topic Re: Which accounts should I pay off first? in General Credit Topics

Which accounts should I pay off first?

Anonymous — Sun, 09 Jul 2017 18:01:28 GMT

I am currently in escrow for a home (closing in 60 days) and I have some extra $$$. Not enough to pay everything off, though. Should I pay off smaller store account balances to $0 or apply it towards some of my accounts with higher balances (bank credit cards)?

My credit score is decent - about 708, but I would like to use this extra money in a way that would benefit me the most in a relatively short amount of time.

Any advice would be greatly appreciated.

Re: Which accounts should I pay off first?

Anonymous — Sun, 09 Jul 2017 19:33:42 GMT

I would prioritize the money in the follwing way:

First, pay all cards to < 49%

Then, after that, create as many $0 balances on your cards as possible. In practice this would mean paying off cards with the smallest balances.

If all that can be accomplished, try last of all paying down one or more of the remaining big balances to < 29%.

With regard to the first step, make sure that you take into account being charged interest. I.e. even after the issuer charges you interest and any other fees, your balance needs to still be < 48.9%

Re: Which accounts should I pay off first?

Anonymous — Sun, 09 Jul 2017 21:15:44 GMT

Thanks for the quick reply. The info is very helpful. I only have one card that is right over the 49%. All others are below. I will pay that one down to below and then knock out the smaller balances to zero. Then, of course, work on knocking them all down to 0 balance.

Re: Which accounts should I pay off first?

Anonymous — Sun, 09 Jul 2017 21:34:00 GMT

Yup, final goal should be to have all CC debt paid off. Then continue to use one card after that so that you always have one card reporting a balance.

Re: Which accounts should I pay off first?

CreditInspired — Sun, 09 Jul 2017 22:12:39 GMT

I agree that paying down/off CCs is a great idea. However, IMHO, I think you should ask your lender about this before moving forward. This way, there will be no questions about where these extra funds came from unless these funds were already noted when you first applied for the mortgage. Just my 2 cents.

Re: Which accounts should I pay off first?

Anonymous — Sun, 09 Jul 2017 22:24:19 GMT

That's a good point. I will do that. It's not a whole lot of money. Actually, it's just proceeds from stuff I am selling as I am packing. I'm trying not to take more stuff with me than I actually need.

Re: Which accounts should I pay off first?

SouthJamaica — Mon, 10 Jul 2017 02:45:46 GMT

@Anonymous wrote:
I am currently in escrow for a home (closing in 60 days) and I have some extra $$$. Not enough to pay everything off, though. Should I pay off smaller store account balances to $0 or apply it towards some of my accounts with higher balances (bank credit cards)?

My credit score is decent - about 708, but I would like to use this extra money in a way that would benefit me the most in a relatively short amount of time.

Any advice would be greatly appreciated.

My sense of the mortgage scores is that they are extremely sensitive to 'number of accounts carrying balances'... so in your shoes my priority would be getting as many cards as possible down to zero.

Re: Which accounts should I pay off first?

Anonymous — Mon, 10 Jul 2017 03:09:32 GMT

Thanks! Luckily, many of the accounts have small balances on them that I can easily pay off within the month. I'll get the one account down to below 29% and pay the rest of the small ones off. Thanks for the advice. It's tricky when you're trying to do the right thing for you credit and for getting to the finish line of closing on a mortgage. Stressful times!

Re: Which accounts should I pay off first?

Anonymous — Mon, 10 Jul 2017 04:50:35 GMT

@Anonymous wrote:

Thanks! Luckily, many of the accounts have small balances on them that I can easily pay off within the month. I'll get the one account down to below 29% and pay the rest of the small ones off. Thanks for the advice. It's tricky when you're trying to do the right thing for you credit and for getting to the finish line of closing on a mortgage. Stressful times!

It sounds like you've already received sound advice and formulated a sound plan. I'm rooting for you! Pay off as many small accounts as you can, as has been said, and then logically work to pay down the rest. The ultimate goal is to have just one with a balance, as low as possible. Sometimes when folks focus on that like a laser, it may come sooner than they had expected.

