topic Re: Need some advice in Credit Cards

Need some advice

Mikkel3906 — Sat, 17 May 2025 04:25:47 GMT

What method would you use to tackle this debt? Right now I have 4 debt's, but I want to pay them all off as quickly as possible. The method I currently use to pay down debt is called velocity banking. It actually does work to help you pay down debt fast when you have ever changing income from several sources at once, but you also want to pay off the max possible that you can torwards your debt each month. There is no more guessing at how much you can pay torwards your debt each month. It acts like zero based budgeting by putting the max you can torwards your debt each month, then using a revolving line of credit.

Anyway here are my debts. In what order would you recommend paying these off?

$314.69 (revolving LOC) - Credit Card 1 (29.99%) $10.86 in interest

$346.27 (non-revolving) - Car Repair Loan (71.08%) $38.53 in interest

$2322.14 (revolving LOC on home repair services only) - Home Repair Loan 0% for 60 months

$797.85 (revolving LOC) - Credit Card 2 (23.49%) $15.62 in interest

Before I started using velocity banking I used to always make an extra payment of $353 which would bring my total debt payout to $604.74 per month before I started maximizing the max payoff by using velocity banking. Out of my full $60,000 in available credit I only use $3.9K so my utilization is relatively low in usage. Still I am unsure what the best method is to pay these off when trying to get out of debt fastest.

I feel as though paying down the revolving LOC's first for general purpose use serves me best. Since I use them like a checking account through the month, but I would like to hear from others how you would recommend paying off these 4 debt's. The small amount of interest doesn't really impact my choice when choosing to use velocity banking, but I do somewhat feel it would be better to just eliminate the smaller debt's altogether just so I don't have to focus on paying off so many bills a month. However I would like to know how you would recommend paying down this debt. I have really been considering getting a balance transfer card for 0% apr or a personal loan just so I am not having to pay 4 different lenders a month. Not sure I want the ding to my credit when my score is good. Let me know what method you think is best to pay down this debt. Thanks

Ontop of the $604.74 I pay for torwards debt each month I also throw an additional $100.00 torwards the $346 71.08% car repair loan and $100.00 torwards $314 credit card 1 every two weeks. If I get a windfall I throw it all torwards my debt divided by 50% each over the car repair loan and credit card 1. I plan to use my 2026 tax refund to knock out the $2402 home repair loan if it even still exists by then. By my estimates if I just kept paying $353.00 a month and I didn't use velocity banking I would be debt free by march 2026. With velocity banking by maximizing debt payout and no guess work I am thinking only 6-8 months or even less. Since my paychecks and other income sources are ever changing and never a set value velocity banking works wonders to put every single dollar I can into crushing debt. Eventhough I have about $60K in credit if I ever need it, I only use $3.9K.

I mainly just want to see what paydown order and strategy is recommended by most for the 4 debt's. I could do snowball. I could do avalanche. I could divide my debt paydown strategy by using 25% of my paycheck torwards each debt. As I mentioned I hate having to pay 4 different lenders a month, but I do think maximizing the revolving LOC's first is a good strategy since they act as a revolving checking account.

Re: Need some advice

Vinjints — Sat, 17 May 2025 22:44:03 GMT

You need to knock that 70% interest loan out immediately. Then, personally, the other 300 card just to get rid of it. I don't see any reason to divvy up additional payments across lines.

Re: Need some advice

Kforce — Sat, 17 May 2025 22:53:57 GMT

@Vinjints wrote:
You need to knock that 70% interest loan out immediately. Then, personally, the other 300 card just to get rid of it. I don't see any reason to divvy up additional payments across lines.

This ^^^^

Pay highest interest first, then next.

If you have 600 / month, this is only 7-8 months to have it all paid off.

Re: Need some advice

Mikkel3906 — Sat, 17 May 2025 23:31:33 GMT

Thank you guys that is what I was thinking too, but I wanted be sure. I will payoff the 71.08% loan and the other $314.00 credit card completely on my next payday. Just this month alone I have thrown $1963 from windfalls and velocity bankings method at debt. I now have my mortgage paid ahead for 2-3 months. So I can repeat this each month. I will be hitting this debt very hard. Looking forward to being debt free by september or maybe even earlier.

