High CC utilization and which do I tackle NOW!

[Kiwill]

You can see  my ultimate goals this year, short and long term for the year below in my siggy. 

I have 6 of 12 cc reporting balances, they are listed below starting from least amount owed:

1.  Capital One - $670 (89% util)

2.  Meijer - $792 (88%)

3.  Macy's - $1,134 (76%)

4.  Restoration Hardware - $2,109 (94%)

5.  The Room Place - $3,522 (37%)

6.  Pottery Barn - $3,665 (69%)

I have always been a fan of the Suzy Orman Snowball repayment plan by paying down the smallest balances first, that has been working great for me until now with these very large balances and high utility.  In order to achieve my goal by June 30th, tackling which debt first and by how much will give me the boost I need by my June goal date?  Thanks!! 

[marty56]

In order to give the best answer, we would need to know how much money you have to pay down the debt by then. The goal is always to reduce the number of CCs with balances and the util on each card.

Anyway the debt snowball approach is the best in terms of geting out of debt and is FICO friendly but it may not give you the best FICO result if it leave you with high util on single cards.

Also you are looking at 37 points or so which means going to about 9% util and reducing the number of cards with balances.

[MarineVietVet]

Goals are good to have but don't be so locked into achieving them that it rules and/or ruins your life. Credit repair and rebuilding is a roller coaster ride and sometimes we don't move forward as fast as we'd hope.

Keep focused and you'll get to where you want to be. It might take longer than you thought it would but that is part of life.

Good luck to you.

From a BK years ago to:
7/09 TU-742 EQ- 779
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802

You can do the same thing with hard work

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[Kiwill]

Thanks Marinevietvet!!!  I must say that I am obsessed with my fico score and eliminating my cc debt.  It's a struggle but I am soo tired of paying these ccc's that i'm willing to sacrifice this entire spring, summer and fall from doing much of doing anything in order to accomplish my goal of having <9% util on 1 card going into 2011. 

Thanks Marty56!  I have about $1200-1500 a month to pay my bills which does include my $570 car note which leaves me about $800-900 a month for my cc debt. 

[bicknar]

Hi Kiwill,

Based on what you have here so far, I would say to keep up with the lowest first plan.  Since FICO also looks at individual utilization as well as overall util, the more you have at <10% the better.  That being said.....  You may also want to gather up some more details on each account, especially interest rates.  You may find that your higher interest rate cards are eating up more of your availble $$ in minimum payments and thus slowing down progress.   Once you have that you can do a comparison of what you can pay off faster etc.

Also be sure to focus on having a savings safety net too, so if an unexpected event happens it won't ruin all the hard work.

Good Luck,

A

[Kiwill]

Thanks bicnar!  My lowest balances; Meijer and Macy's are in fact my highest interest rates at 23% and 22%.  I was afraid to make those my 1st priorities right now because of my other high balances, over 3k on each of  the other cards which interest rates are NOT below 19%.  Interest doesn't start to accru on my Restoration Hardware card until July, then interest will be backdated from the date of purchase 1 year from July if I don't pay in full.  Interest on both my Pottery Barn and RoomPlace cards have just started to acrue, so am I screwed either way no matter which one I attack first? 

After reading the responses here, I have come up with a budget that will best probably work for optimal fico points and eliminating interest paid as much as possible.  I am the biggest fan of the Suzy Orman debt repayment plan but at this point I think Dave Ramsey's plan will work best, but i'm still unsure.  Please tell me what you think.

Starting in AprilI I will pay $400 a month towards my RH card and $200 to macy's and $100 on all the others.  I've decided to make TheRoomPlace my lowest priority because I have only 37% util. compared to 69, 76, 88, 89 ande 94 percentages.  I must have the $2,100 balance paid in full by July 2, 2010 in order to avoid the $443 in finance charges. 

April - $400

May - $450

June - $800 and pay absolute minimum payments on all other cards this month.

July 1 - $450 

I think the only card I will hold a balance on past 2010 will be the Pottery Barn card, I want to pay this debt off but not hurt myself doing it like marinevietvet said.  My main purpose for having such an aggressive repayment plan is because I am sooooo tired of looking at these bills and not seeing my money each month, I just want to get it over with.  All my bill money is electronicall debited from my account on the same day as my direct deposit so I don't even see my money anymore.  It gets depressing to be broke ALL the time.  I was thinking of doing the same thing next year with my installment loans; student loan and car note but I might have to take a year off and only make the contractual payments, we'll see.

By August I think I should be able to snowball my payments and completely pay off the Capital one and Meijer.  Going into September I "SHOULD" only have two cards with balances; Pottery Barn and RoomPlace.  I should then be able to snowball my available cash into the TRP card and pay $1000 a month until the end of December, leaving me with the pottery barn balance going into 2011 and only about 8% utility. 

[RobertEG]

It is a matter of what you are trying to do.

Unpaid debt has two components.... one financial, and the other FICO scoring.

From a purely financial perspective, paying on the debt that bears the highest interest rate will lower you total monthly interest .  With a CC debt of $12K, you are probably paying close to $200 a month in interest alone.  That makes paying down existing principal difficult.

From  FICO perspective, FICO has three components when dealing with existing revolving debt.  The largest by far is overall % util, and of course, for this calculation, it does not matter which is paid first.  Next in weight of importance is % util of each revolving account.  Paying the higher % util card first would gain the most bang in this area.  Last in weight is the % if cards showing any balance.  So paying as many down to $0 balance will help, but it is not the major factor.

The other factor to consider is the potential future impact of high % util accounts.  They run a risk of having their CL reduced, and if you are ever even one day late, you can be assured that the creditor will hit you with highest default interest rate that they can.

If you have a goal to apply for new credit in the next three months, and thus value FICO score above money out of pocket, I would advise concentrating on the highest % util cards first.

[Kiwill]

Thanks RobertEG!!  During the first half of 2010, optimizing my fico score is most important to reach the 700 fico club but after that, saving money on interest rates is highly important to me.  Once I eliminate the smaller balances; macy's, cap1 and Meijer  which are all under 1k, the other three cards pretty much have the same balances and interest rates, so I won't save any more or less money in interest by tackling one over the other first there.  So, as you suggested I am going to eliminate the the RH card first because it has the highest utility PLUS if I PIF by 7/2/10, I will have completely avoided interest, a two for one.  Like I said before, 6 of 12 revolving cards are PIF, I have 14 total accounts. 

[bicknar]

I love it when a plan comes together