New member here looking for some advice on paying down utilization

[coldnmn]

In my opinion save at least a couple thousand for a rainy day fund. You wont have a car to sell if something happens.

[Chris679]

Here is my opinion:

Forget about your credit score and focus on saving on interest so you can get these cards paid off. The $5000 needs to go on the card with 14% interest. Keep paying $200 per month on it though even if it stings a bit. You are going to be making a much bigger dent in that balance without the interest sucking up so much of that payment each month. Then I would start hitting the other balances so you can have them almost all paid off when 0% ends. If you don't you should be able to get a decent balance transfer card by then since your situation will be much better.

Instead of a grad present I would wait and get myself a no debt present. I should not take that long to pay these off and then you can buy whatever you want guilt free and pay for it with all of the money you saved by paying this debt of as fast as possible.

As far as emergency fund goes you can almost always use a credit card for emergencies and be no worse off than you are now.

[Anonymous]

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@Chris679 wrote:

Here is my opinion:

Forget about your credit score and focus on saving on interest so you can get these cards paid off. The $5000 needs to go on the card with 14% interest. Keep paying $200 per month on it though even if it stings a bit. You are going to be making a much bigger dent in that balance without the interest sucking up so much of that payment each month. Then I would start hitting the other balances so you can have them almost all paid off when 0% ends. If you don't you should be able to get a decent balance transfer card by then since your situation will be much better.

Instead of a grad present I would wait and get myself a no debt present. I should not take that long to pay these off and then you can buy whatever you want guilt free and pay for it with all of the money you saved by paying this debt of as fast as possible.

As far as emergency fund goes you can almost always use a credit card for emergencies and be no worse off than you are now.

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Hmm, I guess I kinda missed the part of that 10K being at 14%....Jeez yeah, You're paying $120/mo just in interest. Get that stuff paid down on the double!

[Anonymous]

I will have to agree with most people here. 

Paying 14% interest is very steep. It is very hard to make a dent by paying that much interest. Put every single dollar into paying down that card. Screw the emergency fund and thinking about the future for now. In the future we are all dead. You need to worry about the present. 

Now, here is what I would do. 

Go to your univ financial aid office and ask if they can give you a loan. It doesn't really matter if this is a student loan from the government, private loan (Sallie Mae) or a university loan from university funds. Student loans are great cause they usually accumulate no interest until you graduate, and if they do, their interest is something like 5%. 

If no success at the financial aid office, go to your university credit union and ask for a loan for bill consolidation. Test the water first: ask to sit down with someone there, show them your numbers and ask what they think. Then apply formally and take the credit ding. 

Pay off all your credit cards. You can leave the ones with a 0% interest unpaid, but I would not even do that. Just pay them off and be done with it. 

At the end of this you will have no real CC balance and only one instalment loan. Having this loan by itself will increase your credit score (because it shows diversity of credit), having a low utilization on your CCs will further increase your credit score. 

Then you can start building your emergency fund. 

Good luck!

[jsucool76]

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@Anonymous wrote:

Hey everyone. I am a new member on here and I really need some advice.  First of all I am a student at the University of Florida, going into my last year and will be finishing up my bachelors in Civil Engineering soon.  Unfortunately due to the absence of parental support I had to depend on various credit cards to get by. However the thought of my high utilization on each card literally keeps me awake at night.

I started attempting to build my credit at the age of 19 (I am 22 now by the way), I got a used car loan with 15% interest rate as a first time buyer but I refinanced it a year later and got it down to 4.9% I then started off with a secured card from capital one. Well long story short and fast forward three years I now have a FICO score of 630 and that includes four credit cards. At first everything was fine and dandy, low utilization and all, but then things got real hard for me in school, job cut hours and I had to sell the car to avoid falling behind on payments. 

My current balances are as follows:

Credit Union card: Limit $14,000/Balance $10,000 14% interest

Discover: Limit $1,000/Balance $900 0% interest

Amex: Limit:$2,000/ Balance $1,800 0% interest

Citi: Limit: $2,100/ Balance $1,900 0% interest

Now I am sure most of you are reading this thinking "Another irresponsible college kid drowning in debt" but to be honest, if that was the case I would not be here on this forum now. I can afford the monthly payments of all the cards right now as is, thanks to my decent paying job(for a college kid of course), but I must admi it is quite difficult trying to mke ends meet each month, especially as a student. I really am interested in raising my credit score and being more attractive to lenders. My goal is treat myself to a grad present in a few months, maybe a pre-owned car or motorcycle, but I want to be sure my credit is in the right standings for such purchases first.  My main concern is the larger card with the $10k limit, that is currently suckng about $200/month in minimum payment alone.

