cancel
Showing results for 
Search instead for 
Did you mean: 

Credit card payoff strategy to increase score

tag
Anonymous
Not applicable

Re: Credit card payoff strategy to increase score


@Anonymouswrote:

Appreciate the replies.  I have an important credit application approaching.   My goal is to pay off all CC debt by Sept 1 2018.

 


When is the need for credit?  I am guessing it is shortly after you make all the payments described in your first post (thus probably in May).  Is the need for credit a mortgage or something else?  Score improvement strategies for mortgages are a tiny bit different than those for (say) auto or personal loans.

 

If the credit need is after all the payments, it looks like you can get all your remaining cards to < 48% (you can crunch the numbers to confirm).  Even better would be all cards < 28%.  You already have <1/3 of your revolving accounts at a positive balance, so that's encouraging.

Message 11 of 20
joltdude
Senior Contributor

Re: Credit card payoff strategy to increase score

Regardless of Snowball or Avalanche ... id get these remaining cards out of their maxxed out status pronto.....

Finish the snowball on the card thats partially paid for.. 

 

Yeah paying off the debt is the most important part, but if you *need* another financial product down the road..  the idea is to avoid AA AND pay off the debt...  Yeah scores arent the most important part.. as in opening more credit.. but since they can and are used for other things.. lets try to stop the bleeding as we move forward...   Still think trying to whack down the per card utilization THEN either resume snowballing or even consider switching to the other technique (highest APR first)......

 

 

Message 12 of 20
Anonymous
Not applicable

Re: Credit card payoff strategy to increase score

I would go down a hybrid approach focusing on my score and high interest. In your case I think seeing the score increase would give you that good feeling you are getting from snowball. It did for me.

 

1) Pay down all balances to < 87%. 

2) Pay 2x minumums on all accounts to try avoiding AA. (this always happens)

3) Pay 11 to 0% since it has a much higher interest.

4) Pay down all accounts to 67%.

5) Pay 13 down to 7%

6) Pay 12 down to 7%

7) Pay down rest to 47%, 27%, 7%.

8) Pay down rest to 0% leaving one account at $5 - 7% (search AZEO method)

 

You may have noticed I choose breakpoints to be at 7% instead of 8.9%. This just makes it easy for me to provide a buffer when the interest posts. You can math out exactly how much interest will post and get closer to 8.9 if you like.

 

You can do the maths if it will work by the date you are trying to use score to apply for something. When you really want to squeeze points you can just focus on the util% breakpoints. No guarantee on score bumps though since like was said prior biggest gains are under 88.9% and 8.9%. Your aggregate util will be going down automatically in this process, but definitely try to get it under a breakpoint before applying for something. Like if you have it at 30% make sure it gets under 28.9%.

 

Message 13 of 20
Anonymous
Not applicable

Re: Credit card payoff strategy to increase score

If the OP has ~$40k in CC debt now and has the means to take it down a finite number, say to ~$25k (paying off $15k) by May, those numbers are really what's most important.  His aggregate utilization regardless of which cards he pays is still going to be King to what's going on with the individual cards.  If he's going for a mortgage app, the MR is still going to see ~$25k in CC debt regardless of how its spread out.  If his middle mortgage score is "on the cusp" perhaps losing sleep over which to pay first, thresholds, etc. are more important, but I'm not sure we have that information from the OP yet. 

Message 14 of 20
SouthJamaica
Mega Contributor

Re: Credit card payoff strategy to increase score


@Anonymouswrote:

Looking for some guidance.  I've been exercising the snowball method for the past couple months, now I'm second guessing myself. I just found this forum and wanted to get a sanity check.  Should I continue snowball, or work on bringing down individual cards below a certain threshold? Or a combination of both?   My goal is raise my score as fast as possible.   I never missed payment, nothing bad lingering out there.  3 hard pulls the past 2 years.  I have not used a CC since Jan 1.  

