How Best to Split a Large Payment Amongst Several Cards?

[Jazee]

I'm guessing it may not make a big difference but just curious. If my situation is currently:

Card A - $4,500 limit, 0% UTI (I do use the card)
Card B - $10K limit, 7% UTI

Card C - $5,500 limit, 60% UTI

Card D (lowest interest) - $20,000 limit, 90% UTI

If I had $7K to pay out to any of the cards, is there an optimal strategy to maximize the beneficial effect on my credit score?

[NoHardLimits]

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@Jazee wrote:

I'm guessing it may not make a big difference but just curious. If my situation is currently:

Card A - $4,500 limit, 0% UTI (I do use the card)
Card B - $10K limit, 7% UTI

Card C - $5,500 limit, 60% UTI

Card D (lowest interest) - $20,000 limit, 90% UTI

If I had $7K to pay out to any of the cards, is there an optimal strategy to maximize the beneficial effect on my credit score?

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To improve your credit score, I would pay the 90% Util card to 69% and the 60% Util card to 49%.  To improve your finances, pay the highest interest cards first.  As some forum members like to say:  It's finances vs FICOs.

[Snook_on_the_Line]

I'm no expert but If it was me I'd pay cards B and C to zero and pay the remaining 4k towards card D

thus bring three of your 4 accounts to a zero ballance and one to ~ 70% uti

then id make some budget rearrangements and start aggressively paying more than the minimum on card D while only putting a small purchase on cards A, B & C every few months to keep them open.   

That's my take on it.    

you would probably pick up a few points by bringing your number of accounts with balances down   And start seeing a rise in score as the uti %age on card D drops as the months go by. 

[coldfusion]

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@NoHardLimits wrote:

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@Jazee wrote:

I'm guessing it may not make a big difference but just curious. If my situation is currently:

Card A - $4,500 limit, 0% UTI (I do use the card)
Card B - $10K limit, 7% UTI

Card C - $5,500 limit, 60% UTI

Card D (lowest interest) - $20,000 limit, 90% UTI

If I had $7K to pay out to any of the cards, is there an optimal strategy to maximize the beneficial effect on my credit score?

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To improve your credit score, I would pay the 90% Util card to 69% and the 60% Util card to 49%.  To improve your finances, pay the highest interest cards first.  As some forum members like to say:  It's finances vs FICOs.

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That's about right.

Something along the line of paying off the entire approx. $700 balance on Card B,  $1800 toward Card C (drop util below 28.9%),  and put the remaining approx $4500 toward card D to drop below 68.9% util.   The snowball method would work to minimize the total amount of interest you paid until the cards were all paid off but that method doesn't look to optimize your scoring in the short term.

[Jazee]

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@coldfusion wrote:

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That's about right.

Something along the line of paying off the entire approx. $700 balance on Card B,  $1800 toward Card C (drop util below 28.9%),  and put the remaining approx $4500 toward card D to drop below 68.9% util.   The snowball method would work to minimize the total amount of interest you paid until the cards were all paid off but that method doesn't look to optimize your scoring in the short term.

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There's a bit of a fudge factor on what actual utils will be and the amount I'll have depending on actual income and actual spending.

If the $700 to pay off card B makes the difference to get card C or D to 28.9 or 68.9, would it be more important to still get the $700 card to $0 and be a few percent above 28.9 or 68.9 on the other cards? Or more important to leave $700 on the card and get one of the others to the target percentage level instead of missing it by a few percent?

[NoHardLimits]

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@Jazee wrote:

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@coldfusion wrote:

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That's about right.

Something along the line of paying off the entire approx. $700 balance on Card B,  $1800 toward Card C (drop util below 28.9%),  and put the remaining approx $4500 toward card D to drop below 68.9% util.   The snowball method would work to minimize the total amount of interest you paid until the cards were all paid off but that method doesn't look to optimize your scoring in the short term.

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There's a bit of a fudge factor on what actual utils will be and the amount I'll have depending on actual income and actual spending.

