topic Re: Utilization what is best way to decrease????? in Credit Cards

Utilization what is best way to decrease?????

traveler2005 — Mon, 15 Jul 2013 01:15:57 GMT

I am wondering which way is best to decrease my utilization, do I pay off completely several small cards at once, or 1 larger balanced card. Some of my cards are reporting over 90% so should I get all of my higher balanced cards down to 50% first then start chipping away at them a few at a time. I know that utilization is scored two different ways, by each card, and then total.

I know carrying high balances is bad. The reports I receive spec say that my card is over 90% utilized and that this is a red flag. Some of my cards carry low balance, some high,

Thanks is advance

Re: Utilization what is best way to decrease?????

chnceit — Mon, 15 Jul 2013 01:23:53 GMT

IMO I would pay off the small balances so I could focus to pay off the larger ones. But if your larger balances have high interest then pay them off first.

Re: Utilization what is best way to decrease?????

flan — Mon, 15 Jul 2013 01:24:45 GMT

@traveler2005 wrote:
Hi

I am wondering which way is best to decrease my utilization, do I pay off completely several small cards at once, or 1 larger balanced card. Some of my cards are reporting over 90% so should I get all of my higher balanced cards down to 50% first then start chipping away at them a few at a time. I know that utilization is scored two different ways, by each card, and then total.

I know carrying high balances is bad. The reports I receive spec say that my card is over 90% utilized and that this is a red flag. Some of my cards carry low balance, some high,

Thanks is advance

The cheapest way is to pay the mininum on all the accounts, and pay as much as you can on highest interest rate account. Once that's paid off, move to the next highest interest rate account. It can be psychologically satistfying to pay off balances, which is why the popular finanical press often says pay the smallest balance first. But economically, that makes sense only rarely.

It should go without saying that you stop making new charges on the accounts.

Re: Utilization what is best way to decrease?????

myjourney — Mon, 15 Jul 2013 01:27:55 GMT

@traveler2005 wrote:
Hi

I am wondering which way is best to decrease my utilization, do I pay off completely several small cards at once, or 1 larger balanced card. Some of my cards are reporting over 90% so should I get all of my higher balanced cards down to 50% first then start chipping away at them a few at a time. I know that utilization is scored two different ways, by each card, and then total.

I know carrying high balances is bad. The reports I receive spec say that my card is over 90% utilized and that this is a red flag. Some of my cards carry low balance, some high,

Thanks is advance

Pay them off from highest int% rate to lowest

If you want better results post limits, int% rate and balances

Re: Utilization what is best way to decrease?????

traveler2005 — Mon, 15 Jul 2013 01:31:04 GMT

would it help scores if I brought down the cards that do exceed the 90% to around 50% so that utilization on a single card is scored better, so it isn't considered maxxed out?

Re: Utilization what is best way to decrease?????

myjourney — Mon, 15 Jul 2013 01:39:04 GMT

@traveler2005 wrote:
would it help scores if I brought down the cards that do exceed the 90% to around 50% so that utilization on a single card is scored better, so it isn't considered maxxed out?

Yes it would help a little

Re: Utilization what is best way to decrease?????

traveler2005 — Mon, 15 Jul 2013 01:41:09 GMT

Thanks myjourney for all your help.

Re: Utilization what is best way to decrease?????

SnackTrader — Mon, 15 Jul 2013 04:08:34 GMT

+1 flan

Your scores will probably look better if you get the balances under 50%, but who cares about your scores if you are paying hundreds of dollars in interest every month. You should do what makes most financial sense, since your scores don't matter unless you are applying for new credit. And you probably shouldn't be applying for new credit because you have maxed out credit lines already.

High interest rates first.

Re: Utilization what is best way to decrease?????

Walt_K — Mon, 15 Jul 2013 06:22:26 GMT

To elaborate a bit further on what people are telling you, your credit score has no memory. As an example, let's say your target utilization is 10%. Once you reach it, you will have the same score no matter how you got there (all else being equal, e.g., no new derogatory marks). You could pay the high utlization cards down to below 50%, then concentrate on your high APR cards, or you could start with the high APR cards, or you could deliberately max everything out and then pay your cards back down to 10%, and in all three scenarious, once you reach the 10%, you'd have the same score.

