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Should I pay off collections account with credit card?

  • Yes

    Votes: 7 50.0%
  • No

    Votes: 7 50.0%
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Discussion Starter · #1 ·
Hi all. I have an account that went to collections from Abby's birth. I am paying it off quicker now that I work PT. It shows up on my credit report and we are planning on buying a house in a year.

Here is my question. Should I pay the balance of on our credit card even though it has interest so that it will show paid for longer when we buy a house? It will bring our credit card debt to about $9,000 which should be paid off by December 2005 or maybe January 2006. The card has never been late or anything so I don't think it will hurt that way, we will pay interest on the amount though when currently there is no interest.

Thanks guys!
 

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Why not go to a bank and ask the loan officer? You can pretend you are thinking about using them for a home loan/credit card. Don't give them tons of personal info just ask the above question. They will know better.
 

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When a mortgage company looks at your credit, they look to see that you are consistantly paying your bills on time. Paying this thing off, but having a big credit card debt isn't going to really make a difference.

And for that amount of money, I wouldn't pay interest on it when you aren't now. No way.
 

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I think I would b/c the sooner you pay off the collections account, the better. If you keep paying the cc on time- it will help re-establish your positive credit faster. I don't know for sure, just my thoughts- you know, paying on time increases your credit score. I also think calling a loan officer is a good idea.
 

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Mortgage companies also look at how much spending power you have. When you open a credit card, you have the spending power of its credit limit, whether you have a balance or not. When you make regular, on time payments, the cc company will raise your limit, raising your spending power. So, being in debt on a credit card is much better than having a collection agency come after you for other debt, as long as you make your payments on time. It can actually help your credit.
 

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The mortgage company will probably only look at your credit score. Do you know what it is? Since you're not planning on buying your house for a year you've got time to get your score and if it is low then you've got time to research all of the things that affect credit scores.

If your score is excellent now then I wouldn't worry about it. If it is marginal then do research on what affects a score and what to do to bring it up.

I think there is an article on bankrate that shows what different scores mean in terms of the kind of interest rate you'll quailify for. Pretty interesting stuff. Just look up "credit score" or "improving credit score" on Yahoo or Google. And, you can do all the stuff yourself to raise your score, you don't have to hire a company to do it for you.

Best wishes!
 

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Discussion Starter · #7 ·
thanks everyone! my DHs credit score is 708 and mine is 596, so mine sucks and his isn't bad. that is why i was thinking if i pay if off right now, it might improve my score over time and be in paid status longer, add that to not paying anything late for the past (should be 2 years or so by then). i think i will just pay it off and pay the interest. we should be able to pay it off by the end of the year, so interest won't be that horribly bad and may end up being worth it. hopefully so. it might not even come into effect since DH might be able to qualify for a house in a better price range by himself.

thanks for helping me out and for all the ideas.
 

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If your only option is to pay using credit, I would look on-line or your mailbox for a good balance transfer credit card. Some give you really low interest rates on the card. You may want to open 2. One to pay off the collections and the other to transfer that amount. If you keep them open, that also helps with your credit. Hope this all sorts out soon for you!
 

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Discussion Starter · #9 ·
thanks! i actually called them and the guy said he could offer me a settlement, so i told him that i didn't want to because even though it is less money, it will look bad to have a "settled" account on my credit. he said they didn't do that. so i said okay and took the settlement. THEN, when he transferred me to verify the transaction, i asked the new person if it would say settled or not, he said it would, that he didn't know why the guy had told me that. i told him that he offered to settle when i was calling to pay in full. he told me that if i wanted to pay in full, to call him after the transaction went through and he would REMOVE the collections from my credit report completely. i told him that i woudl pay it in full and that i would believe him even though i doubted he would do that. he told me his first and last name, his extension and that he had been there for 4 years and would be there when i call him.

i don't believe him, but it is now paid either way. maybe there are miracles and he can do that, but i highly doubt it. oh well. if he does, i will be completely shocked.

anyone ever heard of that? i am sure he was lying since the other guy did, but i guess he could have lied to me and said they would write "paid in full" not "settled, paid"
 

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If it's still in the in house collections dept, I believe they do have the ability to remove it and show current payments. You're right, settled is much worse than paid in full! Good for you for double checking.
 
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