Strategy to increase my credit score. Snowball(Low Balance) Vs High Interest. URGENT, PLEASE HELP!

[Optimiztic]

Hey guys, i'm gonna apologize in advance this is gonna be a long post but with reason. I'm really hoping your knowledge will jump start my journey to a great credit score! I'm in my mid 20s and a newlywed. Both the hubby and I are in university and I will be graduating this coming may or august (if delayed). I can't wait to get my diploma and find a job and really expedite my plan towards no debt. 

Currently my credit score is 590 (it was 592 but I applied for a secure credit card and it was declined).

Here is a brief description of my current finances:

Creditor                 Balance         Rate        Payment

Best Buy               $4212.99      25.24%    100.00

Capital One          $2876.28     11.90%     58.00

Care Credit           $703.96       29.99%     26.00

Citibank                 $872.61       20.99%     25.00

Express                 $506.80       24.99%     25.00

Prosper                 $490.88        0%            104.52

Radioshack          $980.00        0%            245.00

Student Loan        $2888.82     0%            50.00

Total                       $13532.34                    $633.52

(BTW my minimum payment for Best Buy is $55 but interest only would be $88 so that's just weird!)

Both BB, Citibank and Radioshack are closed accounts. Radioshack is in collections and the settled amount will be paid off in late March. Since I was delinquent with my Radioshack bills, Citibank decided to close my account as well since Radioshack is via Citibank. Prosper will be paid off in April as per the agreement. 

The CL for BB is $3,000 so I'm way over! And if this isn't bad enough...I am defaulted with my student loan (due to my confusion) and I'm currently enrolled in a rehab program with March '14 being the 9 month mark where the default is taken off my records (oddly I didn't see any mentions of this default on my credit report). I also have an auto loan of $4k left that is paid by sister for her car. Her credit wasn't established at the time of the purchase but hers is good now so I will be doing my best to refinance under name so I can be relieved of it under my  name, but no guarantees!

So my question to you guys is which route do I take: paying of the highest interest first or use the snowball strategy. I understand it'll cost me more via snowball BUT which will help me improve my credit score the fastest?? I like that I'll have majority of my cards via snowball but then again I really don't know what'll help my score the most. Do keep in mind I'm hoping that my income will increase by leaps and bounds. Currently I'm getting unemployment of $700 and alotting $635 towards bills and I'm taking three classes as well. Also I spoke to the collections agency and they said they don't report anything on my credit report except notify citibank it's paid and settled. So can I requet Citibank not to put it on my credit report? Or am I stuck with it for 7 years?? Please help!! Totally appreciate it 

SNOWBALL

Prosper                    April 14

Express                    May 14

Care Credit              Jul 14

Citibank                    Sep 14

Radioshack             Mar 14

Captial One             Feb 15

Student Loan          Jun 15

Best Buy                  Jan 16

Total: $2554.14

HIGH INTEREST FIRST

Care Credit           Jun 14

Best Buy                Mar 15

Express                 April 15

Citibank                 May 15

Capital One          Sep 15

Prosper                 Apr 14

Radioshack          Mar 14

Student Loan        Dec 15

Total: $1989.02

All calculations via Vertex42 Debt reduction calculator- Credit repair Edition

[guiness56]

It would help to know what the limits are on those cards.  If they are maxed out you will be getting double dinged for those.  First, each individual card is scored and if maxed out you will be dinged.  Then if your overall utilization is high you would be dinged for that also.

FICO does not like to see all credit cards with a balance.  Also, having a 0 balance on all of them is bad.

Any of your cards that are maxed out, get them out of that red zone by paying enough on it.  I would at least get them down to 75% for safety.

If your short term goal is raising your score, and paying off some CC, the snowball affect would be better.  You can pay off the lowest balance then use that money for the next lowest balance etc.  Not only does this way free up money for the next balance, it also has a CC reporting a 0 balance faster.  As long as you make your minimum on the others at the same time you are paying these off.

If the goal is long term, then go for the higher interest first.  FICO doesn't care about interest and you are not scored on that.

Either way you do it, I would consider paying off the Radioshack and Citi before anything.  Once those are paid off they will no longer be factored into your utilization %.  The CL will also be taken out of the calculations.

FICO has no memory of utilization.  Your score is only based on what is reported every given month.  If you are at 95% this month but 20% next, that is what your score is based on.  Utilization is the fastest way to increase your score.

[SunriseEarth]

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@Optimiztic wrote:

Creditor                 Balance         Rate        Payment

Best Buy               $4212.99      25.24%    100.00

Capital One          $2876.28     11.90%     58.00

Care Credit           $703.96       29.99%     26.00

Citibank                 $872.61       20.99%     25.00

Express                 $506.80       24.99%     25.00

Prosper                 $490.88        0%            104.52

Radioshack          $980.00        0%            245.00

Student Loan        $2888.82     0%            50.00

Total                       $13532.34                    $633.52

(BTW my minimum payment for Best Buy is $55 but interest only would be $88 so that's just weird!)

