Credit decisions?

Question

I have an account in collections right now and my wages are being garnished because I made some poor decisions (I'll save you the story, but this is pretty much the ONLY blemish on my credit). They're currently taking out about a quarter of my paycheck each month (a few hundred dollars a month). I'm considering using my "emergency" credit card to pay off this collections account so that this wage garnishment stops. However, using this card to pay off this account would nearly max out my card. Keep in mind, this is an emergency card and not one I use every day. My question is:

Which would look better on my credit report -- leave the wage garnishment & get the account paid off faster because of bigger payments (garnishments) OR pay it with the card so that I can make smaller payments per month and actually put some money into savings too?

I hope this all makes sense. If more info is needed to better answer my question, just say so & I'll add it in. Thanks!

Answer 1

The sooner you get this blemish out of collections the sooner it will get off your credit report. Although it's great of you to want to save, right now that's not your best option. The stakes are against you. Use whatever you have to pay the arrears right away. Once that's out of the way, you can get back on track to saving again.

Answer 2

If I were you I would apply for a 0% interest credit card.  The 0% depending on the card can last up to a year.

That way you can pay off the collection and not incure interest payments on top of the amount you owe.  

If you can not pay off the credit card in a years time, open another 0% interest card and transfer the balance.

Check out bankrate.com and look through the credit card offers.  You want to look for 0% interest only cards.

Good Luck!

Answer 3

This is what I would do in your situation:

On this "emergency" card, does it have a balance? Keep in mind that unused credit cards even with a 0 balance, isn't building credit for you because there's no payment history being accumulated. I'm going to assume that you're not using this card.

I would use 30% of the available credit on the card towards the collection. This actually does a couple of things, it creates new activity with the card, because you're now carrying an allowable balance, and you'll be able to demonstrate payment history by making slightly more than the minimum payment each month. This way you still have available credit on your card and you've knocked down a ⅓ of the balance, and used an account you hadn't in the past. You should ALWAYS put some money away in savings, especially with how things are going with the economy. Hopefully this will help you, and keep at it!

Thanks for reading and good luck!