topic Re: $15k in 4 months pay off - where to distribute it? in General Credit Topics

$15k in 4 months pay off - where to distribute it?

Jenja — Thu, 08 Apr 2021 13:10:21 GMT

I owe about $33k total and am tightening my belt and aiming to pay about $15k between May 1st and August 15th.

I can pay 3703 a month for those 4 months on top of minimums for any accounts which are not part of my focus.

I have:

1 car loan of 8k, 50% paid - will make monthly payment as normal

2 store cards - 1 at a balance of 1000 of a 2k limit and 1 at 1800 of a 2200 limit

7 credit cards :

1 at 10, 000 of a 12k limit

1 at 7400 of a 8,100 limit

1 at 3300 of a 3800 limit

1 at 500 of a 2k limit

1 at 900 of a 1850 limit

1 at 150 of a 650 limit

1 at 750 with no limit reported (Amex charge card)

I have one Affirm loan at 2k, no limit reported

I have one paid medical collection of $158 which I'm seeking to get removed.

No missed payments ever aside from that one collection which is only reported on Experian.

average length of account - 2 years 11 months

Oldest account - 5 years

(Im relatively new to the country)

my current Fico 5,4 and 2 are

640, 661 and 601

My goal is to get to a middle score of 680 by September

Any credit lines I don't focus on will of course just get the min payment.

My plan is to use that 15k to get my 3 highest credit card balances to under 30% , so the top 3 credit cards in my list above which are

1 at 10, 000 of a 12k limit

1 at 7400 of a 8.1k limit

1 at 3300 of a 3800 limit

If it were you, what credit lines would you focus on? Is my plan a good one?

Any advice appreciated!!

Re: $15k in 4 months pay off - where to distribute it?

IntegerIntrovert — Thu, 08 Apr 2021 14:54:31 GMT

That's a good plan for sure. I personally would attack the smallest loans first and work up to the large loans. The reason is because the savings on the minimums once they are paid off will give you more money for the larger loan payoffs. Plus you get the emotional satisafaction of have some $0 accounts quickly which should help keep you motivated to pay the rest off. This is known as the snowball method of debt payoff.

Re: $15k in 4 months pay off - where to distribute it?

Anonymous — Thu, 08 Apr 2021 18:48:58 GMT

Since your concern is the middle score I am assuming you are trying to improve scores before getting a mortgage? If so, I would focus on paying off the small balances first. Mortgage scores don't like having a large number of accounts reporting balances. My perosnal strategy would be to pay off all store cards and credit cards. Your 12k and 8.1k limit cards are the only ones that you can't fit into this repayment strategy, therefore I would try to pay both of those down to 50% utilization, your total spent to do this would be about $15,800. If your loan payments are also coming from this 15k, then you might not be able to get those last two cards paid down to 50%.

Re: $15k in 4 months pay off - where to distribute it?

Jenja — Thu, 08 Apr 2021 23:28:16 GMT

Ok good to know, so reducing the number of accounts reporting balances will do more for my mortgage score than having my 2 biggest cards at 30%.
And yes I'm hoping to get a mortgage later in the year so going for the 680.
I'll do some math and work out how many I can get rid of. I guess I thought the large balances would be the most detrimental.

Not sure anyone will be interested but I'll update the thread when my 15k is paid and hits my reports in Sept.

Re: $15k in 4 months pay off - where to distribute it?

Anonymous — Fri, 09 Apr 2021 02:02:16 GMT

Getting all cards under 29% is an important point as well - if there's any way to do that and zero out as many others as you can, you'll get the best score results. And definitely follow up with results - data points are always appreciated here by current members, and can provide empirical evidence for future members facing a similar situation.

Re: $15k in 4 months pay off - where to distribute it?

SouthJamaica — Fri, 09 Apr 2021 12:12:22 GMT

@Jenja wrote:
I owe about $33k total and am tightening my belt and aiming to pay about $15k between May 1st and August 15th.

I can pay 3703 a month for those 4 months on top of minimums for any accounts which are not part of my focus.

I have:
1 car loan of 8k, 50% paid - will make monthly payment as normal
2 store cards - 1 at a balance of 1000 of a 2k limit and 1 at 1800 of a 2200 limit
7 credit cards :
1 at 10, 000 of a 12k limit
1 at 7400 of a 8,100 limit
1 at 3300 of a 3800 limit
1 at 500 of a 2k limit
1 at 900 of a 1850 limit
1 at 150 of a 650 limit
1 at 750 with no limit reported (Amex charge card)

I have one Affirm loan at 2k, no limit reported
I have one paid medical collection of $158 which I'm seeking to get removed.

No missed payments ever aside from that one collection which is only reported on Experian.

average length of account - 2 years 11 months
Oldest account - 5 years
(Im relatively new to the country)

my current Fico 5,4 and 2 are
640, 661 and 601

My goal is to get to a middle score of 680 by September

Any credit lines I don't focus on will of course just get the min payment.

