topic Re: Question: What is the smartest method to pay of CC debt in Rebuilding Your Credit

Question: What is the smartest method to pay of CC debt

Anonymous — Fri, 15 Nov 2019 13:56:43 GMT

Hello,

I've been on this forum for years and at the beginning of this year was able to get my scores from mid 500's to 760/780. I was then approved for a $7500 and $25k Navy Fed.

Around June I quit my job and my income went to $0 and I pretty much lived off my cc's. That has resulted in me now having high balances. I relaunched my business this year and now my balances are as follows:

Navy Fed $24,622 due on the 19th $25k

Navy Fed $3,035 due on the 10th $7500

Discover $3,922 due on the 12th $9000

Cap 1 $5,248 due on the 10th $7500

Cap 1 $5,035 due on the 28th $5400

Amex, Fingerhut, BOA $0 balance

My question is what is the smart way to pay them down to avoid a drop in my score? I was told if I pay them down to $0 my score could actually drop. All of my cards were maxed out last month, so the new balances for the cards due on the 10th-12th havent reported yet. I'm hoping the lower balance will help my score go up a bit. Any advice is greatly appreciated. I plan to pay $4000-$5000 for the $25k Navy Fed, then $2000-$3000 on the Cap 1 due on the 28th if you guys think it's a smart move. My scroe dropped from 700's to 450's. It recently went up to 519... I really want to get back to 700's and I'm hoping thats still a chance since I tanked so bad recently.

Any help would be greatly appreciated.

Re: Question: What is the smartest method to pay of CC debt

FireMedic1 — Fri, 15 Nov 2019 14:06:33 GMT

@Anonymous wrote:
Hello,

I've been on this forum for years and at the beginning of this year was able to get my scores from mid 500's to 760/780. I was then approved for a $7500 and $25k Navy Fed.

Around June I quit my job and my income went to $0 and I pretty much lived off my cc's. That has resulted in me now having high balances. I relaunched my business this year and now my balances are as follows:
Navy Fed $24,622 due on the 19th $25k
Navy Fed $3,035 due on the 10th $7500
Discover $3,922 due on the 12th $9000
Cap 1 $5,248 due on the 10th $7500
Cap 1 $5,035 due on the 28th $5400
Amex, Fingerhut, BOA $0 balance

My question is what is the smart way to pay them down to avoid a drop in my score? I was told if I pay them down to $0 my score could actually drop. Thats is false. You scores will go up.All of my cards were maxed out last month, so the new balances for the cards due on the 10th-12th havent reported yet. I'm hoping the lower balance will help my score go up a bit. Any advice is greatly appreciated. I plan to pay $4000-$5000 for the $25k Navy Fed, then $2000-$3000 on the Cap 1 due on the 28th if you guys think it's a smart move. My scroe dropped from 700's to 450's. It recently went up to 519... I really want to get back to 700's and I'm hoping thats still a chance since I tanked so bad recently.

Any help would be greatly appreciated.

Main thing first is to get the maxed out cards below 89%. (In red) Then keep lowering all your balances and you scores will rise on up. Once you get them all down to 0 and have 1 report a balance of <8.9%. 700 will be in reach and then some. Its great your tackling your debts and hope it doesnt happen again. You will pass thresholds and your score will go up each time. Good Luck!

Re: Question: What is the smartest method to pay of CC debt

FireMedic1 — Fri, 15 Nov 2019 14:05:19 GMT

And Welcome to the forums! Almost forgot.

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Fri, 15 Nov 2019 14:19:37 GMT

@FireMedic1 wrote:
@Anonymous wrote:
Any help would be greatly appreciated.
Main thing first is to get the maxed out cards below 89%. (In red) Then keep lowering all your balances and you scores will rise on up. Once you get them all down to 0 and have 1 report a balance of <8.9%. 700 will be in reach and then some. Its great your tackling your debts and hope it doesnt happen again. You will pass thresholds and your score will go up each time. Good Luck!

Thank you VERY much for your response! 89% I can do for sure! I plan to get the $25k down to $20k this month which will be 80%. I'm really trying to shoot for lower.(I may sell a kidney or something lol) Through this forum I've been able to learn that the name of the game is making sure that I pay my bills on time, typically I pay two days in advance. Then I don't spend on the card until AFTER it reports to my credit. So, as much money as I can gather for each card before the due date is important so I can get my scores back up.

And, thank you for the warm welcome! It's really appreciated.

Re: Question: What is the smartest method to pay of CC debt

FireMedic1 — Fri, 15 Nov 2019 14:26:00 GMT

It will take some discipline. But once you see your progress from the debts going down and the scores going up. You'll go into high gear and it will be a thing in the past. Tell that person who said your scores go down paying off debt to make a visit here. HeHe. It doesnt work that way. in time. You'll rebound just fine. Good Luck!

