecosystem of the United States. And really there's nothing wrong with being in debt. It's a really great way. It's a great tool that you can utilize to build the life that you want. Where it gets messy obviously is when it gets out of hand and you run into life events or circumstances that might make it hard to manage. Sounds like Gwyneth, you've had personal experience with that, which is what inspired you to create Remynt and do what you do. Can you tell us a little bit more about your story if you're comfortable sharing?

Gwyneth (08:13):

No, I mean I found myself falling behind. I basically had a roommate moved out. I thought I could live by myself. Turned out I really couldn't started to really mount debt, fall into collections and I had to do a spreadsheet, figure out how I would pay off my debt going over time I actually moved out of where I was living and with a roommate. I had to completely restructured my life. This was when I was younger, not right now, and I remembered how hard it was going through and figuring it out. But the thing that I learned in that process as I was repaying my debts and I was repaying them in full because I understood that paying them less than settled, the settled actually has more of a ding to your credit report. I was finding that my credit was not improving. I didn't realize that paying off collections does not improve credit scores because credit scores are based on open accounts and a debt collection account is essentially usually a closed.

And so once it's been closed, the only value is if you have it reporting as a charge off getting that resolved, but that won't boost your score or change your life in that way. And I think for me a few years ago when I started to think about what I wanted to be when I grow up and how I could take all of my experiences personal and professional and build something, and then I was looking at the fact that debt collection really hasn't evolved that much. It's still robo calling people on the phone and sending letters in the mail and no one read their mail and no one is answering their phone, although people want us to call people. But the point is that I felt like there was a better way and a way to provide agency to a consumer that's not being taken into consideration.

Typically, like I said, debt collectors are calling you, can you pay a hundred dollars, $500? It's like name a number, name a number, you need to pay this amount. It's like you don't know my financial position and I feel like I have no agency. So if I'm got multiple collectors calling me and I have to pay my bills, I'm not going to call you back. I'm not going to call you because there's no conversation we're going to have in which I can say I'm not going to pay. And you're going to say, that's great. And so what we really wanted to do is put that back in the hands of the person's stress, your financial position, what's going on with you. Get started, like I said, a little $10 a month, whatever works for you, pay where you want to pay from, but it's just a starting point so that you can start tackling everything else. Because again, I think the process is really overwhelming even for the most organized, but it's absolutely debilitating when you have all the other complicated things going on in your life. If you're looking for a job or you're going through health problems or you're having a separation from a spouse or a partner, all of those things make dealing with this even more painful.

Hannah (10:50):

Agreed. And I think the vast majority of people don't take out debt thinking, I'm just not going to pay this off. I'm going to mismanage my debt. Most people take out debt with the plan to pay it back, but life happens, health issues, divorce tragedies, whatever life happens, and those kinds of events can make it hard to manage your debt. And so I love that. I love what you're doing with Remynt and I just want to make sure I understand it right, and maybe you could even give us a case study or an example of how exactly it works, but it sounds like if someone has had a debt go to collections, they can use Remynt to start paying that debt back and earn credit.

I wish it were that easy. So we actually partner with creditors. So we have Buy Now pay leader platform and credit unions, and we do that. We do that primarily to help them do a better collections process that's focused on financial wellness. More people are realizing that financial wellness is important, and what we're really trying to do is transform an industry that has no regard from the person being collected from, yes, people need to pay back their debts and if they had the money, they've already would've paid it, right? That's generally the case. People aren't sitting on money that they're annoying. Really rich people do that and they bankrupt LLCs, but poor people do not. The rest of us are not doing that. Nobody really wants to have collections calls. Nobody really wants to have their credit ruined. And so we work directly with creditors to say, no, there's a better way. Don't do the old way, partner with us. And actually you can actually create loyalty and lifetime customer value with the customers or the members that you serve by having a process when they're going through their darkest days that actually helps them bridge to the other side as opposed to the robocalls. Where's your money escalation thing that typically happens?

Hannah (12:41):

So you guys partner directly with the creditors and if a debt has gone delinquent enough before they send it off to a third party collection agency, maybe they could use Remit to get back on track, pay off their debt, and still continue to earn credit for paying that debt.