Re: Need some advice

ptatohed — Sun, 18 May 2025 07:37:27 GMT

Financially, avalanche wins every time. Quicker and cheaper. Snowball should only be used when someone needs it, psychologically. Those aren't huge debts. Knock them out! You can do it!

But do stop spending on your CCs until everything is paid off. Then PIF when you start using CCs again. Good luck.

Re: Need some advice

TrapLine — Sun, 18 May 2025 12:41:15 GMT

@ptatohed wrote:
Financially, avalanche wins every time. Quicker and cheaper. Snowball should only be used when someone needs it, psychologically. Those aren't huge debts. Knock them out! You can do it!

But do stop spending on your CCs until everything is paid off. Then PIF when you start using CCs again. Good luck.

Good advice here! Pay off debt and breathe

Re: Need some advice

Mikkel3906 — Sat, 31 May 2025 19:53:53 GMT

I knocked out that $346.00 car repair loan at 71.08% and my upgrade loan $336.00 at 29.99%, then socked away the rest for my emergency fund. Now I can focus each credit card with a $1,000.00 payment every two weeks. One is $1239.06 (40% CU) 23.49% and the other is $2322.87 0% (52% CU).

My question is related to the steps I can take for an event which recently happened about 4-5 months ago.

I set my chase credit card up for autopay, but accidently chose pay off the balance in full instead of choosing to pay the minimum payment at that time. So chase hit my card for $2,465.00 about four or five months ago. It turns out this happened on the statement closing date as luck would have it so to the credit bureau this was reported as paid off. The problem is this drained my account where I could not pay the mortgage so I called chase and told them I needed that reversed asap and to keep the minimum payment from it. My fico 8 credit score took a 12 point hit when this was reversed due to my previously reported paid off balance 6 days later now showing $2275.00 again. What can I do to fix this mistake and get it removed from my credit report to get those 12 points back. What steps can I take. It takes years to raise a fico credit score and I lost 12 points just for choosing the wrong autopay option.

Re: Need some advice

FicoMike0 — Sat, 31 May 2025 23:54:21 GMT

What to you want removed, that you pifed, which you say you did, or that you reversed a payment and ran the balance back up, which you also say you did? They're not likely to remove info that you admit is true.

I wouldnt worry, your score should recover when the dust settles. It doesn't take any time at all to see a 12 point swing.

As far as your first post, I'm glad you got that 71% loan paid off. You could do better with a loan shark.

Re: Need some advice

Thomas_Thumb — Sun, 01 Jun 2025 00:22:35 GMT

Good advice in the above posts. Just be careful to avoid any late payments as you progress through this process.

Re: Need some advice

1lifeisworthit — Mon, 02 Jun 2025 05:09:26 GMT

@ptatohed wrote:
Snowball should only be used when someone needs it, psychologically.

Not true. The better reason to Snowball would be to eliminate payments. Sometimes people get into a place where they can't make all their payments every month. Or their income has gone from steady to variable. So any and all extra should be put on lowest balances to eliminate payments.

Then once they can afford all their payments, then switching to Avalanche is not only doable, but as you pointed out, best.

That's a far better reason than someone "needs it, psychologically"

Re: Need some advice

ptatohed — Mon, 02 Jun 2025 08:12:21 GMT

@1lifeisworthit wrote:
@ptatohed wrote:
Snowball should only be used when someone needs it, psychologically.
Not true. The better reason to Snowball would be to eliminate payments. Sometimes people get into a place where they can't make all their payments every month. Or their income has gone from steady to variable. So any and all extra should be put on lowest balances to eliminate payments.

Then once they can afford all their payments, then switching to Avalanche is not only doable, but as you pointed out, best.

