Extra $$ coming in. Do not know what I should pay off first. HELP!!

[Anonymous]

I have some left over money from my school loan and I was thinking about paying off my car (balance approx $3500-$441/month).  I could also possibly pay off a personal loan from the bank (balance approx $2500-$175/month).  I also have a ton of credit cards with high balances (but low intro rates that expire in a few months).  What should I pay first? 

My last score off the Fico score watch was around 660 or 670 and I would love to get it to 700.  We are going to try and get a house in the spring and I would like to get my scores up as much as I can.  

[cobaltnv]

The answer to your question depends (at least partly) on the interest rates on your loans and credit cards (before and after intro rate expires). What are the balances and credit limits of your credit cards? If your goal is to increase your credit score then lowering the % utilization on your credit cards is probably the way to go. It looks like you should only have 1-2 years left on your loans. My understanding is that if you have fewer than 10 payments remaining on a loan your mortgage officer will not (or may not) count that loan in your DTI.

As far as home ownership goes make sure you have money in reserves for when things break etc.

Good luck 

[Lel]

Pay down the high interest rate cards or loans first.  This will save you money in the long term.  Check on the terms of those credit cards with the low introductory rates, because the interest rates could skyrocket after that.  You'd then have to pay more to the cards and thus have less to put to your new home purchase.

Paying down the credit cards will also be the most likely route to a higher FICO score.

[marty56]

I would go after the credit cards first, paying all off but 1 and then PIF it and switch to another.  I would normally pay them off smallest to largest balance but these days I might look at the "at risk" cards - the ones with CCCs that are known to CLD.

While it may save you some money to pay the high interest ones off first, in the long run, paying them all so and being able to PIF will both increase your FICO score and save you money on interest.

I would also say these days everyone's focus would be to protect their credit lines and the best way to do that is to have the best FICO score possible. Of course being debt free is awlays a good idea. 

[Anonymous]

I have a Chase card with a balance of $15,630 with a limit of 17,500. About $10,000 of that has a 4.99% APR (I think this is for the life of the balance), $5330 has a 2.99% APR (not sure when this expires, but I will find out, and the rest (about $500) is at an interest rate of 24.99%.

I have another Chase card with a balance of $3500 & credit line of $5000.  I am paying 0% interest but I need to find out when it expires.  I used those promo checks 3 seperate times so the rate will expire at different times for this card.  

I have a BOA card with a balance of $2,208 & a credit limit of $11,000.  I think this balance has a promo rate of 3 or 4% but the normal annual APR is 35.77%.

Last but not least a Citi card with $5,200 & credit limit of $7,340.  The APR on this balance is 9.99%.  Over 1/2 of this balance is my sisters & I am really hoping that she can pay me with her income tax.  

**Do you know how it works if I do pay down one of these cards.  Will the payment go to the newest promotional balance or the oldest (like for the 1st chase card where I have 3 different interest rates)?

 

[marty56]

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@Anonymous wrote:

**Do you know how it works if I do pay down one of these cards.  Will the payment go to the newest promotional balance or the oldest (like for the 1st chase card where I have 3 different interest rates)?

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Most of the time, payments go to the lowest interest rate balance first.  That is so they can squeez more money out of you.  I would check with the CCC though.

[cobaltnv]

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@Anonymous wrote:

  We are going to try and get a house in the spring and I would like to get my scores up as much as I can.  

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Zanidee, 

I would work on paying that off your ~$33k in credit card debt before even thinking about home ownership.  In the credit environment, depending on your HHI, you will likely have a very difficult qualifying for a mortgage with your level of credit card debt.