How fast will your score jump/paying off cc's

Anonymous · ‎12-04-2008

Hi there....newbie here and finally ready to get the credit i should have always had..lol. We have roughly 7k in credit card revolving dept....if we pay allof that off or down to the 1-9% what kind of improvement can we see and how long will it take. There are 8 collections that i am sending letters to trying to get those off.

Also we are looking at trying to get out of a auto loan (4-6 months from now) we didn't really put 2 seconds worth of thought into our current loan it was an impulse buy and have regretted it since and owe 19k and it's worht about 9k on a good day......should we start paying down the current auto loan so it's not so upside down or put the cash towards a bigger down payment.

Any advice will be greatly appreciated. Equifax score is 471 right now. We also just purchased a new truck back in june not really sure how much that hurt our already horrible score

THANKS)

Anonymous · ‎12-04-2008

If you were to pay down the balances and bring your overall util to 1-9%, expect nice big jump in your score. You will also get a few brownie points for paying it down over time.

I would save the cash to put towards a bigger down payment. Not only will youhave high chances of getting approved for the auto loan, but it will save you lots in the long run.

llecs · ‎12-04-2008

Welcome to the Forums!

Utilization for CCs plays a huge part in your score. To roughly calculate the point increase, youd' have to do some math. You'd need your last report with score and take the reported balances and divide those into the CLs. Convert that into a percentage and that is your utilization. To confirm the figure, look in your myFICO report. On page 2 or 3, you'll see possibly a utilization figure. If it matches, then you are good to go. If not, some CO'd CCs do and will continue to factor into utilization. You may need to add those using the CL or the "high balance" as the CL and tweak them to make sure everything adds up.

Then, calculate your new utilization. You mentioned 1-9% which is great. In general, if your mix of credit is good, your individual CC util is close to 1-9%, and you don't have any CO'd CCs impacting util, expect roughly 10 points per every 10% of utilization lowered down below the 10% level. So, if you were at 50% and you pay them to $0 or 0%, then expect a 50 point bump.

If you have $$$ in savings to cover any emergency, then I'd probably throw it at the truck. Once lowered, then you could refi if you wanted to reduce the interest and save $$$ in payments. If you sent letters to CAs, then be sure to have the $$$ in hand to cover those.

Anonymous · ‎12-05-2008

@Anonymous wrote:

Also we are looking at trying to get out of a auto loan (4-6 months from now) we didn't really put 2 seconds worth of thought into our current loan it was an impulse buy and have regretted it since and owe 19k and it's worht about 9k on a good day......should we start paying down the current auto loan so it's not so upside down or put the cash towards a bigger down payment.

THANKS)

I would pay extra on the auto loan. For one thing, it will be hard to finance that much negative equity and you'll be limited in your car choice and your financing choices. Also, the auto loan is probably at a higher rate than your savings is paying so you'll make headway faster.