What to attack first - utilization or collections?

[Matt626]

Hey all. I am in the process of repairing my credit after a bk in 2017. I had been doing very well, slowly but steadily throwing everything I could at it. I was up to 670, then I had a series of fun events. In the spring, new manager came in and cut everyones hours. Got that fixed after two months but maxed out my credit cards in the meantime. (not great, but not the end of the world, no plans to apply for anything any time soon. Reliable car and stable housing) . Then took a big hit from my ex breaking into an old Affirm account (woke up to 14 lates one one crisp October morning, I'm taking legal action and also disputing, but it's slow going), and then a week later someone totaled my car in stopped traffic (yay dash cameras, dude was texting. Settlement is enough to pay off the car loan with $5k extra.) 

So.... Now I'm with a credit score of 480, $5000 cash, and no car. Ouch. 

I live less than a mile from my work, so I know I need to repair my credit as much as possible before replacing my car. I can walk for now, but will need a car again by January for a longer commute. I am not confident these affirms will come off in time, but either way, most of the big banks are still holding a grudge from the bk. So I need the best score possible. 

So my question is, using this $5k, what should I attack first? Would it be better to leave the collections and get the cards back down? Or keep the high utilization and settle the collections down with PFD? or 50/50? Would settling the capital ones give me a chance at prequalifying with them again? 

I am down to:

-9 credit cards ranging from $400-1400 limits, 8 are maxed out. $6300 out of $6700 used.

-3 collections,  $3500 C Corp / $2600 MCM (capital one)  / PRA $1800 (capital one), all three collections from 2020

What would have the bigger/more immediate credit impact?

[FicoMike0]

Wow, you need the experts! They're around here.

I think id hit the utilization at least enough to avoid balance chasing.  Then again, id probably be looking for a < $5000 car.

[Matt626]

You're telling me! It's been an... interesting few months. 

That's certainly an option too, and one that I'm working on coming to terms with. Trouble is, in my local-ish market, even the old beaters are about 10k now for under/around 10 years/150k miles. Especially for a small hatchback to fit three large dogs, and reliable *enough* for regular two hour (per way) freeway drives once January hits. So still would need some financing because of the poor timing. I'm sort of thinking (hoping, really...)  that I can bring my credit back up to get approved for something like a basic used civic hatch, around ~13-16k. then aggressively pay off or refinance with my local credit union to counter the inevitably horrible interest rates. 

I'm just sort of in my denial/negotiating stage I think, seeing what the best way to use this $5k would be. Using it for a cheap sedan is pretty straightforward, but I'd like to at least see what other options are. But I am working on accepting that as the likely option. 

[FicoMike0]

You don't seem to be getting comments from the credit wizards, maybe @JoeRockhead will help.

If it weren't for the car thing, I'd say yours is a finance, not fico, problem. Not to sound harsh, but I don't think credit has been your friend.

The identity fraud is a nightmare. Make sure you persue it on all fronts. Police report, notify the lender, do everything!

That still leaves some collections and high utilization, at high interest, I'm sure. As I've told others, the first time you can't pay an account in full, that's the time to declare a crisis. It just grows out of control.

You don't give any details about income and expenses, but I'm assuming you are in a real bind. On the car, maybe you don't get what you want, but what you can afford. Maybe you end up finding a bargain on a crown Vic land barge. Sure, it uses twice the gas, but if the price is right it'll do till you get in better financial and fico shape. No car payments buys a lot of gas. Think outside the box.

[JoeRockhead]

If you try to look at this situation logically, you need transportation first and foremost. Without it... it's going to make your situation worse. Being completely frank, your scores are in the toilet, and unless you have the ability to make all the baddies, as well as the high utilization go away in short order, chances of a car loan approval  are going to be virtually non existent at this point in time. 

Even if you used the $5k to pay down the utilization, which would greatly help your scores, getting approved for a car loan would still likely require a large down payment... which you wouldn't have. If you had more time to work with, my advice would be different. Forget your scores and your utilization for right now. Your number one priority should be to secure reliable transportation so you can continue to earn an income. 

1. Find suitable transportation so you can continue to have an income.
2. Stop using your credit cards except for anything you can't afford to pay in full every month plus a little extra towards the balances.
3. As you continue to earn, focus on more aggressively paying your high utilization down to hopefully avoid balance chasing and account closures (get all accounts under 50% UTI, then under 30%, then under 9%... and keep them there!). Use the avalanche, or snowball methods (lots of posts here discussing it).
4. Once your utilization in under control, refer back to #2
5. Focus on getting any charge offs and collections taken care of.
6. As your situation, reports, and scores improve... NO NEW CREDIT or applications until your reports and utilization are vastly improved, and scores are at least 680+

By no means do I consider myself an expert. I came from a place with scores lower than yours, and currently all are in the 800s and... I'm not the only one. My issues were never a problem of not having enough money, it was far worse, we'll call it laziness and other "distractions". What's in front of you isn't impossible by any means, but there are also no magic answers, or wizardry. It's a matter of focus on making good decisions, and the dedication to make things right again. 

[Troopscott]

I am not expert but I would look at a buy here pay here type place put a couple grand down, don't over buy and use another 2k to pay down credit cards. 

Save 1k for an emergency fund