topic Re: Help Needed - How should I pay off debt for credit score increase? in General Credit Topics

Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 08:02:54 GMT

Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.

Discover - $684.71 - $2,900.00 - 23.61%

Chase - $0.00 - $1,500.00 - 0.00%

Wells Fargo - $4,880.00 - $5,500.00 - 88.73%

Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%

Capital 1 #2 - $770.31 - $1,150.00 - 66.98%

Citi - $0.00 - $3,000.00 - 0.00%

Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

Re: Help Needed - How should I pay off debt for credit score increase?

Gollum — Tue, 30 Apr 2019 08:25:43 GMT

@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

IMHO, $1500 won't make an appreciable difference in your FICO scores right away, but don't get discouraged... keep plugging away at paying off your debt.

Paying off the highest-interest-rate debts first is best, arithmetically speaking, but some people (like Dave Ramsey) say that paying off the smallest debts first gives the debtor psychological reward/incentive.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 14:45:27 GMT

Pay the highest interest debt first. It's costing you the most in the long run.

I would ax the Cap 1 #2 just for a mental boost.

Additionally, as you get things paid down, start to request CLI's. This will help offset the use ratio and will have no negative effect on your future plans.

*also consider buying a used car. I dont know what your current plans are, so no judgment on my part. I've had plenty of friends ax debt only to immediately go buy a $60k car because they were approved for the loan.

Re: Help Needed - How should I pay off debt for credit score increase?

Remedios — Tue, 30 Apr 2019 15:01:37 GMT

@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

Hi and welcome!

If you are looking purely from scoring gain point of view, you want to bring those cards down below certain threshold. In your case, that would be below 68.9% 48.9% then 28.9% and if possible below 8.9% right before application.Ideally, you'd only have one card with balance less than 8.9% at the time you're ready to refinance.

A single payment of $1500 will not make that much difference in the first month because you will still have other cards with "scoring penalty" and your aggregate utilization will still be above second ideal ideal threshold at 28.9%

In any case, I'd start with WF card as that one is maxed out by scoring standards.

If you are looking to save money while improving your scores (you have plenty of time), I'd pay off cards with highest interest first. Snowball method also works for many.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 15:07:57 GMT

Thanks for the quick and helpful responses so far!

Would there be a scoring difference if I paid off the two smaller balances (Discover and Cap1 #2) vs putting all $1500 toward the WellsFargo? Of those two options, which would impact my score most (if at all)?

Thanks again!

Re: Help Needed - How should I pay off debt for credit score increase?

Remedios — Tue, 30 Apr 2019 15:21:41 GMT

@Anonymous wrote:
Thanks for the quick and helpful responses so far!

Would there be a scoring difference if I paid off the two smaller balances (Discover and Cap1 #2) vs putting all $1500 toward the WellsFargo? Of those two options, which would impact my score most (if at all)?

Thanks again!

Scoring wise, maxed out card has by far worse impact than number of cards reporting balance, especially when balance is not high.

You could pay off smaller ones, put rest in WF this month, then continue hammering on WF but dont expect to see much of a gain for paying smaller ones.

It's the WF and the other two that are impacting your score the most.

If seeing zeros on those two cards would provide some positive reinforcement for you, start there.

Maybe if @Anonymous is around later, we'll get lucky and he'll have time to offer some suggestions.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 15:47:10 GMT

I disagree that the OP's $1500 paydown won't result in a nice score increase. The most important thing here is aggregate utilization, which is King to individual card utilization. OP is at just over 50% aggregate and a $1500 paydown will bring him down to 41% or so aggregate, crossing the 48.9% threshold. This will be good easily for 10-15 FICO 8 points.

Since we're talking aggregate, it really doesn't matter where the $1500 goes. The second factor to consider, though, is his highest individual utilization card. By throwing $1100 toward that card, he'll cross the 68.9% threshold which could be good for (say) another 5 points. The remaining $400 could go anywhere and it wouldn't matter from a scoring perspective although enough should go to the Cap One cards to keep them both below the 68.9% threshold, even after interest is added.

So, my vote is $1100 toward that highest individual utilization card, then the other $400 anywhere else (highest interest makes the most sense) and you'll realize a 15-20 point score gain, based largely on crossing a well known aggregate utilization threshold.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 15:39:28 GMT

Yeah, you're pretty close there with WF, so that should be your first priority before they decide to take action. IMO you're going to need most of that 18 months to rebound. At $725 you could pay it off in 12 months, giving you some extra cash in the bank come refi time in 18 months.

