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How to target best way to pay Credit Card balance

Established Member

How to target best way to pay Credit Card balance

Thank you for reading my post.  Please Advise...

 

I know you always pay the highest interest rates first.  If I have 5 cards that have the same rates, but with different balances.  What is the best way to pay them to increase my FICO score quicker.

 

I think I should target each card by getting them below 10% first, before paying one off at a time.

 

Would this be the best plan to get score increases?  Or does it really matter, because the credit ratio available to debt is the key.

 

I still think the 10% below each card first is the better way to go.

 

Thanks again, really looking forward to everyone input.

Message 1 of 12
11 REPLIES
Community Leader
Valued Contributor

Re: How to target best way to pay Credit Card balance

Hey Dino! Welcome!
I believe that FICO takes into account how many cards carry a balance along with utility. Personally- I'd make minimum payments to all cards but one- pay as much as I can each month to pay it off then move to the next balance adding the old cards minimum payment to the next cards payment. Attack each account balance aggressively until they are all paid off 1 by 1. JMO Smiley Happy That's the way I'd do it. Hope this helps. Good Luck!

Starting Score: 642
Current Score: EQ 773, EX 780, TU 777 (All FICO)
Goal Score: 800+

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Message 2 of 12
Valued Contributor

Re: How to target best way to pay Credit Card balance

Some people go with the lowest balance first, so you can snowball the payment into the next lowest card.


Starting Score: 693 TU FICO, 679 EQ FICO
Current Score: FICO 8 = 844(9/15) EQ, 827 TU, 811 EX (7/15); mortgage FICO= 758 (9/15)EQ5, 797 TU4, 748 EX2 (7/15)
Goal Score: 750+, but shooting for the 800's
Hyatt Visa Sig ($23K), Amex BCP (24.8K), BofA Travel Rew Sig (22.5K), B&N World MC (22.3K), Amex RP Gold (NPSL w/ S&T), Cash+ Sig (20K),United Mil+ExpSig (16.3K), FNBO Visa (13.1K), Hilton Surpass (10K), Freedom Visa Sig (8.6K), Disc It (16.4K), Citi Dia Pref MC (3.7K),Sam's MC (10K), Wally (7.5K), JCP(5.3K), Costco (2K)
Message 3 of 12
Established Contributor

Re: How to target best way to pay Credit Card balance

I'd target the card with the lowest balance first, then the next lowest.  This way the number of monthly payments gets reduced quickest and less money is wasted making minimum payments only.

FICOs (2/24/12): EX 752, EQ 740
Chase Sapphire Preferred, Freedom; American Express PR Gold, Blue Cash Everyday
Message 4 of 12
Frequent Contributor

Re: How to target best way to pay Credit Card balance


Koop10010 wrote:

I'd target the card with the lowest balance first, then the next lowest.  This way the number of monthly payments gets reduced quickest and less money is wasted making minimum payments only.


+1

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Message 5 of 12
Senior Contributor

Re: How to target best way to pay Credit Card balance


rbh wrote:

Koop10010 wrote:

I'd target the card with the lowest balance first, then the next lowest.  This way the number of monthly payments gets reduced quickest and less money is wasted making minimum payments only.


+1


Just to clarify, this is a good tool because it makes it seem like you are making progress more quickly, but there is no difference financially between paying off multiple cards of the same interest rate by spreading the payment equally between the cards versus paying more agressively toward the card with the lowest balance first.  Assuming you have a set amount to apply toward the cards each month, it's the same no matter how you divide the payments.  Some people feel motivated by seeing that they are chunking away at one balance and then moving on to the next.  But there's no waste involved no matter how you split it up. 

 

The only time that it would make a difference is if you later were to have a cashflow problem, it would be easier to manage fewer minimum payments than multiple minimum payments.  But assuming the same amount of money to apply toward those balances each month, you'll pay them off in the same amount of time no matter how you divide the payments.

 

To answer the scoring question, I don't know, and I think it would be pretty difficult to predict. I'd probably pay cards off completely rather than trying to leave 10% or less balances, if for no other reason than that it would simplify things, and I expect the difference in score to be fairly minimal between the two options. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 6 of 12
Established Contributor

Re: How to target best way to pay Credit Card balance

I suppose you are right, thanks for pointing that out.  I guess I've just always thought that would be the strategy I'd take.