 

I budgeted the following to be paid out:

Second Feb payment  $3K

March payment $3500

Second March payment $10K

April payment $3500

Second April payment $2K

 

 

Card Rate Limit Balance Min Payment Utilization Opened
1                   1500           0             $0                       0% 2012
2                   1700          0             $0                        0% 2011
3                   1800          0             $0                         0% 2014
4                   2500          0             $0                         0% 2015
5                   2500          0             $0                        0% 2014
6                   2501          0             $0                        0% 2004
7                   3000           0            $0                         0% 2013
8         0        2000        944          $150                   47% 2016
9   10.50%    6750     4986         $118                   74% 1994
10 13.24%   7000     6896          $103                   99% 2014
11  26.49%   8450     8294         $274                   98% 2012
12 16.24%   8700     8592           $216                 99% 2010
13  15.90%   10000    9559        $220                 96% 2006

Aggregate       58401 39271       1081                 67%

Thanks

 


The snowball method is a great way of reducing debt, IMHO. But since your goal is to raise your scores as fast as possible, there are probably other ways that would be more directed towards accomplishing that goal.

 

Great news that you have very low inquiries, and no negatives, and are not using credit cards anymore! Good work!

 

The problem for me is that your card number 11 is such an outlier; you have one of your biggest balances there, and a humongous 26.49% interest rate. If I were you I would combine 2 goals: (a) score improvement and (b) getting rid of card number 11.

 

I would

1. pay card number 8 down to zero

2. pay off 10, 11, 12, and 13 to 78%

3. pay off card number 11 (and shred it)

4. then bring the others down to 48%, then 28%, then 9%.

 

By then, you'll be sitting pretty.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 15 of 20
SouthJamaica
Mega Contributor

Re: Credit card payoff strategy to increase score


@Anonymouswrote:

BBS and I are in agreement and basically saying the same thing: focus on the best way to get your CC debt paid off, not what your scores are doing, since the scores will end up at the same place.

 

Curiously, I have grudgingly moved into a more accepting posture of Snowball over time.  I was never a fan since it advises paying off a $3000 0% balance before a $10,000 19% balance. 

 

But I have gradually come to realize that for some people, each $0 balance creates a huge emotional feeling of accomplishment, and induces them to pay debt down even faster.  When such folks lack that periodic atta boy!  they can lapse into despair.  So as long as the interest rates between accounts are not wildly different, I am now fine with Snowball if it helps that particular person move ahead.


To my mind its greatest value is that when an account is paid off, the money what would otherwise have been applied to its monthly payment can now be applied to the next project.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 16 of 20
HeavenOhio
Senior Contributor

Re: Credit card payoff strategy to increase score

Paying off card #8 makes sense until you see that it's the one with 0% interest. Either way, it's all going to be done by September, and the OP has lots of good options.

Message 17 of 20
Anonymous
Not applicable

Re: Credit card payoff strategy to increase score

Thanks again for all the replies.  So I am going to lease a Ford vehicle within the next 12-14 weeks.  What I'm looking at is the Experian FICO® Auto Score 2 and 9, it has me at 640. Fico 8 got me at 692, but I don't think Ford uses 8.  So I need to get at least 40 points in 12-14 weeks.  I hope that is reasonable.  

Message 18 of 20
Anonymous
Not applicable

Re: Credit card payoff strategy to increase score


@AnonymousSo I need to get at least 40 points in 12-14 weeks.  I hope that is reasonable.  

You've probably got 60-80 points on the table within the utilization sector of the FICO pie, so depending on how much you have available to pay down your utilization over those 12-14 weeks will be the biggest factor here in raising your score.

Message 19 of 20
HeavenOhio
Senior Contributor

Re: Credit card payoff strategy to increase score

So that's approximately between May 15–30. I'd go for the scoring advantage until then, then use interest to determine how you pay after that. If you need a tie-breaker before May, use interest.

Message 20 of 20
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.