How to utilize my tax refund?

[titanofold]

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@Jen2196 wrote:

I would pay off what I can and then cut those cards up. Once you gotten your utilization down to a reasonable number I would start closing accounts. I see my pre-bk habits in your credit card usage. Do you need all of these accounts?

No I absolutely do not need all of these accounts, cutting them up is a good idea. How long should I wait before closing them for it not to hurt my score as much? Keeping them open for a while with a $0 balance should help me because it will lower my utilization, correct?

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You don't have to close them, you just need to stop using them for a while. You'll want them to stay open to help your overall utilization.Eventually they'll be closed because of disuse. You can keep them alive by using it for a little something and paying it off as soon as it posts.

[Jen2196]

Does having so many cards open affect my score negatively? What's an ideal number of cards to have open? I'm trying to get a plan of action going to up my score.

[titanofold]

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@Jen2196 wrote:

Does having so many cards open affect my score negatively? What's an ideal number of cards to have open? I'm trying to get a plan of action going to up my score.

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That's singular to the individual. Some people have dozens and are in the 800 club, others just have 2 or 3 and are still in the 800 club.

[user5387]

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@Jen2196 wrote:

Does having so many cards open affect my score negatively? What's an ideal number of cards to have open? I'm trying to get a plan of action going to up my score.

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For scoring purposes, a minimum of 2-3 cards is recommended.

There is no direct effect beyond that.

However, there are indirect issues.  For example, if I have $5000 and $500 cards, and a $450 balance, that balance will have less of a negative impact on the $5000 card than on the $500 one, even though the overall utilization and proportion of cards with balances is the same.

So in general fewer cards with higher limits is better, unless a person is skilled in managing low-limit cards.

[cottoncrown]

Not to be rude, just honest. You don't need to be worried about FICO scoring or utilization at all. Basically all of credit is maxed out and you shouldn't be applying for more. Pay the highest interest rate first, then move to the next. Stop using your credit cards until they are all paid off.

[Jen2196]

I'm not planning on applying for anymore credit. I am planning on possibly trading my car in for something else and to see if I can get a better interest rate. But thank you for your advice.

[Kenny]

You're doing the right thing for asking where the refund should go.. so good job!

I would honestly try to keep the older car for a while and if you can then get a secured loan on it through your CU if you have the self control to not use the cards again (or only use what you can PIF) until you've got your car paid off.

It's very hard to make the same decisions that someone would who is out of debt when you're not in the habit of being out of debt. The only way to be out of debt is to make those decisions, though. Very hard!

Stay strong, and develop a HATE of the debt and you will get rid of it.

You can turn this around! Good luck.

[Jen2196]

Thank you for the support! I am paying each debt off one by one. Slow and steady wins the race as they sometimes say! I paid off my mortgage in December, that was my biggest debt and my number one goal. My car is also close to being paid off, but the interest on it is much lower than my credit cards so I am not to worried about it. My biggest problem is my shopping addiction. Hopefully by cutting up my cards I won't have that problem anymore!! I am using what used to be my house payment towards my credit cards now, my goal is to be debt free by 2015.

[SunriseEarth]

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@cottoncrown wrote:
Not to be rude, just honest. You don't need to be worried about FICO scoring or utilization at all. Basically all of credit is maxed out and you shouldn't be applying for more. Pay the highest interest rate first, then move to the next. Stop using your credit cards until they are all paid off.

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+1

I'd defintiely try to hold on to your current car until you can get your debt more under control.  Paying off the highest interest amounts first will get you out of debt faster, but won't necessarily raise your scores in the fastest way. 

If you do the snowball method, because it's more encouraging, that's a factor, too, and sounds like that will be what you're doing.  Good luck with your plan!

[Jen2196]

Thanks! I've been reading about Dave Ramsey snowball method, it seems like the best approach for me. Being able to check a few cards off my list right away should give me some more motivation.