Should I pay maxed credit card or medical bills?

[Anonymous]

RIght out of college I was hit with a serious illness that has left me with about $5500 in medical bills after insurance. I also have a credit card from college that is currently at 97% with close to $3000. Though I worked all through college, I'm not able to work at this time and in the process of waiting on a disability hearing. 

 My current credit score is 653. My student loans are on hold. In the next couple of years I plan to go back to work full time. Right now I have no income and no way to pay these bills. Some family members jump in a pay the minimum amount each month to keep it from going to collections.

I was just given $1500 to help me out and want to raise my score. Do I pay of medical bills or cut my credit card balance in half? From what I understand with the new system is that medical collections cannot hurt your score as much as they have in the past. Is it more beneficial to try and get the credit card down to under 30% and let my medical bills go to collections? Or is it smarter to continue to pay the absolute minimum, not getting my credit card balance down any, and tough it out little by little until I can work more to prevent the medical bills from going to collections? 

Help. please. thanks. 

[-NewGuy-]

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@Anonymous wrote:

RIght out of college I was hit with a serious illness that has left me with about $5500 in medical bills after insurance. I also have a credit card from college that is currently at 97% with close to $3000. Though I worked all through college, I'm not able to work at this time and in the process of waiting on a disability hearing. 

 My current credit score is 653. My student loans are on hold. In the next couple of years I plan to go back to work full time. Right now I have no income and no way to pay these bills. Some family members jump in a pay the minimum amount each month to keep it from going to collections.

I was just given $1500 to help me out and want to raise my score. Do I pay of medical bills or cut my credit card balance in half? From what I understand with the new system is that medical collections cannot hurt your score as much as they have in the past. Is it more beneficial to try and get the credit card down to under 30% and let my medical bills go to collections? Or is it smarter to continue to pay the absolute minimum, not getting my credit card balance down any, and tough it out little by little until I can work more to prevent the medical bills from going to collections? 

Help. please. thanks. 

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Welcome to the forums. To be clear, your medical bills have NOT gone into collections yet?

[Anonymous]

I had one bill go to collections for $75 and paid it immeditely. No other collections, yet, out of the $5500 total in medical bills. 

[CreditDunce]

If you haven't already, try working out a payment plan for the medical bills.   Make sure you have enough cash to pay the minimum for everything for the next couple of months.  Then put the rest towards your highest APR bill.   With no income, your credit score doesn't matter.  Try to minimize your interest paid instead.

With the FICO 9 model that just came out, medical collections don't hurt you as badly as current FICO models.   However, no one uses the FICO 9 model.  Even when some CCC's start using FICO 9, not everyone will immediately use the new model.  Some credit unions still use the NextGen Fico (1990's) for lending decisions.  Most mortgages still use FICO 04/98 (~2003 for FICO 04).   I haven't heard any mortgage lenders are even looking at the new FICO 9 model.

[TheGardner]

I'm not sure there is a right answer for you. You can "protect" your score by paying on the medical bills but it won't cover all of them so I'm not sure if that will help. You usually can't negotiate much with the hospital directly either but I would def try with limited funds.

Is family helping pay the minimum on the med bills as well?

Here is how I would likely "try" to handle this.

Call all medical bills, explain your situation and ask what they can do for you in the way of forgiveness and payment arrangements. Any arrangement will need to be followed through with if you miss any payments you will fall into default and sent to collections. Remember these are NOT accumulating interest! Some you can get down to 10$ a month as long as your displaying good faith. Hopefully some will forgive as your disabled and unemployed.

Pay the $1500 towards the CC as this account does cost you money. (Roughly $30-40 per month interest saved could be applied towards payments on medical bills)

Side note: Scores aren't going to help you right now. IF the medical bills do fall into collection these types of collections are generally seen as the easiest to PFD not always , buy most of the time.. There are other methods that can help as well. 

Moral of the story is I would try and eliminate the accounts that are "wasting" money (interest) that you don't have.

[takeshi74]

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@TheGardner wrote:

Scores aren't going to help you right now. 

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^ This but get utilization down as adverse action from the credit card issuers will just make things much worse.  Work on negotiating with the medical bills.

[oscar_actuary]

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@CreditDunce wrote:

 With no income, your credit score doesn't matter.  Try to minimize your interest paid instead.

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I agree with the first sentence 100%

What are you doing about food and shelter and light bills?

[Anonymous]

Thank you for the advice everyone. I'm currently staying with a family member and collecting food stamps. It is my plan to move into an apartment and get my life back within a year which is why I'm concerned about my credit score. I have called the hospitals, but the payments are still $25 a month at least, and there are several different ones. That adds up a month. Just as I expected, that money needs to go to the credit card. 

Thanks again.