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tpmcCalifornia
Posts: 1
Registered: ‎07-28-2007
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Strategy in paying off credit

Question regarding how to pay down credit cards.
I'm building a house and the builder ran out of money.
Because it is a construction loan, there is significant $$ in equity but I cannot tap into it until the project is completed with an occupancy permit in hand.
I have been paying him out of pocket to get the project finished.
As such, I charged many credit cards up to the 90% - 95% level.
My score dropped from 755 down to 675 = 80 points in 6 months due to this activity over time.
I now have some cash and want to pay the cards down. Should I pay off a select few, or pay them all down to a lower loan to available credit ratio?   (Ex.  In lieu of 90% of available credit, down to 70%).  Further, what are the trigger points? I know if you are below 50% of LTV, it is a score adjuster at the 49% mark. What are the other trigger points? 79% or 69%?  Hoping this makes sense and would greatly appreciate any input.
New Member
pennypine
Posts: 4
Registered: ‎07-13-2007
0

Re: Strategy in paying off credit

90% 72% 50% 34% 25% 9%
Bad ----------> Good


Rough estimates!
Moderator Emeritus
Timothy
Posts: 9,252
Registered: ‎03-19-2007
0

Re: Strategy in paying off credit



tpmcCalifornia wrote:
Question regarding how to pay down credit cards.
I'm building a house and the builder ran out of money.
Because it is a construction loan, there is significant $$ in equity but I cannot tap into it until the project is completed with an occupancy permit in hand.
I have been paying him out of pocket to get the project finished.
As such, I charged many credit cards up to the 90% - 95% level.
My score dropped from 755 down to 675 = 80 points in 6 months due to this activity over time.
I now have some cash and want to pay the cards down. Should I pay off a select few, or pay them all down to a lower loan to available credit ratio? (Ex. In lieu of 90% of available credit, down to 70%). Further, what are the trigger points? I know if you are below 50% of LTV, it is a score adjuster at the 49% mark. What are the other trigger points? 79% or 69%? Hoping this makes sense and would greatly appreciate any input.





Put in all into an Excel worksheet and create a plan.

Paying highest APR= save $

The break points in UTL are at 50% 30% and less than 10%
Remember that Fico takes both total UTL and Individual UTL into the score.
Contributor
m_jonis
Posts: 76
Registered: ‎06-30-2007
0

Re: Strategy in paying off credit

IF you believe the FICO score simulator, your score will actually rise about 20-30 points MORE if you pay them down slowly over the course of 6 months, vs. paying them down all at once. At least that's what it does for me (when I run the score simulator, put in what happens if I pay X of my revolving debt. vs what happens if I pay X amount/month for X months.)
Finally made it to 813
Moderator Emeritus
fused
Posts: 16,373
Registered: ‎03-12-2007
0

Re: Strategy in paying off credit



m_jonis wrote:
IF you believe the FICO score simulator, your score will actually rise about 20-30 points MORE if you pay them down slowly over the course of 6 months, vs. paying them down all at once. At least that's what it does for me (when I run the score simulator, put in what happens if I pay X of my revolving debt. vs what happens if I pay X amount/month for X months.)

The score simulator is highly inaccurate. It's far better to pay down the balances quickly.
Credit Profile -
FICO 08 Scores (11-08-2014): EQ 818, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1

Super Contributor
MidnightVoice
Posts: 8,161
Registered: ‎03-25-2007
0

Re: Strategy in paying off credit

The reason the score simulator "prefers" paying over 6 months is that it also adds in 6 months ageing and assumes perfect payment during this tim,e.
 
Paying off at once and waiting 6 months will be better  :smileyhappy:
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Moderator Emeritus
fused
Posts: 16,373
Registered: ‎03-12-2007
0

Re: Strategy in paying off credit



MidnightVoice wrote:
The reason the score simulator "prefers" paying over 6 months is that it also adds in 6 months ageing and assumes perfect payment during this tim,e.
 
Paying off at once and waiting 6 months will be better  :smileyhappy:


Agreed!
Credit Profile -
FICO 08 Scores (11-08-2014): EQ 818, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 26+ years ~ AAoA: 12 years ~ Util: 1% ~ Inqs: EX 1


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