Withdraw from 401K to payoff balance of Credit card.

[eddymvp]

---

llecs wrote:

---

eddymvp wrote:
I have 3 credit cards:

HSBC: CL $1,700 Balance $1349.00
DCU: CL $1,000 Balance $566.00
Capital One: CL $1,000 Balance $386.00

---

Nooooooooo! Don't do it! I'm probably going to repeat what others say (as I haven't read other posts), but it has to be said.

First off, you need to continue paying your debts as planned, but the only thing listed that impacts your score are your CC balances. Now assuming these are your only ones, your cards breakdown this way:

HSBC: 79.4% utilization

DCU: 56.6% utilization

CapOne: 38.6% utilization.

Total Util: 62.2%

FOR MAX IMPACT, your cards need to be like this (based on 7% (extra room for interest, etc)):

HSBC: $119

DCU: $70

CapOne: $70

Total: $259.

---

Thanks a lot for that example. I just sent an online payment to capital one for 315 to bring down the balance to 10%. Since they update the credit bureau quarterly I should see an impact on my score next month. I also get pay month and when I get pay i'm going to bring down the DCU card to 10% balance and then I will work on the HSBC card.

I stopped your cards a couple of months ago so I will take them out of my wallet and put them into a safe box that way I won't be temp to use it.

[llecs]

---

eddymvp wrote:

llecs, your suggestion is good, but I don't need to sell  the furnitures or the TV or neither get a 2nd job. The last two months I have been able to save about $800 dollars a month after paying all my bills and utility. In the last 3 months I've been paying $500 on the credit card, so I can stop saving and pay more toward the balance of the credit card and once I paid off my credit cards, I will start saving again to have the down payment for the house. I can pay $600 dollars toward the cards next month. 

Should I paid off the whole balance on my capital one card since its the lowest balance I have and then put about $150 toward the other two cards? 

Message Edited by eddymvp on 03-18-2008 06:55 PM

---

$800 is great! I'd stop the CC use and payoff those card in the next 2-3 months. You will then have a clear snapshot of what your scores could look like with the low utilization. If they aren't where they need to be, you've got to hammer repair.

After the cards, I'd then pay $800 into a 3 mo CD (I hate CDs, but you need the cash in 9 months) for the remaining 6 months. If you did this, then you'd have $5000 extra towards the down payment. After you buy your home, redistribute that to your 401(k) to get as close to the max as possible.

Doesn't matter how you distribute the money now. Pay them off and let them report. For best results, I understand a balance on one or two cards under 10% is ideal for max score effect with a balance of $0 on the third.

[eddymvp]

---

llecs wrote:

After the cards, I'd then pay $800 into a 3 mo CD (I hate CDs, but you need the cash in 9 months) for the remaining 6 months. If you did this, then you'd have $5000 extra towards the down payment. After you buy your home, redistribute that to your 401(k) to get as close to the max as possible.

---

I'm losing you now, what is a CD, and what's the benefits of it?

[eddymvp]

I just checked my bank for a CD and these are the rates that they have.

Term ...........APY    Interest Rate  Compounds     Minimum Deposit
3 months.... 1.50 ... 1.50                    Simple             $500.00
6 months.... 1.75     1.75                    Simple             $500.00
9 months.... 2.00     2.00                    Simple            $500.00
12 months.. 2.50     2.47                    Daily               $500.00

Plz correct me if i'm wrong based on that table, if I open a CD for $1000.00 for 9 months, does it mean that I would gain $20 dollars in the whole 9 months or $20 dollars montly?

[llecs]

---

eddymvp wrote:

I just checked my bank for a CD and these are the rates that they have.

Term ...........APY    Interest Rate  Compounds     Minimum Deposit
3 months.... 1.50 ... 1.50                    Simple             $500.00
6 months.... 1.75     1.75                    Simple             $500.00
9 months.... 2.00     2.00                    Simple            $500.00
12 months.. 2.50     2.47                    Daily               $500.00

Plz correct me if i'm wrong based on that table, if I open a CD for $1000.00 for 9 months, does it mean that I would gain $20 dollars in the whole 9 months or $20 dollars montly?

---

$20, but It would be more than $20 because the interest compunds monthly. It would also be more because you are depositing more than just $1k. $20 earned is also better than the typical savings rate out there. You could earn a lot more via mutual funds or individual stocks, but you could loose it too. A CD is a good place to park money in the short-term.

You also wouldn't choose 9 mo, unless you can add to that 9mo CD purchase. However, you could get around 2% for a shorter term.

[Anonymous]

does your new employer match your 401k contribution?  Then at least put 6% into it.  Otherwise you are losing money.  Use that 800 extra and pay down your ccs.  Rollover that old 401K-- either into your new one or an IRA.  Never touch 401K.  It's the only break we get.  Each year you can contribute something to a Roth IRA. Roth is the governments mistake in our favor. LOL

Get your finances and time on the job before jumping into a mortgage.  But if you must FHA doesn't care about scores.

Message Edited by casinoannie97 on 03-18-2008 10:11 PM

[haulingthescoreup]

I love my Roth IRA! And it doubles as a you-know-what hits the fan emergency savings, because I can withdraw my contributions without penalties, if I really, really have to, as long as I don't touch any earnings.

And it wasn't a mistake, it was created exactly for this purpose --put already-taxed dollars into it, and withdraw in the future and not pay taxes on any earnings.

[eddymvp]

---

casinoannie97 wrote:

does your new employer match your 401k contribution?  Then at least put 6% into it.  Otherwise you are losing money.  Use that 800 extra and pay down your ccs.  Rollover that old 401K-- either into your new one or an IRA.  Never touch 401K.  It's the only break we get.  Each year you can contribute something to a Roth IRA. Roth is the governments mistake in our favor. LOL

Get your finances and time on the job before jumping into a mortgage.  But if you must FHA doesn't care about scores.

Message Edited by casinoannie97 on 03-18-2008 10:11 PM

---

Unfortunate my current player doesn't match my 401K contribution, that's why I wanted to withdraw to lower down the balance on the HSBC credit card. and what is FHA?

[Anonymous]

Please note CD interest rates are APR's not term interest.  If you buy a 9mo CD @ a 4% rate, you will not get the full 4% on your deposit when it matures.  It will compound daily at 4% APR which will give you a fractional portion of the APR because that money isn't invested over 12 months.

[pattycake]

Your balances are low enough, and your salary seems pretty high - is that all the debt you have?

What is causing your scores to be in the low 600's?

How about taking your splurge money and just using that for your credit card balances? Also, it doesn't seem like just paying those down will bring your credit scores to your goal.