My credit is currently at 460. The only thing that I owe is a credit card in collections with a $500 limit, but it has a $2,600 balance making my credit utilization 530%. If I paid this off or settled, will it bring up my credit drastically? Maybe at least the 500’s? -TONY
Paying off any debt in collections will certainly help you improve your credit. Just be aware that paying off collections accounts can cause your credit score to drop at first. That’s because when you make a payment, the last activity on the account becomes more recent, making it weigh more negatively in your credit report.
Something else to remember is that credit scores do not just weigh the current status of your debts, but your history of credit use. A record of on-time payments is necessary to demonstrate that you can reliably manage your debts. You must demonstrate through good credit management over time that you will not repeat the mistakes that landed you in credit difficulties. This is also referred to as building a positive credit history.
Once your debts are paid, you need to keep your balances low and continue to make any remaining payments on time. It’s hard to predict exactly how much your score will change as a result of these actions. Credit scoring is numerical data based on an analysis of your credit file, and many factors go into calculating your scores. Your credit scores will slowly begin to improve as time passes. The worse your difficulties, the longer it will take, but you will be able to rebuild a positive credit history that will be reflected in strong credit scores.
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If you’re struggling with credit card debt and could use some more personal help, contact the certified staff at American Consumer Credit Counseling. Call 800-769-3571 for a free counseling session, or visit ConsumerCredit.com for more information on getting out of debt.