Question about debt reduction... credit counselors please read!?
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I'm about $4000 in debt currently. My rating is somewhere between 525-580 depending on the credit firm. My question is that is it better to pay it all back now or make payments to my creditors (not credit cards, more like hospital bills, payday loans, old acocunts) over a six month period? Which (or what) will help my rating rise quicker? I'd like to get it 700 by the spring. Is that possible? I may follow up this depending on the answers. Thanks!!!
Question about debt reduction... credit counselors please read!?If the accounts in question (your hospital bills, payday loans and old accounts) are in collection or charge-off status, it doesn't matter how you settle your debt. You can either pay each bill in full or you can attempt to settle the accounts for less than what you owe. Either way, paying off the negative accounts will not raise your score. The only way to raise your score is to 1) pay down your current debt to less than 40% of what you can borrow and 2) make on-time payments.
Having said that, you can always negotiate to pay less than what you owe. If it's signifigantly less than the original amount, they might ask for it in a lump sum as oopposed to putting you on a payment plan, so be prepared for that. If they do say that they will accept less, make sure you have them put it in writing. Then send your money and ask for a letter or a receipt stating that the balance is 0. Hang on to this for your records - you might need to make a copy of that and send it to the credit bureaus in order to have them update the status of your accounts. The accounts will not be removed until it's been 7 years from the date of last delinquency. But they can still update it to say paid collection or paid charge-off.
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