Rebuilding Your Credit

[luvfran]

Hi All,

I currently owe about $13k in dreaded credit card debt.  I have about $5k to put towards this debt.  I have been paying the MINS on all these accounts for a long time, and the major factor bringing down my score right now is high utilization on these cards.

So, my question is this- when I pay down the $5k, is it best to put it towards the cards with highest interest rate? Highest utilization?  Spread over all cards to lower overall utilization?  I know that in money terms, I'll get the most bang for my buck by paying down the highest interest card first.  But in credit terms, will it help or hurt me to pay off like 3 cards without touching the balance on the others?  Would it best to consolidate this debt with a low-interest personal loan?

Please advise as I would like to pay down this debt, but also maximize the boost to my credit score as much as is feasible while doing it.  I can't afford to take major hits for "doing the right thing". 

Thanks in advance for your help!!!

Message Edited by luvfran on 09-08-2009 01:10 PM

[tullz85]

Ideally you want to have 50% of your cards report a balance of 1-9%. If it was me, and I had a bunch of smaller cards I could pay off completely, that is what I would do.

[Chopbrocoli]

I would first put it towards the accounts that are either maxed or close to being maxed out. Then I would deal with the one with the high APR's 2nd.

[Credit-Wise]

Please post your account with balance and CL so that we may give you a more informed opinion/ recs

[llecs]

Opinions will vary, but, IMO, pay the smallest balance first. FICO likes to see mostly $0 balances and certainly your $5k will go a long way in hitting that goal thereby resulting in a higher score sooner vs. paying the largest balance first. Psychologically, if you do pay some CCs to $0, then you'd have less payments to worry about. Finally, because your min. payments are less, you'd have extra to roll over into your other CCs and you can pay those down much faster.

[ArmyStrong]

+1

That's the strategy I'm using. Working great!

[RobertEG]

How to pay off CCs has two different, and quite often contrary, components.

For financial reasons, you would pay the higher interest rate cards off first.

But for FICO reasons, FICO does not care about money out of your pocket.

FICO plan is kinda simple.  FICO scores % util scores overall % util at approx 50% of its scoring under this category, so who you pay first doesnt matter in overall % util. 
But FICO also scores the other half of its % util scoring by looking at the % util of individual cards, along with the percent of cards showing balances, at any level.  So for FICO reasons, pay off the higher % util cards first, try to get all below 10%, and try to get more than half reporting  no balances.