I've been reading for quite a while and have done a lot of searches trying to figure out which debts make the most sense to pay off first. I've got a recently closed CC account (not by my preference) that I'm going to pay first, prior to it going to collections and being charged off. After that, I'm not really sure, I've got the following: $119 - American CB $229 - Credit MGMT $273 - Credit MGMT $1480 - Enhancrcvrco $840 - Med Data Sys $668 - Nat L Cr MGT $887 - NCO Fin $215 - RMA Credit $1510 - RMA Credit $1440 - RNT Debt $204 - GTE Southwest Inc All of these are 2+ years from dropping off my report and I'd really like to get into a nice new car sometime soon. I've got a couple grand saved up and will eventually get these all squared away, but in the meantime, does it matter which order I get them done in? Will my credit go up more if I take care of 6 of these at a total of around $1700 or if I just take care of the big $1500 and another small one? Is it the number of past due accounts or their balances that matter in terms of my FICO score? I have every intention of sending PFD letters to them and even intend on offering them only a % of what is owed (particularly the older ones), but which ones should I tackle first? I know Dave Ramsey suggests doing the small ones first, but that seems to be a mental thing and I've also read that you should pay down the higher interest items first, but none of these are accruing interest. Thoughts?
Where to start really depends on your priorities: Ease of negotiation (path of least resistance): I would pay the one that has the least amount of time left in SOL, then the next, etc. The less time left on the SOL ,the more leverage you have. Start on the older ones, and while you are working on them, the newer ones will be getting older and giving you better leverage to negotiate them as well. However, some companies are hard-nosed down to the very end. Lawsuit prevention: Then again, you can start on the larger balances, as you may be more at risk of getting sued over them since there is more money at stake (or whichever ones you feel are most likely to be sued for). However, some companies sue over small balances and the larger balances slide through the cracks.
Agreed w/ Nunna - pay off the biggies to avoid the greater conflict potential those charges carry. And you're right - paying off the small debts first is more of a mental advantage, plus it makes tracking all of these debts easier simply because you start crossing a couple off. Also, when negotiating to pay off a % of the debts, remember that it's important to get the CA to report "Paid in Full" to the CB's - otherwise these old debts could continue to sting your credit reports for years to come until they drop off.
Also, there's a part of the question that remains unanswered. I'm curious to see if FICO score is effected more by the number of outstanding debts or the amount of the debts themselves. P.S. I had back surgery today and am quite high, so if the beginning of this reply seems a little rude, it certainly isn't my intent...I just can't come up with a better way to phrase it. Thanks again! EDIT: High from the meds the shot me up with and prescribed...
Oof - here's to a speedy recovery, Mark! 1.) Your FICO score is likely more affected by the outstanding debts; having different accounts of credit open isn't necessarily a bad thing - if you're keeping up on them each month they can have a positive effect on your score, assuming your credit utilization stays low. Delinquent or outstanding debts, on the other hand, ALWAYS hurt your score. 2.) Generally, a Pay for Delete is better because even if you have a paid in full on your report it will still have a neg. effect on your score until the SOL run out. Just make sure to have the PFD in writing and dictate the conversation so that you're the one making the initial offer. Don't pay them anything until you've received written documentation agreeing to the PFD.
