Need some Guidance

Need some Guidance
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After years of negligence I have decided to take my credit building seriously as i have realized you cant get anywhere in life without good credit.

I defaulted on my student loans all $33k. I entered a student loan forgiveness program, completed the program and im now back to making monthly payments to Great lakes who holds my loans.

I have paid off $395 capital one credit card that was in collection.

I still have left $576 verizon bill in collections, and about $3300 bill from tmobile in collections.

Throughout this process my score has gone up from 532 to 580.

what should my next steps be, would agreeing to make monthly payments on the bills I have in collection help my credit score? Should I get a credit card and which one would be best.

The goal is to get my credit to the 690 range.


Arles, congratulations for making the difficult first steps toward debt freedom!

I am guessing you entered rehabilitation to deal with your defaulted student loans, rather than forgiveness? Rehabilitation would have erased the default from your credit report once you made a series of on-time payments — and it’s a major accomplishment.

There’s nothing more important now than being able to stay on top of your student loan payments, because a) you can only use rehabilitation once, and b) student loans are a much stickier form of debt than credit cards and cell phone bills.

(If I misread your student loan actions, apologies.)

Let’s assume you can deal with your student loan payments and have something tucked away for emergencies. Now you’ve got two decisions to make: How to deal with the past-due debts you already owe, and how to rebuild your credit.

Paying off debts already in collections won’t help your credit score much, as the black marks are already there. On the other hand, creditors could pursue you in court and win a judgment that allows them to seize part of your paycheck. In the end, one of three things will happen:

  • Your creditors lose their shot at using the courts to collect once the statute of limitations on debt has passed in your state; or
  • You find a way to settle the debts; or
  • You file for bankruptcy protection.

NerdWallet has an excellent guide to debt-relief options.

As you noted, it’s time to begin racking up some positive factors on your credit report as well. A secured credit card is not your only option. We like credit-builder loans in particular (a loan where the proceeds live in a bank account until you make all the payments on time). In the end you wind up with positive credit history and a nice nest egg.

Here’s a guide to rebuilding credit.


Arles, based on Des’s feedback I would caculate how long you think it will take you to pay off your student loan and your nearly $4000 in phone bills, plus any other debt you may have. Then you should ask yourself if filing bankruptcy is a option realizing that it will stay on your credit for 10 years.

If, paying off your debit is a better choice then do exactly that, and at the same time obtain a credit builder loan as Des suggested assuming you have the funds to secure it. Additionally, you could try getting a secured credit card. You might start with the bank that you bank with, as they may be more willing to approve you. Stay the course and pay on time, as all wounds heal over time.

Good luck,


Thank you for the response, Ive been doing really well with my student loans and i even have some extra money to save on a monthy basis, budgeting is a magical thing.

I have a question should I bother paying off the debts that are in collection even if they are past the date where I can be sued for them to be collected? If it wont help my credit what is the point of paying it off?


If they are not on your credit report I would not pay them.


That’s a good question, Arles, because it can be complicated. The statute of limitations that Des was talking about doesn’t prevent the collectors from suing you even when the debts are too old. What the statute does do is give you a defense to cite to get the case dismissed after it was filed. But you would have to show up in court to do that.

It may be possible to settle the bills for less, but that can be a tricky process. The link Des provided you above has some information that can help.

To rehabilitate your credit, you typically need both revolving accounts (credit cards) and installment loans. You already have the installment loans covered with your student loans, although as Des said you could also add a credit builder loan. A secured card is probably your best option for revolving account, and you can find a list of options here: