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New Member
miles2go
Posts: 3
Registered: ‎01-07-2013
0

help -- tuition in collections vs. paying down credit cards

I recently accepted a job that pays more, so I can start seriously tackling my financial problems. My two largest problems on my credit report that I can deal with right now are (1) an open collections account and (2) using 90% of my available credit cards.

 

Credit Karma score: 630.
Collections account: opened Oct. 2009, $2,100 balance (original balance $3,500).
Credit cards: 2 with the same interest rate, one is at $4,150 ($4,500 limit) and the other is at $350 ($500 limit).

 

I have college tuition in Maryland that was sent to the state collections unit. I've called them and they say that they don't settle collections and that they are not held under the same collections law since they are state-run (which seems to be legit.). So it seems that I cannot get this removed even if I pay in full.

 

Questions:

  1. Is it worth sending them an offer to pay the debt in one lump sum in exchange for removing from my credit report? If you think this is a good option, do you have any sample letters I could use?
  2. I've heard that making a payment will only extend the amount of time it is on my credit report. Is that true?
  3. If they will not remove the report (which is likely), is it better to aggressively pay off the collections amount or focus on paying down credit cards? I've heard that paying off a collections account doesn't really help you in the short term since the damage is done when it is reported as in collections and you kind of have to live with it for 7 years. So should I pay off this collections account or pay down my credit cards first? If credit cards first, is 30% usage a good time to move to another step?
  4. Since the collections account was opened in 2009, my TransUnion report says that it is expected to be removed in 2015. Is that only if the amount is paid by then? What happens if I put off paying it?

Thank you for any help you may have. I have not been able to get my head around the tuition in collections aspect.

Moderator
Shogun
Posts: 12,952
Registered: ‎04-15-2011
0

Re: help -- tuition in collections vs. paying down credit cards


miles2go wrote:

I recently accepted a job that pays more, so I can start seriously tackling my financial problems. My two largest problems on my credit report that I can deal with right now are (1) an open collections account and (2) using 90% of my available credit cards.

 

Credit Karma score: 630.
Collections account: opened Oct. 2009, $2,100 balance (original balance $3,500).
Credit cards: 2 with the same interest rate, one is at $4,150 ($4,500 limit) and the other is at $350 ($500 limit).

 

I have college tuition in Maryland that was sent to the state collections unit. I've called them and they say that they don't settle collections and that they are not held under the same collections law since they are state-run (which seems to be legit.). So it seems that I cannot get this removed even if I pay in full.

 Doesn't matter that they are state run, they still fall under the same collection laws. Only difference is, since I'm not familiar with Maryland law, is if they have a special SOL for those debts.  Would have to look into that.  As far as reporting, they can't extend.

Questions:

  1. Is it worth sending them an offer to pay the debt in one lump sum in exchange for removing from my credit report? If you think this is a good option, do you have any sample letters I could use?Absolutely, a PFD would be great.  Just do a search on here for PFD samples.
  2. I've heard that making a payment will only extend the amount of time it is on my credit report. Is that true?Collections aren't reaged.  Paying them will not make them last on your CR longer.
  3. If they will not remove the report (which is likely), is it better to aggressively pay off the collections amount or focus on paying down credit cards? I've heard that paying off a collections account doesn't really help you in the short term since the damage is done when it is reported as in collections and you kind of have to live with it for 7 years. So should I pay off this collections account or pay down my credit cards first? If credit cards first, is 30% usage a good time to move to another step?Are the credit cards in default too?  Which has a higher interest rate and will save you the most money?
  4. Since the collections account was opened in 2009, my TransUnion report says that it is expected to be removed in 2015. Is that only if the amount is paid by then? What happens if I put off paying it?Unless you get a PFD, they will stay on there paid or not.  You should know if they are still within SOL, then you have to worry about getting a judgement.

Thank you for any help you may have. I have not been able to get my head around the tuition in collections aspect.