That's a far better reason than someone "needs it, psychologically"

Yes, it is true. By definition, Avalanche means directing the majority of your extra money to the highest interest debt, while meeting your minimums on the rest of the debt. If someone is in the position of not being able to meet even all their minimum payments, and there is no extra money, as you have introduced, then there is no Avalanche - or Snowball. Avalanche, again, by definition, assumes there is extra money to toss at accrued debt. If there is no extra money, then, yeah, keep making the minimums on all debt.

Re: Need some advice

Mikkel3906 — Mon, 02 Jun 2025 11:43:27 GMT

Okay I have a question related to a FICO score. Which would you choose

If I pay off my debt slowly over the course of 20 months at a much smaller payment my FICO score will reach 795. Keep in mind this is FICO 8, not vantage so it takes much longer to raise it. My vantage 3.0 score is already at 755, but most lenders don't really use vantage 3.0. This one seems way easier to raise than FICO, so for fico 8 to go from 710 to 795 it's telling me I need to keep using credit as revolving for 20 more months. On the other hand if I just pay off my debt at $1,000.00 a month in extra payments with just 2 more months they tell me my FICO 8 score won't go past 735.

Experian is telling me that I should pay off my debt slowly rather than knocking it all out in just 2 months and being done with it. They are recommending this, because average age of credit which they told me is 15% of my score. Long story short I have never been one to borrow alot of credit. Infact I have gotten punished twice with credit limit drops just because I never get near my maximums even though I have 5 years of perfect on-time payments.

So if I pay everything off quickly in the next two months I only get fico 8 to 735. If I pay off my credit cards slowly over the course of 20 months I will reach 795 with fico 8. Which option would you choose and why? Thanks again for all of your help.

I have to be honest I am seriously considering going for the 795 in 20 months, but at the same time I don't like having any debt hanging over my head at all so the $1000.00 in extra payments every month also seems like a great option too.

Re: Need some advice

JoeRockhead — Mon, 02 Jun 2025 11:53:44 GMT

@Mikkel3906 wrote:
Okay I have a question related to a FICO score. Which would you choose

If I pay off my debt slowly over the course of 20 months at a much smaller payment my FICO score will reach 795. Keep in mind this is FICO 8, not vantage so it takes much longer to raise it. My vantage 3.0 score is already at 755, but most lenders don't really use vantage 3.0. This one seems way easier to raise than FICO, so for fico 8 to go from 710 to 795 it's telling me I need to keep using credit as revolving for 20 more months. On the other hand if I just pay off my debt at $1,000.00 a month in extra payments with just 2 more months they tell me my FICO 8 score won't go past 735.

Experian is telling me that I should pay off my debt slowly rather than knocking it all out in just 2 months and being done with it. They are recommending this, because average age of credit which they told me is 15% of my score. Long story short I have never been one to borrow alot of credit. Infact I have gotten punished twice with credit limit drops just because I never get near my maximums even though I have 5 years of perfect on-time payments.

So if I pay everything off quickly in the next two months I only get fico 8 to 735. If I pay off my credit cards slowly over the course of 20 months I will reach 795 with fico 8. Which option would you choose and why? Thanks again for all of your help.

I have to be honest I am seriously considering going for the 795 in 20 months, but at the same time I don't like having any debt hanging over my head at all so the $1000.00 in extra payments every month also seems like a great option too.

It should always be finances over Fico. Aside from that, revolving utilization has no memory so if your high utilization is what's holding your Fico scores down, the sooner you pay them down, the sooner your scores will come up, and that's a fact.

This has been demonstrated in these boards over, and over again in month to month examples, so stretching your debt out over 20 months is completely unnecessary, not to mention expensive in regards to interest charges. If you have the money to pay off the debt you should do so sooner rather than later.

Re: Need some advice

Mikkel3906 — Mon, 02 Jun 2025 12:42:22 GMT

Thanks joe that's what I needed to know experian made it appear as though stretching it out was the only way to get past 735. I know that they want the lender to make more back in interest though. I think I will hit it with $1,000.00 payments until it is completely paid off and be done with it, then maybe buy a 12 oz drink or a stick of bubble gum on it once a month just to keep on building the score. To me it's more about having a high score if I ever need it for things, than racking up more debt.

