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Paying off or paying down?

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jjcor
Established Member

Paying off or paying down?

I have a few credit cards that have high utilization repoting on them. I have about $900 left over monthly to pay them down. Should put that whole $900 towards paying off one card at a time or spread it across all of them? Im trying to get my score above a 640 by this coming March, which its pretty close but I didnt know which way to get there quicker (if there is a way). Here's what Im working with right now and my credit card balances.

 

EQ - 630

TU - 667

EX - 637

 

Amazon - 519 (700 limit)

Furniture Row - 762 (1400 limit)
Alliance federal credit union - 815 (1000)
Walmart - 913 (1400 limit)
Sweetwater Music - 903 (1200)
Capital One - 1185 (1200)
Barclays - 1378 (1500)
Discover - 1562 (1700) 
Lowe's - 3158 (3200)
Credit One - 0 (450)
Wells Fargo - 0 (300)
Chase - 0 (500)
Home Depot - 0 (500)
Sams Club - 0 (600)
 
Thanks for any input and advice!
EQ - 642 EX - 661 TU - 671
Message 1 of 8
7 REPLIES 7
sarux3
Frequent Contributor

Re: Paying off or paying down?

 I'd focus on getting your highly utilized cards down before 60% as quickly as you can.  I was in a similar situation to you not that long ago and I saw big gains in my FICOs once I started stepping back from the "near max" threshold.  It'll also help if you are able to make sure to pay above minimum on all of your cards, even if it's just $10 over minimum.  By the time you have pushed everything below 60%, some of your lower balance cards will be easy to knock out with single payments, and then you can snowball your payoffs from there.  Good luck!

CH7 Filed Dec 31, 2018; DC Apr 9, 2019
FICO 8 at DC (Apr 15, 2019):
FICO 8 current (June 29, 2022):
Total revolving credit limit: $149,150 Utilization: 9% Inquiries:

Who I've burnt: Amex / Discover / Chase / Wells Fargo / CapOne / Barclays / Citi / DSNB / US Bank / NASA FCU / Apple FCU / Synch / Comenity
Who let me back in: CapOne / Citi (Retail) / DSNB / Synchrony / Comenity
Message 2 of 8
ACsteel
Frequent Contributor

Re: Paying off or paying down?

I would suggest you try paying off the cards with the highest APR first since they will incur the most debt every month.

 

At a glance your debt credit to debt ratio is to high, you should see a huge boost in your FICO once your debt goes south of 30% (try to keep it as close to 0% as possible). Think about downsizing your credit portfolio to make it more manageable and make your risk assessment lower. 

Message 3 of 8
Creditaddict
Legendary Contributor

Re: Paying off or paying down?

since many of these are store cards and extremely high interest I would focus on 1 card at a time with highest rate first and down.

Message 4 of 8
longtimelurker
Epic Contributor

Re: Paying off or paying down?


@ACsteel wrote:

I would suggest you try paying off the cards with the highest APR first since they will incur the most debt every month.

 

At a glance your debt credit to debt ratio is to high, you should see a huge boost in your FICO once your debt goes south of 30% (try to keep it as close to 0% as possible). Think about downsizing your credit portfolio to make it more manageable and make your risk assessment lower. 


Right, there are 2 major ways to payoff, each with advocates:

 

1) Pay off the highest APR card first.  This reduces total cost of interest

2) Pay off the smallest balance first.  This is for people who need to see success, as if the card with the highest APR has a high balance, with approach 1 you can pay for several months without seeing apparent progress.  Approach 2 allows you to see that you no longer owe anything on this card.   But the interest costs are higher than the first approach.

 

 

You can also try hybrids suggested by others, reduce utilization on all the cards by paying each.  Personally, don't recommend this as it doesn't have either of the advantages of 1 or 2, but might work for some in showing score improvement.

Message 5 of 8
BootStraps
Established Contributor

Re: Paying off or paying down?


@jjcor wrote:

I have a few credit cards that have high utilization repoting on them. I have about $900 left over monthly to pay them down. Should put that whole $900 towards paying off one card at a time or spread it across all of them? Im trying to get my score above a 640 by this coming March, which its pretty close but I didnt know which way to get there quicker (if there is a way). Here's what Im working with right now and my credit card balances.

 

EQ - 630

TU - 667

EX - 637

 

Amazon - 519 (700 limit)

Furniture Row - 762 (1400 limit)
Alliance federal credit union - 815 (1000)
Walmart - 913 (1400 limit)
Sweetwater Music - 903 (1200)
Capital One - 1185 (1200)
Barclays - 1378 (1500)
Discover - 1562 (1700) 
Lowe's - 3158 (3200)
Credit One - 0 (450)
Wells Fargo - 0 (300)
Chase - 0 (500)
Home Depot - 0 (500)
Sams Club - 0 (600)
 
Thanks for any input and advice!

The cards that I highlighted in red are all using over 90% of the credit limit. Anytime you are over 90% the card is considered "maxed out" and you take a hit to your credit score. My suggestion is that you first bring all of your cards out of the maxed range.

 

After that, I would try to bring as many of the card balances to zero as you can before march. That would mean paying down the smaller balances first. This does mean that you will pay more interest if any of the larger balances have a higher rate than the lower ones but the number of cards carrying balances affects your score as well. If you happen to run into some extra money and can pay everything down, make sure that you leave at least one card reporting between 1-9 percent; you don't want then ALL reporting zero because that will lower your score as well.




Starting Score: All Under 590 (8/2011)
Current Score: Ex: 676 Eq: 681 Tu: 683
Goal Score: Ex: 725 Eq: 725 Tu: 725

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Back in the Garden 4/22/16 Smiley Happy
Message 6 of 8
jjcor
Established Member

Re: Paying off or paying down?

Thanks! I know about the high apr an snowball effect but I am trying to just bring the score up for the mean time. I didn't know that they consider it maxed out when it's above 90%. I'm definitely going to bring those down first. Thanks again for the info!
EQ - 642 EX - 661 TU - 671
Message 7 of 8
Anonymous
Not applicable

Re: Paying off or paying down?

 

I would pay TWICE the minimun on all cards, and whatever funds are left I will choose one of those near max to pay down extra.

 

Message 8 of 8
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