Both BB, Citibank and Radioshack are closed accounts. Radioshack is in collections and the settled amount will be paid off in late March. Since I was delinquent with my Radioshack bills, Citibank decided to close my account as well since Radioshack is via Citibank. Prosper will be paid off in April as per the agreement. 

The CL for BB is $3,000 so I'm way over! And if this isn't bad enough...I am defaulted with my student loan (due to my confusion) and I'm currently enrolled in a rehab program with March '14 being the 9 month mark where the default is taken off my records (oddly I didn't see any mentions of this default on my credit report). I also have an auto loan of $4k left that is paid by sister for her car. Her credit wasn't established at the time of the purchase but hers is good now so I will be doing my best to refinance under name so I can be relieved of it under my  name, but no guarantees!

So my question to you guys is which route do I take: paying of the highest interest first or use the snowball strategy. I understand it'll cost me more via snowball BUT which will help me improve my credit score the fastest?? I like that I'll have majority of my cards via snowball but then again I really don't know what'll help my score the most. Do keep in mind I'm hoping that my income will increase by leaps and bounds. Currently I'm getting unemployment of $700 and alotting $635 towards bills and I'm taking three classes as well. Also I spoke to the collections agency and they said they don't report anything on my credit report except notify citibank it's paid and settled. So can I requet Citibank not to put it on my credit report? Or am I stuck with it for 7 years?? Please help!! Totally appreciate it 

---

IMHO, I'm not sure why you're looking to improve your score quickly.  The LAST thing you need is attempting to get more credit.  Given the high UTIL, balances on closed accounts, and accounts in collections, you'll just be getting denials.  You need to improve the credit you have.

However, that being said, I'd pay on the closed accounts first to improve scores.  The balances due count against your UTIL, but you don't have the benefit of their CL counting toward UTIL (badly worded; please see subsequent post). Once those are paid, go in order from the highest interest rates in paying these off.  In other words, make more than a minimum payment on the highest rate cards.  That will get you out of debt most quickly.   Needless to say, don't spend any more on the open accounts until debt is more in control.  

I also would NOT remove yourself from your sister's auto loan, provided that she has a good payment history.  You need as much good credit reporting as you can.  

Is the CA reporting the collection?  if so, they'll update when you settle and you can try to get a GW removal after that time.  

[Optimiztic]

Thank you guiness56 and SunriseEarth for such speedy advice.
Here are some more info requested and some Qs I have:

Does it reflect differently if I'm trying to increase my score faster or slower? I'm looking to rebuild it so I can co-sign for my hubby's car or if we look to get a condo etc in the future. I don't want to be the reason to hold us back. I'm not looking to getting anymore credit cards nor am I looking to make any purchases on my current ones. I know you suggest to not relieve myself from the auto loan but doesn't the $4k hurt me more vs the timely payment? I've been paying all my payments on time with no late ones since May. Upon speaking to the law office/debt collector they say they don't have any connections to reporting it but they let their client Citi know when the settle amount has been paid. To my knowledge citi would be the one reporting it. I have seen some posts where people write the CA to delete the report upon paying the full amount prior to making any payments but I'm almost done making all my payments, so I have no leverage. Any suggestions?

Credit limits:
Bestbuy (closed) $3,000
Capital one $3,000
Care credit $1500
Citibank (closed) $1200
Express $1010 (recently bumped up)
Prosper (loan) $105 per month till April '14
Radioshack (closed/in collections)
Student loan (rehab program)

I also have a chase freedom with CL of $1700 and a discover card with $500. Neither have a balance.

Thanks in advance!!

[guiness56]

---

@SunriseEarth wrote:

---

@Optimiztic wrote:

Creditor                 Balance         Rate        Payment

Best Buy               $4212.99      25.24%    100.00

Capital One          $2876.28     11.90%     58.00

Care Credit           $703.96       29.99%     26.00

Citibank                 $872.61       20.99%     25.00

Express                 $506.80       24.99%     25.00

Prosper                 $490.88        0%            104.52

Radioshack          $980.00        0%            245.00

Student Loan        $2888.82     0%            50.00

Total                       $13532.34                    $633.52

(BTW my minimum payment for Best Buy is $55 but interest only would be $88 so that's just weird!)

Both BB, Citibank and Radioshack are closed accounts. Radioshack is in collections and the settled amount will be paid off in late March. Since I was delinquent with my Radioshack bills, Citibank decided to close my account as well since Radioshack is via Citibank. Prosper will be paid off in April as per the agreement. 

The CL for BB is $3,000 so I'm way over! And if this isn't bad enough...I am defaulted with my student loan (due to my confusion) and I'm currently enrolled in a rehab program with March '14 being the 9 month mark where the default is taken off my records (oddly I didn't see any mentions of this default on my credit report). I also have an auto loan of $4k left that is paid by sister for her car. Her credit wasn't established at the time of the purchase but hers is good now so I will be doing my best to refinance under name so I can be relieved of it under my  name, but no guarantees!

