Which collection accounts to I pay first?

Question

All of my mortgage, credit card, installment and otherwise accounts are up to date. However, I have about 4,000 worth of collections that I would like to pay. I am going to have $1500 I am able to use to pay them off. Since I can't pay them all, which ones would be best to start with to make the biggest impact on my credit score? A couple large or a bunch of small ones? Newst ones? Help!

Answer 1

DONT PAY THEM....

Well... not yet.. Please do yourself a favor.. Go to creditboards.com !!! Read... You might even be able to get them removed from you credit without paying!!!

Answer 2

It depends on your intentions with the cards. Keep the installments up to date.

If you can, pay off one card fully and request it "closed per customer request" by doing this you will limit your risk liability when someone reviews your CBR (credit bureau report).

Keep the other cards up to date, slow credit can be just as damaging as not paying at all.

Also, look to pay the higher interest rate cards off first -- you don't want to continue to use them anyway.

There's always a better deal - if your careful and read the fine print.

PLEASE BE ADVISED -- studly is completely wrong -- Creditors will NOT clear past credit histories unless there was an error on part of the bank and even then its difficult to get T/U Experion and Equifax to complete it.

There is no Statute of Limitations on paying bills -- you must pay or file bankruptcy that's the way it works.

With the new Bankruptcy laws it is very hard to file Chapter 7 - full release of debts - most people must file Chapter 13 now and pay a portion of all debts back.

Once the balance is zero, it will be reported this way. At this point use only one or two cards, charge no more than 105 of the balance and pay it off every month. Your limit may not increase drastically but this is the fastest way to improve your credit score.

-------Get your facts straight before screwing up someone else's credit studly.

ccdpat -- no idea about Canada - sorry.

Answer 3

If you're planning to apply for any more credit in the future, you want to pay off the smaller bills first. Part of your credit score equation looks at how many lines of credit you have open. Even though paying the $1500 on collection accounts will not approve your used credit-to-available credit ratio (which affects your score), active items out for collection count as open lines. The more open lines you have, the heavier it weighs against your credit. Paying off the smaller bills will close some of the open collection lines. This does not guarantee to make a big improvement on your score though.
This WILL do a couple things: First, reducing the number of lines of open collections will make you look less spread out. If a creditor looks that you have 10 lines of credit open, they will immediately think you've got too many bills to pay and may deny you. They will still look at your overall debt vs income, but less bills makes it look better for you. Second, it reduces the number of bills you have to pay in the future. If all of the collection agencies decide to take legal action at the same time (hypothetically) would you rather have 10 small claims suits on you or 5? Pay the smaller bills, reduce your debt/collection lines and it will serve you better in the future

Answer 4

All bad answers.

Lets start over. What is it you are trying to accomplish here? You want to improve your credit score.

How do you accomplish this? By getting the creditor to delete the negative information from your credit history.

Paying off a bill does NOT do it. All the creditor will do is place "paid" on your credit report, but it will still reflect that it was in collections, or that it has late payments. Therefore, it does you no good to pay off a bill if the creditor will not fix your credit.

So....here is my opinion.

NOTE HOW YOU TALK TO CREDITORS!!!!!

Do NOT offer to pay off your debt. Tell them you are negotiating some sort of payment arrangement and if they don't agree, forget the whole thing. If you make an offer to pay, you will "restart the clock" on the Statute of Limitations.

Tell them that if they agree to delete the negative information from you credit history, you will consider paying off the bill in full. If they agree, make sure you get this agreement IN WRITING.

Do this with all of your creditors. Those that agree, pay them off. Those that don't agree can wait for the next time you get a little extra cash.

If everyone agrees, then maybe work out payment plans for all of them, and use the $1500 for beginning payments.

But I seriously doubt they will all agree. But I can guarantee one or two will take the offer. That will help your credit score.

Answer 5

The short and sweet answer to this question is this. The credit scores are based on alot of different equations, that have several different variables. One of those is the date of last activity. So by paying any or all of these will bring the date of last activity forward. There by lowering your credit scores instantly. Time is truly the best heal for these accounts. Legally after 7 years these accounts have to be removed. So if they are old your best bet is to just leave them alone.

Answer 6

Bunch of small ones, kind of. Revolving accounts have a higher impact on your credit then installments.

Really someone would have to see your credit to be sure.

Answer 7

there are 2 answers to this

logically, pay off the ones with the highest interest rate first as this will end up cheaper

psychologically, pay off the smallest ones first as you will feel you have achieved more

Answer 8

To studly,

I am really interested in your advice. Does it also hold true in Canada?