On an entertaining note, whenever I hear the word "close", I often think of that great movie, Glengarry Glen Ross. It's a very sad drama based on a broadway play but it has an EPIC cast, tjhe likes of which is rarely matched....and has a number of laugh out lout moments. Even if you dont wish to watch it, you can watch the amazing Alec Baldwin monologue that is often quoted, where he rips the sales team a new one.

Anyhow, I want to hear that youre a "closer", and get the job done. Otherwise, I will tell you to "put the coffee down!"

Best wishes my friend, it sounds like youre about to firmly move in the right direction!

"always be closing" (I hope this inspires you to close!) https://www.youtube.com/watch?v=Q4PE2hSqVnk

Re: Which accounts should I pay off first?

me12345 — Mon, 10 Jul 2017 15:50:55 GMT

ALWAYS, ALWAYS, ALWAYS ask your MLO first, nobody on these boards knows the details of your situation more then your loan officer....what you do may help, or hinder your chances of closing on your loan.

I see this way too often, ask your loan officer first, if you don't have one, get one first.

Thanks,

Re: Which accounts should I pay off first?

SouthJamaica — Mon, 10 Jul 2017 18:49:16 GMT

@me12345 wrote:
ALWAYS, ALWAYS, ALWAYS ask your MLO first, nobody on these boards knows the details of your situation more then your loan officer....what you do may help, or hinder your chances of closing on your loan.

I see this way too often, ask your loan officer first, if you don't have one, get one first.

Thanks,

With all due respect, I've seen many instances on this board where people got advice from their loan officer which was not good advice.

Re: Which accounts should I pay off first?

me12345 — Mon, 10 Jul 2017 18:59:31 GMT

Likewise with the posts on these forms....

All I'm saying is that the MLO will have ALL of the details, and the specifics regarding an individuals situation.

What may be great advice for one person, may be detrimental to another given that each has a different situation.

Thanks,

Re: Which accounts should I pay off first?

Anonymous — Mon, 10 Jul 2017 19:26:17 GMT

@CreditInspired wrote:
I agree that paying down/off CCs is a great idea. However, IMHO, I think you should ask your lender about this before moving forward. This way, there will be no questions about where these extra funds came from unless these funds were already noted when you first applied for the mortgage. Just my 2 cents.

I think the first person to raise the idea of keeping the loan officer in the loop is right on target. Notice that it's specifically in the context of the LO knowing about where the extra funds came from.

Regardless, keeping all stakeholders in the loop (and getting buy-in) seems like it is indisputably a good thing to do.

What SouthJ may be driving at (and here I would agree) is that the LO, simply by being virtue of being an LO, does not thereby become a reliable source of information about how FICO scores work. SJ and I have seen lots of posts where people have been advised by their LO to (a) pay all cards to $0 or (b) keep all cards showing a small balance, when in fact either of those will without question harm the person's mortgage score.

So I'd say that the best answer is to keep all parties apprised of steps the borrower is thinking about taking (whether the LO or the people advising the borrower here) and if there is conflicting advice pause and figure out the disconnect before taking any action.

Re: Which accounts should I pay off first?

me12345 — Mon, 10 Jul 2017 19:32:07 GMT

@Anonymous wrote:
@CreditInspired wrote:
I agree that paying down/off CCs is a great idea. However, IMHO, I think you should ask your lender about this before moving forward. This way, there will be no questions about where these extra funds came from unless these funds were already noted when you first applied for the mortgage. Just my 2 cents.
I think the first person to raise the idea of keeping the loan officer in the loop is right on target. Notice that it's specifically in the context of the LO knowing about where the extra funds came from.

Regardless, keeping all stakeholders in the loop (and getting buy-in) seems like it is indisputably a good thing to do.

What SouthJ may be driving at (and here I would agree) is that the LO, simply by being virtue of being an LO, does not thereby become a reliable source of information about how FICO scores work. SJ and I have seen lots of posts where people have been advised by their LO to (a) pay all cards to $0 or (b) keep all cards showing a small balance, when in fact either of those will without question harm the person's mortgage score.

So I'd say that the best answer is to keep all parties apprised of steps the borrower is thinking about taking (whether the LO or the people advising the borrower here) and if there is conflicting advice pause and figure out the disconnect before taking any action.

Agreed...