Gwyneth (12:58):

Exactly right. And so we worked directly with them for them to do their collections. And at that stage, and again, we are really, what we're trying to do is change the industry. We want to get away from the fear and shame tactics. We feel like if we can prove that you can actually do better by doing good, more people will move this way in this direction. Unfortunately, there's a whole thought that you have to use the stick and not the carrot. And we're like, no, you can use the carrot and not the stick and treating people who are in financial distress. Why are you making people's lives more difficult when they're having? So that's kind of really what it's, I mean, I wish we had a way to easily go and have consumers join us, but I haven't figured out that easy way to do that. Those are more like that management or settlement companies, and those are a whole another beast that's much more complicated. We talk about those.

Hannah (13:47):

Well, I love that what you're doing is disrupting the industry for the better. And I agree with what you said. If creditors are willing to work with Remynt, I think it's a great opportunity to build lifelong consumer loyalty to their brand because obviously, like you said, no one wants to receive a collections letter. It's the worst feeling ever, right? But knowing that you have other options and not have to deal with that third party collection agency, but you can deal directly with the creditor through Remynt and stay on track and get back on track if you will. I love that. I was wondering if maybe you could give us an example, it doesn't even have to be a real example, but just kind of an example of someone who might have used Remit to get back on track and continue rebuilding their credit while they were paying off their debt at the same time. Could you give us an example?

Gwyneth (14:43):

Yeah. One of our customers is a buy now pay later platform. And one of the reasons that they wanted to work with us is because they're very much focused on meeting their buy now pay later product is a bill pay. So you're having a problem, you need to pay your power bill or your car payments. It could be a healthcare bill, it could be a bill any size. They do cashflow underwriting to look at your finances to determine your eligibility. So no pooling of credit score. They're not doing some sort of predatory lending price. There's a subscription fee and that's separate. But they decided to work with us because they got into that business because they really care about being there at a pinch when people have a tough time and not providing payday loans. And so we partnered with them and from the first moment of outreach, people were so excited that their partner that pay later their name is decided to work with us because we were a better alternative than all the other kind of collections things.

And we were like, listen, if you're having a hardship, let us know. People signed up for the credit builder because they wanted to build their credit and they were thrilled that with paying a little $10 a month or $10 every other week that they could actually build their credit. We got thumbs up, which I never think that debt collectors ever get, but we got a really positive response and people started to see their lives transform. And I think that's what's so amazing is that there is a real opportunity to support people and their hour of need and not judge people, but actually support people. And that's what was so we've seen it's been so exciting and that reception we got from the customers of pay later was so we were so touching because in a collections process, you don't ever think of positive responses from people.

Hannah (16:29):

No. Yeah, and I love that you guys are getting that positive response. That's amazing. Well, I think that gives us a good background of Remynt and exactly how it works. And Gwyn, we're excited to give you some questions that have been submitted to the debt hotline from Real People and hear your expertise and see what kind of insights you can offer. Just as a disclaimer before we jump into those questions, while Gwyneth is an expert in the debt space and the financial space, any of the information we share in this podcast is purely a resource and educational. Don't consider it legal advice or financial advice tailored specifically to your situation. Hopefully this can get you some information that would be helpful to help you get back on track. But again, it's not legal advice. We're not attorneys, it's not financial advice. We're just trying to give resources and information to help people all along the way. So with that being said, we'll jump into our first question. This one's from Trina in Ohio it says, after a messy divorce, I was left with a bunch of joint credit cards in my name. I've been chipping away at the balance for over a year, but my credit still looks terrible. How can I rebuild while paying it off?

Gwyneth (17:44):

Well, there's a couple different things. I mean, one of the things is look at, and it just depends on your utilization, is the number one thing that really affects credit scores. So if you can in any way look across all of your cards, say you have $6,000 in debt, you want to get to no more than 30% of that if you can, that is being utilized at any given time. So if you can chip away at utilization, that will start to see your score creep up pretty significantly. If in fact you might even want to consider opening up another sounds terrible, say opening up another card so that you can increase your overall utilization board, get that card, put it in the free or freeze it or whatever you might do. The key thing, one of the biggest things around credit scores is utilization, particularly if you don't have a lot of other negative things going on.