Re: Need some advice

FicoMike0 — Mon, 02 Jun 2025 12:58:55 GMT

ditto @JoeRockhead

The reason the simulation is telling you your score will be higher paying off over 20 months vs 2 months is the age metric. If you do nothing, your score will increase over 20 months, just due to ageing.

Re: Need some advice

ptatohed — Mon, 02 Jun 2025 15:02:50 GMT

No one should ever purposely pay interest to raise their score.

Re: Need some advice

Patient957 — Mon, 02 Jun 2025 16:02:58 GMT

@Mikkel3906 wrote:
...experian made it appear as though stretching it out was the only way to get past 735. I know that they want the lender to make more back in interest though.

This is a myth that gets perpetuated by certain people on these forums who don't understand how credit scoring and reporting work, and it simply isn't true.

Neither FICO nor Experian are trying to help lenders make more interest at the expense of borrowers. It doesn't work that way.

We have a case of confirmation bias here. Because you're expecting to see Experian/Fico trying to help lenders get more interest, that's what you see. As others have said, there is no scoring benefit to stretching out the payments and paying interest. The likely reason that paying over a longer period of time appears to benefit your scores has nothing to do with interest. It simply has to do with your accounts ageing, which is going to happen anyway, whether you pay interest or not.

Re: Need some advice

Thomas_Thumb — Tue, 03 Jun 2025 00:57:00 GMT

@Mikkel3906 wrote:
Thanks joe that's what I needed to know experian made it appear as though stretching it out was the only way to get past 735. I know that they want the lender to make more back in interest though. I think I will hit it with $1,000.00 payments until it is completely paid off and be done with it, then maybe buy a 12 oz drink or a stick of bubble gum on it once a month just to keep on building the score. To me it's more about having a high score if I ever need it for things, than racking up more debt.

Using a card every month does not build score or credit history. All that is required is positive, on time, payment history and account aging. You just need to use the card frequently enough to avoid closure or a CLD due to non use.

The minimum non use time for any type of card triggering closure is 6 months (Wells Fargo account). My Kohls card did not get closed until it passed 3 years of inactivity.

Re: Need some advice

Mikkel3906 — Wed, 04 Jun 2025 14:16:03 GMT

I came across an unexpected windfall due to a bonus at work. So I will follow all of you guys advice and pay all of these off immediately when my payday comes on friday. I've also stopped using the credit card as a revolving LOC and went back to just using my debit card. If it's not in my bank account then I can't spend it. I just wanted to post a final time to say thank you for all of the information. You guys have been very helpful in helping me make the right decisions and understanding how credit works from why experian wanted me to pay slower (age related, not interest related) to how credit scores have no memory of revolving balances.

This unexpected windfall should help me 0 all of my remaining debt come friday, so thank you again.

How far can I expect my score to go up if I have paid off all of my 3.9K worth of debt in 1 month and I carry a 0 balance, but only use the card as needed to keep it open. My average account age from the time I started using credit is only 4 years 2 months, but I have never missed a single on-time payment in 60 months. I have been told that such a short average age of credit is considered high risk to lenders. Is this true? I have never been late on a payment so wouldn't that show them that I pay all of my bills on time every single month.

Re: Need some advice

JoeRockhead — Wed, 04 Jun 2025 13:54:42 GMT

@Mikkel3906 It's great that you'll be able to knock out the debt. But, if you allow all your revolving cards report zero there is an "all zero" score penalty. I can appreciate your wanting to use just your debit card, but consider taking that mindset to the use of your credit cards. In other words, if you can't afford to put a purchase on your debit card, don't put it on a credit card.

At least by using your credit cards this way, (charge, then PIF) you can avoid paying any interest, earn points, and/or cash back. which when done right can benefit you, and your wallet. Do some research on AZE0 for optimum score benefits.