QUESTION ABOUT PAYING A COLLECTION ACCOUNT

[Anonymous]

I am working to get my credit score increased, currently it is 575. I have one collections account left to pay off, the balance is 400$, down from 2100$ (caused by a trip to the ER while still in college with no health insurance!).  My question is would it be better to keep paying my arranged payment of 75$ a month on this collections account or to just pay it all off with a credit card and then pay down the credit card balance.  I am not sure what would be the best way to deal with this issue, I'm assuming that is why  my score is so low.  I currently have 2 credit cards with a 500$ and 1600$ limit, with a total combined balance of 400  and a student loan balance of 46,000$ and a car loan balance of 11500$ both of these loans are current and have never been late. Any suggestions? thanks in advance!

[fused]

Hi and Welcome! Since this is your first post, I would highly recommend you read the credit scoring 101 thread. It includes info and a sample letter which might prove helpful in your situation. Come back to this thread and fire away with all of your questions.

http://ficoforums.myfico.com/fico/board/message?board.id=ficoscoring&thread.id=2654

[haulingthescoreup]

Since you have been paying regularly on the collections, they may figure that you will keep on doing so, and not be willing to work with you, but you might want to try a PFD. PFD means pay for delete, and the idea is that you get the CA to agree **in writing, on letterhead, signed by someone with authority** that if you pay off the debt, they will remove all reference to the debt and the collection from your credit reports.

The language needs to be really precise, so do a search on these boards (search box at top left) for PFD letter. That should give you plenty of suggestions.

Where did you get your score? If it doesn't have the somewhat cheesy FICO gold seal on it, it's not a FICO score. That's not the end of the world, but lenders look at FICO's, not other scores ("FAKO's".) One handy thing about buying your Equifax or TransUnion FICO score is that you can play with a simulator to give you ideas about your best strategies. Unfortunately, it does not offer the option of PFD, so unless and until you can get the collection off, you won't be able to do the what-if's for how your credit would look without it. (Hope that makes sense, lol.)

Have you ever had any late payments with either of your credit cards, or any other accounts that are now closed? (Those keep showing up, unfortunately, for seven years after the problem was posted.) If not, and if you can get your balance on both cards to under 10%, which would be $45 or less on the one and around $1420 or less on the other, that will also help your scores. FICO scoring looks at your utilization (balance due divided by credit limit) on each revolving account AND on your total of revolving accounts. If you do have any late payments showing, pay the cards down, and you will also want to send GW (goodwill) letters. Search as above. Keep your car loan and student loan current, no matter what, but don't worry much about early paydown on them, at least not for the time being.

OK FICO veterans, pls help OP out with the details on the CA stuff!

[fused]

Ha! Das why I referred them to the scoring thread. I hope they come back with questions.

[haulingthescoreup]

And as usual, fused beat me to it! Fused of Flying Fingers Fame strikes again. Go read that thread. Nothing will make sense and stick with you until you do.

[fused]

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haulingthescoreup wrote:
And as usual, fused beat me to it! Fused of Flying Fingers Fame strikes again. Go read that thread. Nothing will make sense and stick with you until you do.

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I really think Tuscani's scoring link is excellent for newbies and even novices as it covers many topics including credit scoring and credit recovery. Just the info on AU accounts needs to be tweaked.

[haulingthescoreup]

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@fused wrote:
I really think Tuscani's scoring link is excellent for newbies and even novices as it covers many topics including credit scoring and credit recovery. Just the info on AU accounts needs to be tweaked.

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I re-read it every two weeks, because every two weeks, everything that I thought that I understood about FICO scoring and credit in general has been turned on its head.