And so the lower your utilization, the higher credit score can be. And so that's one of the things to look at. The other thing is there are a lot of credit builder products on the market. We actually offer one for $10 a month, which is a on paper loan. And for $10 a month you can build your credit. There are other companies that offer similar sort of products. There are also even savings programs that you can basically save money, put some money in the savings, and then pay to get. So I would definitely look at credit builder products. They can be very, very helpful. There's also, depending on whether you're renting, if you're renting, there are some rental companies now that are allowing or enabling reporting your rent payments. And that's a huge thing because that's a large liability. And to be able to show that you're paying your rent consistently, assuming you are, if you're a renter, then that can be very helpful.

And similar utility payments. And so there are companies like Susu out there that are doing that, and then there's a couple companies out there that are doing that. And then more and more landlords are starting to offer it and obviously it's a win-win for them because then people have a reason to be on time. But I think there are creative ways to rebuild your credit without necessarily taking on new debt. And I think that people often think that, oh, in order to have great credit, I have to be using my credit cards. The answer is no, you don't. You have to have credit cards and if you want to use them for one subscription, you put one Netflix subscription on one card and pay it every month. That's great. And so like I said, it is a game of both utilization and then a little bit of new credit history rebuilding.

Hannah (20:02):

I love the option you mentioned about getting credit for paying your rent. I personally rent right now and I've never missed a rent payment. I'm like, my credit could be incredible with all of this history of never being late on a rental payment. There are so many tools though, and options out there. I think to build your credit, even if you are falling behind on certain lines of credit, like if you're staying up to date with paying off other lines of credit, try to focus on those and obviously Remynt is a great tool as well if you're struggling with credit card debt. So I love that.

Gwyneth (20:38):

And always pay more than your minimum. The minimum is never going to get you out of debt. And I think it is depending on how much debt you have. Looking at, I personally found the snowball method to be better that you pay off the smallest debt and you move your way up. The advantage of that approach is that instead of paying five bills a month, now you're paying four bills a month. It just makes things a lot easier. Avalanche is the largest debt of the most significant debt, and that's great because you do save on interest. The challenge sometimes can be is that you don't have those quick wins. And I think what's really hard when you're doing a debt repayment strategy is that you need to have a sense of accomplishment. And sometimes you get really tired if you don't. And so you have to really determine your motivation. I'm a person that needs some sort of quick wins, and so the snowball method was very effective and then I moved up the chain. But again, it just really depends on how people think about it and if you can conquer a few at a time, that's also helpful as well.

Hannah (21:34):

Love it. Well, let's jump to the next question. This one is from Marcus in Arizona. It says, I got laid off during COVID and missed several payments. I'm back on track now working two jobs and trying to fix my credit, but it feels like I'm stuck. How long does it really take to rebuild credit?

Gwyneth (21:52):

So it really can take one to three years just depending on, again, other factors on your credit report. If you have high utilization, if you have new negative marks or you have collections on there, all of those things unfortunately are a little harder to shake. But with a year of really good on-time payments and paying more than the minimum really does help significantly. This is another time when I would also encourage the credit builder products because people have seen scores anywhere from 10 to 60 or 70 points of a boost from using, whether it's the rental payments, utility payments, credit builder loans or credit builder lines is another really effective way to do it without, like I said, acquiring more debt but maybe using things that you're already doing. But the good news is that as time goes on, it becomes less and less of a factor.

But again, if you can get your utilization down because utilization is actually the number one most impactful thing to your credit score. Yes, of course delinquencies and all that sort of stuff, but the way you have to think about it is a credit report. It's like a report card, but a credit score is essentially a risk model. So the interesting thing is if you had a really high score at some time and then you defaulted or fell behind, then you have a larger fall because you were not predicted to default. If you had a lower score, you defaulted, then it's less of an impact. So it's an interesting thing. It doesn't seem like it would make sense, but it does because credit scores are scoring models based on what they perceive risks to be. But the most impactful product in building credit is a credit card because it revolves and it pays and that's where they get the utilization. Like installment loans, you don't have the same thing. Charge card is not the same thing. It's actually credit cards that are the most credit building product. If you can have low utilization on credit cards, that helps exponentially in building your score. And you want to say below 30%, I mean the ideal amount is around 10%, which I know is not necessarily realistic for everybody, but if you can do that, that will help tremendously along with exercising credit builder products and other things.

