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New Member
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Registered: ‎05-24-2013
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Pay each card balance to zero or spread payments to all cards ?

[ Edited ]

I have 4 credit cards that are maxed . 1) 1300.  2) 1400 3) 5400 4) 6300 my fico is 657 and I want to refinance asap . Is is better to pay each down to zero at a time or should I take the same amount of money I am putting towards credit cards and pay them all down at the same time . For example Im thinking Ill pay $3000 on cards over the next 2 months before I go refinance so should I pay off the 2 smaller cards to $0 and have 2 cards maxed  or divide the $3000 across the cards?

    Also I should add that I have a total of 10 credit cards but the other cards were the ones with the highest interest rates so I paid them off to zero already . I am currently utilizing 55 percent of my total credit .

Valued Contributor
Posts: 1,597
Registered: ‎09-15-2012
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Re: Pay each card balance to zero or spread payments to all cards ?

Questions:

1) how much money do you have to put on these balances? Can you pay them off immediately, or do you need a few months?
2) what are the interest rates on each card?

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Epic Contributor
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Registered: ‎01-17-2008
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Re: Pay each card balance to zero or spread payments to all cards ?

[ Edited ]

If you are maxed out on all of those cards your score is getting dinged twice, once for being maxed out and again for overall utilization.

 

Too start, I would at least pay enough on each card to bring it down to at least half, then pay them down.

 

The longer you utilization stays high, the longer your score will stay lower.

Frequent Contributor
Posts: 301
Registered: ‎05-08-2013
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Re: Pay each card balance to zero or spread payments to all cards ?

Pay the highest interest rate first while you pay minimums on the other, then next highest, then next, etc. Don't worry about utilization unless you are getting a mortgage or something. You don't need any more credit as it is.
Senior Contributor
Posts: 3,491
Registered: ‎07-25-2008
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Re: Pay each card balance to zero or spread payments to all cards ?

Since you're refinancing in two months; I'd pay off the smaller balances and see if they'll do a CLI with no HP. Being maxed-out dings the score but having 2 cards with $0 balance will help some.


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Valued Contributor
Posts: 1,067
Registered: ‎03-16-2013
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Re: Pay each card balance to zero or spread payments to all cards ?

I would pay enough on each CC to not looked maxed out which is considered 90% or more.  Which was said that your getting dinged for that.  Then I would pay down the highest interest CC first then second highest and soon on, because your util is high fico looks at the total so why not save money in the process   Also as drkaje said I would request a CLI increase to try and get your Util lower with a SP.  I really think its 50-50 if you will get a CLI but it doesn't hurt to ask.

Senior Contributor
Posts: 3,491
Registered: ‎07-25-2008
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Re: Pay each card balance to zero or spread payments to all cards ?

I'd also get those paid before their closing dates. Waiting an extra month for scores to update is annoying. :smileyhappy:


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Regular Contributor
Posts: 125
Registered: ‎03-21-2013
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Re: Pay each card balance to zero or spread payments to all cards ?

If you're getting murdered with interest on the high balance cards, obviously pay those down. However, I think you might enjoy the feeling of having the smaller two cards paid down first.

Then, see where you can cut back on spending. If you take care of your cards, they will take care of you.
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Posts: 3,889
Registered: ‎05-24-2011
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Re: Pay each card balance to zero or spread payments to all cards ?

I had balances on 6 different accounts, one being maxed with a limit of 1500. Anyway, we just consolidated onto a credit union platinum visa, lowering our interest to 8.25 from atrocious near 30% store card rates (Yes, I'm dumb, but it's this forum's fault because I jonesed for the cards people here had! j/k - my fault) - I diverse anyway, So far my credit score has gone down 5 points - but I'm hoping when the rest report zero then I'll get those points back, and more, though the CU Visa is now nearly maxed but we are aggressively getting that paid down.

Just an idea - CU's are so lenient. I have had a savings and car loan for about 2 yrs with this CU, and they didn't even check our income! Which should be a mistake, right? And the CU that I have had open since I was 16 years old, they turned us down. (They used EQ, the good CU used TU).

It's a thought. You can go far making extra payments with 8.25% interest. And then I recommend closing the other cards you have if you don't have the willpower to NOT use them.

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Posts: 3,360
Registered: ‎10-19-2012
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Re: Pay each card balance to zero or spread payments to all cards ?

Ultimate what matters is the situation at the time of application, which is 2 months from now.  How much do you think you can pay toward those balances in the next 2 months at the maximum? The more you pay the better, but maxed out credit cards look terrible. Suppose you pay exactly $3k, you'll be able to bring overall utilization to around 80%. Here's my suggested plan:

Pay toward the card that has the highest APR until it hits 80%, then spend the rest on the next highest APR card until it hits 80%, then spend the leftover on the next highest APR until it hits 80%, then the leftover on the last card.

This way you minimize the interest paid but still maintain 80% overall as well as individually.

But honestly, I would much rather save every single penny for the next 2 months to pay more, as well as try to borrow as much money from friends and relatives as possible. The potential saving from a favorable refinance rate is so huge that you should utilize every source of money you have, including borrowing against your 401k account if you have one.

If you somehow manage to pay off most of the balances by the time you apply, you'll have a FICO score around 750, and with that you will shave a few hundred basis points from the interest and save tens of thousands down the road. It is worth it.

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