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We’re talking about outstanding debts of $ 100 to $ 400, but I’ve got about $ 3000. I can pay them all off in the next 6 weeks or so (thanks, IRS!), but would my credit score improve if I made payment arrangements instead and kept them?

3 Thoughts on I’m trying to fix my credit. Is it better to make ongoing payment arrangements with creditors, or pay in full?
  1. Reply
    July 27, 2011 at 8:33 am

    Your credit would be improved the quickest if you paid off all balances but left the credit lines open. An important factor in your credit score is your percentage of available credit used, so having available credit that you’re not currently using is very important. Too many people fall prey to the faulty notion that you should cancel credit cards after paying them off, which could not be more inaccurate.

    Therefore the short answer to your question is to pay off your debt but don’t close the accounts.

  2. Reply
    July 27, 2011 at 8:46 am

    If you have the money, pay it in full. Also you can take money and buy a c.d. at your bank and than take a loan out in the amount of the c.d. using it as collateral. making payments on this loan will give you positve marks on your credit every month. The sooner you do not owe anybody, the sooner your credit score will rise again. Good luck.

  3. Reply
    July 27, 2011 at 9:23 am

    The sooner you pay them off, the sooner they will become “old news”. Credit score calculations are set up to give greater weight to more recent activity.

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