Re: Question: What is the smartest method to pay of CC debt

Girlzilla88 — Fri, 15 Nov 2019 16:01:34 GMT

I agree tackle the biggies first and just go slowly one at a time once you get them down to a certain percent if you feel comfortable to add one or two more and start paying them down too you are more than welcome but you will start seeing increases as they go down and as they get below certain percents. Welcome welcome and Good Luck on your Journey!

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Fri, 15 Nov 2019 16:36:36 GMT

@Girlzilla88 wrote:
I agree tackle the biggies first and just go slowly one at a time once you get them down to a certain percent if you feel comfortable to add one or two more and start paying them down too you are more than welcome but you will start seeing increases as they go down and as they get below certain percents. Welcome welcome and Good Luck on your Journey!

Thank you for responding! I think I've been going about it wrong then, I've been paying a chunk of the balance down in the order that they are due. lol But, I'll start working on the bigger balances. Thank you again.

Re: Question: What is the smartest method to pay of CC debt

RSX — Fri, 15 Nov 2019 23:02:48 GMT

setup a spreadsheet

calsulate the amounts for each major percentage of each CL

get them all under 89%

then all under 67%

Then under 50%

under 29%

under 8.9%

Keep going past each threshold. your scores willl keep increasing month over month.

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Sat, 16 Nov 2019 00:41:02 GMT

@RSX wrote:
setup a spreadsheet
calsulate the amounts for each major percentage of each CL

get them all under 89%
then all under 67%
Then under 50%
under 29%
under 8.9%
Keep going past each threshold. your scores willl keep increasing month over month.

Thank you very much!! That I can. do!

Re: Question: What is the smartest method to pay of CC debt

kiea — Sat, 16 Nov 2019 13:20:24 GMT

I'm having the same issue. My scores were close to 700 about 6 months ago and now they are a little under 600 and its basically because of my ulitization. I moved out of state for a better job opportunity and my credit card balances increased because I had to use them on hotels, travel, and the move itself. I plan on focusing on one card at a time while paying the minimum on the rest. Maybe you should try doing the same

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Sat, 16 Nov 2019 16:54:33 GMT

@kiea wrote:
I'm having the same issue. My scores were close to 700 about 6 months ago and now they are a little under 600 and its basically because of my ulitization. I moved out of state for a better job opportunity and my credit card balances increased because I had to use them on hotels, travel, and the move itself. I plan on focusing on one card at a time while paying the minimum on the rest. Maybe you should try doing the same

I guess I'm a bit confused on how paying one off, but maintaining high balances on the others is smarter than getting all of them down to atleast 50% utilization this reporting period, then 30% next period. I know regardless I need to get this utilization down.

Re: Question: What is the smartest method to pay of CC debt

OmarGB9 — Sat, 16 Nov 2019 17:09:51 GMT

@Anonymous wrote:
@kiea wrote:
I'm having the same issue. My scores were close to 700 about 6 months ago and now they are a little under 600 and its basically because of my ulitization. I moved out of state for a better job opportunity and my credit card balances increased because I had to use them on hotels, travel, and the move itself. I plan on focusing on one card at a time while paying the minimum on the rest. Maybe you should try doing the same
I guess I'm a bit confused on how paying one off, but maintaining high balances on the others is smarter than getting all of them down to atleast 50% utilization this reporting period, then 30% next period. I know regardless I need to get this utilization down.

Agreed, that's a decent strategy for when cards are 50% or below, but when you have multiple maxed out cards, bringing them all down from 90%+ first is a better move, IMO.

Re: Question: What is the smartest method to pay of CC debt

Brian_Earl_Spilner — Sat, 16 Nov 2019 17:32:25 GMT

@Anonymous wrote:
@kiea wrote:
I'm having the same issue. My scores were close to 700 about 6 months ago and now they are a little under 600 and its basically because of my ulitization. I moved out of state for a better job opportunity and my credit card balances increased because I had to use them on hotels, travel, and the move itself. I plan on focusing on one card at a time while paying the minimum on the rest. Maybe you should try doing the same
I guess I'm a bit confused on how paying one off, but maintaining high balances on the others is smarter than getting all of them down to atleast 50% utilization this reporting period, then 30% next period. I know regardless I need to get this utilization down.

There are a few ways to pay down debt. What they're talking about is either snowballing or avalanching. These are used when someone doesn't have the ability to pay down large chunks.

Regardless of method, they should all be immediately brought down low enough that interest or an annual fee won't keep you maxed or accidentally take you over limit. If you have the cash and can pay chunks, spreading it across all the cards can give you score boosts as you cross thresholds. Personally, I feel if you're focused on paying down debt, you shouldn't be worried about your scores unless you're looking at a consolidation loan or if you need something like a new car asap.

Avalanching is focusing on paying off the card with the highest APR first so you pay less interest. All other cards only receive a minimum payment. Once done, move to the next card while adding the previous card's payment to the new one.

