Rebuilding Credit

[Anonymous]

I had a lot of problems with medical bills that I was unable to pay in college. I was very irresponsible in the way I handled it and as a result about 7 bills were sent to collections. Most of these bills are from 2005-2007. Now, I have a decent income and would like to be able to purchase a car in the next year. However, my credit score is 617. I am not sure if I should pay off these old medical bills because I've heard it opens the account again. Due to many accounts in collections and a low FICO I am unable to get a credit card or anything to help build my credit score. What should I do??

[mauve]

You actually can open a card, it's just going to be a less than ideal one.  If you have no revolving credit, you should see a really fast jump.

To deal with these collections, you can do a number of things.  You can google the HIPAA letter process and see if that's something you'd like to do.

You can also contact the OC and see if you can work something out with them and if they can ask the CAs to delete their reporting.  CAs would not be under obligation to do so, but the OC may be able to convince them.

You can also DV the CAs and then send them a PfD if they respond with a balance /itemization / whatever that you agree with.  They have no obligation to respond to the DV if it's been more than 30 days since the Dunning notice (which it sounds like it has been), but I've found that they usually will respond to a DV while they'll sometimes ignore other types of communication.  If you live in Texas, they actually are compelled to respond to the DV.

You can also pay them and GW them.  I wouldn't pay a CA that old without a PfD, personally, but I would pay an OC that old.  It is up to you, though, obviously.

None of these actions will extend the CRTP, the credit reporting time period.  It is a common misconception that paying at a later date can make these items report for a new 7 years.  That is not correct. 

You should check out the BK forums for their thread about BK friendly credit cards - they list them by score.  You can also check out whogavemecredit.com and the CC forums.  I would recommend one without a bunch of fees.  I personally got a Capital One with no annual fee a long time ago.  While it's only got a $500 CL,  it has no annual fee (it started at a $200 CL), and it is my oldest card.  Others, like First Premiere, will charge you exorbitant and continuing fees.  One option is a secured card, but I'd recommend trying to choose one that can "graduate" to unsecured. 

[LIGHTNIN]

Hi and Welcome to the forums,

FICO scoring see a Paid and Unpaid collection the same, no score change by paying the debt.

Having the CA deleted now that's a different story, you could see a score jump, it depends on how old the debt was.

I would suggest using PFD letters. Pay for Delete letters is an agreement with a CA. You agreeing to pay and the CA agrees to delete, a win win situation. Here's a link to an example of a PFD sample letter...http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/PFD-Example-Letter/m-p/4519/message-uid/4519#...

Paying off a CA, does not change the date of removal.CA's drop any where from 7 to 7.5 yrs from the DoFD.

Look into secure credit cards to get you started.

To improve your CS, you can also look at being an AU of a CC.

You would not be responsible for the CC. You don't even have to use it yourself.

If you ask a family member or a very best friend, make sure the CC has a long history, no lates and little or no balance reporting.

Welcome to the family here at myFICO. Hope this info helps.

Oh and BTW, great idea getting your CR and CS in order, before purchasing an auto next year. Smart Thinking!!