Pay down Installments or Revolving Accounts?

[frugal]

Hello Guys,

I have to pick the MF forum on this subject.  Over my years of learning what it takes to bring up scores from 471 to 645, it still baffles me when it comes to scoring and when you think you are doing the right thing, the scoring system throws me in a "loop".

Here is the jist of it.  My CS went  down 2 more points.  In July, I had 14 Accounts (most are $0) and out of them, I had $1,225 in Revolving and had Installments.  When I pulled my Aug report,  and I had 13 Accounts (one dropped from previous month), but my Revolving accounts went up to $1,339, but my Installments went down (of course).   

I always utilize about 13% or less on my CC, but wouldn't it seem that because one of my accounts were dropped and my UT is still under 13% (rule of thumb for me) on my CC and my Installments are coming down, it would make my score go up instead of down?

So, here are two questions-1) It seems that if I get more agressive by paying off more of my Revolving accounts more each month and paying the same on my Installments (these are always the same monthly), it will make my Credit Score, go up?  2) Which one benefits more (when paying more), Revolving or Installments?

Please note, I don't ever pay the minumum amt on my CC each month, I always leave between 1%-13% on my CC.  Comments are needed..

[haulingthescoreup]

I assume that by CS, you mean (FICO) credit score, not CreditSecure, right?

If you have balances showing on multiple CC's, however small, and one CC fell off, then this might mean that you have proportionally more accounts with balances. So picking a number out of the air: it was 5 out of 14, now it's 5 out of 13.

We've discovered over the last 6 months or so that if you can do it, your scores will do much better if you only report a balance on one or two revolving tradelines. Do keep using the rest periodically to keep them alive, but PIF before the statement. CCC's don't care a flip if you have a balance report on your statements or not; they just want you to use the cards and make timely payments. (Sorry, you probably know this, I'm just summarizing.)

If you do this, it's easier than trying to keep tiny balances reporting on multiple, multiple accounts, and then paying, plus your scores will probably benefit as well.

In general, you don't really get scoring points for accelerated payments on installment, although it can certainly make financial sense. If you're looking for score improvement, I would throw more money at the CC's, and reduce the number showing balances. Revolving usage carries way more weight than installment.

[frugal]

thanks haulingthescoreup...I knew you would come through!

[Anonymous]

Like hauling said, revolving is far more important score wise. Obviously, though FICO is important, I would also take into account interest rates. Is it worth an extra 30 points in the short term versus saving hundreds of dollars? Probably not. But if rates are near equal, or credit card rates are higher, definitely pay them down faster as they will boost your score.

Generally with installment loans there is a small boost after your utility goes below 100% then very few points until you get very close to paying off the loan. Not worth it in most cases.

[Anonymous]

Where to apply funds as a general rule.

1. Revolving
2. Installment

Don't spread payments evenly between them. Apply all to revolving first.

As for the point drop you stated I'm guessing it was an age loss after a tradeline fell off your CR when you went from 14 down to 13 accounts.

[haulingthescoreup]

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@Anonymous wrote:

....As for the point drop you stated I'm guessing it was an age loss after a tradeline fell off your CR when you went from 14 down to 13 accounts.

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Thanks pizza, I spaced on that one. Insufficient coffee this morning!