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Correct Order of Paying Things Off

CaroleBaskinBB
Established Member

Correct Order of Paying Things Off

I have a long-defaulted federal student loan in collections that I have been making regular payments on for a couple of years.  This loan/default isn't on any of my credit reports thankfully but it cannot be rehabilitated to help my credit.  It's been a goal of mine to pay this off and I'm in a position to pay this off in a lump sum settlement of around $15k.  

 

Very recently I looked at my credit reports and realized the collections isn't on there and my husband's cc, on which I'm an authorized user, is one of a small handful of accts on my reports.  The balance is around $11k and the limit is around $20k, so the utilization for both of us isn't good.  He makes a salary and I'm a real estate agent who makes large chunks of money here and there.  He would likely never be able to pay this off but I can in one lump sum right now.  Our finances are fairly separate.

 

We have a care credit acct and I soon want to seek a CLI for some big dental procedures.  I cannot decide whether to pay off the student loan now or pay off his cc.  I know paying off his cc will immediately help our scores, but I'm also afraid that my student loan could suddently appear on my reports.  I don't know the interest, but I haven't made great headway in paying it off with small monthly payments.  Any insight?

Message 1 of 9
8 REPLIES 8
OmarR
Established Contributor

Re: Correct Order of Paying Things Off

Since it is a federal loan (versus private), it's never going to go away. If it were me and I had the ability to pay it off in full, I would do it immediately. If they didn't update, it would be a win-win. You say that you have been making regular payments and they are STILL not reporting? Maybe they will still not report the pay-off. Hopefully that dept is on Corona furlough.

 

But most likely someone will correct this oversight in the future (while still in collections) and update it anyways. 

 

Just my opinion.

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Message 2 of 9
Iusedtolurk
Established Contributor

Re: Correct Order of Paying Things Off


@CaroleBaskinBB wrote:

I have a long-defaulted federal student loan in collections that I have been making regular payments on for a couple of years.  This loan/default isn't on any of my credit reports thankfully but it cannot be rehabilitated to help my credit.  It's been a goal of mine to pay this off and I'm in a position to pay this off in a lump sum settlement of around $15k.  

 

Very recently I looked at my credit reports and realized the collections isn't on there and my husband's cc, on which I'm an authorized user, is one of a small handful of accts on my reports.  The balance is around $11k and the limit is around $20k, so the utilization for both of us isn't good.  He makes a salary and I'm a real estate agent who makes large chunks of money here and there.  He would likely never be able to pay this off but I can in one lump sum right now.  Our finances are fairly separate.

 

We have a care credit acct and I soon want to seek a CLI for some big dental procedures.  I cannot decide whether to pay off the student loan now or pay off his cc.  I know paying off his cc will immediately help our scores, but I'm also afraid that my student loan could suddently appear on my reports.  I don't know the interest, but I haven't made great headway in paying it off with small monthly payments.  Any insight?


You say the student loan is LONG DEFAULTED if that means it's 7 years old or older it will more than likely not be showing up on your credit report in the future although the debt will still be owed. (and if it did you would dispute it as being too old to be reported).

 

Pay down your 11 thousand dollar cc bill and after your score goes up go for your Care credit CLI. You can then continue to pay on your long defaulted student loan so it will eventually be paid off.

Message 3 of 9
CaroleBaskinBB
Established Member

Re: Correct Order of Paying Things Off

Thanks, I'm inclined to do this. After our credit scores go up, should I wait a certain amount of time before requesting the care credit CLI?

Message 4 of 9
jamaster14
Regular Contributor

Re: Correct Order of Paying Things Off


@CaroleBaskinBB wrote:

Thanks, I'm inclined to do this. After our credit scores go up, should I wait a certain amount of time before requesting the care credit CLI?


It would depend on the specific card and when they pull credit scores.  you may pay it off and have your credit scores increase in a matter of days but it may take months before the CC you are requesting a CLI for updates your score.

 

I'm in a similar situation with Capital One.  My credit score was 646 in february.  i raised it to 748 in march.  but they wont update until june.  so if i request the CLI now, it will still get denied.

 

that said, most CC's only do a soft pull for a CLI and requesting one and beind denied now likely wont effect your chances if you try again in a few weeks.  but again, it varies



Message 5 of 9
CaroleBaskinBB
Established Member

Re: Correct Order of Paying Things Off

Kudos on your quick score increase!

 

After paying off my husband's cc, how long to wait before requesting CLI on that one?

Message 6 of 9
jamaster14
Regular Contributor

Re: Correct Order of Paying Things Off


@CaroleBaskinBB wrote:

Kudos on your quick score increase!

 

After paying off my husband's cc, how long to wait before requesting CLI on that one?


What credit card/bank is it?



Message 7 of 9
CaroleBaskinBB
Established Member

Re: Correct Order of Paying Things Off

It's Bank of America. 

Message 8 of 9
SteelerNYC
Valued Contributor

Re: Correct Order of Paying Things Off

If you need the dental procedures soon, I wouldn't count on a getting a CLI right about now in order to make that purchase.

 

Additionally, your income is very well likely to take quite a toll in the coming months/years. I'd hold on to the cash for the time being.

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