Credit Card Payoff Strategies

[Anonymous]

Hi all,

My credit score right now is pretty good, between 730-765 depending on the CRA, but I would like to get it higher and manage my debt in anticipation of applying for a mortgage in the spring.

I have four credit cards, two of which have high interest rates (15%) and are being paid in full this month. I just applied for a new card with a low balance transfer rate to transfer my highest balance (9 grand) to a 4.99% card. My question is, what's the best strategy here? Do they look at total balance/limit percentages, or per card percentages? In other words, does my having a large balance on one card look worse than having smaller balances spread out over the other cards? My total balance/limit percentage right now is 21%, but on that one new card, it's 83%! So which is better?

I am pretty sure that, no matter what, it's better to do the 4.99 and get it paid off ASAP, which is the plan, but looking ahead, let's say I still have 3 or 4 thousand on that card and zero on the other cards when it comes time to apply for the mortgage. Would it be better to move some of that around at that time?

Thanks for all your help! These forums are extremely informative!

[Anonymous]

FICO scoring looks at both per-account utilization, as well as overall utilization.

Ideally, it would be best to get the utilization for each individual account under 10%, but with your scores, I would instead focus on using your money most efficiently, such as paying the lowest interest rate on your remaining credit card balance. After your balance transfer, try to get the utilization on that card under 50% if you can (under 30% would be even better). Try to get your overall utilization under 10% (which looks like it's quite possible based on your projection) at least a month before the mortgage lender pulls your scores.