Hannah (24:03):

Yeah, I think there's a lot of misunderstanding around how credit works, especially the credit score. It's essentially just a bunch of data combined together in an algorithm and it's not always a hundred percent reliable. But yeah, it's It's a way to tell creditors how trustworthy you might be in paying off your debts. And so I am really glad that you were able to break it down. Do you have any other thoughts on just how credit works and the algorithm itself?

Gwyneth (24:34):

Yeah, no, it's interesting because there's A-F-I-C-O score and there's a vantage score. I don't know if you saw the announcement. Now mortgages will start using vantage score. So what's really interesting is there's a couple of things people need to, first off, the credit score you might see on a Credit Karma or some general place is not necessarily your actual credit score. There's a credit score for each different product. There's a bank card credit score, there's a mortgage credit score, and there's an auto credit score. So your actual credit score could vary depending on the product that you're using because there's different risk factors related to those products. So that's number one. Number two is the scoring models change and they get updated every year. So not all lenders use the most recent model. So sometimes your credit score really depends on the model that someone's using.

Like newer models, for example, around collections, as I was mentioning before, if you pay it in full, no longer will, that collections will be a negative factor in the algorithm where for older models it was because it was just that it was there. So that's another thing you have to think about. And then is that vantage score often is more of a trended score around looking across your behavior over a period of time where it is a FICO score is much more of a snapshot in time like doing and doing today. And so that's the other thing. Your score on a FICO score and your a vantage score could be very different. Most people find unfortunately that their a vantage score is much lower than their FICO score because again, they have different scoring models, they are proprietary, nobody really knows what goes into them, but everyone's looking towards this whole trended model. And the trended model is actually looking across your accounts and across say a year or a period of time, what is your payment history looking like? And so that's why creating long good payment history is really, really important. And having a good mix of credit products by which you're doing that is also critical.

Hannah (26:29):

Yeah, I think to that point, it can be easy to get obsessed with one line of credit that you might be falling behind on. And while that is important to try your best to stay up to date with all of your payments, having a diversified credit portfolio, if you will, I think can do even more for your score than paying every single paying that one line of credit on time every single time.

Gwyneth (26:55):

Well, I mean unfortunately missed payment is a pretty big ding, so you don't want to miss a payment if you can miss a payment. But it is interesting, if you have a loan and you pay it off, your score will go down a little bit. Why? Because your credit mix. So it's really weird, but it's not a can decrease for the people who are like, there are people who are obsessed with their credit scores and they get upset about this thing. But again, it just reduces, that's why you never want to shut down an open credit card account if you can avoid doing so because then it just reduces that credit mix, that credit history that you had that is building upon. Because the other thing that you have is time is your advantage the longer that you've had credit and been exercising credit and that you've had mostly good habits, it works to your favor.

And I would also say in terms of when people are falling behind, I know it's a pain in the butt, and I often tell creditors, please don't make it hard for people to skip a payment or indicate a hardship or to reconfirm their payments. Because the problem is if you owe $50 but you pay $25, you're considered late still because you didn't pay the minimum. And so that's what often people don't understand. So it's important to pay something. And I think if you're in that situation, reach out to your creditor and see if they will out of goodwill, not report it late. If you've always been a great customer, we've all missed the payment date, we've gotten a late fee and you've been able to reach out and get that removed. So I think that that's really important to do. If you're in that situation where you're like, Hey, I can only afford to pay $25.

I know my minimum is 50, can you do something? Now, there is a risk. I will be honest, particularly in a credit card space, when you do let your creditors know that you're having a hard time, some of them will close or lower your credit lines, they'll do the same thing in your default too. But there is a small risk that I want people to be aware of that when you let them know you're in default, that they will lower your credit lines to mitigate their risk so that you don't go bad and they don't have more debt for you to go bat on. But I also think if you have in that communication, listen, I'm in between jobs when I'm about to get offered a job paying more than my last job, there can be situational things because the difference between what creditors look at and what the credit score looks like, the credit score doesn't know your income, it just knows your utilization of credit.

