topic Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please in General Credit Topics

Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Thu, 02 Nov 2017 23:36:35 GMT

I am lucky, and tomorrow I can pay off all my debt. I was just going to pay it all off, but then I started Googling, and it seems that may not be the best for my score! I want a high score, because I want to buy a home soon (in NYC yikes!).

Do you guys think you can help?

Here is my profile:

FICO Score: 716 (was 742 one month ago, but debt has increased since)

1 late payment 52 months ago

0 public records

0 collection accounts

Stated debt levels:

Credit Debt $105,511.00

Total Credit $74,700.00

These figures are not quite right, and I think they may be confounded by American Express. I have about $130k of debt:

Amex Platinum charge card (due November 7): $80k (not behind ever but over spend limit, only $66k is due 11/7)

Chase CC: $13k (revolving CC, 20+% rate, horrible)

Citi CC: $19k (this was a 0% promo that I maximized)

Best Buy CC: $3k (all under 0% promos)

Amazon CC: $3k (all under 0% promos, one due soon for half of the balance)

Lenders Club loan: $9k (that's what's left, payed on time everytime, about 5%, I think, started at $14k)

So that totals $127k. I'm getting more than that amount tomorrow to pay off all this crud. I was just going to ZERO it, but now I'm concerned I'll hurt my credit, which seems crazy. None of this credit will GO AWAY if I pay it off. It's not like closing a mortcage or car loan (except Lending Club, which is small).

What do I do? I am so appreciative of any help!!!

Thanks,

BJNYC

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

AverageJoesCredit — Fri, 03 Nov 2017 00:35:52 GMT

As for your scores, ill leave that to the experts but no matter what, if i had the money to pay off all my debt, id pay it off to zero and celebrate like it was my last day You can always start to manage your credit once its at zero but not everyone gets to restart at zero.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 00:42:35 GMT

Thanks! That was my plan, but I got scared that I would make my score worse. I've been reading some more, and it seems that I might only make it worse if I CLOSED accounts (mortgage, car loan, etc.)

Since none of these accounts will be closing, I'm inclined to pay off.

I mean, Lending Club will be closing, but as an installment loan, that's not helping anyway....

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

woodyman100 — Fri, 03 Nov 2017 01:13:10 GMT

@AverageJoesCredit wrote:
As for your scores, ill leave that to the experts but no matter what, if i had the money to pay off all my debt, id pay it off to zero and celebrate like it was my last day You can always start to manage your credit once its at zero but not everyone gets to restart at zero.

+1 BILLION.

Pay it all off and then charge a pack of gum and let it report. That ought to do the trick.

Congrats!

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

simplynoir — Fri, 03 Nov 2017 01:19:09 GMT

@woodyman100 wrote:
@AverageJoesCredit wrote:
As for your scores, ill leave that to the experts but no matter what, if i had the money to pay off all my debt, id pay it off to zero and celebrate like it was my last day You can always start to manage your credit once its at zero but not everyone gets to restart at zero.
+1 BILLION.
Pay it all off and then charge a pack of gum and let it report. That ought to do the trick.
Congrats!

Ditto as well. Pay it all off and buy a soda and snack at a local store and watch your scores recover. And major congrats on paying off that debt.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Kenny — Fri, 03 Nov 2017 01:20:49 GMT

Just pay it all off. The points will not make a difference, honestly.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Ardecko — Fri, 03 Nov 2017 01:30:44 GMT

[Third edit, geez:] AMEX, pay it, of course.

Chase CC, pay it off. No reason to pay that much in interest, and if 13k is > 29% of you limit, you're taking a score penalty.

Citi CC, Best Buy, and Amazon: the balance is > 29% of your limit, at least pay them down, you're taking a score penalty here as well.

There are at least two scoring penalties/bonuses at play here, one is the utilization of the cards(individually and over all your cards), and the number of cards you're reporting a balance on. The optimum positions for those two scoring penalties/bonuses are <9% utilization on each card, <9% utilization over all your cards, and less than half(rounded up) of your cards reporting a non-zero balance. Unless you have pretty high limits overall right now, and cards you didn't tell us about, your scores will bounce back after paying these down.

The Lender's Club loan is actually a benefit as long as it stays open and you're not paying too much in interest on it. Don't pay it off until you read the first few posts in this thread: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/td-p/4506756

Other than that, I guess it depends on how often you come into $100k. If it's pretty regular, just go about your business and try to keep your balances paid, preferrably before your statements hit, to maximize your scores. But then, if I had 100k coming in extra every now and then, I probably wouldn't care much about my credit score.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 02:04:42 GMT

Thanks so much everyone!!!

Most of the cards I reported are near their limit, so I will being them down to zero, and then start to use them sporatically for small purchases.

About the installment loan, the limit is $14k, the interest rate is about 5%, and the balance is $9k. I would like to bring it close to zero because of the interest.

Should I leave it at $1000, and pay that over time?

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

HeavenOhio — Fri, 03 Nov 2017 02:33:40 GMT

There are significant scoring dings for two things:

All cards reporting a balance of zero.
Having no installment loans.

You're going to need to bring all of your card balances to zero to reset their grace periods. And you're going to need to check the following month's statements for "trailing interest." Once the grace periods are reset, make sure one card reports a small balance (from current charges), with the rest reporting zero, to optimize the revolving credit portion of your score. If you get the "all cards at zero" ding for a short period, consider that to be a necessary step to making interest stop. Those points will come right back after you leave your small balance.