FICOs (2/24/12): EX 752, EQ 740
Chase Sapphire Preferred, Freedom; American Express PR Gold, Blue Cash Everyday
Message 7 of 12
Valued Contributor

Re: How to target best way to pay Credit Card balance


Dino76 wrote:

Thank you for reading my post.  Please Advise...

 

I know you always pay the highest interest rates first.  If I have 5 cards that have the same rates, but with different balances.  What is the best way to pay them to increase my FICO score quicker.

 

I think I should target each card by getting them below 10% first, before paying one off at a time.

 

Would this be the best plan to get score increases?  Or does it really matter, because the credit ratio available to debt is the key.

 

I still think the 10% below each card first is the better way to go.

 

Thanks again, really looking forward to everyone input.


1. pay the one with the highest utilization based on CL vs Balance. especially if any of them are over 70% used, a flag that fico notices. 
2. also pay some on the lowest balances at the same time or at least after you pay down cards over 70% UTILs  

3. still pay more than minimum payment, don't want your credititors to see you making only the minimum payments. I'm sure some internal scoring methods track actual payment vs minimum payment. 

 

 

 

 

Cards: Chase Southwest 20k & CSR 10k & CSP 10k & Freedom 6.6k & Amtrak/Freedom 4.6k, FNBO DISC 25.1k Oregon Duck 5k, & AMEX BCP 15k & Hilton Surpass 7.5k & Delta Gold 6k & Zync NPSL, Fidelity AMEX 17k Commerce5.9k & Cash Forward 7.5k & Sams Club MC 10k, Paypal Extras MC 7.5k, CapOne Venture 15k, QS 2.5k, QS 750, Amazon 5.9k, Walmart 10k, Citi Simplicity 9k, Discover IT 16k and a nice stack of store cards.
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Message 8 of 12
Mega Contributor

Re: How to target best way to pay Credit Card balance


Dino76 wrote:

Thank you for reading my post.  Please Advise...

 

I know you always pay the highest interest rates first.  If I have 5 cards that have the same rates, but with different balances.  What is the best way to pay them to increase my FICO score quicker.

 

I think I should target each card by getting them below 10% first, before paying one off at a time.

 

Would this be the best plan to get score increases?  Or does it really matter, because the credit ratio available to debt is the key.

 

I still think the 10% below each card first is the better way to go.

 

Thanks again, really looking forward to everyone input.


Can you list the cards you are talkign about and:

 

-APR

-Balance




EQ FICO 548 3/3/16
Message 9 of 12
Valued Contributor

Re: How to target best way to pay Credit Card balance


jamesdwi wrote:

Dino76 wrote:

Thank you for reading my post.  Please Advise...

 

I know you always pay the highest interest rates first.  If I have 5 cards that have the same rates, but with different balances.  What is the best way to pay them to increase my FICO score quicker.

 

I think I should target each card by getting them below 10% first, before paying one off at a time.

 

Would this be the best plan to get score increases?  Or does it really matter, because the credit ratio available to debt is the key.

 

I still think the 10% below each card first is the better way to go.

 

Thanks again, really looking forward to everyone input.


1. pay the one with the highest utilization based on CL vs Balance. especially if any of them are over 70% used, a flag that fico notices
2. also pay some on the lowest balances at the same time or at least after you pay down cards over 70% UTILs  

3. still pay more than minimum payment, don't want your credititors to see you making only the minimum payments. I'm sure some internal scoring methods track actual payment vs minimum payment. 

 

 

 

 


Is 70% one of the magic numbers?  I keep seeing under 10% as very important, but that is not possible yet for those of us with big debt loads. 


Starting Score: 693 TU FICO, 679 EQ FICO
Current Score: FICO 8 = 844(9/15) EQ, 827 TU, 811 EX (7/15); mortgage FICO= 758 (9/15)EQ5, 797 TU4, 748 EX2 (7/15)
Goal Score: 750+, but shooting for the 800's
Hyatt Visa Sig ($23K), Amex BCP (24.8K), BofA Travel Rew Sig (22.5K), B&N World MC (22.3K), Amex RP Gold (NPSL w/ S&T), Cash+ Sig (20K),United Mil+ExpSig (16.3K), FNBO Visa (13.1K), Hilton Surpass (10K), Freedom Visa Sig (8.6K), Disc It (16.4K), Citi Dia Pref MC (3.7K),Sam's MC (10K), Wally (7.5K), JCP(5.3K), Costco (2K)
Message 10 of 12