If the $700 to pay off card B makes the difference to get card C or D to 28.9 or 68.9, would it be more important to still get the $700 card to $0 and be a few percent above 28.9 or 68.9 on the other cards? Or more important to leave $700 on the card and get one of the others to the target percentage level instead of missing it by a few percent?

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Anecdotal evidence says that the number of revolving accounts with a balance should be less than half of the total number of revolvers to gain points on FICO8.  In that case, if you have 4 revolvers only 1 can report a balance.

[Jazee]

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@NoHardLimits wrote:

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Anecdotal evidence says that the number of revolving accounts with a balance should be less than half of the total number of revolvers to gain points on FICO8.  In that case, if you have 4 revolvers only 1 can report a balance.

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So I am I correctly translating that to, if you can't get number of revolving accounts  reporting a balance < 50% then if not paying off the $700 card is the difference of going to < 30% on one of the other cards or not, then leave the $700 balance and take the other card to < 30%?

[Snook_on_the_Line]

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@NoHardLimits wrote:

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@Jazee wrote:

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@coldfusion wrote:

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That's about right.

Something along the line of paying off the entire approx. $700 balance on Card B,  $1800 toward Card C (drop util below 28.9%),  and put the remaining approx $4500 toward card D to drop below 68.9% util.   The snowball method would work to minimize the total amount of interest you paid until the cards were all paid off but that method doesn't look to optimize your scoring in the short term.

---

There's a bit of a fudge factor on what actual utils will be and the amount I'll have depending on actual income and actual spending.

If the $700 to pay off card B makes the difference to get card C or D to 28.9 or 68.9, would it be more important to still get the $700 card to $0 and be a few percent above 28.9 or 68.9 on the other cards? Or more important to leave $700 on the card and get one of the others to the target percentage level instead of missing it by a few percent?

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Anecdotal evidence says that the number of revolving accounts with a balance should be less than half of the total number of revolvers to gain points on FICO8.  In that case, if you have 4 revolvers only 1 can report a balance.

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This is my logic behind paying card b and c to zero.     

[Jazee]

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@Snook_on_the_Line wrote:

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@NoHardLimits wrote:

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Anecdotal evidence says that the number of revolving accounts with a balance should be less than half of the total number of revolvers to gain points on FICO8.  In that case, if you have 4 revolvers only 1 can report a balance.

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This is my logic behind paying card b and c to zero.     

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That still wouldn't be less than half the accounts.  I would need 3 cards reporting zero.  I always though it was a bit crazy having like 10+ cards, most not used, almost like a bade of honor or something.  Now I see one benefit.

[NoHardLimits]

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@Jazee wrote:

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@Snook_on_the_Line wrote:

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@NoHardLimits wrote:

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Anecdotal evidence says that the number of revolving accounts with a balance should be less than half of the total number of revolvers to gain points on FICO8.  In that case, if you have 4 revolvers only 1 can report a balance.

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This is my logic behind paying card b and c to zero.     

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That still wouldn't be less than half the accounts.  I would need 3 cards reporting zero.  I always though it was a bit crazy having like 10+ cards, most not used, almost like a bade of honor or something.  Now I see one benefit.

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If you paid off B & C, and kept A at zero, then you would only have 1 card (card D) reporting a balance.  However, the points gained by having less than half of your revolvers reporting a balance is likely to be smaller than the points lost by having card D with a utilization of roughly 75%.  If my back of the napkin calculations are correct, it would take about $700 to pay off B and $3300 to pay off C, leaving about $3000 left over to put towards D.  

You would also need to continue to have cards A, B, and C report at zero.  Otherwise, the points gained would disappear.  You can still use the cards; you'd just need to make sure they report as zero to the bureaus by paying off the cards before they report.  It might be worthwhile to stagger your statement dates so that you always have a card to use while waiting for another card to report zero.  

If score maximization is still your goal, then get card D under 68.9% first because the current 90% util is likely the biggest drag on your score.