When a creditor is extending credit, part of their equation is your income because then they're looking at your debt to income ratio and when they're deciding how to deal with you, that's why in general, when you have a hardship, sometimes they want you to show paperwork and all that sort of stuff, which I actually think is a bad idea, but some people do. But that's because they're trying to figure out your debt to income ratio, determine what you could or cannot pay. I think one of the things that's really hard, there's a lot of expenditures we have in our life like childcare or elder care or maybe even private schools that are not a lending product that wouldn't show up on our credit reports, but impact what we spend our monies on and of course would be our priority over some debts depending on what situation you're in.

Hannah (29:59):

Yeah, I think mean, obviously you're very experienced in this space and so much about it, but I think what stood out to me from what you just said is that creditors know different things about your financial situation than your credit score will tell them. And so that's something also to consider. I just think that understanding better how the credit score works, the algorithm itself, yes, late payments really do matter, but so does your overall credit portfolio and looking at how long you've had that credit, you mentioned if you pay off a loan and it drops from your credit that your credit might go down a little bit, which is so ironic and funny to me. It doesn't mean that you're a bad debtor, you know what I mean? If anything, it means you've done something right. But the score doesn't always reflect reality, I guess is what I'm trying to say.

Gwyneth (30:58):

Exactly right. Exactly right. And again, also, and it's interesting in terms of lenders and how they're thinking about you, the credit bureaus collect a tremendous amount of data. So your creditor, if you are having a struggle, might pull your credit report, which is different in your credit score, and then they'll see, oh, well Susie has $20,000 in collections. Oh no, if they look at your score, they don't see a bunch of collections yet. That's a positive thing in terms of how they'll want to work with you and your financial situation. So that's the other equation. They're also looking at. I mean, interestingly enough, when they often reach out to you, say made debt collectors, they decided they want to sue you, you're like, why are they suing me? Now? They might've seen that all of a sudden you made some large payments or started paying off other debts, and they're like, oh, now you have money.

I want your debt. I want you to pay that off. So they are more sophisticated. Lenders are really following your behavior, and the credit bureaus provide a treasure trove of data around your behavior, the number of payments you made in the last few months, the size of over the aggregate number of those payments. And that's why a lot of time with litigation, it will start happening when you start paying other people, then someone's like, oh, well, they can pay them, they can pay me, which is terrible, but that's how they approach it. That's how they often decide to sue.

Hannah (32:24):

Yeah, and that's really helpful to know. At Solo, we help people who have been sued for debt, respond, defend themselves and try to get in a position to negotiate and settle the debt if it is valid, if it's not valid.

Gwyneth (32:40):

And I had that happen to me. I had that happen to me, and luckily I called up the creditor because again, most of them don't really want to take you to court. It can become costly. And so especially if they want you to deal with them, they just want you to answer them. They want you to put it to rest. That's why they're doing it. And they know that the only way they can get your attention. And the other thing is that every state has a different statute of limitations. And so if you have the twofer of they're approaching the statute of limitations and they think you have capacity, they're going to absolutely sue you so that they have enough time before the statute of limitations happens. Because a lot of laws go into effect around disclosures after the statute of limitation, they can technically still pursue the debt. They can't sue you unless you then acknowledge after the point of the statute of limitations. If you acknowledge that the debt is yours, then you basically restart the clock. And so people need to know that you should avoid restarting the clock. So that's something else.

Hannah (33:40):

Yeah, that's one thing that we are trying to educate people on at solo too. We have a guide for every single state on the statute of limitations of debt, which varies by state, but usually it's somewhere between four to 10 years.

