Fixing my credit – Should I keep making payments?

[Mark]

For the past 3 yrs I have had to let my credit cards unpaid. Just recently I have been able to pay one off, and also pay off a large medical bill, I am making payments on 2 others and I know 1 other card that has not contacted me or sued me and an auto that was repo.

In a few weeks I will be able to pay them all off from a legal settlement, I also have a loan on my home that if I continue to make payments it would be paid off in about 3 yrs.

Will it make a difference if I paid it off or still make payments to help rebuild my credit?
Thanks

[Tracy Winters]

Yes it will

Paying back your debts is the right thing to do, regardless of how it helps to rebuild your credit.

Your credit is much more than just your score. While your credit score may take a lot of time to recover from 3 years of unpaid debts, your credit standing can certainly benefit from you paying back past debts.

Credit score is just a formula. It penalizes late or unpaid debts severely, and I imagine that your score took a serious hit. Unfortunately, bad credit doesn’t go away regardless of whether or not you pay off your debts. Late payments, charge-offs, collection accounts, repossession, liens etc stay on your credit report for up to 7 years. As time passes their impact on your score is reduced, while new (and hopefully positive) information raises it.

Continuing to make payments is always a good thing, because this is what actually builds credit. You need to keep in mind that it takes at least 2 years of timely payments to see a significant improvement of your score.

Another thing to keep in mind is that lenders look at much more than your score. When you apply for new credit’ lenders actually pull your complete credit report and see how you pay your debts. Although your credit score is very low, the fact that you continue to pay back your debts will stand up for you.

For more information please see why-pay-off-debts.html.

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