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Registered: ‎01-15-2013
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Order of paydown

[ Edited ]

I'm trying to boost my credit score for purposes of qualifying for a mortgage later this year. It's in the 690 range, on average, right now, with two baddies ($182 state tax lien paid in 2008 and $310 medical collection paid in 2008, as well), and a so-so utilization ratio.

 

I can't do anything about the baddies, obviously. But I want to do something about the utilization ratio. How should I best go after some of these debts, in your opinion, in order to get the quickest FICO results?

 

Visa BankAmericard: $8,400/$15,000

Discover: $5,000/$10,800

Fifth Third: $2,800/$3,000

Capital One: $4,000/$7,900

Macy's: $0/$1,200

Best Buy: $0/$1,500

 

FWIW, the interest rates are pretty irrelevant at this point. The BankAmericard is still at no interest until the fall. Discover is no interest for 12 months (balance transfer from BankAmericard). Fifth Third is 15 percent, I believe. Capital One is an unbelievable 6.9 percent.

 

Thoughts? Basically, I want to get to 750 or so as soon as I can, and then start saving for a down payment instead.

Contributor
Posts: 93
Registered: ‎10-07-2011
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Re: Order of paydown


jcmaroon wrote:

I'm trying to boost my credit score for purposes of qualifying for a mortgage later this year. It's in the 690 range, on average, right now, with two baddies ($182 state tax lien paid in 2008 and $310 medical collection paid in 2008, as well), and a so-so utilization ratio.

 

I can't do anything about the baddies, obviously. But I want to do something about the utilization ratio. How should I best go after some of these debts, in your opinion, in order to get the quickest FICO results?

 

Visa BankAmericard: $8,400/$15,000

Discover: $5,000/$10,800

Fifth Third: $2,800/$3,000

Capital One: $4,000/$7,900

Macy's: $0/$1,200

Best Buy: $0/$1,500

 

FWIW, the interest rates are pretty irrelevant at this point. The BankAmericard is still at no interest until the fall. Discover is no interest for 12 months (balance transfer from BankAmericard). Fifth Third is 15 percent, I believe. Capital One is an unbelievable 6.9 percent.

 

Thoughts? Basically, I want to get to 750 or so as soon as I can, and then start saving for a down payment instead.


I would think first order of business would be to get that Fifth Third down.   At 2800/3000 that is over 90% and considered maxed out.  Next I would look at getting all utilization down under 50%.  If you get to that point and are able to pay more down, then look at zeroing out balances remaining on cards.  The fewer cards reporting a balance, the better.


Starting Score: EQ-484(10/10/2011) TU-533(10/10/2011)
Current Score: EQ-701(1/18/2013) TU-735(1/20/2013)
Goal Score: 750s!!


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Re: Order of paydown

So you mean get Fifth Third below 50 percent, Capital One below 50 percent (almost there anyway), and BankAmericard below 50 percent before PIF on any of them? It's so tempting to just PIF the Fifth Third card, but it might not be the best use of $3,000.

Regular Contributor
Posts: 138
Registered: ‎11-11-2011
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Re: Order of paydown


jcmaroon wrote:

I'm trying to boost my credit score for purposes of qualifying for a mortgage later this year. It's in the 690 range, on average, right now, with two baddies ($182 state tax lien paid in 2008 and $310 medical collection paid in 2008, as well), and a so-so utilization ratio.

 

I can't do anything about the baddies, obviously. But I want to do something about the utilization ratio. How should I best go after some of these debts, in your opinion, in order to get the quickest FICO results?

 

Visa BankAmericard: $8,400/$15,000

Discover: $5,000/$10,800

Fifth Third: $2,800/$3,000

Capital One: $4,000/$7,900

Macy's: $0/$1,200

Best Buy: $0/$1,500

 

FWIW, the interest rates are pretty irrelevant at this point. The BankAmericard is still at no interest until the fall. Discover is no interest for 12 months (balance transfer from BankAmericard). Fifth Third is 15 percent, I believe. Capital One is an unbelievable 6.9 percent.

 

Thoughts? Basically, I want to get to 750 or so as soon as I can, and then start saving for a down payment instead.


My goal would be to eventually only show balances on half (or less) of the six credit cards. I would pay the Fifth Third card to less than $1500, then pay the BankAmericard to less than $7500, then pay Cap1 to less than $3800. Now you wont be over 50% utilization on ANY cards. From there, I'd plug away at trying to get that Fifth Third card down to 0 so that by the time you go to mortgage app, you'll only be showing balances on 3 of your 6 cards, the utilizations on each individual card will be less than 50% & you could get your total revolving utilization percentage down to the 25-35% range (I would push for less than 30%).


