Which method is better for rebuilding credit?

[nilseks]

Without going into too much detail--after 12 recurrences of cancer (now cancer free!) as you can imagine I have a LOT of medical debt on my credit. That is my only bad credit but it's piling up and my score is not great.

I have 2 credit cards, and I am using them to charge EVERYTHING. First of all that's in an effort to rebuild credit, but second, the rewards help. I charge everything I can on it every month, and pay it off every month.

So here is my question...from a credit rebuilding standpoint, is it better to pay it off every month BEFORE your statement is cut (so your statement would show a zero balance) or is it best to let it all accumulate and show for example a $2,000 balance and THEN pay it off? Or does it even matter?

Thanks for any input!

 

[BubMunkeyBles]

Pretty sure it has to post as a statement to actually help your credit. But I'm sure others can answer better.

Congrats on beating cancer 12 times! What an amazing feat. I hope you can find a way for the creditors to work with you on your medical bills.

 

[minnie1928]

Depends...how much are you charging compared to your available credit line? I think the rule is that you don't want to exceed more than 20 or 30% of your credit line. So, for simple math, if you have a credit line of $1000 and you are running $700 in purchases each month then you are probably hurting your score and you should pay it off before the statement.

Another thing to consider, you need to find out when they report to the credit bureau. It's possible that they don't report statement balance. Perhaps they are reporting the current balance on x day of the month.

 

[MSLRAC]

I work in finance and medical debt can be tricky to overcome. In many cases, what you are doing with the the cc's, really won't off set that negative aspect of your credit.

But back to your question, you need to make sure that you are only using a small portion of your available credit each month, allow that statement to run and then pay off the majority of the balance. It is fine to carry a small balance from month to month especially depending on when the cc reports. Like Minnie1928 mentioned, cc companies can report at various times during the month or even quarter. In order to rebuild your credit, you have to show that you are using your credit and that you are doing so wisely.

Also, make sure that you aren't holding cards with huge available limits. If you have two cards, each with $10,000 limits, whether you are using them or not, they can be seen as credit risk by other creditors. Creditors view things like that as you having the ability to go max them out at any point, thus changing your debt to income ratio and ability to repay them.

There really is a lot that goes into rebuilding credit and it can be a very delicate balancing act but it can be done so good luck!

 

[SandrA9810]

Usually if you have more negatives than positive, it won't matter how good the positives are, because the negs will just bring it down.

You could always pay off the majority of your bill a week before closing, then pay the remainder off after the bill comes.

 

[MSLRAC]

Usually if you have more negatives than positive, it won't matter how good the positives are, because the negs will just bring it down.

You could always pay off the majority of your bill a week before closing, then pay the remainder off after the bill comes.

That is not always true in this case since the bad is medical bills. In many states and many creditors do not hold medical collections against you when deciding credit eligibility. However, in recent month's, I have seen creditors that didn't used to count them, start counting them.

 

[Sheree]

use and pay is the best thing. it's total use vs total allowed percentage. also the age of the accounts so keeping open ones you don't use can be helpful.
BUT, having open collection accounts, even medical will prevent you from getting a mortgage. also as they're paid off, the daes are recent which lowers our score.

 

[nilseks]

Thanks for all the insights. I charge a lot, probably about 40% of my credit limit, so I will bear that in mind and pay off when I get to about 20%, then leave a small balance before the statement cuts.

I know it probably won't make much of a difference, but hey--I'm making an effort. That's about all I can do because there is only so much money to go around, and some of these medical companies who do not want to work with my insurance and accept their discounted rates are just going to have to wait a very long time to get paid. I was initially diagnosed 10 years ago so this isn't anything new as far as the medical debt. I do have to say though that we have been with Chase for our mortgage for a really long time and when we did our refi, they didn't give me a hard time about it. They saw that it was medical debt and had us write a letter about the circumstances, then nothing else was said and our refi was approved.