After about 6 months of paying down balances, I would totally pay off Discover and Cap1 #2. Then continue on with WF and Cap1.

I would also suggest that once all the high balance cards are paid down to under 48%, try hitting up Discover for a CLI. If successfull, that will help some with utilization until the rest is paid down.

Re: Help Needed - How should I pay off debt for credit score increase?

Remedios — Tue, 30 Apr 2019 15:53:25 GMT

@Anonymous wrote:
I disagree that the OP's $1500 paydown won't result in a nice score increase. The most important thing here is aggregate utilization, which is King to individual card utilization. OP is at just over 50% aggregate and a $1500 paydown will bring him down to 41% or so aggregate, crossing the 48.9% threshold. This will be good easily for 10-15 FICO 8 points.

Since we're talking aggregate, it really doesn't matter where the $1500 goes. The second factor to consider, though, is his highest individual utilization card. By throwing $1100 toward that card, he'll cross the 68.9% threshold which could be good for (say) another 5 points. The remaining $400 could go anywhere and it wouldn't matter from a scoring perspective.

So, my vote is $1100 toward that highest individual utilization card, then the other $400 anywhere else (highest interest makes the most sense) and you'll realize a 15-20 point score gain, based largely on crossing a well known aggregate utilization threshold.

So, we're basically in agreement, minus how many points part?

Also, there is at least a couple of hundred in interest to account for unless those cards are in 0% promo, which I doubt.

@Anonymous Would you mind providing your current scores if you have access to them and also, is there any negative info on your CR as that may impact scoring, too.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 17:27:15 GMT

Sure!

As of 4/29 my Fico 8 scores are:

EQ 657

TU 661

EX 656

The only negative I have is a 30 day late from March 2017. I had just opened my cap1 card and SWORE it was on auto pay. Unfortunately it wasn't and I missed that first payment . I've paid that card, and every other card, on time.

I also removed myself as an authorized user from 3 of my mother's cards yesterday. They were high balance cards (17000/19000 - 8000/10000, and 2100/3000) so I'm hoping that should boost my score.

Re: Help Needed - How should I pay off debt for credit score increase?

Kforce — Tue, 30 Apr 2019 17:50:39 GMT

@Anonymous wrote:

Overall - $8,779.89 - $17,550.00 - 50.03%
I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward.

[ 8,800 - (1500 + (800 * 9)) = 100 ]

In 9 months you are clear and free.

Your goal should be best score when you need it, not next month.

Pay how ever you want, just keep paying what you said you could.

I would pay high interest down (save money), and not worry about scores for the next few months (who cares).

Hold off on refinance and car until your scores and debt are ideal. (Rates trump waiting a couple extra months)

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 17:55:18 GMT

If I were you, I would have contacted Cap1 about removing that 30 day. Often times they will forgive your first infraction, by explainig what happend. Especially if you PIF. We're only Human, afterall.

It never hurts to ask, the worst they can say is no.

Re: Help Needed - How should I pay off debt for credit score increase?

SouthJamaica — Tue, 30 Apr 2019 18:49:45 GMT

@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

1. Pay off Capital One #2, and Discover with that initial 1500, because that's the easiest way for you to quickly add 2 zero balances. The FICO mortgage scores like zero balances.

2. Then bring your other 2 cards down to 59%, then 49%, and so on.

3. When you've got both at 29% or less, start zeroing them out.

Re: Help Needed - How should I pay off debt for credit score increase?

SouthJamaica — Tue, 30 Apr 2019 18:43:39 GMT

@Anonymous wrote:
Thanks for the quick and helpful responses so far!

Would there be a scoring difference if I paid off the two smaller balances (Discover and Cap1 #2) vs putting all $1500 toward the WellsFargo? Of those two options, which would impact my score most (if at all)?

Thanks again!

Yes, that is the best thing you can do, because the mortgage scores react strongly to the number of accounts with balances... they love zero balances.

Re: Help Needed - How should I pay off debt for credit score increase?

SouthJamaica — Tue, 30 Apr 2019 18:49:08 GMT

@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

I disagree with most of the advice you are being given here. It is all great advice for FICO 8 scores, but your biggest concern is your mortgage scores, which are not as reactive to percentage changes in dollars utilization as they are to changes in the number of accounts with balances. Quickly picking up 2 zero balances with the $1500 -- dropping the percentage of cards with balances from 66 2/3% to 33 1/3% will give your mortgage scores a nice boost!