Starting Score: April 2011- EX FAKO 639, EQ FAKO 645, TU98 FICO 665
Current Score: Jan 2013- EQ FICO 746, EX FICO is the best kept secret in the world, I guess, TU FICO ???, Vantage 790
Goal Score: 760 by years' end. I didn't make the 760 club in 2013 but I'm pounding down the door in 2014.


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Contributor
Posts: 93
Registered: ‎10-07-2011
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Re: Order of paydown


jcmaroon wrote:

So you mean get Fifth Third below 50 percent, Capital One below 50 percent (almost there anyway), and BankAmericard below 50 percent before PIF on any of them? It's so tempting to just PIF the Fifth Third card, but it might not be the best use of $3,000.



The problem with PIF of the Fifth Third is still having cards over the 50% utilization.  IMO pay down all cards under 50% like you said, and then look at what can be PIF.


Starting Score: EQ-484(10/10/2011) TU-533(10/10/2011)
Current Score: EQ-701(1/18/2013) TU-735(1/20/2013)
Goal Score: 750s!!


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Re: Order of paydown

Thanks, guys. I have $3,000 right now to throw at cc debt. I was thinking, based on the advice on this thread, $1,500 at Fifth Third, $1,000 at Bank Americard, and then the last $500 at Capital One.

 

Fifty percent really seems to be a magic threshold then, huh?

Regular Contributor
Posts: 138
Registered: ‎11-11-2011
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Re: Order of paydown


jcmaroon wrote:

Thanks, guys. I have $3,000 right now to throw at cc debt. I was thinking, based on the advice on this thread, $1,500 at Fifth Third, $1,000 at Bank Americard, and then the last $500 at Capital One.

 

Fifty percent really seems to be a magic threshold then, huh?


50% is one of the thresholds, yes. And the lower it goes, the better it gets.


Starting Score: April 2011- EX FAKO 639, EQ FAKO 645, TU98 FICO 665
Current Score: Jan 2013- EQ FICO 746, EX FICO is the best kept secret in the world, I guess, TU FICO ???, Vantage 790
Goal Score: 760 by years' end. I didn't make the 760 club in 2013 but I'm pounding down the door in 2014.


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Re: Order of paydown

How much do you expect you can reasonably pay off before the mortgage process?

 

Reason I ask is financially it's best to simply attack the highest APR first and work down the ladder; that saves you more money per month, allowing you to pay off the rest of the debt correspondingly faster by some amount.

 

That said, if you have less money to work with (since admittedly the downpayment + cash reserve is more important by the end of the year) then picking individual tradelines based on immediate FICO returns is the better approach.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 693, EQ 8 685, TU 705, EX 709 (02/27/15)
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Re: Order of paydown


jcmaroon wrote:

Thanks, guys. I have $3,000 right now to throw at cc debt. I was thinking, based on the advice on this thread, $1,500 at Fifth Third, $1,000 at Bank Americard, and then the last $500 at Capital One.

 

Fifty percent really seems to be a magic threshold then, huh?


I would recommend paying the Fifth Third off first for 2 reasons - 1) it is the highest interest and 2) you will get a boost having only 3 of 6 cards report balances. Usually your score takes a ding when over half of your cards have a balance.

Then I would take the remaining $$ and put it on Capital One - it is the next highest rate and it would get that card under 50%.

Then between now and the time you apply for your mortgage, i would work on paying down the Bank Americard to under 50%. After that, i would put all the effort into paying of Capital One since the other 2 are 0%.

 

FICO: EQ 769, TU 762 , EX ???

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Re: Order of paydown

[ Edited ]

The real big step on individual card util is usually around 79-90%. I think you are wasting money trying to find an individual utilization step around 50% although there tends to be an overall utilization step around 40-60%.

 

Paying off the 5/3 gets you another account reporting zero and your highest interest rate retired. That is usually a no-brainer.

 

Save the rest of the $3K for residual interest on 5/3 or put it toward the CapOne. 6.9% is only acceptable interest, not good. I'm paying an average of 4.87% on my revolving debt, including a small bit left on a CapOne at 6.9%.

 

Make sure non of the zero interest cards only go to regular interest and don't hit you with back interest if not paid off by end of promo period.

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