Got myself in a mess and need to fix it.
Two years ago, my credit rating was high but it is now middle of the road because of CC debt. I have high balances and high limits:
- card 1 has a balance of $9,000 with a limit of $25,000 (36% utilization)
- card 2 has a balance of $8,000 with a limit of $11,000 (73% utilization)
Between a tax refund and selling something, I have $6,000 to put to CC debt. How do I allocate the money? I am MOST concerned about my credit rating rather than the less than $100 interest difference. So how important is utilization if both CCs are high?
Option 1: Pay all to card 1 because I am so high on utilization that it doesn't matter and I should pick based on interest rate, which is card 1. If so, utilization would drop to 8%. So I am left with one really high utilization and one relatively low utilization.
Option 2: Pay all to card 2 to get down the highest utilization. If so, utilization on card 2 goes down to 18% but I still have card 1 at 36%.
Option 3: Split the payment to get both below 1/3. If so, I pay $1500 to card 1 reducing utilization to 30% and card 2 gets $4500 reducing utilization to 32%.
I think option 2 is the best but is there a magic threshold in the 30-35% utilization range that I should aim for with Option 3?
Thank you so much.
PS -This is a cross post from the credit card forum because posters in both seem to be very helpful but with slightly unique perspectives.