 


Starting Score: 504

July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+

Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
New Member
miles2go
Posts: 3
Registered: ‎01-07-2013
0

Re: help -- tuition in collections vs. paying down credit cards

1.&2. Ok, I'll look into a PFD. From what I've read, it seems like this is unlikely since it is a state-run collections agency.

3. Credit cards are not in default. They are all paid on time, they are just all 80% used up of higher. All the credit cards are the same interest rate. I'm not paying interest on the collections.

4. Do you know what SOL rules tuition (not loans) fall under? This was for direct payments the the university, which is a public univ., and not for a subsidized loan.
Moderator
Shogun
Posts: 12,952
Registered: ‎04-15-2011
0

Re: help -- tuition in collections vs. paying down credit cards

Without digging deeper into what I've already done, I'm looking at 3 years as the SOL.  You will want to make sure of that however.


Starting Score: 504

July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+

Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
Contributor
BKFireFly
Posts: 149
Registered: ‎01-03-2013
0

Re: help -- tuition in collections vs. paying down credit cards

Hi everyone, this is for Shogun:

 

I have  $ 6,000+ tution debt that has been sold to a CA,  the tution was incurred more than  years ago. How does the 3 yr SOL apply to tution? I am willing to settle. I left school becuase I just had a breakdown and couldnt manage everything going on in my life. They have sued me and received a default judgement (not on CR), but I have learned that I file an injuction becuase I was not properly served. However, the account was sold after the judgement was received.

 

So want to get rid of this but don't know where to start?

 

Please help, Any advice would be gratly appreciated.

***Nothing Beats a try but a Fail*** I refuse to fail, success is the only option.
Moderator
Shogun
Posts: 12,952
Registered: ‎04-15-2011
0

Re: help -- tuition in collections vs. paying down credit cards

A judgement is a totally different duck.  You would have to address that first if not properly served.  This is a legal issue that has to taken care of because it changes the game.  The SOL would no longer apply to the original debt, it now goes by the judgement which can even be renewed at a later date.


Starting Score: 504

July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+

Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
Contributor
BKFireFly
Posts: 149
Registered: ‎01-03-2013
0

Re: help -- tuition in collections vs. paying down credit cards

Thanks for this information. I guess I will be getting to the courts with my paperwork.

 

This is all just so frustrating.

***Nothing Beats a try but a Fail*** I refuse to fail, success is the only option.
New Visitor
leecharlene
Posts: 1
Registered: ‎01-27-2013
0

Re: help -- tuition in collections vs. paying down credit cards

I am no credit guru, but it seems to me that you should pay the mimum monthly amount to the largest credit card, and really zero in on the smallest credit card and wipe them out first.  As far as the tuition that is already in collections, I would figure out how much I could carve out of the monthly budget and pay them what I could till they were paid off.  But I wouldn't kill myself on that one, because it is already in collections.

New Member
plrogers1126
Posts: 5
Registered: ‎04-24-2012
0

Re: help -- tuition in collections vs. paying down credit cards

Nothing you can really do about the collections account, just keep paying on it per whatever your agreement is.  For immediate impact on your score, lets look at your ccards.  You have 1 card at 4150 (4500 limit) and 350 (500 limit).  The first problem is the first card is considered "maxed out", meaning above 90% utilization (4500*90%=4050), so make a $101 payment immediately so it is not maxed.  Then look at utilization, the thresholds (for total credit limit utilization are roughly (65%+  52%-64%, 30%-51%, 16%-29% and 0%-15%), you have $4500+$500 total credit limit, so:

 

$5000 x 65% = $3250

$5000 x 52% = $2600

$5000 x 30% = $1500

$5000 x 15% = $750

 

As long as neither card is "Maxed Out" it doesn't matter to your score which you pay down, but as your combined balance drops below these thresholds (based on your last statement balances) you should see an increase in your score.  Hope this helps

New Contributor
stormb28
Posts: 104
Registered: ‎12-12-2012
0

Re: help -- tuition in collections vs. paying down credit cards

With the tuition, they can and will take your state tax return, federal will not be taken AFAIK.

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