UTILIZATION QUESTION

[dledo]

Hello all,

My question is...I have 2 CC both maxed out at 10k each from NFCU.  I have a 10k loan with much lower interest rate to use towards paying these cards.  Do I pay 1 off in full or should I pay 5k on each.  What is the best action to take for credit scoring.  Thanks in advance.

Dave

[Anonymous]

Hello,

The best action would be to drop them BOTH below 30% utilization as soon as possible! Your Fico score will almost immediately improve when the new balance is reported!

The rule is to never exceed 30% of your credit lines and it's better to have several cards with a very low balance, than one with a high balance.

Good Luck!

[Anonymous]

I would put 5K on each and then get each below 50% ASAP.

[Anonymous]

Hi Dave.  Great advice from Norman.  There are two factors at play: Your total utilization and the separate utilization on each card.  Either approach will do the same for total U but Norman's approach will also help with the penalty you are taking for the U% on each card considered separately.

Another crucial short term goal, if you haven't done it yet, is to develop a budget and plan for paying off both cards in entirety.  That may take a year or more, but it's very much in your interest to do it.  The best plan would be one that begins to shift, at the end of the plan, the same money you were using to pay off your CC debt into retirement savings (like a Roth IRA) and a rainy day account.

[SouthJamaica]

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@dledo wrote:

Hello all,

My question is...I have 2 CC both maxed out at 10k each from NFCU.  I have a 10k loan with much lower interest rate to use towards paying these cards.  Do I pay 1 off in full or should I pay 5k on each.  What is the best action to take for credit scoring.  Thanks in advance.

Dave

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Pay 5k on each. Get each to below 50%, which is an important cutoff.