Which to pay off?

[Anonymous]

Hi All,

My husband and I are ready to begin our road to credit recovery... we pulled our credit reports/ scores yesterday; his is 500, mine is currently 620 EQ and 668 TU. We recently got married and are currently taking steps to clean up our credit in order to purchase a home in the next couple of years. I only have a few student loans and a medical bill (which is delinquent and was unaware of until recently) He on the other hand has a weightier credit history.

We are debating between paying off his outstanding charged-off credit card debt or paying off the current balance on his car in order to improve his score. Both overall balances amount to closely $10,000. Which should we choose?

I, personally, would like to better my FICO score... I just joined this site and have already found a wealth of knowledge!

Thanks in advance...  

[makingitbetter]

To see the greatest improvement, you want to attempt PFDs with the charged-off credit card debt. Just paying off the charged off cards can actually lower your score because it makes it look like a more recent baddie. Send PFDs for the charged off cards and if they agree make sure to get it in writing.

[RobertEG]

Paying the car loan wont help much

Addressing the CO is where I would start, and certainly, offering a PFD would be great, provided you can PIF (for fulll or reduced amount on the balance.)  If you cannot, they wont delete reporting of a debt that remains unpaid.

So next option is to look at both the DOFD and your state SOL, and make a decision on whether to set up a payment plan. That might forclose their refererral to a CA, or worse yet, bringing legal action to collect in court by way of a judgment, eitehr of which will result in a new derog added to his CR.

The DOFD will tell you when it is scheduled to drop from his CR, and also when the SOL initially begins to toll.  But under some state laws, making offers to pay or payments can reset your SOL.  So know those dates!

It is not a simple do this or do that recommendation.  There are potential benefits and detriments with each course of action.