Who should I pay first?

[Anonymous]

Hi, I am in a little over $20,000.00 in CC debt, not so bad considering almost 2 yrs ago it was in the upper $50's. Been working hard to reduce my debt, I have $1,500.00 saved up and I want to apply it to something, should I put it on the highest balance, the lowest balance,  the highest APR or I have a closed CC that I owe $700.00 on. What would help my fico score? Also, wanted to know on my fico, my EQ score is 696 just got it on the 19th of this month, today the 22nd I bought all 3 scores from True Credit and it says EQ is 744, what gives? Other scores are TU 760, EX 721. Are these scores accurate? Plan a major purchase soon, any suggestions would be much appreciated. Thanks...

[Anonymous]

Hi Frankie,

It would be helpful if you could post the card, rate, and amount on it for each one of your cards.

Do you have any specific idea of when the "major purchase" will be?  If it is for a house, do you have other funds saved up for your Downpayment, closing, etc?

The scores you have from True Credit are called "FAKOs" on these boards because they aren't from FICO and most lenders pull FICO scores.  You can't compare the scores you got from TC with FICO.

Generally, to raise scores, you want to lower your UTIL on the cards...so if you have, for example, $3,700/$4,000 on one card...you want to lower it to $1,950 (ie, under 50% util).  You'd want ALL your cards to report under 50% (or under 30% or under 9%...for better and better scores).

However, because you have such high debt and a low amount to spend, it would be helpful to have all the cards laid out so we can best advise you.

good luck!

[Macroman]

Generally you get the most bang for the buck by paying off the highest interest first.

If score maximization is your goal:

1. avoid totally payingoff the closed account. This will retain the CL in your UTIL calculation.

2. Get all your cards under their respective limits.

3. Either payoff small balances or reduce the amount at high interest according to your option.

4. If it suits you you can try to bring all the obligations under an important utilization threshold.like 50%.

For score maximization you'll get the best bang for the buck by having less than half of revolving accounts report a balance and overall utilization 9% or less (failing in that then as low as you can manage). Individual account utilization means less both financially and score wise than overall utilization.

[Anonymous]

agree with macroman,

If it were me, i would start by paying off the highest apr first - this way you save more and apply that towards the next highest apr - all the way to the least highest - snowball it and you will be debt free sooner than you think

good luck

[Anonymous]

You should pay the closed CC with the balance first. Never leave a balance on a closed card.  After that it is really up to you.  I would pay the ones with the lowest balances first.  Not only will it lower your overall utilization more quickly, it will free up money to use to pay off the next CC.

Unless you got your scores from this site, then they are FAKOs.

Half of your cards should have a zero balance.  Use the other ones but keep the utilization under 9%.  Pay them in full before the statements post to keep from having to pay interest.

Message Edited by guiness56 on 09-23-2009 04:33 AM