Need some Direction

Anonymous · ‎12-22-2014

Right now I'm sitting at a credit score of 598 according to my capital one credit tracker (charge off from college a few years ago killed my credit.) I'd like to stark working on raising my score, and I have some ideas, but I don't know what order to do things in. I currently have 3 credit cards through capital one, at 98% utilization. I have a crappy car loan at 11.84% apr that is in good standing for all 7 months that I've had it. I also have student loans that I've recently started paying back a couple months ago.

I figure my best bet is to start paying down my credit cards and to refinance my car, but in which order? Should I pay down my credit cards before applying for refinancing to get a better deal? Or should I refinance now and use the "extra" money from the lower payments to put towards the credit cards? I'm not too terribly concerned about what will save me the most money as far as interest is concerned; I want to have the most impact on my credit score that I can. I'm worried about the refinancing inquery lowering my score. I have 12 inqueries currently but the newest one was in May.

I'd really appreciate the guidance.

Anonymous · ‎12-22-2014

Refinancing isn't really going to help your score. OTOH, getting your score up by paying down debt will allow you to get a refi at a lower rate....

RobertEG · ‎12-22-2014

Pay down your CCs.

Reducing revolving % util will give you the greatest bang for the scoring buck.

gdale6 · ‎12-22-2014

@RobertEG wrote:
Pay down your CCs.
Reducing revolving % util will give you the greatest bang for the scoring buck.

@Anonymous wrote:
Refinancing isn't really going to help your score. OTOH, getting your score up by paying down debt will allow you to get a refi at a lower rate...

+1 to both of these.

Anonymous · ‎12-22-2014

Refinancing would free up more funds to put towards CC debt; which would, in turn, help my score. Lowering my monthly payment from the current $500 a month down to $400 would mean $100 more a month to pay down debt.

I guess the real question is how much of a difference do you think I'd get in refinancing between a 598 score and a 620 score? Would the difference be enough that it's worth spending 4-6 months paying off CC debt before hand? Or should I do it now and potentially potentially pay down my CC debt in 2-3 months? I assume getting up to 620 faster would in turn mean a quicker rise in score in the long run? More months on record with a good utilization percentage and what not?

Anonymous · ‎12-22-2014

Wellll....You didn't say how MUCH credit card debt we're talking. $500,$5000, $10,000?

UTI% has no 'memory', so all the boost you're going to get from it comes right away. 620 seems to be a signifigant 'breakpoint' where you may get pretty decent interest rates, maybe half where you are now. If you have any accounts with a CU, ask them what a 620 score is going to get you for auto refi rates. If you're not a member of a CU, join one ASAP. I'd suggest SDFCU.

If the CC debt is not 'really high' I can show you a way to pay it off with out really paying it off....

Anonymous · ‎12-22-2014

$2,683.50 out of my $2750 limit.

What are the benefits of joining a credit union?

Anonymous · ‎12-22-2014

"If the CC debt is not 'really high' I can show you a way to pay it off with out really paying it off...."

I'll bite...

And Slynk, I'd pay down the CC debt. It isn't an excessive amount, but with scores on the low end and high utilization, I doubt you'd see the rate difference that you're hoping for on a refi.

Anonymous · ‎12-22-2014

So after digging around and playing with the capital one credit simulator, it looks like I could see a 40 point boost by taking a personal loan for about $2000 and using it to pay down my credit cards. I could go from a 598 to a 638 according to the simulator. Anyone know how accurate this thing is?

The personal loan that I'm approved for has higher apr than my credit cards, but with a 12 month length the difference between 22.9% and 35.82% isn't all that significant (A difference of $150~ it looks like; assuming I don't pay it off early.)

Any downsides? Anything I'm missing? Seems like for my credit, this would be the best use of my money. Within a month I could boost my credit score and drop my car payment via refinancing.

Anonymous · ‎12-22-2014

Aparently eliminating the balence, instead of keeping <30%, would bump me up an additional 10 points making the final score 648 (would push me up from poor to fair credit.) I thought keeping a balence was better than eliminating it?