Ideally, for scoring purposes, you have a loan reporting less than 9% of it's original amount. If you can bring your Lending Club loan down to this level and keep it open until you apply for your mortgage, that would be ideal. If not, you could replace this loan with a share secure loan from Alliant (read the first three posts of the thread), Or you might find that your score is high enough to absorb the approximately 30 point difference between having a loan that's mostly paid off vs. having no loan at all.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 03:13:56 GMT

I've read that paying off big debt in lump sum can sometimes lower your score, I think it's called a windfall. I would care less if I lost a few points, however, as long as I was debt free.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

HeavenOhio — Fri, 03 Nov 2017 03:18:45 GMT

@Anonymous wrote:
I've read that paying off big debt in lump sum can sometimes lower your score, I think it's called a windfall. I would care less if I lost a few points, however, as long as I was debt free.

Current scoring models care only about today, e.g. which open and closed accounts are present today, which baddies are present today, today's card utilization, today's loan utilization, etc. They don't care about yesterday or tomorrow.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 03:26:46 GMT

Your idea of paying off all your credit card debt is great (and then using cards as needed but never carrying balances month to month again).

Also great idea is to pay the loan way down. Talk to the lender and ask them if paying off a huge chunk of the loan will cause the next Payment Due Date to be pushed way into the future. If so, pay it down to $100 or whatever and you are set.

If not, that means they will force you to continue making monthly payments even after you pay it down. In that event pay it down to a balance of four payments and then explore the Alliant SSL technique. Do not take steps toward opening an account with Alliant, however, until your credit reports reflect the paid off CC debt.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 09:12:26 GMT

Thanks again everyone. I am going to pay off all the CC. They won't show zero balance almost right away, because I use them. I just won't carry a balance. I also have another Chase card ($20k limit) that I use for day to day purchases, a few thousand a month, which I never carry a balance on. That card is at $1700 now. So I won't be zero's across the board.

On the installment loan, I think I'll pay it down to <$1,000, then call to see if they will improve the payment terms. Thanks for alerting me to keep it!

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

marty56 — Fri, 03 Nov 2017 09:43:33 GMT

@Anonymous wrote:

On the installment loan, I think I'll pay it down to <$1,000, then call to see if they will improve the payment terms. Thanks for alerting me to keep it!

You could just PIF and then the terms would be OBE.

FICO score should never trump being debt free. As others have said it's easy to have a small balance report.

Youre goal now is to let your accounts age and not accumulate debt.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 09:58:38 GMT

PIF = Pay in full? I think I got that one.

OBE? Not sure I understand, because if I "PIF" the loan will go away, no?

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

HeavenOhio — Fri, 03 Nov 2017 10:26:29 GMT

I don't know what OBE is either.

PIF (paying in full) on a credit card means to pay the full statement balance (the balance printed on the statement).You always want to do at least that much to avoid interest.

Paying to zero on a card means to bring your current balance to zero. If you do that before the statement cuts, the card company will report a zero balance to the bureaus. Your cards all report the statement balance on the statement date. In addition, Chase reports zero whenever you pay to zero. I've seen them report zero three times in the same statement period.

A handful of cards (none of yours) report something other than the statement balance. For instance, US Bank reports whatever your balance is on the first of the month.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

iced — Fri, 03 Nov 2017 14:05:15 GMT

Your scores are the least of your worries. After you clear everything, you'll eventually charge something on a card that reports on a statement and everything will be back to good.

What you should worry about is ensuring you have fixed the behavior that got you in debt to begin with. Don't let those cards go anywhere near maxing out again, and don't spend more than you can afford to pay off each month.

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

SouthJamaica — Fri, 03 Nov 2017 20:22:30 GMT

@Anonymous wrote:
I am lucky, and tomorrow I can pay off all my debt. I was just going to pay it all off, but then I started Googling, and it seems that may not be the best for my score! I want a high score, because I want to buy a home soon (in NYC yikes!).

Do you guys think you can help?

Here is my profile:
FICO Score: 716 (was 742 one month ago, but debt has increased since)
1 late payment 52 months ago
0 public records
0 collection accounts
Stated debt levels:
Credit Debt $105,511.00
Total Credit $74,700.00

These figures are not quite right, and I think they may be confounded by American Express. I have about $130k of debt:

Amex Platinum charge card (due November 7): $80k (not behind ever but over spend limit, only $66k is due 11/7)
Chase CC: $13k (revolving CC, 20+% rate, horrible)
Citi CC: $19k (this was a 0% promo that I maximized)
Best Buy CC: $3k (all under 0% promos)
Amazon CC: $3k (all under 0% promos, one due soon for half of the balance)
Lenders Club loan: $9k (that's what's left, payed on time everytime, about 5%, I think, started at $14k)

So that totals $127k. I'm getting more than that amount tomorrow to pay off all this crud. I was just going to ZERO it, but now I'm concerned I'll hurt my credit, which seems crazy. None of this credit will GO AWAY if I pay it off. It's not like closing a mortcage or car loan (except Lending Club, which is small).

What do I do? I am so appreciative of any help!!!

Thanks,
BJNYC

Amex platinum -- pay it down to zero

Chase -- pay it down to $50 balance, let $50 report in statement, then pay off balance to zero

Citi, Best Buy, Amazon, pay down to zero

Lenders Club - pay it down to $700, try to maintain tiny balance as long as possible until you have to pay it off

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

marty56 — Fri, 03 Nov 2017 21:06:40 GMT

OBE (Military/Gov community) Overcome By Events - doesn't matter anymore/not important

Re: Tomorrow I Can Pay Off All My Debt of $130,000 - Help Me Do It Right Please

Anonymous — Fri, 03 Nov 2017 21:26:01 GMT

Thanks for everyone's help! Paid it all off today, but left 8% on the installment loan. Feels wonderful. Thanks again.