Gwyneth (33:55):

So yeah, knowing the statute of limitations on your debt can make a huge difference in terms of not so much in terms of your credit score and whatnot, but in terms of whether or not you'll get sued and legal action will be taken. But I do want to echo what you said, Gwyneth that, and you're speaking from experience having been sued, you called up your creditor and it sounds like you got it resolved. Right. I think that is such a good thing to emphasize that if you are willing to engage with your creditor or if you're being sued by a debt collector, if you're willing to engage, you can usually find a resolution at Solo. We have a tool called Solo Settle that you can use to kind of make the process more digitalized if you're not really in the mood to play phone tag and wait on hold all day with a collection agency, you can use solo settle to negotiate online and settle the debt that way.

But engaging, reaching out, explaining your situation, what's going to get you a resolution more so than avoiding it. And I also want to echo what you said earlier. I wish that creditors did have a better way for people to maybe skip a payment if they're facing some sort of hardship in that moment. I do think creditors could do a better job at listening to consumers hardship and working with them if they do need to skip a payment or two or get on a new payment plan. But I think the key for both creditors and consumers involved is communication. Nothing's going to get resolved if you're avoiding it.

Gwyneth (35:21):

And that's the thing, and I think it's really hard because I get it. When you're overwhelmed, you don't want to. And the nice thing, if you're being sued specifically, then you don't need to file. You can talk to them and get them to file with the court to basically hold off on, go into proceeding, and then you figure out the settlement agreement, and then they will ultimately dismiss the case altogether once it's been resolved. But again, you don't have to go to court and testify all sort of stuff if you don't want to, but if you don't do anything, they will get a default judgment and they can garnish your wages, and in most states, they can garnish your wages at 25%. Some states have realized the issue and changed it, but it's really, it's actually crazy to me because they can garnish your wages without regard to whether or not that's what you can afford.

Hannah (36:13):

Yeah, I think in a lot of cases, wage garnishment can be kind of the worst case scenario in a debt situation. And I'm just imagining in my current situation, if all of a sudden 25% of my income was being taken from me, I would not be able to pay my bills. I would get even further, further behind with my other debts. It just causes more debt issues when you avoid your debt issues. So it spirals, because again, the problem with going de link one-on-one debt is, again, your creditors are paying attention, right?

Gwyneth (36:39):

I've seen that happen where, oh, I'm accumulating too much debt or whatever, and all of a sudden some credit card is lowering my credit limit. It's interesting, it becomes like if you were living off your credit cards, right, paying and living and paying and living, the minute that your credit lines start to be shrunk, they're basically pushing you over into delinquency for a lot of people because now the little bit of runway and credit, your credit card shouldn't be your runway, but let's deface it. A lot of Americans it is. Once they take that away, then that tips people over into delinquency sometimes because they don't have that extra they were paying and living off of a credit card. And if your creditor sees that you're defaulting somewhere else, they may shut down that credit card and your ability to do that. Yeah.

Hannah (37:28):

Well, I think the big takeaway from this answer to Marcus's question is communicate with your creditors. There are ways to resolve your credit and debt issues, and it may take some time, but communication is key.

Gwyneth (37:45):

By the way. They'll take any amount, pretty much, they'd rather get something than nothing, so they might start off a hard bargain, but in general, just for their numbers and their metrics and all the things they're trying to accomplish, they would rather get something than nothing. And I will say one thing to think about in the long term, for people who don't realize this, if you ever go to get a mortgage, if you don't have a mortgage now or you want to get a new mortgage, even though a debt may have fallen off your credit reports, theoretically it still exists. And a lot of mortgage companies will find old debts that you haven't paid and basically tell you if you don't repay that debt, they won't give you the preferred interest rate. And those interest rates make a big difference in hundreds of thousands of dollars depending on the size of that loan. So that is something to consider when people think, oh, I don't want to pay these old debts. They're falling off the statute of limitation. Yes, you can get away with that, but if you want to buy a house in the future, mortgage lenders, because it's a long big loan over many, many years, will not look favorably upon that. And people either, there's many stories, you can even look it up on Reddit where people had to go find and pay an old debt in order to get the preferred mortgage rate they wanted.

Hannah (38:58):

Craziness. Well, I think Gwyneth, I think we've got time for maybe two more questions if that's all right with you. Let's move on to a question from Elisa. In Texas, it says, I just paid off an old collections account, but it's still showing up on my report as settled. I thought paying it would help my score. What can I do?

