Transfer Credit Balance or Pay off and close

[SharonNYU]

I want to know if it is better to payoff a large credit card and transfer the smaller ones to the larger one?  i.e.  payoff credit card with a credit limit of $2,500 and transfer 2 credit cards with a balance of $500 each.

I want to buy a home and go to law school in 2-3 years.  Is this a good strategy?

Also, is it better to show no debt on your credit report or better management of debt?  i.e. 5 credit cards and all paid off or 5 credit cards and only 35% of credit limit used?

[Anonymous]

For your credit score, it's not going to matter if you have the balance on one card or spread between a few.  Your overall revolving credit utilization is what matters.  Ideally, utilization between 1% and 9% will get you the best score.

Your credit score is a reflection of how you manage your debt and keep your obligations.  You want to have SOME debt reportng.  But again, keep it between 1% and 9%.

It's also a good idea to use each card at least every 2-3 months to keep the creditor from closing the account for inactivity.  Closed accouts can hurt your utilization as you have less available credit.

As far as transfering your balances, look at what you will gain or loose throught the interest rates and annual fees (if any).  Some cards charge a balance transfer fee which, on a $500 transfer, could eliminate any savings you might get if the interest rate is reduced.

[MarineVietVet]

---

@Anonymous wrote:

For your credit score, it's not going to matter if you have the balance on one card or spread between a few.  Your overall revolving credit utilization is what matters.  Ideally, utilization between 1% and 9% will get you the best score.

Your credit score is a reflection of how you manage your debt and keep your obligations.  You want to have SOME debt reportng.  But again, keep it between 1% and 9%.

It's also a good idea to use each card at least every 2-3 months to keep the creditor from closing the account for inactivity.  Closed accouts can hurt your utilization as you have less available credit.

As far as transfering your balances, look at what you will gain or loose throught the interest rates and annual fees (if any).  Some cards charge a balance transfer fee which, on a $500 transfer, could eliminate any savings you might get if the interest rate is reduced.

---

That's not exactly correct. FICO looks at both individual util and overall util. For example you could have 5 cards with an overall util of 5% but if some of the individual cards were maxed out at say 90% that might be a concern.

[Anonymous]

I was wondering the same thing. I would like to try to transfer a balance of 3500.00 but not sure if I would be approve at a better rate (currently 9.90%) or just pay down.

[Anonymous]

---

marinevietvet wrote:

---

@Anonymous wrote:

For your credit score, it's not going to matter if you have the balance on one card or spread between a few.  Your overall revolving credit utilization is what matters.  Ideally, utilization between 1% and 9% will get you the best score.

Your credit score is a reflection of how you manage your debt and keep your obligations.  You want to have SOME debt reportng.  But again, keep it between 1% and 9%.

It's also a good idea to use each card at least every 2-3 months to keep the creditor from closing the account for inactivity.  Closed accouts can hurt your utilization as you have less available credit.

As far as transfering your balances, look at what you will gain or loose throught the interest rates and annual fees (if any).  Some cards charge a balance transfer fee which, on a $500 transfer, could eliminate any savings you might get if the interest rate is reduced.

---

That's not exactly correct. FICO looks at both individual util and overall util. For example you could have 5 cards with an overall util of 5% but if some of the individual cards were maxed out at say 90% that might be a concern.

---

Good point.

Also, FICO looks at how many accounts with balances you have. So, a person could get dinged for having too many accounts reporting a balance. I'd try to keep no more than half reporting a balance.