My DH and I are receiving a fairly large income tax return. Our intentions are to pay down some of our debt with this money. My question is... in order to raise our credit score, should we pay off three small CC's and one large AL debt, or should we pay off seven small CC debts. The cumulative amounts of the payoffs are equal, however, the first way will free up approx. $600 in monthly income, and the second way will only free up about $200. Logically, I know that the first way would help out my household, but will it help my credit score as much? Any guidance would be much appreciated.
I am in an almost identical situation. My tax return will allow me to pay of 85% of my outstanding debt, which includes medical bills. I am attempting to reach "Payment by Deletion" agreements with each of my creditors. I've offered "P by D" to only one creditor as of today (ProCollect). They've informed me that they are unable to agree to my terms, even though I offered to pay 100% of the debt. I have no credit cards/loans/etc to pay off, only small collections. Some of these are on my credit as Charged Off's (utility company). My plan is to pay off all creditors who agree to the payment by deletion, and invest in 2 secured credit cards. After 30 days, I will again offer the payment by deletion to remaining creditors. If they again decline, I will use my remaining funds to pay off the debts. Although the collections will remain on my account, they will be paid off. Is this a good plan?? If not, please be a lifesaver and provide your suggestions. I greatly appreciate your assistance. - rbrussell My goal is to buy my first home by 1/2008 2/01/07 TU 534 EX 500 EQ 547 I've got a lot of work to do!
What really matters is that you pay down your debt that is what will effect your fico score.You should pay the highest interest rate first and then the next etc.Why would you want to pay 6 or 7 small cc bills every month?It is not the number of cards you have but how high of a line of credit each one has and how much available credit is available on each card.Having 10 cards with a 500 credit limit and owing 300 on each one is no better or no worst than having one credit card with a 5,000 line of credit and owing 3,000 on just that one.
None of my accounts are in collections. They are all current, valid debts. In your case, I'd pay as many as possible with what money you get. I'd refrain from the secured cards and go for the unsecured ones after your CA's have been paid off for a several months. You might have a better chance at halfway decent cards to help re-establish your credit and bring your score up. JMHO. I am by no means an expert.....that's why I'm here asking questions!
We're here to learn. Thanks for your comment. My problem is that I have NOTHING helping my credit. I have NO credit cards, NO loans, etc. Should I wait until these collections are pd off to start building credit. I dont think I will get approved for an unsecured card with my credit scores (see my signature). Once these collections are pd off, it is my understanding that my score will drop even lower than it is now. It doesnt make sense to me, but thats what I've been told.
Thanks for the reply peeper. I understand what you're saying about the way the credit works.....my question was more about the BEST way to increase my score. If I have a car loan at 12% interest and three small cc's at 8% interest versus seven cc's with interest rates ranging from 8-18%, with every single card close to their limits(300-1000), doesn't it equal out to about the same? Will my credit score be equally effected?
To improve your fico you want your credit card balances to be no higher than 50% of your credit limit this is whats know as utilization, say your credit line is 5K then you want your balance to be no higher than 2500 at any time. And if it's even better to pay it in full each month if possible.
