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Here are my current debts:
Chase: $547 29.9% APR, $1200 limit
Capital One: $3,765, 11.7% APR, $4,200 limit
Citi: $230, 16% APR, $2600 limit
Bank of America: $5,365 5.5% APR (this is a closed account, had an $11,000 limit, on a $150/month payment program and does not count towards my uti)
VW car loan: $4,829, 6%
I have $3,000 to spend from a year end bonus. What is the best way to spend it? I was thinking about using it all towards Capital One? Or should I pay off Chase and Citi, and use what is left towards Cap One? What would impact my score the best -- having 2 cards with 0 balances, or having all cards with under 50% uti?
Pay Chase and Citi completely. I say this for two reasons. FICO likes to see less than half of cards reporting a balance so that would leave 2 of 3 reporting $0 so this would boost your score. Reason #2 the interest rates are higher on them so it will save you money. That will leave you a little over $2000 you can put toward the Cap 1 or BofA cards.
And I am curious you said BofA isnt counting toward your utilization. Why is that? Closed accounts with balances still affect utilization and closed accounts with $0 balance arent factored. Thats the impression I was under anyway.
I wouldnt dare guess at Cap 1 I am not a cardholder and dont know much about their habits. Maybe someone else here has personal experience?
@Anonymous wrote:Pay Chase and Citi completely. I say this for two reasons. FICO likes to see less than half of cards reporting a balance so that would leave 2 of 3 reporting $0 so this would boost your score. Reason #2 the interest rates are higher on them so it will save you money. That will leave you a little over $2000 you can put toward the Cap 1 or BofA cards.
And I am curious you said BofA isnt counting toward your utilization. Why is that? Closed accounts with balances still affect utilization and closed accounts with $0 balance arent factored. Thats the impression I was under anyway.
I agree with this approach. If you pay off Chase and Citi that will leave you with $2223. Use that to pay down Cap 1 to $1542. That would lower the utilization on Cap 1 to 37%. That's still a little high but it's much more manageable than the 90% it is right now. From this point forward use this criteria to tweak your utilization:
Optimal credit utilization for FICO scoring purposes seems to be:
Total revolving utilization > 0 and < 9%, the lower the better, and
Reporting a balance on less than half of your revolving TL's, and
Reporting a balance on half or less of all TL's.
@ktscore wrote:
Thanks okstate. I agree that the BoA balance should be killing my uti, but for some reason FICO is treating the account as an installment account with a $150 monthly payment. Its been that way since August of 08. Since the APR is so low, I would rather put a dent in Cap One. Is there any concern that if I send a $2000 payment to Cap One they would slash my credit line? I think I've seen that in the forum. Would it be better to make a few $500 payments over time?
I've had Cap 1 for many years and have made both small and large payments with no CLD. I can't say what might happen to you. However I would rather pay off a big chunk of debt and not worry about what MIGHT happen. In my opinion debt reduction is always the #1 priority.