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Since I have $5,000 in cash, I could use it to pay down some of my credit card debt, which is around $40,000. Would doing so be a good idea if, within two weeks, I expect to apply for a personal loan and obviously would like the best rate? Assuming no negative factors except high credit utilization, how much should this payment improve a below average score of 640? On the other hand, within 4 weeks from now (unless the loan amount becomes available for use sooner than expected), I will just have to request a cash advance of $2500 for routine living expenses, paying a 3% origination fee for the cash advance. With the loan I expect to pay off all the credit card debt, yet have new monthly loan payments of at least $600. Not a pretty picture, but what makes sense?
Without knowing your total limit, we can't know exactly, but I'm guessing 5000 on 40000 not be taking your utilization below one of the thresholds and wouldn't have much effect. (I'm guessing your utilization is well above 30% right now, but that's not necessarily correct(
@Anonymous wrote:Since I have $5,000 in cash, I could use it to pay down some of my credit card debt, which is around $40,000. Would doing so be a good idea if, within two weeks, I expect to apply for a personal loan and obviously would like the best rate? Assuming no negative factors except high credit utilization, how much should this payment improve a below average score of 640? On the other hand, within 4 weeks from now (unless the loan amount becomes available for use sooner than expected), I will just have to request a cash advance of $2500 for routine living expenses, paying a 3% origination fee for the cash advance. With the loan I expect to pay off all the credit card debt, yet have new monthly loan payments of at least $600. Not a pretty picture, but what makes sense?
Yes it makes sense to apply it to your credit card debt, but no one can know how much of a score improvement there will be. It won't be much. My advice would be to apply it to your highest utilization account, or to try and bring a couple of accounts down to zero. BTW 2 weeks isn't enough to be sure your payment(s) will even be reflected, so if you can, try to make the payments towards accounts which are reporting within the next 2 weeks.
In your scenario, I don't think I'd consider the potential for FICO score improvement to be a motivating factor for whether or not to apply your $5k to your balances... I'd just do it, regardless.
That said.. your score probably won't improve a lot, but I'd bet you'll get a couple points for it. Maybe up to 5 points. It certainly won't be an earth-shattering 50pt gain or anything like that.
But the inportant thing is you'll be 12% closer to being free of credit card debt, so regardless of your score boost, that's a very good thing.
Could be anything from 0 points to perhaps 15 points, depending on if/which threshold is potentially crossed.
As someone already mentioned above, we'd need to know your before/after aggregate utilization as well as the before/after utilization on the card(s) (really all your cards) you're planning on paying down.
First get a copy of your credit report, upto date as possible even if its from CreditKarma or other. You want to see reporting balance vs Credit limit, use the money to pay down all cards to less than 60% UTL, if possible 30%. if you have any SP CLI friendly lenders, ask for CLI's check on here for Syncrony back door numbers for Walmart, Sam's Club and Amazon cards, shoot for the moon, ask for 10k or more they will counter you, and see if you can further improve your UTL over all. Don't apply for new credit or go for HP CLI's. You want to have as much time from last card or HP as possible before you apply for your consolidation Loan, Marcus gave me 5.99% APR after I had did those steps and got my UTL under 30% on all cards.
Good luck.
Just paid off a navy federal credit card with a balance of $9512 out of a high of 24k and a paypal account with a balance of $4165 out of $8440. Pretty much drained my savings doing it but was tired of max $400 and $150 payments on both accounts each month. Had to take screen shots of both for my satifaction and pleasure! Heard paypal was going to start reporting to the credit bureaus so it scared me into paying that thing off real quick! I am waiting for both to hit my credit files; navy federal on about the 23 of the month or so and paypal about the 15th. I'll let you know how much of a bump I get. I have total credit card highs of 49k, zero balances and 2 installment debts left.