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What to pay first...

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jmatarrese
New Member

What to pay first...

I am in the process of rebuilding my credit. My credit age average is 3 years, so I understand that any delinquencies will hit my score harder. I have six collections-all medical bills ranging from $51-$983 and I have 4 credit cards. I know that paying off everything will boost my score the most, but unfortunately I don't have the money to do so. My question is, is will paying down my credit cards or using PFDs to get rid of the collections raise my score more? All answers are appreciated! Thanks in advance!

Message 1 of 6
5 REPLIES 5
ChangeIsPossible
Contributor

Re: What to pay first...

Search forums or google for WhyChats method for taking care of the medicals.

Keeping util under 10% and showing balance will also help.

Those you can PFD do so!

Keep in mind that most companies only update once a month, so you may not see the increase you want right away!


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Message 2 of 6
jmatarrese
New Member

Re: What to pay first...

Thanks for the quick reply. I did google whychat method and to my understanding the medical collections need to be paid first in order to go through with the process. I'm sorry if I didn't word my question well enough. I'm asking if I should work on paying my collections off first or paying down my credit cards. Which will have a better effect on my credit score.

Message 3 of 6
Tdbremer
Established Member

Re: What to pay first...

I would pay down the cc leaving only one showing a balance at 9%. Paying the collections won't raise your score unfortunately, Fico scores paid and unpaid collections the same. PFD is an option but could take time. For an instant boost, utilization is where to start.
Message 4 of 6
jmatarrese
New Member

Re: What to pay first...

Thank you very much, it was just the answer I was looking for.

Message 5 of 6
RobertEG
Legendary Contributor

Re: What to pay first...

I would recommend a different approach.

 

Collections represent delinquent debt, and major derogs along the path of not paying the debt.

Payment history is the most highly-weighted scoring category, directly representing your risk of not making timely payments.

Higher % util represents potential, not actual, timely payment risk, and thus is not scored as heavily as prior derogs.

 

While payment alone may not improve your score, it could prevent a whole lotta future pain.

If still within SOL, you may be hit with legal action.

You may be hit with continued pulls of your CR by parties authorized to collect on the debt.

PFDs stand a shot at getting deletion of a major derog.

If you app for credit now, an unpaid, delinquent debt alone could be a show-stopper, regardless of FICO score.

Many reasons why I would first address the unpaid, delinquent debt.....

 

Reducing your % util on an account in good standing can be done later, and since %util has no historical memory in scoring, improvements in any one month will get you to the same point as reduction on % util now.  Util of credit is weighed less than derogatory payment history, and a lower current % util is unlikely to have as much impression on a poential creditor as the lack of the major derogs....

 

Message 6 of 6
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