So assuming you aren't going to be looking for any credit in the meantime before you reach your goal, you shouldn't worry about your score. You should do what will save you the most money. The way to do that is to pay down the highest APR cards first.

If you do have a need to apply for something before you can get to your ideal utilization, then there may be reasons to pay your cards down differently. Your score would benefit from not having cards at 90% utilization. And you would benefit from not having balances on all or on a majority of your cards. There could be scenarios where it would make sense to pay down some of the lower APR cards first. For example, if you are near an interest break tier and you are looking at applying for a car/mortgage soon. The better rate you could get if you could juice your score up a few points, and consequently the savings you could realize over the life of the loan, may make it worthwhile to pay a little more in CC interest now in order to improve your scores.

Re: Utilization what is best way to decrease?????

RushXTC — Mon, 15 Jul 2013 12:07:33 GMT

someone told me to line all your accounts up from highest debt to lowest, and begin backwards... highest debt, pay minimum while you throw more than minimum at the low debts so you can pay off accounts faster, then when you're down to the high debt accounts, throw what you'd usually throw at the small ones to that, plus extra and you'll lower your UTI in no time.

Re: Utilization what is best way to decrease?????

traveler2005 — Mon, 15 Jul 2013 12:35:55 GMT

Thanks everyone for the great advice!!!

Re: Utilization what is best way to decrease?????

silverzgirl — Mon, 15 Jul 2013 12:38:11 GMT

In my case, the smaller balances have the highest interest and vice versa. If you are gardening, then score won't matter for now, so all of the above is correct.

Re: Utilization what is best way to decrease?????

traveler2005 — Mon, 15 Jul 2013 13:38:48 GMT

I am trying to get aboit 20 points added to trans union score by october. Need new vehicle! Financing with CU. Score of 680 puts me in their "A" credit catagory with 100% financing if necessary and 2.5% interest rate.

Re: Utilization what is best way to decrease?????

Anonymous — Mon, 15 Jul 2013 13:44:19 GMT

@traveler2005 wrote:
I am trying to get aboit 20 points added to trans union score by october. Need new vehicle! Financing with CU. Score of 680 puts me in their "A" credit catagory with 100% financing if necessary and 2.5% interest rate.

20 points seems manageble in 3 months. Some people need 20 points in a month and that itself could be a challenge for some. I hope it all works out for you!

Re: Utilization what is best way to decrease?????

takeshi74 — Mon, 15 Jul 2013 15:39:42 GMT

@traveler2005 wrote:
would it help scores if I brought down the cards that do exceed the 90% to around 50% so that utilization on a single card is scored better, so it isn't considered maxxed out?

Yes but I wouldn't recommend worrying about your scores until you've seriously dropped your overall utilization -- unless high utilization on specific cards is putting you at risk of limit drops (has happened to me with high utilization). Your scores really don't matter until you're ready to start applying. It can be a bit more satisfying to see the scores drop but I'd focus on avoiding interest first as you won't be applying for anything anyway.

Re: Utilization what is best way to decrease?????

Walt_K — Mon, 15 Jul 2013 16:42:31 GMT

@RushXTC wrote:
someone told me to line all your accounts up from highest debt to lowest, and begin backwards... highest debt, pay minimum while you throw more than minimum at the low debts so you can pay off accounts faster, then when you're down to the high debt accounts, throw what you'd usually throw at the small ones to that, plus extra and you'll lower your UTI in no time.

This is called the snowball method. Because you are starting with lowest balance rather than highest APR, it will actually end up costing you more in interest than if you begin with the highest APR regardless of balance. The reason people advocate for the snowball method is not that it is the most efficient way to pay down your debts, it's not.

However, it can be psychologically satisfying to see those lowest balances disappear, and then to be able to throw more money per month at the higher balances. Because it can be satisfying to push through those low balances quickly, it can encourage people to stick with their debt management goals and not get back into a bad habit of spending beyond their means. So for some people, even though it is not the most efficient method, it works better because it encourages them to stick with the program. That is the allure of the snowball method.

If you are not worried about being disciplined and you want to pay the least amount of interest, you prioritize by APR paying the highest APRs first.