Pay off delinquency or lower CC balances.. Higher score impact?

[Anonymous]

I've been a member of MyFICO for some time now, but not especially active across the forum, but I have received a lot of helpful insight as to how I can manage/rebuild my credit, so thank you for that...

I've got a real-life scanario here, and it's not totally clear to me which is more advantageous from research.

I'm currently using 44% ($849 / $1950) of my total available credit (across 5 accounts) but also have a serious delinquency on my record ($1047) that I really want removed (duh) and have been offered a settlement for this account for $627.

So my question is:

What would have a larger positive impact on my credit score in 2 months since both of these goals require the same amount of cash:

A) reducing that 44% to 11%, or

B) pay off the delinquent account to achieve a "paid derogatory" status?

Thanks for your help!

[RobertEG]

In my opinion, prior derogs and delinquencies are more harmful.  However, they are much more difficult to overcome.

Payment of the debt on an delinquent account does not, in and of itself, result in any deletion of the delinquencies, and thus no improvement in FICO score.  Either a PFD or GW deletion is necessary to get CR removal.  Obatining CR deletion is at the discretion of the creditor.

% util is much easier to improve with a resulting increase in FICO score because this is under your control.  % util has no historical memory in FICO scoring, and thus an improvement in one month is instantly seen once reported to the CRA.

Going the PFD route is much less certain than paying down % util, but the overall benefit, in my opinion, is greater.  Like most things in FICO scoring, there is rarely one single answer.

[OptimalCS]

Past due balance is a score killer based on my experience.

I find that when I paid my past due balance, my scores went up more than 20 points (especially with TU).

TU hates balances.

My advice to you is to pay your debt.

[gagum129]

Did you try running FICO simulator? If would be interesting to run and then compare to what you decide to do.