Which to pay off on to better my credit score

[Aznmomma2]

So I am coming into a little bit of money and want to pay on the smarter choice to boost my credit score.  Should I pay off the remainder of my bank loan or use that money to pay down my credit cards, which would bring them to about a 35-40% balance. I am in good standing on both instances and again want to make the smarter move to increase my score. Thanks for your input!

[Melanie220]

Paying down utilization on credit cards is a sure way to get a quick score boost. Just my two cents

[Cavifl45]

pay min on the loan and pay as much as you can on the credit cards, the lower credit % utilization on CCs will help your score

[bluescale]

I'll be a bit of a contrarian here, and say that you should do whatever puts you in a better financial position.  If getting the extra points will help you secure a loan you need now, then by all means pay down the credit cards.  If paying off the loan now gives you more financial flexibility (less going out in monthly payments) allowing you avoid putting things on your cards, then consider that.  FICO score aside, the best financial move is to pay off the debt that cost you the most (i.e., has the highest interest rate).

My point is simply that maximizing your credit score is only necessary when you need to leverage the score.  Otherwise, think about the financial big picture, and do what's best there.

[rckstrscott]

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@bluescale wrote:

I'll be a bit of a contrarian here, and say that you should do whatever puts you in a better financial position.  If getting the extra points will help you secure a loan you need now, then by all means pay down the credit cards.  If paying off the loan now gives you more financial flexibility (less going out in monthly payments) allowing you avoid putting things on your cards, then consider that.  FICO score aside, the best financial move is to pay off the debt that cost you the most (i.e., has the highest interest rate).

My point is simply that maximizing your credit score is only necessary when you need to leverage the score.  Otherwise, think about the financial big picture, and do what's best there.

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100000000000% this.

If your goal is simply FICO scoring, then sure, pay down the cards. But a FICO score is not the whole picture. If you pay off the loan, you no long have that fixed minimum payment. If the interest is higher on the loan, you will save money.  People fixate on the FICO score, but bluescale is right. Unless you need to increase your score to secure something, a mortgage, and auto loan, then just pay down the debt costing you the most money. Besides, 35-40 percent util won't give you a huge FICO boost, like getting to sub 10 would do

-scott

[Aznmomma2]

Thanks for the advice. I did the big no-no and tried to be a good sister and co-signed a dentist credit card for her  - and yes I paid for it with my credit score when she did not pay two months. Anyhoo yes I am trying to raise it back up as quickly as possible because we are trying to get a house hence the better move for a score boost. The bank loan is the lowest APR. So would you recommend paying more on some credit cards to get the balance under 10-15% and then use the remaining money to put towards my other cards. This way I have some credit cards with a low util???

[bluescale]

Bump.

This kind of nuance isn't my strong suit, so I'd rather some of the FICO wizards weigh in.

[guiness56]

If what you want is a better FICO score, paying down the CC is what is going to help.  Paying an installment loan won't help your score.

But, I agree to pay off the installment loan and use that money to pay down your CC.  In the long run, you will have paid off more than just one account.

[bluescale]

Have you already found a house, or do you have the luxury of waiting a few months?

As far as the co-signed dentist credit cards go, are those still showing on your credit file?  If those are still overdue, your biggest bang will come from getting those caught up.  If that's already paid off, I'd recommend sending a goodwill letter to get that removed from your credit report.  Taking care of/getting rid of the baddies on your file will pay huge dividends.

[bfranklin825]

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@bluescale wrote:

I'll be a bit of a contrarian here, and say that you should do whatever puts you in a better financial position.  If getting the extra points will help you secure a loan you need now, then by all means pay down the credit cards.  If paying off the loan now gives you more financial flexibility (less going out in monthly payments) allowing you avoid putting things on your cards, then consider that.  FICO score aside, the best financial move is to pay off the debt that cost you the most (i.e., has the highest interest rate).

My point is simply that maximizing your credit score is only necessary when you need to leverage the score.  Otherwise, think about the financial big picture, and do what's best there.

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+1