Best way to pay off credit cards for quickest fico increase

[Anonymous]

Hi there,
I'm trying to maximize my Fico as much as possible for a refinance. I can pay down several thousand dollars in the next couple of months. I am just realizing that credit utilization on individual cards is affecting my score.
My score is 687.
I have a 41% total credit utilization rate.
My cards are:
$4950 out of $5000 0% interest
$4900 out of $5000 0% interest
$2400 out of $2500 25% interest
$2600 out of $6500 20% interest

Should I first try paying down the first two cards to 90% utilization rate before paying off the third?

[tomfromrictmame]

Your biggest drag on your score is 3 cards are maxed out.  The theory is that anything above 90% utilization is considered maxed out in the scoring models.  So, I would start there.

[VinnyVee]

Financially speaking it would be ideal to pay off the cards with interest.

[Anonymous]

From a purely financial aspect, VinnnyVee is correct, BUT the goal here is to get the best possible Refi rate. I would try to get all below 50%, 30% would be even better, and below 10% is considered ideal

[Anonymous]

I guess I'm asking for the best possible strategy. So pay down all three to 90% and then pay the $2400 balance to under 50%? Would that give me the quickest bang for my buck?

[tomfromrictmame]

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@Anonymous wrote:
I guess I'm asking for the best possible strategy. So pay down all three to 90% and then pay the $2400 balance to under 50%? Would that give me the quickest bang for my buck?

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I would:

$4950 out of $5000 0% interest <== Pay $1,000
$4900 out of $5000 0% interest <== Pay $1,000
$2400 out of $2500 25% interest <== Pay $500
$2600 out of $6500 20% interest

That gets the top 3 accounts to 80% utilization.  Then I would focus my attention on getting the 25% interest account to $0.  IMHO, this would give you the biggest bounce quickly, address a high interest account and most quickly get an account to $0.  YMMV.

[Anonymous]

There is really no "hard answer" to this. The thing is that FICO is a computation that is a closely held secret. No one really knows for sure exactly how that computation is done - they only deduce it from what seems to work. And what works well for one person may not work as well for the next.

What people have noticed over time is that the 'best' strategy seems to be under ten percent UTI on all cards. Between the ten percent and ninety percent range its kind of a gray area.

Getting all card under 90% would certainly be the first step - do that immediately if you can, then work at getting the high interest card to below 50%, that will give you more dollars to throw at the 0% interest cards.