bad credit. Is it better to pay off several small accounts or larger ones?

Question

All is old debt, mostly in collection. Also pay off revolving accounts or more current accounts?

Answer 1

Pay off the ones charging the highest rate of interest, because they are the ones costing you most money



.

Answer 2

All of the answers above are correct. But the answer really depends on what your goals. There are many different ways to answer your question.

If your goal is to get out of debt quicker, a personal financial planner would advise you to pay off your higher interest accounts since these are costing your more money over time.

If your goal is to eliminate some of your monthly bills, then you should pay off the account that is billing you more per month. For instance, if you can eliminate your car payment, then you will free up $300 - $700 per month.

If your goal is to improve your credit, it is better to pay off the following in the following order:1) tax liens or judgements, 2) collection accounts, 3) any account late or past due 4) credit card accounts, and 5) installment accounts.

Credit scores deduct points according to your delinquencies, debt levels, and ratios of balance to credit limit. So if you can first reduce or eliminate any defaulted accounts and then reduce or debt to credit limit ratio, then your credit will improve.

However, it is not a good idea to pay off one account and become delinquent in another. Because although you will decrease your debt to credit limit ratio, you will incur a delinquency status which will bring down your credit score.

So the answer to your question will depend on what your financial goals are.

Answer 3

Probably not a great idea to "pay off" any of them. Try to make a payment on each account that is larger than your minimal payment. And if you have a large sum of money try to clear the accounts with the highest interest rates. With this good Faith payment done, talk to the various account managers and let them know that your financial status has changed and you will be making your payments on time, If these accounts are credit cards... You should also ask for reductions in your interest payments. Explain politely that you are trying to straighten things out and a little help from their end would be appreciated. Can't hurt to ask and it has worked for me in the past. If worse comes to worse you can cancel the cards and work out a payment schedule with them Also...
You do have to ask yourself if you are ever going to break free of your bad credit and be able to get back to zero some time in the future. There is a point of diminishing returns where it just isn't feasible to regain your good credit status.
Bankruptcy is an option but I am not suggesting that you do this. I don't have enough information. There are credit councilors out there that work for free. Get some help if things are grim.

Answer 4

Your question is about CREDIT, not interest. Everyone keeps answering the wrong question. As far as your credit is concerned, get all credit card balances below 30%. Your credit score will take an immediate shot in the arm. You can try to dispute the collections, although they are harder to remove than most. Best to negotiate witth the agency and agree to pay them only a percentage of the total amount - and ONLY if they agree in writing to remove the account from your credit record.
Good Luck

Answer 5

if the accounts are already in collection, it really doesn't matter, as it still shows "collection account" on your credit report. To get them addressed sooner than later, pay the small ones down first and then start working on the bigger accounts. Either way, it will take some time for your credit to improve. If you have accounts that are not in collection, bring your balance-to-limit ratios below 50% however you can. If that means paying the bigger ones down first or the smaller accounts.

Answer 6

Pay off the highest interest rates first, or look into consolidating your debts by calling the American Consumer Counseling Center - unlike a lot of those "debt solution" places, this is a non-profit and won't take your money.
American Consumer Counseling Center
http://www.consumercredit.com/ or 1-800-769-3571

Also, get down to your lcoal library tonight and start checking out personal finance books - they can be wonderfully empowering and inspiring, and many are written in simple English.
-The Complete Idiot's Guide to Personal Finance in your 20s and 30s
-The Complete Idiot's Guide to Managing Your Money
-any David Bach or Suzy Orman books

Answer 7

If you are trying to improve your credit each one of them counts against you. It is hard to say without knowing more, but if you can catch any up and keep them active, that will help your rating more than paying off one big one. If you are just trying to get out of debt, yes the higher interest rate ones cost you more money, but you need to develop some momentum. Knock off a couple of the small ones and build on that success.

Answer 8

I think it is better to pay off accounts that incur interest first - the longer these accounts are unpaid - the more money you will pay in interest - then in the mean time pay a small amount on remaining accounts, once the accounts are paid that incur interest - then focus on paying a larger sum on one account - remembering to pay a small amount on each remaining account - that way - keeping everyone happy

Answer 9

It is better to pay off several small ones first and here's why- 1)it eliminates the overwhelming feeling of so many bills coming in, and
2) it gives you a feeling of victory- that you can succeed at paying your debts off

My advice would be to start with a high interest rate smaller loan, pay off the rest of the small loans, and then work on any bigger ones you have, starting with the one that is the highest interest rate.

Answer 10

Pay off the ones that charge the most interest, and pay as much as you can on ones with smaller interest.