BAD CREDIT: Paying off chargeoffs, rebuilding credit score..??

Hello,

I am 27 years old and I'm trying to resolve some bad credit issues. I accrued about $7000 of debt (now about $12000 with finance charges) in college, which now, 5 years later, has all gone to collections and/or has been charged off.

After college I didn't have a job and stopped paying my cc's. When I finally got a job it was paying $10 an hour and I couldn't afford to pay what had then become the minimum payment, sending most of my accounts to collections.

I've paid off the accounts under $1000 so far on my credit report, including chargeoffs. Was paying the chargeoffs a good idea? I hear it's pretty much useless paying them off once an account has been charged off. Recently I also had an account go to the National Arbitration Forum. SCARY!

I have 3 other good-standing credit card accounts (all with a low balance for people with bad credit because I have a 558 credit score). The only things left are 3 chargeoff accounts which are over $1000 each. What should I do?

My husband paid off a $5000 chargeoff last year, and his credit score is now around 670. I don't remember what is was before, but he used to get denied any credit he would apply for and now he has been approved for Home Depot and American Express with a high limit. So I would say that it does help.

The only thing you must make sure of is to get a settlement letter in writing from the collector before making any payments stating the amount to be paid and that this will settle the debt. My brother is an attorney and I had him help us, sent the collector a letter that they must hold the cashier's check we sent and not cash it until we receive a letter stating that the debt has been paid. This is so that if they fail to report your payment to the credit agencies, you have proof and can handle it yourself.

Good luck!

One unless you received in writing from the company owning these charge offs that upon payment they will be removed from your credit report, they will remain there for 7 years, thus paying them off did nothing, accept they will be annotated as satisfied. If the others are over 4-5 years old, they are beyond the statute of limitations for collecting. Depends on your state. Even if a bill collector would take you to court, thats all you have to state in order for them not to win judgment against you, and as before will come off record after 7 years.

I would recommend you pay off the balances remaining on the credit cards, and then cut up your credit cards so you don't use them again. You don't want to have that same thing happen to you down the road.

What you want to do before that is build up a small emergency fund of about $1,000. This can be used to help you out should something happen. After this is built up (try to do it in about 1-3 months; sell something or take on some extra work) then start paying off the credit cards (then cut them up), and then tackle the other charge off accounts.

It may take some time but you will have gotten rid of those debts. Then you can fund some more money to your emergency fund (maybe 3-6 months worth of expenses) so you never have to rely on credit cards again.