Gwyneth (39:19):

So unfortunately it doesn't, as I mentioned to you before, paying settled is in the new scoring models that still affects your score in a negative way, whereas paying it in full doesn't, and again, the older scoring models are even more detrimental. What you can do is try to reach out to that creditor and see if they'd be willing to remove it. I don't know that they would, but you can always, there's no harm hurting and a goodwill, sending them a goodwill letter and saying, listen, I was going through a tough time. I paid this off because the truth is at the point at which it was charged off and put into collections, you had penalty, APRs, interest fees, all that sort of stuff, you probably still paid more than what you actually fundamentally spent. So that's something to try to do. Also, again, credit building products would also be something that's very helpful. I mean, the further that you get away from that settled another year or so, it won't matter anymore. But in the short term, unfortunately, there really isn't a whole lot you can do other than try to do the goodwill approach with the creditor to see if they would be willing to update it or remove it. And then also credit builder products.

Hannah (40:29):

In my experience, there are creditors and collectors that are willing to remove a mark from your report if you just ask them to and if you've settled at a reasonable amount. But I do want to emphasize that settling a debt does not look as bad to your credit score as a delinquent debt. So it should improve your score to an extent, but it still may be a negative mark on the score overall, but nothing looks worse on your credit score than delinquent debt, especially no delinquent debt. Okay, perfect. Next question is from Tyler in California. I think this will be our last question for the day. Tyler says, I'm 28 and dreaming of buying a house before I'm 30. I have a few collection accounts from when I was younger and made dumb money decisions. I've paid most of them, but how can I rebuild fast enough to qualify for a mortgage?

Gwyneth (41:22):

Well, again, this is a great example. If you can go back to the collections agencies to see if they will delete them if it was a collections agency, because that will help tremendously. If you can get rid of those, those will instantly help improve your credit score. I would also take on some credit builder products. If you can get your landlord to report your rent payment, it's very applicable, right? If you can afford and pay your rent regularly, then obviously you can afford a mortgage. Same thing with utilities and other credit builder products. If you don't have a good credit card, take out one credit card, use it very sparingly, because as I mentioned, the most influential credit product in your credit score is a credit card because about a third of your credit score is based on utilization. And so installment loans don't have anything to do with utilization, but credit cards do. And so having a credit card using that and paying that regularly can also really skyrocket your credit score as well.

Hannah (42:17):

Yeah, and it sounds like Tyler, you have a couple years before you turn 30, so if the goal is to buy before you turn 30, I think you've got time to work out your credit score to qualify for a good mortgage. And I would also say your credit doesn't have to be in the eight hundreds to qualify for a mortgage loan. There are options out there. We actually recently interviewed a mortgage broker in California named Scott Griffin, and he shared a lot of information about resources and different loans available to people who maybe don't have this phenomenal credit score. So even if you're somewhere in the six hundreds, you still can qualify, especially if you're a first time home buyer.

Gwyneth (42:59):

Yeah, the only thing I would say, and that's absolutely true, you can get a loans, even car loans with lower credit scores. The difference is the interest rate that you'll pay. The difference between a 3% and a 6% interest rate is for a $300,000 home is a $300,000 difference. That's $300,000 you could have had in your pocket from a better credit score. So while it's true that you can get a loan, obviously if you can get a better credit score, then you can get a better loan. And instead of giving that extra 300,000 to the mortgage company that could be used in your life. I mean, the interesting thing is our whole society is built on this whole getting a mortgage so that you work so that you have to work for 30 years and they have people in the workforce. So just know that you can also nowadays get shorter term mortgages as well, and you can also refinance.

That's another option. So if you can't early on qualify for the level of an interest rate that you'd like, but you can still qualify for a loan, you can always choose to take out a loan and then boost your credit score and refinance. And that's what I would highly recommend. If the goal is to get a house regardless of your credit score, do that. But then, like I said, refinance, refinance, refinance. Because again, oftentimes people who don't make a lot of money give a lot more money away because that interest is what kills you when you actually start computing how much money you're actually spending. That money could have gone to other things in your lifetime than it does make it.

