Which is better?

[Anonymous]

I'm trying to buy my first car (used) like many people on here.  My stats are:

• $3000 monthly income
• 7 year credit history
• No mortgage
• Student Loans--all in good standing
• 5 open revolving accounts--all in good standing
• All closed accounts in good standing
• Utilization rate: 50%
• 2 baddies--2 medical accounts sent to collections
• FICOs in mid-600 range.

My question is, should I use the $1000 I have right now towards a down payment, or should I apply it to my credit card debt to bring my utilization down from 50% to 40%?   I'm not sure which option will help me the most in getting approved for financing.

And secondly, if the answer is apply it to the CC balance, how quickly will that show up on my credit report and affect my score?  I was hoping to qualify for a used car loan before the end of the month, so if it's reported monthly, that wouldn't help me.  Should I use it for a down payment instead?

[Hairy_Satchel]

Paying off existing high interest debt before taking on new debt is always a good policy. Is paying the baddies and option? Having them removed, if you can pay in full, is easy using the HIPPA process found on this site and one of the best way to increase your fico score. Collection accounts have a very negative affect on your credit score. I'm not sure paying down your cards to 40% utilization will help your score all that much. Maybe someone else can chime in on that one.

I would think that if your bank is okay with your current debt to income ratio, credit report and fico scores, they would rather see the money down. Check with your bank. They might even require it as a condition of approval.