Repairing credit questions
DH was out of work for over 8 months back in 2002 and our credit suffered horribly at the time, mainly due to medical bills. (we had no health insurance until 2004) We are currently in the process of trying to purchase a home and are having to use a "subprime" lender. The rate we have been quoted is 8.2%. We are looking at taking the subprime rate, but refinancing in a couple of years after intensive credit repair. We do not want to wait until after our credit repair to purchase because the area we currently live in is escalating in price and we do not want to be priced out of the market in a couple of years. Presently, DH has taken on a second job and our intention is to use the extra money to pay off old debts in order to raise our credit score. Would we be better off first paying off the smaller collection debts (quite a few of them) or putting the money towards paying off the larger debts? The smaller ones I am talking about range from $50.00 to approximately $500.00 and the larger ones are between $1,000 to $3,000.00. The total amount of old debt reflected on our credit reports is about $5600.00. (not including accounts we are current on, such as car payment, we are paying our bills now and keeping all current, we are looking to also paying off the old debts that went to collection or charge-offs) We just finished paying off $900.00 worth of a $1400.00 credit card debt, and received a letter from the credit card company stating that they were reporting to the credit bureaus that the debt was settled, but for less than the amount owed. I am kind of sorry we agreed to the settlement, I would have preferred to pay in full, but it's a relief to have that monkey off our back. Additionally, yesterday I received a letter from a collection agency for a medical bill from 1999 ( I have no clue what it's about, it doesn't even show up on my credit report). The amount owed is $112.00. I can send them a letter requesting that they send me proof that I owe the debt (name and address of the original creditor), but will that make the debt show up on my credit report again? If I owe the money, I want to pay, but I don't want to be stupid about it....I'd rather pay off the things that are hurting us now than pay off something that isn't currently hurting our credit score. Any advice anyone can give me would be surely appreciated. I'm excited to move forward into a healthy financial future but I need guidance.
Thanks a lot!