Imoact of paying off Personal Line of Credit

[Anonymous]

So over the past year, I have been been very adamant in increasing my credit score. In 2014, I have increased it from 577 TU (according to credit karma) now to 676!!

Basically, I have three credit cards for a total utilization of 56% and going down every month.

I also have a personal line to f credit 2500 credit limit balance of 1900, going down every month.

To improve score most, should I pay off line of credit first or after credit cards?

[HiLine]

Do not pay off installment loans if you only have one, unless you want your FICO credit score to suffer.

[Anonymous]

My line of credit is a revolving account though, so if I pay off the entire balance of 2500, I would have 2500 again available to use. Its basically a credit card, but without a card lol.

The only thing that confuses me is the various free credit score sites does not factor this limit into my credit utilization ratio.

So I know that paying down any debt would benefit my score, but paying it off entirely and then using like up to 10% of the limit (which is my plan), would this help me more in the short term than paying off a very small portion of a credit card that has like a 98% utilization ratio while making min payments on that line of credit?

I was kind of rambling there sorry lol: basically what's better, the "divide and conquer" approach of just focusing on the line of credit, or "slow and steady" approach of paying min payment on both?

As a side note, or I guess the overarching question, how does having this personal line of credit affect my credit score?

[MarineVietVet]

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@Anonymous wrote:
My line of credit is a revolving account though, so if I pay off the entire balance of 2500, I would have 2500 again available to use. Its basically a credit card, but without a card lol.

The only thing that confuses me is the various free credit score sites does not factor this limit into my credit utilization ratio.

So I know that paying down any debt would benefit my score, but paying it off entirely and then using like up to 10% of the limit (which is my plan), would this help me more in the short term than paying off a very small portion of a credit card that has like a 98% utilization ratio while making min payments on that line of credit?

I was kind of rambling there sorry lol: basically what's better, the "divide and conquer" approach of just focusing on the line of credit, or "slow and steady" approach of paying min payment on both?

As a side note, or I guess the overarching question, how does having this personal line of credit affect my credit score?

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Hello and welcome to the forums.

Since LOC's are revolving accounts they are scored the same as a credit card. Utilization on the LOC right now is 76% (1,900/2,500) which is pretty high.

FICO looks at not only individual account utilization but overall utilization with overall carrying more weight.

If you'll list any other CC's you have with their CL's (credit limits) and balances we can look at your situation in more detail.

[Anonymous]

I have four revolving accounts: (balance/limits)
Chase credit card: 6897/7000
Kay Jewelers cc: 311/4600
Synchrony Bank: 133/1500
Line or credit: 2073/2500

[Anonymous]

Hello. In reference to the combined utilization, I have the following:

Chase Freedom- 2500

Capital One- 1000

LOC- 5000

*Total: 8500

8500x.20= 1700 ( as long as my total utilization is 1700 combined, this would be ok??  In terms of the 20% rule) 

[NRB525]

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@Anonymous wrote:
I have four revolving accounts: (balance/limits)
Chase credit card: 6897/7000
Kay Jewelers cc: 311/4600
Synchrony Bank: 133/1500
Line or credit: 2073/2500

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OP: You want to pay down that Chase card rapidly. That's really high utilization, and taking that balance down will probably be the most obvious way to see some increase in your score. It takes time, so it won't be a huge jump, but you do want it lower.

(says me who has four cards at 60%-70% utilization)

And did I hear you said you are making minimum payments? Hopefully your payments are more than that, particularly on the highest util CC/LOC. The Kay and Sync, not so important with those low amounts.

[Anonymous]

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@NRB525 wrote:

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@Anonymous wrote:
I have four revolving accounts: (balance/limits)
Chase credit card: 6897/7000
Kay Jewelers cc: 311/4600
Synchrony Bank: 133/1500
Line or credit: 2073/2500

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OP: You want to pay down that Chase card rapidly. That's really high utilization, and taking that balance down will probably be the most obvious way to see some increase in your score. It takes time, so it won't be a huge jump, but you do want it lower.

(says me who has four cards at 60%-70% utilization)

And did I hear you said you are making minimum payments? Hopefully your payments are more than that, particularly on the highest util CC/LOC. The Kay and Sync, not so important with those low amounts.

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+1

[MarineVietVet]

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@Anonymous wrote:
I have four revolving accounts: (balance/limits)
Chase credit card: 6897/7000
Kay Jewelers cc: 311/4600
Synchrony Bank: 133/1500
Line or credit: 2073/2500

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If I figured it right here are you utilizations:

Chase credit card: 6897/7000 = 98%
Kay Jewelers cc: 311/4600 = 7%
Synchrony Bank: 133/1500 = 9%
Line or credit: 2073/2500 = 83%

Overall = 60% (9414/15600)

The first thing I'd suggest is stop using any of the cards until you get the balances down. It's extrememly hard to do that when you're adding new charges. Your overall utilization is pretty high at 60% and the Chase and the LOC are also way up there.

Paying off the LOC  will drop overall utilization to 47% which is still high but not a score killer. But your Chase account would still be maxed out and that can make a creditor nervous if the high balance continues for awhile.

If I had the funds to pay off the LOC ($2,000) I might consider splitting the money between the LOC and Chase accounts. By reducing the Chase balance by $1,000 it's individual utilization would be 84%; not as low as we want but certainly better than 98%. After a $1,000 payment the LOC would show utilization of 43%.

Put every extra dollar you have to paying these down/off. I know it will seem like it takes forever but if you are determined you'll see the balances steadily decrease.

Self discipline and setting goals are keys to this. Remember my approach might not work well for you or anyone else and there is seldom a single right or wrong answer to credit management. Only you can decide how to proceed.

Almost forgot. Your original question was how would paying off the LOC impact your score.That's one of those questions almost impossible to accurately predict because all of our credit profiles are different and constantly changing. But since revolving utilization makes up 30% of your total score (second only to payment history at 35%) any reduction in balances should be a positive thing.

 Please let us know how your journey goes.

[MarineVietVet]

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@Anonymous wrote:

Hello. In reference to the combined utilization, I have the following:

Chase Freedom- 2500

Capital One- 1000

LOC- 5000

*Total: 8500

8500x.20= 1700 ( as long as my total utilization is 1700 combined, this would be ok??  In terms of the 20% rule) 

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Hi there.

Sorry if I'm not understanding your post.

What are the credit limits and balances for each account? You need both figures to calculate utilization.