Re: Help Needed - How should I pay off debt for credit score increase?

CreditInspired — Tue, 30 Apr 2019 19:24:21 GMT

@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!

Since more than half of your cards have balances (4 out of 6), I would pay off Cap 1 #2. The more cards you have with a $0 balance, the better.

Then the remaining $750, I would put towards Wells Fargo.

Then every month, I would work to get the other cards below 48.9% UT, then 28.9%, and finally 8.9%.

Good luck to you.

Re: Help Needed - How should I pay off debt for credit score increase?

Remedios — Tue, 30 Apr 2019 19:56:01 GMT

@SouthJamaica wrote:
@Anonymous wrote:
Hi All,

I'm looking to pay off some of my credit card debt in hopes of boosting my FICO scores asap. My wife and I are hoping to refinance our mortgage and purchase a car in the next 6-18 months. I've got a bit of cash to throw at some of my debt and I'm wondering which is the most effective way to pay the cards down in regard to boosting my score? Here are my cards and balances:

Card - Balance - Limit - Util.
Discover - $684.71 - $2,900.00 - 23.61%
Chase - $0.00 - $1,500.00 - 0.00%
Wells Fargo - $4,880.00 - $5,500.00 - 88.73%
Capital 1 #1 - $2,444.87 - $3,500.00 - 69.85%
Capital 1 #2 - $770.31 - $1,150.00 - 66.98%
Citi - $0.00 - $3,000.00 - 0.00%
Overall - $8,779.89 - $17,550.00 - 50.03%

I have about $1500 to throw at the cards today and then anywhere from $500-1200 a month going forward. If I'm trying to get the biggest score jump possible with this first payment ($1500) which cards should I pay down first and down to how much? Then, what should be my approach going forward?

Thanks for you advice!
I disagree with most of the advice you are being given here. It is all great advice for FICO 8 scores, but your biggest concern is your mortgage scores, which are not as reactive to percentage changes in dollars utilization as they are to changes in the number of accounts with balances. Quickly picking up 2 zero balances with the $1500 -- dropping the percentage of cards with balances from 66 2/3% to 33 1/3% will give your mortgage scores a nice boost!

It's auto loan also, so both mortgage and FICO 8 scores are both in play.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 21:16:39 GMT

@Anonymous wrote:

The only negative I have is a 30 day late from March 2017.

While it goes off topic of this thread, if you only have 1 negative item on your CR, removing it would have a very big impact on your FICO scores. The gain you'd receive from getting that negative removed would be greater than the gain received from your utilization improvements, perhaps even if you were to pay all of that debt down. I'd suggest hitting the rebuilding forum and checkout out goodwill letters. A lone 30 day late payment is the easiest negative mark to get removed via GW, so if I were you I'd get on top of that immediately. Aside from the cost of some stamps and some time, the score gain comes at little actual cost... far less than the thousands needed to pay down/off utilization.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 21:25:42 GMT

@SouthJamaica wrote:
I disagree with most of the advice you are being given here. It is all great advice for FICO 8 scores, but your biggest concern is your mortgage scores, which are not as reactive to percentage changes in dollars utilization as they are to changes in the number of accounts with balances. Quickly picking up 2 zero balances with the $1500 -- dropping the percentage of cards with balances from 66 2/3% to 33 1/3% will give your mortgage scores a nice boost!

Not necessarily, SJ. I proved the opposite about a month ago if you recall when going from AZEO to all of my cards with balances and 2 out of 3 of my FICO 8 scores moved more than 2 out of 3 of my mortgage scores. Only my EX 5 score was impacted significantly. After some discussion with TT, it was determined that my lack of an inquiry in the last 12 months was likely the reason. My question then to the OP becomes whether or not he has an inquiry in the last 12 months... because if he doesn't, it's possible that his EX/TU mortgage scores aren't likely to be impacted much by number of accounts with balances.

Re: Help Needed - How should I pay off debt for credit score increase?

Anonymous — Tue, 30 Apr 2019 21:29:19 GMT

@Remedios wrote:
So, we're basically in agreement, minus how many points part?

I didn't see you quantify how many points (I may have missed it) you believe the OP would gain in crossing 48.9% aggregate and taking his highest individual utilization card from > 68.9% to < 68.9%, but my feeling was that you didn't think it would be many at all. I'm quite certain the impact would be 15-20 points on most profiles, which to me is a pretty significant shift for the paydown proposed by the OP.