My plan is to use that 15k to get my 3 highest credit card balances to under 30% , so the top 3 credit cards in my list above which are
1 at 10, 000 of a 12k limit
1 at 7400 of a 8.1k limit
1 at 3300 of a 3800 limit

If it were you, what credit lines would you focus on? Is my plan a good one?

Any advice appreciated!!

@IntegerIntrovertand @Anonymous are right.

Since your focus is the mortgage scores, your best bet is to 'snowball' it, getting as many zero balances as possible. Which means paying off all the smallest balances, and not letting any balances report on those cards. Similarly, don't let any balances report on your charge card.

Re: $15k in 4 months pay off - where to distribute it?

Anonymous — Fri, 09 Apr 2021 17:22:31 GMT

@Jenja wrote:
Ok good to know, so reducing the number of accounts reporting balances will do more for my mortgage score than having my 2 biggest cards at 30%.
And yes I'm hoping to get a mortgage later in the year so going for the 680.
I'll do some math and work out how many I can get rid of. I guess I thought the large balances would be the most detrimental.

Not sure anyone will be interested but I'll update the thread when my 15k is paid and hits my reports in Sept.

Correct. The number of accounts with a balance has a pretty significant affect on mortgage scores. From my experience, and from what I have seen looking at datapoints, crossing individual account usage thresholds (9%, 29%, 49%, 69%, 89%) doesn't change your FICO 2 scores much. The scores are more influenced by overall utilization which is going to be the same regardless of how you pay down the debt. Definitely keep us posted on your progress and best of luck, mortgages can be stressful!

Re: $15k in 4 months pay off - where to distribute it?

Jenja — Sat, 10 Apr 2021 02:56:36 GMT

Thanks all

I worked out I can get them all to zero (except car loan which I have no intention of paying off early) except my 2 biggest Credit cards which will be at 50% each (so the 8100 limit and the 12k limit). The 3800 limit one will be at 75% but I'll put anything else I can spare to that one and in fact if I just do one more month, I can get that right down too.

So that will leave me with just 3 credit cards reporting and my car loan, which feels a lot cleaner AND if I take a break for a few months and get back on it after Christmas I can be "debt free" (except car and hopefully the mortgage!) by March 2022! Which is an amazing feeling.

So grateful for everyone's help, I'll update for sure!

Re: $15k in 4 months pay off - where to distribute it?

Anonymous — Sat, 10 Apr 2021 11:44:57 GMT

Sounds great. Just so you know, if you can get the two 50% balances down to 47%, you'll cross another scoring threshold and stay under it after interest is added. That should net you a few more points. Likewise on the 75% card, going down to 67%.

Re: $15k in 4 months pay off - where to distribute it?

Jenja — Sat, 15 May 2021 05:11:04 GMT

Update - rather than me pay the $15k over 4 months, we took $15k from the house deposit fund and paid it all at once. I paid off every thing but my car loan, and 2 largest credit cards, reducing my total utilization from around 98% to 50%. I have only 2 cards reporting balances now, one is 8500/12000 and other is 6800/8100

Starting Fico 8s were

648/657/649

Current are

694/718/666

Starting Fico 5, 4,2

640/661/602

Current 5,4,2

706/703/622

so I achieved my goal of a middle score for mortgage of 680 and then some.

$4K is already paid back to the deposit fund, now to do the rest by end of Aug. I will update when complete.

thanks for the advice to pay as many to 0

as poss, it really helped.

I think when I payback the remaining debt on the cards (once done with the deposit pay back) I can achieve 800s from 2 bureaus.

I am still trying to get the medical collection of $150 removed from Experian, had a reply but only to say they'd update it as paid in full, not a remove.

Also 2 of the cards I paid off are showing a $5 balance, which was interest posted after I paid off, which has now been paid. Hoping to see a small lift when those report 0? Not sure if that matters.

Re: $15k in 4 months pay off - where to distribute it?

babygirl1256 — Sat, 15 May 2021 06:38:44 GMT

@Jenja Great budgeting . . . you will get there.

Re: $15k in 4 months pay off - where to distribute it?

Horseshoez — Sat, 15 May 2021 12:39:45 GMT

@Jenja, great idea to "borrow" from your house account and pay stuff down and then repay yourself.

Regarding your credit card balances, just keep in mind, if you push them all to a balance of zero you're going to get dinged a number of points, it's called the "All-Zero" penalty. To get around this issue, simply allow one or two of your cards to report a small balance (typically less than $100) per month; this will give you your best chance for your mortgage lender to see your tip-top scores.

Re: $15k in 4 months pay off - where to distribute it?

Jenja — Sat, 15 May 2021 19:01:34 GMT

Thanks, more good advice!

Re: $15k in 4 months pay off - where to distribute it?

Anonymous — Tue, 18 May 2021 15:18:29 GMT

Great to see the progress and you achieving your goal middle score! Based on data from others, you are likely to see an additional score increase when those cards with the remaining interest report at $0.

Re: $15k in 4 months pay off - where to distribute it?

NoMoreE46 — Thu, 20 May 2021 00:28:09 GMT

Nice @Jenja .

That is one massive snowball effort there.