To Pay (Off) or Not To Pay (Off)...

[turninganewleaf]

That is my question...

I have two adverse accounts on my credit report:

1.  Bk of Amer CC, balance $1649.  Account closed by consumer.  Pay status: paid or paying as agreed.  Past due:  $0.  Has serious late pymts (most recent is 30 days in May '07 and it goes up from there).  On time payments since June '07.

2.  Cap One CC, balance $1014.  Account closed by credit grantor.  Charged off as bad debt.  Past due:  $1014.  Has serious late pymts though I've been paying regularly since June '07.

My original plan was to pay both balances in full by the end of this year (Dec '07) or as quickly as possible.  However, playing with numbers in FICO simulator, it gives me a better FICO score if I make regular payments for revolving accounts over a longer period of time. 

Which is the best approach?  Pay off these negative accounts as quickly as I can or delay pay off to get the better FICO score?

After these accounts are satisfied, I'll only  have two open accounts, an installment loan and a gas card - both of which I've had for a year and have paid on time and in full each month.  Debating whether I should apply for another CC to possibly boost my score or just sit tight as my goal is to get approved for a mortgage.

[Anonymous]

It's a lot easier to explain to an underwriter that you paid late but paid as soon as you could. My $.02 is to pay the outstanding debt ASAP... FICOs will grow as you continue to keep the others current. You will not lose the Hx from the paid lates.

You could also use the PFD strategy if the Hx is not as significant as you state in your OP. (This is what I would be doing.)

Your call. But my position is - as always - pay what you owe.

Rob 

[turninganewleaf]

Sorry, but what does "Hx" mean?

And to clear up any misunderstanding, I am paying on those balances, never intended not to.  My question was whether I should pay off those balances in full in the next month or two, if possible, to get a $0 balance or pay off those balances over 6 months to get any FICO score benefit from "making regular payments on time over an extended amount of time and decreasing balances".

I guess I'm unsure as to which approach to take as they are old balances (Cap One is reporting as past due even though I've been making regular monthly payments).

[fused]

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turninganewleaf wrote:

Sorry, but what does "Hx" mean?

And to clear up any misunderstanding, I am paying on those balances, never intended not to.  My question was whether I should pay off those balances in full in the next month or two, if possible, to get a $0 balance or pay off those balances over 6 months to get any FICO score benefit from "making regular payments on time over an extended amount of time and decreasing balances".

I guess I'm unsure as to which approach to take as they are old balances (Cap One is reporting as past due even though I've been making regular monthly payments).

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Hx = History

[Anonymous]

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fused111 wrote:

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turninganewleaf wrote:

Sorry, but what does "Hx" mean?

And to clear up any misunderstanding, I am paying on those balances, never intended not to.  My question was whether I should pay off those balances in full in the next month or two, if possible, to get a $0 balance or pay off those balances over 6 months to get any FICO score benefit from "making regular payments on time over an extended amount of time and decreasing balances".

I guess I'm unsure as to which approach to take as they are old balances (Cap One is reporting as past due even though I've been making regular monthly payments).

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Hx = History

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Sorry... What I meant to communicate is that the Hx will not be lost, so just pay them ASAP. I would however be attempting to have the derogatory information removed completely. Much better alternative to the reported "Closed by Grantor" comment. Especially when a lender is reviewing manually.

Rob