Which Credit Cards Should I pay down below 30%

[gardini51]

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@K-in-Boston wrote:

As someone who found themselves in the same situation (although many more cards and more than twice the dollars) and has been working to get rid of it, I hope that I can offer some insight.  Are you planning to apply for a mortgage or auto loan in the very near future?  If the answer is no, I would suggest working on a strategy to pay off the debt faster rather than worrying about slightly increasing your credit score in the short term.  That will take care of itself as the balances come down, the accounts age and the accompanying payment history to go along with it.  

Does the $30k card have any balance transfer offers?  If the answer if yes, I would highly suggest that you pay it and one of the $12k cards off completely and move the entire remaining balances to the 30% card.  If the previous posters' math works out to be your dollar amounts, then this should put you at about 87% on that card and 0% on the rest.  From where you are right now, you will already see a huge boost in scores anyway and whatever you have been paying on the 4 cards could then be applied to that balance which will come down quickly.  That will likely save you thousands of dollars!  If the $30k card does not have a BT offer, try calling the lender to see if one is available, or I would suggest looking into what is available on the 12k cards.  

Moving the balances to a loan as has been suggested would really only make sense if you were trying to maximize your score for a mortgage in my opinion.  You're very likely not going to get a rate low enough to compete with even a 1.99% + 3% fee or 0% + 5% fee BT offer.  I don't know about you, but paying an extra $2k or something every year in interest is not worth an extra 10 points on my credit score.

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Ahh. I didn't even think about the possibility of a balance transfer. That would be a better solution than trying to apply for a personal loan. 

[Chris679]

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@Anonymous wrote:

Thanks Everyone for the comments and feedback.

Yes, I am planning to refi my mortgage. And with the refi proceeds ALL my credit card debt will be paid off. However in order to be approved for the refi my FICO score needs to improve. Thats why I am asking for what to do in the short term, with the money I have, to increase my FICO score.

After reading the comments, I now have 4 scenarios

A. All accounts paid off by the same percentage.

B. Multiple Smaller accounts at 30 %, with the larger account at 50%

C. Or largest account at 30%  with muliple accounts at 50%

D. Pay off as many small accounts as possible, transfer balances to the largest account. 

Which scenario works best to affect FICO score? If you recommend one over the other please explain why?

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We don't know.  They keep FICO scoring a secret for a reason and these types of changes do not affect people the same way because there are so many variables.   I would pay them all down to the same % if I were in your shoes. 

[Anonymous]

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@Anonymous wrote:

Thanks Everyone for the comments and feedback.

Yes, I am planning to refi my mortgage. And with the refi proceeds ALL my credit card debt will be paid off. However in order to be approved for the refi my FICO score needs to improve. Thats why I am asking for what to do in the short term, with the money I have, to increase my FICO score.

After reading the comments, I now have 4 scenarios

A. All accounts paid off by the same percentage.

B. Multiple Smaller accounts at 30 %, with the larger account at 50%

C. Or largest account at 30%  with muliple accounts at 50%

D. Pay off as many small accounts as possible, transfer balances to the largest account. 

Which scenario works best to affect FICO score? If you recommend one over the other please explain why?

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SouthJ (as usual) indicated the right answer, which is B.

    Note: the OP has clarified that he is only interested in a score increase and in a short time (and that the model is the mortgage scoring model).  He does not have the money or time for a long term paydown of the CC debt, though he does intend to do that once his mortgage refi is complete.

If some of his credit cards had smaller debts (in dollar value) I'd recommend trying to create multiple accounts reporting at $0 with the remaining accounts reporting < 49%.  (The mortgage model does like to see multiple revolving accounts at $0.)  But I am guessing that the OP doesn't have enough money to do that, given that his smallest debts are at 12k.

One thing that would be helpful is knowing whether the OP has four credit cards total. or just four cards that are maxxed out (with some others not discussed)   In other words, is it possible that he has some other credit cards, reporting at $0 or a very small balance?  His original post does not rule out that possibility, and we can help him best if he lets us know that.

He wants to know why SoutJ's answer is the best.  It's because FICO has a penalty based on total utilization (all credit limits considered together) and also a penalty associated with individual utilization.  The total U penalty is being addressed by any of his paydown scenarios the same.

With the individual U penalty, South J's approach will reduce the number of penalties.  (Eliminating 3 out of four penalties.)

Final note:

I do not think anyone has mentioned that FICO rounds percentages up.  Where the OP wants to be is at < 50% and at < 30%.  If he has a card at 49.01%, however, that will be rounded up by FICO to 50%.  And therefore his individual U will not be LESS than 50%.

