I have 10k to use...What do I pay off?

[Anonymous]

I am closing on my house in a few months and need a quick boost to my credit score to get an ever better rate. What would you do with 10k to get your score up? Is it best to apply it to one balance, or spread it out? Here is what I have:

Wells Fargo LOC - Balance $16,300 - Credit Line $16,500

Wells Fargo - Balance $6,200 - Credit Line $6,500

WAMU CC - Balance $1,700 - Credit Line $3,000

CITI CC - Balance $4,200 - Credit Line $5,300

Compass CC - Balance $0 - Credit Line $600

Household CC - Balance $0 - Credit Line $300

Legacy CC - Balance $0 - Credit Line $350

FNCC CC - Balance $0 - Credit Line $850

Is it best to get the CC's down below 50%, or apply it toward the big LOC balance? Thanks for your advice!

Message Edited by K-Dub on 07-07-2008 01:38 PM

[Anonymous]

If this is all the open lines I'd
First make sure all accounts report less then 89% UTL per account.
Then apply the rest to the highest interest and so on. I don't think you're going to get a boost from below 50%. Might be better to ramp down the amount as fast as you can for max points by reducing the interest on the debt. The only time I noticed a further loss was when I was 90-100% maxed on a card. 50+% UTL on a individual credit card never did anything to my personal score that I noticed. But could be different for others.

The only thing that is really bad is exceeding 89% per account.

Being that you already have only 50%/4 accounts with balances out of 8 accounts is a;ready good. Had you had 5 balances I'd tell you to PIF one right away. But in your case reducing balances shouldn't change the score. So if you wanted to spread it to reduce debt per card to below 50% that would work too. I'd just bring under 89% per account actually 85% just to be safe and apply the rest to highest interest.

Message Edited by ilovepizza on 07-07-2008 06:39 PM

But what I don't know about mortgages is whether your number of balances is taken in to effect by the lender. Like are you more likely to be approved with 2 debts vs 4 debts by a manual review? Don't know. But your FICO Score will only ding your profile if you exceed 4 balances out of 8 accounts. 0-4 is fine.

I'd post this in the mortgage forum too. My answer will apply for scoring but a question to ask is does it matter if you have $10,000 in debt between 2 accounts or between 4 accounts under manual review. What will a human think? Don't know. The mortgage lender might think that balances are too high or could also say too many? If I had to guess fewer debts would look better since it is less to manage. Applying towards highest interest will reduce number of debts faster.

Message Edited by ilovepizza on 07-07-2008 06:47 PM

[Anonymous]

Wells Fargo LOC - Balance $16,300 - Credit Line $16,500 **PAY 5K (LEAVING YOU WITH 11,300)

Wells Fargo - Balance $6,200 - Credit Line $6,500 **PAY 2k (LEAVING YOU JUST ABOVE 50%)

WAMU CC - Balance $1,700 - Credit Line $3,000 PAY **1k (TAKING YOU BELOW 50%)

CITI CC - Balance $4,200 - Credit Line $5,300 PAY **2k (TAKE YOU JUST BELOW 50%)



**if we had your interest rates, that would be better. It's always better to pay your higher interest cards first. For example if your Citi is sitting @ 0% for the next six months but Wamu is @ 20%- I would recommend paying the entire wamu balance and dividing the rest between wells fargo and your loc.

[Anonymous]

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ilovepizza wrote: If this is all the open lines I'd First make sure all accounts report less then 89% UTL per account. Then apply the rest to the highest interest and so on. Message Edited by ilovepizza on 07-07-2008 06:47 PM

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Why 89% utilization? Is that a general rule to go by? Sorry if I don't follow.

[Anonymous]

     I believe that once a TL is at 85-90% (somewhere there) they consider it maxed out.  Vicki

[marty56]

I like AlishaR's plan.  I am not a big fan of asking for CLI's to reduce util but in this case I might also ask the CCC's about CLI's as long as they dont do a hard INQ.

Message Edited by marty56 on 07-19-2008 05:16 AM

[Anonymous]

I think it is anything above 50% looks bad... If you can get them below or right at 50% it will look better than have a few @ 20% and the rest at 80.

[RobertEG]

I concur totally with Alisha's analysis, based on what you have posted, and your goal to reduce FICO in the short term.  Get as many below 50% as you can, and make sure that at least half retain zero balances upon reporting date to the CRAs.

All of this is predicated only on FICO short-term scoring.  Otherwise, from a purely financial viewpoint, pay down the higher balance/ interest rate cards first.  Your Wells Fargo accounts are now costing you well over $200 a month just in interest, and are at over 90% util.  Util on the CITI is also near 80%.  I do not know the interest rates on any of the cards, so this is speculative.

FICO scores you on overall %util, on the separate %util of each card, and on the number of cards that report balances. 

I dont want to sound negative, but will offer only one further observation.  You are closing on your current house, and have $10K from that transaction available to pay off your CC debt, which is good from a FICO perspective.  Congrats!  But that equity will then be gone from your net liquid assets after paying off  your CCs, and then when shopping for a new mortgage, will not be there in their review of your overall financial status.  FICO scores do not secure mortgages or mortgage rate per se. They do a finacial review, and not just a FICO snapshot.

[Anonymous]

This post was started on the 7th... OP, have you put that 10K to use? If so, please let us know how you did.

[MattH]

If I were you I would seriously consider talking with a financial planner.

And before you talk with any advisers, look at the following:

http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=106018#M106018