How best to apply payments?

[hombre14]

Hello-  would love any opinions/thoughts on the following.   My current credit card balances and limits:

Citibank MasterCard   $20,134  ($21.6k limit)

B of A Visa   $15,344  (15.8k limit)

Discover  $14,677 (15k limit)

Chase Visa  $3,112  (4.4k limit)

NuVision Visa  $2,770 (4k limit)

So obviously I know I have very high utilization rates.    In about a week, I will have approximately $30k I can apply to these balances.     My question is, is there a best way to apply the $30k, in order to maximize my current FICO score?     Should I try to get as many cards reporting zero balances as possible (i.e. I could completely pay off the two smaller Visa accounts plus the Discover, and still have approximately $10k to apply to the others).    Or, should I try to apply the $30k equally across the larger balances.   Or something else?     Thanks in advance.

[user5387]

Your overall utilization is not affected by how you apply the funds.

But there are two specific issues that I'd focus on initially:

1.  Moving cards out of maxed out territory, for example below 75% individual utilization.

2.  Paying off the two smaller cards.

Beyond this, there might be more than one possibility -- clearing out one of the larger cards that has a high APR, further reducing balances across the larger cards, and so on.

[TimeToRecover]

I think it just depends on your thinking.  like one poster stated as far as utilization it will be the same no matter which card you put the money toward.  

When it comes to pay off strategy it is a personal thing and there are many many article not only on my fico but all over the internet on different strategies.  

1. Pay off smaller debts first and as they are paid off apply more to the next card in line (good if a person likes to see things move quickly)

2. Pay off the debts with the highest interest rate first (good to save on interest paid)

In either case once a card is paid off sock drawer it.

I think rather then worrying about your score right now you need to just get yourself out of this bit of a hole you have dug and pick one payment strategy, stick with it, and then continue building.  Decreasing your utilization alone will raise your score.

[Revelate]

Welcome to the forums!

What's the time horizon on trying to improve your FICO score?  

If you need it now then just take user5387's advice; but if you have some time, simply go right down the list on the highest APR's as the rest of the debt will get paid off faster.  Financial savings > FICO.

[hombre14]

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@Revelate wrote:

Welcome to the forums!

What's the time horizon on trying to improve your FICO score?  

If you need it now then just take user5387's advice; but if you have some time, simply go right down the list on the highest APR's as the rest of the debt will get paid off faster.  Financial savings > FICO.

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Thank you for your replies.

I probably should have stated-   there is very little difference on APR between the cards.   They are all in the 14-17% range, with the exception of the smallest balance (NuVision) which is 7.9%.

So as of next week I will eliminate 30k of the 54k total debt;  and I believe I will have the cash flow to retire the remaining 24k within one year.    So the order of paying off the cards really shouldn't have much impact on financial savings.   But I likely will be applying for a loan in the next 1-2 months;  which is why I was asking if there's any order in paying off the cards which would result in the highest immediate boost to my FICO score.

[user5387]

FICO utilization scoring considers at least the following:

   (1)  maxed out cards

   (2)  overall utilization

   (3)  individual utilization

   (4)  proportion of cards with balances

In general, if you need to carry a balance, I would try to isolate it on one or two high-CL cards, and keep the utilization of those cards at no more than around 50-75%.

[bdhu2001]

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@hombre14 wrote:

Hello-  would love any opinions/thoughts on the following.   My current credit card balances and limits:

Citibank MasterCard   $20,134  ($21.6k limit)

B of A Visa   $15,344  (15.8k limit)

Discover  $14,677 (15k limit)

Chase Visa  $3,112  (4.4k limit)

NuVision Visa  $2,770 (4k limit)

So obviously I know I have very high utilization rates.    In about a week, I will have approximately $30k I can apply to these balances.     My question is, is there a best way to apply the $30k, in order to maximize my current FICO score?     Should I try to get as many cards reporting zero balances as possible (i.e. I could completely pay off the two smaller Visa accounts plus the Discover, and still have approximately $10k to apply to the others).    Or, should I try to apply the $30k equally across the larger balances.   Or something else?     Thanks in advance.

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Pay off the two small cards, then get as many of the other cards, as you can, to 25-30% or less. After paying off small balances pay 11K to Discover; 11.5K to B of A; that will leave approx $1800 for Citibank. With your next paycheck or payments, pay minimum on all bills except Citibank. Pay highest amount you can to Citibank trying to get it down to $5400.

[takeshi74]

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@hombre14 wrote:

My question is, is there a best way to apply the $30k, in order to maximize my current FICO score?

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Score is the least of your concerns at this point.  You need to focus on getting your maxed cards (the first 3 in your list which are all over 90%) down as quickly as possible and then focus on getting utilization down on all your cards.

That said, utilization plays a significant role in credit scoring.  You don't want any of your creditors to start balance chasing or else you'll really have problems with maxed utilization.

With $30K you should be able to get the top three under 50% each and pay off the two smaller ones.  Make a spreadsheet and play with the numbers (how I determined this).  Continue to work to get each of them under 30% and always keep that 30% max in mind.

[adavis425]

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@hombre14 wrote:

Hello-  would love any opinions/thoughts on the following.   My current credit card balances and limits:

Citibank MasterCard   $20,134  ($21.6k limit)

B of A Visa   $15,344  (15.8k limit)

Discover  $14,677 (15k limit)

Chase Visa  $3,112  (4.4k limit)

NuVision Visa  $2,770 (4k limit)

So obviously I know I have very high utilization rates.    In about a week, I will have approximately $30k I can apply to these balances.     My question is, is there a best way to apply the $30k, in order to maximize my current FICO score?     Should I try to get as many cards reporting zero balances as possible (i.e. I could completely pay off the two smaller Visa accounts plus the Discover, and still have approximately $10k to apply to the others).    Or, should I try to apply the $30k equally across the larger balances.   Or something else?     Thanks in advance.

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I would pay off the two smallest accounts. I would pay $10,000 to Citi, $7,000 to Discover and $7100 to B of A. That way you're at 50% util (not ideal, but workable) and have a couple cards reporting at 0.

[Bman70]

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@hombre14 wrote:

Hello-  would love any opinions/thoughts on the following.   My current credit card balances and limits:

Citibank MasterCard   $20,134  ($21.6k limit)

B of A Visa   $15,344  (15.8k limit)

Discover  $14,677 (15k limit)

Chase Visa  $3,112  (4.4k limit)

NuVision Visa  $2,770 (4k limit)

So obviously I know I have very high utilization rates.    In about a week, I will have approximately $30k I can apply to these balances.     My question is, is there a best way to apply the $30k, in order to maximize my current FICO score?     Should I try to get as many cards reporting zero balances as possible (i.e. I could completely pay off the two smaller Visa accounts plus the Discover, and still have approximately $10k to apply to the others).    Or, should I try to apply the $30k equally across the larger balances.   Or something else?     Thanks in advance.

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Here's how I'd do it (assuming 30k available to pay toward balances): 

$15k on Citibank MC, bringing util to ~24%

$10k on BofA, bringing util to ~34%

The remaining $5k I'd split between Chase and NuVision, bringing util to 14% and 6%. These could then be zeroed out pretty quickly having hardly any balance left.

You'll see a huge bump in your FICO any way you do it just from total util being cut in half. You'd only have one high balance card left, Discover at 98%. Psychologically I always like to have only one high balance reporting (assuming it's necessary), as my "project" card. Plus with the other balances reasonably low you might be able to open a new card - it's less scary than all near 90% - and BT some of Discover, lowering util even further with the new line. Have fun