Therefore he wants to get his cards to under 28.99% or under 48.99% (counting any extra interest that FICO will be charging him).

[Anonymous]

I had $30K in credit card debt over 3 cards.   Low interest rates (13K BT @ 5%, 5K BT 0% 10K @16%).  I came into money on Thursday and was able to pay it all off immediately.  I thought about keeping some cash and not paying the whole 0% card off (5K balance) or not the whole 5% card (13K balance).  But I decided to pay the whole thing off.  I still have the BT option at 5% if I need to pay taxes or something with a 18.9K Discover card.  I had $1000 cash left over after I made the payments.  If I hadn't had enough to pay off the entire debt, I would have gone under 30% on the two cards and 50% on the 0% card.  My utilization overall was 34% before I paid the three cards off.  Now it's 0.  I noted what someone said about not getting into the payoff - recharge cycle.  I have to be cognizant of that.  I guess the best advice is to pay what you can afford.  

[Anonymous]

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@Anonymous wrote:
I had $30K in credit card debt over 3 cards.... I came into money on Thursday and was able to pay it all off immediately.... My utilization overall was 34% before I paid the three cards off.  Now it's 0.  

I noted what someone said about not getting into the payoff - recharge cycle.  I have to be cognizant of that.  I guess the best advice is to pay what you can afford.  

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Congrats on paying off your CC debt!

You don't actually want all of your CC balances to report $0.  That will cause you to take a score hit.  Make sure one card reports a small balance each month (the rest of your cards can be $0).  That way your score will be as high as it can be (with respect to CC debt).

Can you expand a little bit further on your last few sentences?  What is a payoff-recharge cycle?  What do you mean by saying that a person should only pay what he can afford?

[Anonymous]

One can pay off the cards completely and then immediately charge up a storm again because they really couldn't afford to make the full payments.  Someone in this blog mentioned this.  I thought about this when I paid off my cards.  But I was foolish when I charged up the $30,000 in a short amount of time.  I have taken steps not to repeat myself but have not eliminated the credit option should I need it.  Right now I don't have to pay interest except on a massive home equity loan I owe at prime rate minus 1/2%.  Before I was able to pay my debt I considered bankruptcy and loan delinquency but have decided to keep my credit standing, such as it is, and keep my stepmother's condo until she sells or starts paying on it.  Life at 56 (almost) must go on.

[Anonymous]

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@Anonymous wrote:

One can pay off the cards completely and then immediately charge up a storm again because they really couldn't afford to make the full payments.  Someone in this blog mentioned this. 

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I suppose that's possible, but I think it's very rare.  It's rare, that is, to have the available cash to pay off a huge CC debt, and then be forced to buy lots of merchandise in the upcoming month.  What is not uncommon is for a person to feel tempted to buy lots of stuff now that his cards are paid off (big screen TVs, furniture, vacations).  But that's more of an issue of managing an addiction -- he could just as well have chosen to live simply after the payoff (foregoing the vacations and the Tv and so forth).

Regardless, congrats on the decision to pay off all youur CC debt.  Even better is the way you have taken a hard look at how the debt happened in the first place and plan to make sure that doesn't happen again.  Good for you.

[Anonymous]

You said the key word: addiction. An excuse, perhaps, but I am a compulsive gambler and my credit card debt and home equity debt were mostly gambling losses. I won the credit card debt back on a slot machine on Thursday. I also like to buy rare coins. I have to pay taxes on the winnings but my income is untaxed disability. So you see I could run up the debt again very quickly. I informed my creditors, been getting support from friends. I might get married later this year and sign my finances over to her. I'm in therapy, though I'm not following advice. I'm still trying to stay solvent and not file bankruptcy over the loan or have it go into
Default. If I haven't won I would had to file and stop using my cards. I'm ok for now but must stay vigilant. This past episode was way out of control. I'm diagnosed bipolar and a disabled veteran.

[Anonymous]

My deepest sympathy.  That's a tremendous burden to carry.  Developing a plan to protect yourself from yourself is crucial.  People at risk of misusing their cards (and there are many such folks) often include in their plan placing the cards in a place where they simply cannot access them -- in a shoe box with a trusted loved one, etc.  There are ways to keep utilization ultralow but still make enough charges that prevent the cards from being cancelled -- all while having no access to them.

Best of luck for your future and your possible marriage.

And grateful thanks for the sacrifices you have made protecting our country.

[Anonymous]

Thank you for the kind understanding words. I hope my experience helps someone. That's one of the reasons why I post here. I think a lot of this stuff is real. I am.