Snowballing is focusing on paying off the card with the lowest balance first. This is more for a psychological boost as it helps motivate people as they hit smaller and faster milestones. While you may pay more in interest, people underestimate how well this can motivate someone, especially if they felt like what they're trying to do is impossible. Same premise though. Pay off a card. Roll that payment into the next card

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Sat, 16 Nov 2019 22:16:16 GMT

@Brian_Earl_Spilner wrote:
There are a few ways to pay down debt. What they're talking about is either snowballing or avalanching. These are used when someone doesn't have the ability to pay down large chunks.

Regardless of method, they should all be immediately brought down low enough that interest or an annual fee won't keep you maxed or accidentally take you over limit. If you have the cash and can pay chunks, spreading it across all the cards can give you score boosts as you cross thresholds. Personally, I feel if you're focused on paying down debt, you shouldn't be worried about your scores unless you're looking at a consolidation loan or if you need something like a new car asap.

Avalanching is focusing on paying off the card with the highest APR first so you pay less interest. All other cards only receive a minimum payment. Once done, move to the next card while adding the previous card's payment to the new one.

Snowballing is focusing on paying off the card with the lowest balance first. This is more for a psychological boost as it helps motivate people as they hit smaller and faster milestones. While you may pay more in interest, people underestimate how well this can motivate someone, especially if they felt like what they're trying to do is impossible. Same premise though. Pay off a card. Roll that payment into the next card

Thank you! I'm going to take a look at which one's i'm paying interest on. I think it's only the capital one cards, so I'll focus on paying those off first. Thank you again!

Re: Question: What is the smartest method to pay of CC debt

kiea — Sun, 17 Nov 2019 18:22:57 GMT

I was just reading this article that states the best strategy is to pay all cards to 29%. I'm not sure if that is best or not. I just thought it would be to pay the entire balance at once so I won't have to make monthly payments.

Re: Question: What is the smartest method to pay of CC debt

FishingGuy — Tue, 19 Nov 2019 06:25:41 GMT

Hi Rose,

You're on the right track, however I noticed you said that you pay your bills two days before the end of the cycle... here is a suggestion.
I have had instances where an issuers site had problems, so to make absolutely sure I don't have a late payment I often pay something earlier in the month ( at least the minimum, or something above that )... so in case the unexpected happens..... at least the minimum is covered.

THEN, I make a second payment closer to the end of the cycle.... to reduce the reported amount before, should something "anything" come up, ( including a "glith" in their system ) at least there won't be a late payment...... just sharing a thought of what I often do.

Re: Question: What is the smartest method to pay of CC debt

Anonymous — Wed, 20 Nov 2019 11:54:24 GMT

@FishingGuy wrote:
Hi Rose,

You're on the right track, however I noticed you said that you pay your bills two days before the end of the cycle... here is a suggestion.
I have had instances where an issuers site had problems, so to make absolutely sure I don't have a late payment I often pay something earlier in the month ( at least the minimum, or something above that )... so in case the unexpected happens..... at least the minimum is covered.

THEN, I make a second payment closer to the end of the cycle.... to reduce the reported amount before, should something "anything" come up, ( including a "glith" in their system ) at least there won't be a late payment...... just sharing a thought of what I often do.

Thank you! I've actually read making two payments a month boosts your score.

Re: Question: What is the smartest method to pay of CC debt

OmarGB9 — Wed, 20 Nov 2019 12:24:19 GMT

@Anonymous wrote:
@FishingGuy wrote:
Hi Rose,

You're on the right track, however I noticed you said that you pay your bills two days before the end of the cycle... here is a suggestion.
I have had instances where an issuers site had problems, so to make absolutely sure I don't have a late payment I often pay something earlier in the month ( at least the minimum, or something above that )... so in case the unexpected happens..... at least the minimum is covered.

THEN, I make a second payment closer to the end of the cycle.... to reduce the reported amount before, should something "anything" come up, ( including a "glith" in their system ) at least there won't be a late payment...... just sharing a thought of what I often do.
Thank you! I've actually read making two payments a month boosts your score.

Hate to burst your bubble, but I don't want you to be misinformed. The number of payments you make per month doesn't matter. It could be one lump sum for your full balance, or it could be spread across several payments. It doesn't matter or boost your score whatsoever. What helps your score is having low utilization, and using the AZEO method (all zero except one), meaning out of all of your credit cards, only allow one to report a balance, and all the rest should be at zero balance before statement date. This is because FICO penalizes you for having no accounts with balances as well as for having too many accounts with balances.

Re: Question: What is the smartest method to pay of CC debt

ktl72455 — Fri, 06 Mar 2020 11:44:50 GMT

I just did this, had to come back here to find this thread, set up my sheet since it was on my old pc that crashed. Set it to 00.00% paid one down to 88.58% ..whew.. below 89... well smh// no its not below! So set my % to no decimals. 89%. Kinda bummed but still less that 99% :-)

Re: Question: What is the smartest method to pay of CC debt

RSX — Fri, 06 Mar 2020 16:48:38 GMT

Good point. You need to make sure you pay enough below 89%, that the monthly interest charge doesn't bump you back over 89% again

it really depends on the APR and amount owed on the card, how big that interest charge will be and how big a factor it is % wise