So my question to you guys is which route do I take: paying of the highest interest first or use the snowball strategy. I understand it'll cost me more via snowball BUT which will help me improve my credit score the fastest?? I like that I'll have majority of my cards via snowball but then again I really don't know what'll help my score the most. Do keep in mind I'm hoping that my income will increase by leaps and bounds. Currently I'm getting unemployment of $700 and alotting $635 towards bills and I'm taking three classes as well. Also I spoke to the collections agency and they said they don't report anything on my credit report except notify citibank it's paid and settled. So can I requet Citibank not to put it on my credit report? Or am I stuck with it for 7 years?? Please help!! Totally appreciate it 

---

IMHO, I'm not sure why you're looking to improve your score quickly.  The LAST thing you need is attempting to get more credit.  Given the high UTIL, balances on closed accounts, and accounts in collections, you'll just be getting denials.  You need to improve the credit you have.

However, that being said, I'd pay on the closed accounts first to improve scores.  The balances due count against your UTIL, but you don't have the benefit of their CL counting toward UTIL.  Once those are paid, go in order from the highest interest rates in paying these off.  In other words, make more than a minimum payment on the highest rate cards.  That will get you out of debt most quickly.   Needless to say, don't spend any more on the open accounts until debt is more in control.  

I also would NOT remove yourself from your sister's auto loan, provided that she has a good payment history.  You need as much good credit reporting as you can.  

Is the CA reporting the collection?  if so, they'll update when you settle and you can try to get a GW removal after that time.  

---

Actually that is not true.  Until they are paid off they both count as long as the CL and balance are being reported.

[guiness56]

---

@Optimiztic wrote:
Thank you guiness56 and SunriseEarth for such speedy advice.
Here are some more info requested and some Qs I have:

Does it reflect differently if I'm trying to increase my score faster or slower? I'm looking to rebuild it so I can co-sign for my hubby's car or if we look to get a condo etc in the future. I don't want to be the reason to hold us back. I'm not looking to getting anymore credit cards nor am I looking to make any purchases on my current ones. I know you suggest to not relieve myself from the auto loan but doesn't the $4k hurt me more vs the timely payment? I've been paying all my payments on time with no late ones since May. Upon speaking to the law office/debt collector they say they don't have any connections to reporting it but they let their client Citi know when the settle amount has been paid. To my knowledge citi would be the one reporting it. I have seen some posts where people write the CA to delete the report upon paying the full amount prior to making any payments but I'm almost done making all my payments, so I have no leverage. Any suggestions?

Credit limits:
Bestbuy (closed) $3,000
Capital one $3,000
Care credit $1500
Citibank (closed) $1200
Express $1010 (recently bumped up)
Prosper (loan) $105 per month till April '14
Radioshack (closed/in collections)
Student loan (rehab program)

I also have a chase freedom with CL of $1700 and a discover card with $500. Neither have a balance.

Thanks in advance!!

---

In a sense, yes, it will reflect differently. The faster you pay down your CC debt the faster your score will go up.  If you go the longer route, your score will still go up, it will just take longer.

There is debate on whether paying off and closing an auto loan has a negative affect on your score.  Some swear they have lost a lot of points, others didn't really notice it.  Installment loans, such as autos, are calculated differently for utilization and not included with revolving.  So paying it off shouldn't have a huge impact.  I would at least continue making payments for 1 year to get the good payment history.

A mix of credit is 10% of your score, which is not that much.  There are those who have attained 800s with only CCs and others with only installments.  Anything is possible.

Your score also is calculated on what is in your entire credit profile.

Where the CA is concerned, just because you are in a payment plan does not leave you without leverage.  At some point, if you could pay the remaining balance in full, negotiate an agreement with them for not reporting if you PIF.

We can only give advice and suggestions, in the end it is totally up to you. 

[SunriseEarth]

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@guiness56 wrote:

---

@SunriseEarth wrote:

---

However, that being said, I'd pay on the closed accounts first to improve scores.  The balances due count against your UTIL, but you don't have the benefit of their CL counting toward UTIL.  Once those are paid, go in order from the highest interest rates in paying these off.  In other words, make more than a minimum payment on the highest rate cards.  That will get you out of debt most quickly.   Needless to say, don't spend any more on the open accounts until debt is more in control.  

---

Actually that is not true.  Until they are paid off they both count as long as the CL and balance are being reported.

---

I should rephrase this.   The CL isn't helping UTIL, if the balances due are over the actual CL.   So, if the CL was $1500, but the balance is $2500, it'd be at 167% UTIL.  I apologize for confusion on this....thanks for pointing this out!

[SunriseEarth]

@Optimiztic wrote:

Does it reflect differently if I'm trying to increase my score faster or slower? I'm looking to rebuild it so I can co-sign for my hubby's car or if we look to get a condo etc in the future. I don't want to be the reason to hold us back. I'm not looking to getting anymore credit cards nor am I looking to make any purchases on my current ones

FICO doesn't have a memory.  It's just a snapshot of what your credit is like at a given moment.   How soon are you looking to do the car loan or condo?  

I know you suggest to not relieve myself from the auto loan but doesn't the $4k hurt me more vs the timely payment?

I suggested keeping the loan because it's likely boosting your AAoA and showing positive payment history.   UTIL isn't factored like how it would be on revolving TLs.

[guiness56]

Even closed, any OC account is factored into AAoA.

I would at least keep it open for a year to get that much perfect payment history.