Pay off or Pay down??

[Anonymous]

This is my first time here, Just wondering if it is better to pay off one cc ($3000) or pay 3 cards down to within the 30-35% mark (I just have the 3).  Which will help raise my score faster?  I'm @ 649 now (trans Union).

Thanks for any help

[Jazzzy]

Hi shutterbug, and welcome.

FICO scoring looks at your overall utilization plus the utilization on individual cards. You definitely don't want any of your cards to look close to being maxed out.

FICO scoring also looks at how many balances you have on cards. So, you want balances to show on as few cards as possible.

If you want to post your balances & credit lines (& interest rates if that matters to you), you'll get some advice on which direction your $$ might go.

[Anonymous]

Thank you so much, here goes:  cc#1 limit, 2600 bal 2327 int rate 9.99

                                                cc #2 limit 2000 bal 1772 int rate 9.99

                                               cc #3 limit 4750 bal 3173 int rate 17.9

thanks again

[bicknar]

From what you have posted here, my generic, knee jerk reaction is to pay off #3 first.  It has the highest balance and the highest int. rate.  If you pay that off, the money that would normally go towards that ballance can go towards the other two cards bringing down their % faster.

Just my first reaction.  Based on your goals though your course of action may very well differ.

[Anonymous]

That's what I was thinking too, just wanted another opinion, I tried to get cc #3 to lower the interest rate (i negotiated the other two to where they are at) but they wouldn't budge.  my goal is to get to 700+  and hopefully be able to get a used car loan with a decent interest rate.  Got a lot going on this year with a son starting college hope I can pull it off.

Thanks again for the help!

[Jazzzy]

So...your utilization percentages are:

cc#1: ~90%

cc#2: ~89%

cc#3: ~67%

To maximize scores, I would probably pay cc#2 off because that's your lowest balance, and that at least gives you 1 zero balance (so you'll have balances on only 2 of the 3). I would then try to get the other 2 cards down. If you want to knock out the smallest balance first on the remaining two cards, pay the remaining $$ toward cc#1. If you want to pay by the highest interest rate, then pay towards cc#3. If you decide to pay down the last two cards according to interest rate, I would still pay some towards cc#1 to get it out of that 90% utilization category.

This is the advice I give because your original question had to do with raising your scores. Me? I'd pay down by interest rate, and the whole thing would go towards cc#3...but that's not the way to maximize your scores.

Will this use all your cash? It would be smart to put some cash in an emergency fund if you don't have one.

[bicknar]

I Agree with Lynette for the score raising strategy.  It all depends on what kind of time frames you are looking at.  So it looks like we have 2 options so far...

To raise score faster pay number 2 first.

To decrease the outgoing fundage, pay 3 first.

And now that i'm putting the options together with the whole scenario, I'm going to say if you are in a hurry for the car and such.... Go with Lynette's suggestions for #2 and keep some in a safety net fund in case that used car turns out to be a lemon (Knock on wood for you).

A

[Anonymous]

I have $4000 from income taxes, I have nothing in an emergency fund, only about $200 in savings.  Still want to pay something down, thats why I wasn't sure where to start.

Thanks for all your advice

[Anonymous]

Thank you so much!  I already have a van that is falling apart so I don't think it can get much worse!!  I have been trying really hard to get my scores up and don't want to do the wrong thing now.  I feel alot better tho when I have some $ in an account to fall back on. (with teenagers seems you always need that).

[Jazzzy]

If you want to put $3k on your cards, try to put the other $1k into a savings account for emergencies.

Then...do not use your credit cards. Can you get by on your income without using the cards? That's about the only way to stay out of the hole and not to have to see next year's refund go to credit cards again.

Plus...with one going off to school...you'll need to get by on your income so that you are not seeing hundreds of dollars go to interest each month. It's amazing what you can do with the $$ you used to spend on interest.