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ttonnka3
Posts: 11
Registered: ‎01-08-2013
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To pay off or just pay down Credit Cards?

[ Edited ]

Hello,

 

I have seven credit cards ranging from credit limits 300-1500 Dollars all of my credit cards are at 90%  full.Will it be better to pay down all of the cards or just start paying them off?? Or does it matter

 

The other reason I am asking is because I was reading and some people say to pay them down to 30%? 30% of TOTAL util  or each card?

Which is better??

 

I have NEVER been late of ANY of my bills.

 

Thank You

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guiness56
Posts: 22,408
Registered: ‎01-17-2008
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Re: To pay off or just pay down Credit Cards?

If all of your cards are at 90% then you are getting double dinged by FICO.

 

If at all possible I would pay enough on each card to get them out of the maxed out area.  Once you do that, while still making minimum payments on the others, pay off your lowest balance first.  Then take that money and pay off the next one.  Do that until you have them all paid off.  Let the last card report at 9% or below.  The reason I suggest doing it this way is you will have more reporting a 0 balance quicker which FICO likes to see.

 

It is your overall utilization that needs to be 9% or below.  You can experiment and find which works best for you as far as %.

 

Never let all of them report a 0 balance.  You can rotate the cards so they all get used and reported at 9% or below..

 

 

Frequent Contributor
hutchj
Posts: 387
Registered: ‎06-15-2013
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Re: To pay off or just pay down Credit Cards?


guiness56 wrote:

If all of your cards are at 90% then you are getting double dinged by FICO.

 

If at all possible I would pay enough on each card to get them out of the maxed out area.  Once you do that, while still making minimum payments on the others, pay off your lowest balance first.  Then take that money and pay off the next one.  Do that until you have them all paid off.  Let the last card report at 9% or below.  The reason I suggest doing it this way is you will have more reporting a 0 balance quicker which FICO likes to see.

 

It is your overall utilization that needs to be 9% or below.  You can experiment and find which works best for you as far as %.

 

Never let all of them report a 0 balance.  You can rotate the cards so they all get used and reported at 9% or below..

 

 


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tcrutchf
Posts: 35
Registered: ‎06-24-2013
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Re: To pay off or just pay down Credit Cards?

Are there certain threshold percentages that trigger a score change? At what percentage does FICO consider a card to be maxed out? In the last month, I have lowered my overall util to 26% from 60%. I now have 7 cards at $0, 2 at 15%, 2 at close to 30%, 4 in the 40% range and 1 at 68%. I am impatiently waiting for them all to report hoping for a bump! I paid off the smaller ones and really tried to get all others below 50%, but still have one to go. I was just wondering about the thresholds because I have a little more that I could pay before they report and trying to figure out where it would have the biggest effect on my score.

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guiness56
Posts: 22,408
Registered: ‎01-17-2008
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Re: To pay off or just pay down Credit Cards?

90% is maxed out for FICO.  That includes individual utilization and overall.  You are scored for each card first, then overall.

 

26% overall is still a bit too high.  Optimal FICO scoring occurs for most at 9% or below, overall.

 

Optimally, all but one card should report a 0 balance and the other at 9% or less.

Valued Member
tcrutchf
Posts: 35
Registered: ‎06-24-2013
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Re: To pay off or just pay down Credit Cards?

Thank you! I understand that under 9% on just one card is considered optimal, but can I expect a score bump by lowering my utilization like I have?

NavCheck $12000. NFCU CashRewards Visa $12000. NFCU Flagship Visa $12000. Cap 1 Cash Reward MC $3500. Barclays Carnival MC $2000. Cap 1 QuickSilver MC $1750. Cap 1 Platinum MC $1200. HH Gregg $2500. CFNA Firestone $2200. CareCredit $800. Buckle $1250. Victoria Secret $1040. NY&Co $900. Bealls $700. KayJewelers $1500. Kohls $500. Walmart $2000. Gap $1000. American Eagle $500. JCrew $650
Starting Score:TU: 672 EQ: 593 EX: 592 (Lender Pulled 5/20/2013) BK7 – 5/2009
Current Score:TU: 746 EQ: 707 EX: 691 (Lender Pulled 12/18/2013)
Goal Score: 700 across the board (for now)

Moderator
guiness56
Posts: 22,408
Registered: ‎01-17-2008
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Re: To pay off or just pay down Credit Cards?

Anytime you lower your utilization your score should go up.  Because your individual cards are still pretty high just lowering one at a time will improve your score.

 

Once you get to the point of all but one reporting a 0 balance let that last one report 9% or below.

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: To pay off or just pay down Credit Cards?

[ Edited ]

At 90% utilization you pretty much need to just pay them off to 0%.  The interest might be killing you here.  I would not worry about leaving 1-9% utilization on the cards.  Just pay them off.  If you want to apply for credit or a mortgage or whatever later, plan to charge something like 3% to the card (groceries, bills, etc) to the card, let it report, and then pay if off immediately.

 

At least from my experiences and the experiences of my wife, you might see score bumps when all cards drop below 50% utilization (per card), when you drop below 50% overall utilization, and when you drop below 30% total utilization.  You might also see score improvements once less than half of your cards carry a balance, and when you finally get only 1-2 cards carrying balances.

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closschumacher
Posts: 16
Registered: ‎07-06-2013
0

Re: To pay off or just pay down Credit Cards?

A suggestion I would have for you is to pay off each card in full, then spend within your means on your credit card, then pay off the card. This shows 2 things: use of the card itself, and then DTI ratio will be reduced all together. Think of it this way- if you pay off each card in full (or start doing that), once you start paying your cards off, that is money you are able to save or use on another card. I have 13 credit accounts and all but 4 of them are at 0 balance..... but my top 4 lines are all next to maxed out for balance transfers, but it took me 3 years to go from 13 in debt to only 4 in debt.

 

Good luck!

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