I have about $5,000 tucked away and I am wondering is it a good idea to use that to pay down the larger 10k card or pay off the other 3 and transfer balance from the larger one? 

Any advice would be great. Thanks in advance.

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First of all, GO GATORS - and you shoulda got your car at gatorland - they offer special financing for college students, I went with a friend there car shopping. lol. 

I've always been a "pay off the highest interest rate first" kinda guy, but make sure you save yourself enough money to make at least minimum payments if you start putting big chunks of money into one card at a time. 

If your 14k card offers decent balance transfer rates, then fantastic, but be careful. If the BT rate differs from the purchase rate, (say a 0,1,2, or 3% BT offer APR) you will still be charged the 14% on the purchase balance (which after you put 5k in, will be 5k). 

[Anonymous]

Hey OP.  Instead of thinking "another irresponsible kid drowning in debt..." I commend your responsible attittude towards your current and future financial situation, and the fact that you're paying your way through college.  A good attitude and responsible nature will go a long way.

Other than that you might want to hold off making any big expendetures for yourself until you've paid down your debt.  You probably want to focus on the 14% first (you're an engineer so I'm guess a little bit of math should be in your wheelhouse).  And lastly, maybe you can eventually get a good BT card like a Slate or whichever to do a BT.

I'm sure you'll figure out the best course of action, and like I already said:  A good attitude and responsible nature is the key here.  Keep on doing what you're doing.

[IamB2]

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@Anonymous wrote:

Thanks for the encouragement. I was thinking maybe paying down the larger one and then getting another card to transfer the balance of some of the lesser ones to. I head Dscover and Chase had some pretty good deals going on right now with balance transfers, but I am not sure if I will evem get approved with such high utilization. 

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I wanted to take a moment and say congrats on taking the first step to get the debt under control. 

I'd take $4700 (Balance on other cards: Discover, Amex and CITI) and pay them in full. This leaves you with $10K in debt which for a college student isn't really much. After that, I'd take the Dave Ramsey approach and take whatever the minimum payments I was sending to the other cards per month, together with the $200/month min payment and pay on $10k heavily. If the goal is to pay the debt, you focus on that, and that alone. Cut off everything non-essential from your bills and simply work on that.  

That is the approach I would take, but again, the decision has to be yours, and I wish you all the best. As they say, the first step is to understand/admit that there is an issue or a problem

[Chris679]

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@IamB2 wrote:

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@Anonymous wrote:

Thanks for the encouragement. I was thinking maybe paying down the larger one and then getting another card to transfer the balance of some of the lesser ones to. I head Dscover and Chase had some pretty good deals going on right now with balance transfers, but I am not sure if I will evem get approved with such high utilization. 

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I wanted to take a moment and say congrats on taking the first step to get the debt under control. 

I'd take $4700 (Balance on other cards: Discover, Amex and CITI) and pay them in full. This leaves you with $10K in debt which for a college student isn't really much. After that, I'd take the Dave Ramsey approach FG and take whatever the minimum payments I was sending to the other cards per month, together with the $200/month min payment and pay on $10k heavily. If the goal is to pay the debt, you focus on that, and that alone. Cut off everything non-essential from your bills and simply work on that.  

That is the approach I would take, but again, the decision has to be yours, and I wish you all the best. As they say, the first step is to understand/admit that there is an issue or a problem

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What is the logic behind paying off the 0% APR cards first?  This could easily cost $1000 more in interest to pay back and therefore will take much longer to pay off that way.

[takeshi74]

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@Anonymous wrote:

I really am interested in raising my credit score and being more attractive to lenders.

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With utilization like that scores are the least of your concerns.  I'd also put interest as a secondary concern.  IMO you need to get your balances down as quickly as possible.  Calculate utilization on each and use whatever payment allocation that reduces utilization on all the fastest.  If you have any maxed then make sure you get all under 90%.  After that work towards getting them all under 50%, all under 30%, etc.  You don't want your high utilization to lead to adverse action or else you'll be in even worse shape.  Closed accounts with balances and balance chasing will make improving utilization even more difficult.

I find a spreadsheet helpful for this sort of thing since you can have a column for payment amount and adjust the numbers until you get something that works with the liquid cash you have available to pay down your cards.

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@Anonymous wrote:

I head Dscover and Chase had some pretty good deals going on right now with balance transfers, but I am not sure if I will evem get approved with such high utilization. 

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Probably not.  Even if you could get approved you'd be hit with a high APR and a low limit.

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@Anonymous wrote:

The reason I ask is that the interest accrues from day one.

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Depends on the specifics in the terms.  Terms are not all the same and each should defintely review the relevant terms.

[Anonymous]

The Dave Ramsey approach encourages an unhealthy attitude towards credit.

Pay the highest interest first.