Posted on: 16th Jun, 2011 03:46 pm
I have 4 credit cards that have balances of between $1500 and $2500 on them, but they have been closed by the grantor. They were closed last year due to some missed payments due to temporary pay cuts at work. In December of last year, my income was restored and I was able to pay the back payments to bring them current, and have been paying the minimum +$50 on each of them for the last 6 months, but since they now have very high interest rates, I am haven't been making too much of a dent on them. They aren't charge-offs, as they are still receiving their payments and still collecting interest, and my credit report indicates "paying as agreed" for all 4 of them. I do have 1 credit card that isn't closed, has no balance on it, but due to its high interest rate I have been reluctant to use the last few months.
My question is this...I now am making more money than I have been...I was planning on paying off the 4 closed accounts, one each month over the next 4 months. If I want to rebuild my credit quickly, is it better to pay them off as I planned and use the 1 open card to establish an on-time payment history, or do I not pay them off immediately, but enough such that through consistent, on-time payments, they will be paid off over the next 12-18 months and push those delinquencies past the 2 year window? I do not know if on-time payments towards closed accounts are better or worse with regard to credit scoring than paying them off immediately, or is there any difference?
My question is this...I now am making more money than I have been...I was planning on paying off the 4 closed accounts, one each month over the next 4 months. If I want to rebuild my credit quickly, is it better to pay them off as I planned and use the 1 open card to establish an on-time payment history, or do I not pay them off immediately, but enough such that through consistent, on-time payments, they will be paid off over the next 12-18 months and push those delinquencies past the 2 year window? I do not know if on-time payments towards closed accounts are better or worse with regard to credit scoring than paying them off immediately, or is there any difference?
I am not a credit expert but in my experience, it is best to work on delinquincies and then any balance that is near the credit limit. Rule of thumb on credit is not to close your accounts, use them. Keep your balances below 40% of the credit limit. Negotiate with your creditors to report your account as current and paid as agreed and to remove the derogatory. If they wont, then dont pay. They should work with you. For mortgage loans, you need 3 active tradelines for atleast 12 months. Good luck!
Negative items will remain on your credit report for at least 7-10 years. The best method to improve credit score is to make payments on time. Late payments may hurt your credit score by 35%. Therefore, you need to payoff your existing debts first. Your credit score will improve gradually once you start making payments on time. You can make a written request to your creditors to update your account status as “Paid-in-full†and remove all negative listings from your credit report after repaying the debt in full.
You've said that they appear on your credit report as being paid as agreed - that means no delinquencies.
It's a good (great) rule of thumb to pay off this type of debt as quickly as you are able. Pay as much as you can as often as you can and eliminate that debt; in so doing, you begin the rehabilitation of your credit record. As for the other card that you don't use, I suggest you use it, but do so sparingly (one or two times per month) and pay it in full each time you receive a bill. This will benefit your overall credit standing and score.
It's a good (great) rule of thumb to pay off this type of debt as quickly as you are able. Pay as much as you can as often as you can and eliminate that debt; in so doing, you begin the rehabilitation of your credit record. As for the other card that you don't use, I suggest you use it, but do so sparingly (one or two times per month) and pay it in full each time you receive a bill. This will benefit your overall credit standing and score.