Hannah (44:00):

Totally, well, I think with that, we'll probably wrap things up right now. I wanted to just end by saying that Solo is hosting a giveaway during the month of July to celebrate Independence Day, which we had earlier this month on July 4th. The giveaway is called in Debt End Day giveaway, and we are trying to help people find a way to end their debt. So we are going to be rewarding one lucky winner, $4,700 to help pay off their debt. We're also giving away weekly prizes of $500 that we'll be announcing every Friday, so you can enter the giveaway tonight and potentially win tomorrow. We'll be announcing our weekly winner tomorrow for that $500 mini prize. But like I said, $4,700 is the grand prize that we'll be giving away to one lucky winner at the end of the month. That number is the average amount that people get sued for on Solo's platform.

So we're trying to help people who have been sued or even people before lawsuits, just find a way to end their debt and find that independence from debt that I think most of us are searching for. I do want to say also, yeah, if you want to enter that giveaway, you can go to SoloSuit.com/giveaway. And then I also wanted to say that if you are falling behind with your debts and maybe you want to communicate with your creditors or look for tools to get back on track while still earning Credit Remit is a wonderful tool that you can use to do that. The website is get Remynt.com, and Remynt is spelled R-E-M-Y-N-T. So get Remynt.com and we'll be sharing the link as well. Any other last thoughts from you, Gwyneth, on the topic at hand?

Gwyneth (46:17):

Yeah, no. I mean, on our website, we have our Credit Builder product. You can sign up for the wait list. It's going to go live next week, and basically for $10 a month without actually accruing any debt, you can actually build your credit. We open a $2,000 trade line so that every month that you're paying the $10, it's showing a very low utilization on a high trade line, and it's a way to build your credit without actually getting into any debt, and it's like just $10 a month. So if you want to take advantage of that, we highly recommend you to do that because we believe that people should be able to build credit without having crushing debt. So thank you so much, so much, Hannah, for this opportunity to talk about what we're building at Remynt. Thank you all for tuning in. If I can ever be of service in any way, please let me know. This is something I'm very passionate about. I want you to help me change this industry so that we don't, I mean, we love solos people that we don't need SoloSuit because people are no longer getting sued.

Yes. And I think that's the ideal outcome, right? No more lawsuits. But in the meantime, if you have been sued for debt, you can use solo to respond to the lawsuit, defend yourself, and then negotiate to settle the debt. Go to SoloSuit.com if you're interested in doing that. And again, if you want to build your credit while paying off your debt, if you've been falling behind, go to get Remynt.com. Another great resource to help anyone maybe struggling with debt. Thank you so, so much for joining. We really appreciate you sharing your insights and expertise, and I want to wish you the very best in your journey with Remynt, and I just know that you guys are going to be making some really wonderful positive changes to the debt industry.

Gwyneth (47:55):

Thank you. Thank you all so much. Thank you for what you do for helping people who are obviously at their lowest point when you can sue. There's nothing more stressful and upsetting, especially if you couldn't afford your debt, you can't afford a lawyer, so thank you for doing that.

Hannah (48:11):

Yep. Thank you so much, Gwyneth. This is The Debt Hotline, and yeah, we're rooting for you, and we know that you can find your debt resolutions. Thanks so much.

Disclaimer: The information presented in this podcast is intended strictly for general informational purposes and should not be construed as legal, financial, or investment advice. Solo and its hosts are not licensed attorneys, financial advisors, or other certified professionals. While select guests may hold active professional licenses, their contributions are purely for educational and thematic discussion. They're not delivering professional or personalized advice. Solo is not a law firm, does not offer legal representation and must not be relied upon as a substitute for professional legal counsel. It is also not engaged in debt, settlement, credit repair, or financial counseling services. SOLO provides self-directed software tools designed to support users in navigating their own legal and financial situations. Participation in this podcast is not establish an attorney-client relationship. Listeners are encouraged to consult with attorneys or licensed professionals for guidance specific to their circumstances. The opinions expressed by podcast participants are their own and do not necessarily reflect the views or official positions of Solo Suit Inc. Doing business as solo or any affiliated organizations.

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Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.