Debt Repayment and FICO Score

[RoRa]

Question:

Like many others, I need to get out of debt and I need help understanding the best way to do that with the greatest saving and impact to my FICO score.  Recently my FICO score took a huge hit from 747 to 657.  My student loans were delinquent nearly 8 months, simply because I did not know they had gone into repayment and relocated after grad school never having received a single bill.  They were being sent to my parents house and instead of telling me, they simply stacked them away in my old bedroom.  Needless to say, I never paid.  When I found out, I immediately called consolidated, and put them into forebearance until I can figure out the best plan of attack.  

I have a ton of debt for various reasons.  Anyhow, I now have some extra money per month $500 to pay in addition to my base payments.  WHat I would like to know is if I should use that money to pay an unsecured personal loan in the amount of $10,865 with an interest rate of 18% or if I should put that towards credit card payments.  I have 3 cards total as follows:  #1: 3,610 @ 13.24% #2: 5680 @ 9.24% #3: 19,964 @ 7.9%.  

Which debt should I pay first to help raise my score while still saving money from interest?

Thanks in advance for all your wisdom and advice.

[pakman92]

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@RoRa wrote:

Question:

Like many others, I need to get out of debt and I need help understanding the best way to do that with the greatest saving and impact to my FICO score.  Recently my FICO score took a huge hit from 747 to 657.  My student loans were delinquent nearly 8 months, simply because I did not know they had gone into repayment and relocated after grad school never having received a single bill.  They were being sent to my parents house and instead of telling me, they simply stacked them away in my old bedroom.  Needless to say, I never paid.  When I found out, I immediately called consolidated, and put them into forebearance until I can figure out the best plan of attack.  

@I have a ton of debt for various reasons.  Anyhow, I now have some extra money per month $500 to pay in addition to my base payments.  WHat I would like to know is if I should use that money to pay an unsecured personal loan in the amount of $10,865 with an interest rate of 18% or if I should put that towards credit card payments.  I have 3 cards total as follows:  #1: 3,610 @ 13.24% #2: 5680 @ 9.24% #3: 19,964 @ 7.9%.  

Which debt should I pay first to help raise my score while still saving money from interest?

Thanks in advance for all your wisdom and advice.

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No brainer.  Pay down the CC debt.  First reason.  Doesn't make sense to pay 18% interest. which are higher than your CC interest rates.  #2, while mix of credit matters for FICO score, revolving credit utilization is a much bigger facter.  

Pay down the credit card debt.

[RoRa]

Thanks so much for your response.  I want to be sure I understand.  I have both an installment loan at 18% and 3 credit cards.  With that in mind, you are recommending I pay the minimum monthly payment on my personal loan and use the extra $500 per month to pay down the credit cards  that have much smaller interest rates as this will have the most impact on my FICO score? is this understanding correct?  I want to make sure I do this right!!

Thanks so much

[InvincibleSummer3]

My thoughts: Paying off the installment loan makes sense from an interest perspective, but not from a credit score perspective. The quickest way to get your scores up would be to pay down your revolving accounts. 30% of your credit score is based on utilization of your revolving accounts. So the fastest way to get a score boost is to pay those down to less than 10% of your available credit.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Your-Guide-to-Credit-Scoring/m-p/718550#U7185...

Where is your priority? You can either pay down debt faster, or raise your score faster. You can't really do both at the same time. Unless you are planning a big purchase (need a new car or something), I'd pay off the personal loan first.

Something else to consider: if your loans are in forebearance, they're still accumulating interest as well. Be careful there.

[pakman92]

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@RoRa wrote:

Thanks so much for your response.  I want to be sure I understand.  I have both an installment loan at 18% and 3 credit cards.  With that in mind, you are recommending I pay the minimum monthly payment on my personal loan and use the extra $500 per month to pay down the credit cards  that have much smaller interest rates as this will have the most impact on my FICO score? is this understanding correct?  I want to make sure I do this right!!

Thanks so much

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@I'm sorry.  I misread your post.  I thought you were thinking about getting an installment loan @Anonymous percent. Didn't realize you already had one.  I agree with the previous poster.  Paying down the 18% loan makes most finanacial sense.  However, if you have a need to immediately boost your score, you'll get more bang for your buck by paying down the credit card debt.