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

[Anonymous]

Pay everything down to 50% utilization. It may or may not take more than $15K to do so, and I cannot tell because I do not know the original amount of the CITI personal loan (in order to calculate the utilization). Furthermore, utilization of credit cards is weighed more heavily than utilization on installment loans (such as personal loan). So, without knowing the original amount of the CITI personal loan, I recommend the following: In order to bring utilization down to 50%, pay the following amounts: $8,8083 - Wells Fargo LOC - Balance $16,333 - Credit Line $16,500 $3,062 - Wells Fargo - Balance $6,312 - Credit Line $6,500 $309 - WAMU CC - Balance $1,809 - Credit Line $3,000 $1,916 - CITI CC - Balance $4,566 - Credit Line $5,300 $0 - Compass CC - Balance $0 - Credit Line $600 $41 - Household CC - Balance $191 - Credit Line $300 $31 - Legacy CC - Balance $31 - Credit Line $350 $0 - FNCC CC - Balance $0 - Credit Line $850 $1,558 - CITI Personal Loan - Balance $7149 - Payments are $214/Month $0 - Student Loan - Balance $7280 - Payments are $79/Month I recommended paying off certain balances that already had a low utilization (like the Legacy CC) because the balance was so small, you might as well finish it off. Didn't suggest anything for the student loan because it is the most innocent debt you can have in the eyes of creditors. For the reasons mentioned in the beginning, only recommended $1,558 for the CITI personal loan (the amount of the $15K left over after getting all CCs and LOCs down to 50% utilization). Continue paying all minimum payments (or more if you can afford to) on time. Try not to incur any new charges before you close (as this could easily tip any account over 50%) or if you need to charge, charge to those lines with $0 balances, but not more than 50% of the available line. By doing this, all CC and LOC lines can be below 50% by October 10.

Message Edited by Start_Young on 08-05-2008 06:56 PM

[fused]

I agree with having all revolving lines reporting < 50% util if that's all the OP can do.

Message Edited by fused on 08-05-2008 04:09 PM

[Anonymous]

I just heard back from the loan officer and the lender said to pay off the personal loan (Balance of $7000) which would then free up 214/month. They also said not to worry to much about the CC balances.

Does this sound right?

[Anonymous]

Based upon my experience, you would raise your score substantially by closing out credit cards without any balances.  When you request this, make sure to inform the Banks / Financing entities that you would like for them to close your account and report to the Credit Bureaus as "Closed by Request of Customer."

This usually raises your score by 5 to 15 points per credit card.  I have been amazed at the affect this has had on my credit score.  Lastly, paying off credit cards with the $10,000 you are considering will have the most dramtic impact on your credit score.  Since these are unsecured loans and are revolving, they seem to hurt ones credit score more than other types of loans.

I hope this helps.

[Anonymous]

Seems that the bank is more concerned with your debt to income ratio (how much of your monthly income goes towards minimum required monthly debt payments). Therefore, take their advice and pay of the personal loan, but then spread the remaining money out among the others to bring your utilization down. They won't get down to 50%, but maybe you can work on that in the coming months by making extra payments from disposable income.

Wells Fargo LOC - Balance $16,333 - Credit Line $16,500 PAY $4,948, NEW BAL $11,385, UTIL 69%
Wells Fargo - Balance $6,312 - Credit Line $6,500 PAY $1,827, NEW BAL $4,485, UTIL 69%
WAMU CC - Balance $1,809 - Credit Line $3,000 PAY $0, NEW BAL $1,809, UTIL 60.3%
CITI CC - Balance $4,566 - Credit Line $5,300 PAY $909, NEW BAL $3,657, UTIL 69%
Compass CC - Balance $0 - Credit Line $600 PAY $0, NEW BAL $0, UTIL 0%
Household CC - Balance $191 - Credit Line $300 PAY $41, NEW BAL $150, UTIL 50%
Legacy CC - Balance $31 - Credit Line $350 PAY $0, NEW BAL $31, UTIL 8.9%
FNCC CC - Balance $0 - Credit Line $850 PAY $0, NEW BAL $0, UTIL 0%
CITI Personal Loan - Balance $7149 - Payments are $214/Month PAY $7,149, NEW BAL $0, UTIL 0%
Student Loan - Balance $7280 - Payments are $79/Month PAY $0, NEW BAL $7,280, UTIL ?%

Or, if the bank's main concern debt to income ratio, use the excess to pay down the accounts with the greatest interest rates first, while paying the minimum on the others, as that will have the greatest effect on your minimum required payment.

Do not close accounts with zero balances. Don't know where Not_A_Traditional_Banker got that from, but that is contrary to advice from financial experts all over. Doing so will raise your utilization and shorten your credit history, both of which will lower your score.

[fused]

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Not_A_Traditional_Banker wrote:

Based upon my experience, you would raise your score substantially by closing out credit cards without any balances.  When you request this, make sure to inform the Banks / Financing entities that you would like for them to close your account and report to the Credit Bureaus as "Closed by Request of Customer."

This usually raises your score by 5 to 15 points per credit card.  I have been amazed at the affect this has had on my credit score.  Lastly, paying off credit cards with the $10,000 you are considering will have the most dramtic impact on your credit score.  Since these are unsecured loans and are revolving, they seem to hurt ones credit score more than other types of loans.

I hope this helps.

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Hold the door Baker! This is usually (almost always) not the case! How have you come to this conclusion?

[Anonymous]

I know better than that! The accounts with small balances which charge me fee's monthly I've had open for 8 years and then some. Closing them would put me in worse shape!

I know debt to income is a major factor with lenders, but my LOC has a higher monthly payment right now than the personal loan. Why not pay that down? In the lenders eyes I probably have a good score, good enough to get the loan...but in my eyes I'd like a higher score to get a better interest rate. Am I thinking wrong when it comes to a FHA loan? Maybe I should look at a conventional loan???

Thoughts?

[Anonymous]

Let me clarify what I meant by closing credit cards with zero balances.  I was referring to cards that you do not use on a regular basis.  If you request to close the account with the message "closed by request of consumer", this will raise your credit score.

As far as your credit history with the Card, this will continue to be shown after the card has been closed.  Lastly, I was given this information by a representative of one of the three credit bureau companies.

I hope this clarification helps. 

[haulingthescoreup]

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@Anonymous wrote:

Let me clarify what I meant by closing credit cards with zero balances. I was referring to cards that you do not use on a regular basis. If you request to close the account with the message "closed by request of consumer", this will raise your credit score.

As far as your credit history with the Card, this will continue to be shown after the card has been closed. Lastly, I was given this information by a representative of one of the three credit bureau companies.

I hope this clarification helps.

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No, sorry, they gave you incorrect information.

The best scoring scenario, in general, is a whole lot of available revolving credit which is unused. That means keeping all cards open, used enough to keep them from being closed for inactivity, but reporting $0 each month. Ideally, you will have a truly minimal util reporting, as in 1-4% of total credit limits.

Now some mortgage lenders will ask that you reduce available unused credit, if you have a huge amount, but for scoring, the more open revolving unused credit, the better. And if a mortgage lender told me to do that, I'd keep looking.

[_andClimbing]

I was under the impression that the messages - Closed by consumer vs. Closed by credit grantor - had no impact on FICO scoring, and were only considered in manual reviews. Am I mistaken?

Message Edited by _andClimbing on 08-13-2008 11:40 PM