Paying off debt all at once VS Making Monthly payments.

[Anonymous]

Hello! 

I have 4 cards total and they are all maxed out to their credit limits. My plan is to use my tax return to pay off one of my cards, and then use the monthly payment I used to pay for that card and add it to another card every month to pay that card off as well. I am wondering how it would affect my credit score if I paid off a debt all at once VS making payments to it every month for 12 months to pay it off. Would I increase my score farther by paying it all off all at once or paying it every month? 

For Reference, here are my cards:

Card A Balance: 7,998.00 (Credit Limit: 8,100.00) Monthly minimum payment: 212.00

Card B Balance: 7,755.00 (Credit Limit: 8,000.00) Monthly minimum payment: 198.00

Card C Balance: 1,888.00 (Credit Limit: 2,000.00) Monthly minimum payment: 58.00

Card D Balance: 980.00 (Credit Limit: 1,000.00) Monthly minimum payment: 25.00

[gdale6]

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@Anonymous wrote:

Hello! 

I have 4 cards total and they are all maxed out to their credit limits. My plan is to use my tax return to pay off one of my cards, and then use the monthly payment I used to pay for that card and add it to another card every month to pay that card off as well. I am wondering how it would affect my credit score if I paid off a debt all at once VS making payments to it every month for 12 months to pay it off. Would I increase my score farther by paying it all off all at once or paying it every month? 

For Reference, here are my cards:

Card A Balance: 7,998.00 (Credit Limit: 8,100.00) Monthly minimum payment: 212.00

Card B Balance: 7,755.00 (Credit Limit: 8,000.00) Monthly minimum payment: 198.00

Card C Balance: 1,888.00 (Credit Limit: 2,000.00) Monthly minimum payment: 58.00

Card D Balance: 980.00 (Credit Limit: 1,000.00) Monthly minimum payment: 25.00

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I would recommend paying off higher interest rate card first and on down the line, I also would take some of that money and drop all those below 90%, you will recover some points if you do as you are being dinged pretty good for each card over 89% of its CL. If you have the funds you pay off the debt no reason to be running up interest charges. Welcome to My FIco

[RobertEG]

There really is no best way.  It depends upon your individual factors and primary concern.

Maintaining score in the interim, saving interest, preserving your current credit limits........... ?

An important factor might be how long you have been near-maxed.  Remaining near-maxed for a substantial period could make your creditor antsy, and result in a credit limit decrease as you pay it down.  If your higher limit cards have been maxed for a while, I would recommend paying them down to under 60=70% forst.

[Anonymous]

If my understanding of the UTI% calculation is correct, any single card thats near maxed is going to ding you badly. So just paying one card down is not going to help scorewise. What I would do is spread that payment out across all the cards, and get each of them below 80% - ideally below 60% if possible. That will help your scoring the most, and as Robert pointed out, may prevent the creditors from lowering your limits. Then pay down the smallest and do the debt snowball.

If any of them have very high or low interst rates, that may be a factor to consider as well.