Payment dilemma

[Anonymous]

I need to buy a car and rent a new place in April. As of now I have two maxed out credit cards:

- Capital One $7,500

- PNC bank    $9,500

I am getting $7,500 in January and plan on paying off Capital One before the cut off  date. This way I achieve AZEO, even though PNC still will be maxed out.

What do you guys think - what's the best way to boost my credit score with $7,500?

[Late2theGame]

Imo you need to find a way to turn that 7500 into about $12,100 to get utilization on both cards below 30%.

Imo, I am uncertain that a AZEO where that ones utilization is %100 and the total or combined utilization is 56% is going to help your score much.

Admittedly I am not an expert, but by the way I understand it AZEO gets its best effect where the card with a balance has a utilization <9%. And in general, you do not gain or lose points when all cards at {edit: >9% but <30%} <30% utilization.

I also think it would look better having 2 cards reporting close to but under 30% rather than having 1 card report zero with a max balance equal to your current CL, and the other card still maxed out.

The other thing to consider is the odds the CC company you owe $7500 might close your account when you PiF. This would leave you with 1 open CC and it would be maxed out.

Hopefully someone more senior will chime in with some advice.

[Anonymous]

Thank you for your reply.

To add to my post - I have 8 credit cards with the total CL of $24K, the other 6 have $0 balances.

So after paying $7,500 I'll be having 40% combined utilization.

[Anonymous]

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@Anonymous wrote:

 To add to my post - I have 8 credit cards with the total CL of $24K, the other 7 have 0 balances.

 So after paying $7,500 I'll be having 40% combined utilization.

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Few things:

1. Get both cards under 80% to stop them from reporting as "maxed" out
2. Get both cards under 30%
3. Pay off the higher intrest card

First step: pay $1,800 on the 9k card and $1,500 on the 7.5k card, $3.3k left.  Split it up or pay down one card as much as possible.

If you're wanting to look good you 2 cards with "similar" "lower" utilization will look better than one maxed out.  Two cards under 30% will look better.  One card <30% looks better yet.  One card <10% is best.  It all depend on how agressive you can get with your paydown plans.

What's you're history look like?  Current scores?

[Anonymous]

AZEO is a strategy for people who need to optimize their score and who have enough money to pay off almost all of their CC debt.  The acronym stands for All Zero Except One -- with the one card reporting a small positive balance.

Having almost all your open accounts reporting $0 affects the scoring factor called "Number of accounts reporting a balance."  But that factor is much less heavily weighted than "individual utilization" which measures how close an individual card is to being maxxed out.  And individual utilization is weighted less heavily than total utilization (all credit limits combined).

That's why when a person has one or more cards at a very high individual utilization, but cannot afford to pay off almost all his CC debt right away, the right strategy is as follows (in order of priority):

(1)  Make every payment on time -- never be late.

(2)  Never pay only the minimum payment on any credit card -- always pay at least $2 more than the MP.  (This will offer you some protection against being balance chased.)

(3)  Pay all cards to under 87% (individual utilization).

(4)  Pay all cards to under 67%.

(5)  Pay all cards to under 47%.

(6)  Use whatever strategy that you like best to pay off the remaining CC debt (Snowball Method, paying off high interest cards first, whatever).

[SomewhereIn505]

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@Anonymous wrote:

I need to buy a car and rent a new place in April. As of now I have two maxed out credit cards:

- Capital One $7,500

- PNC bank    $9,500

I am getting $7,500 in January and plan on paying off Capital One before the cut off  date. This way I achieve AZEO, even though PNC still will be maxed out.

What do you guys think - what's the best way to boost my credit score with $7,500?

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The new place will likely only look for collections and chronic late payments. If you bring a huge down payment when buying your car, that will help immensely. AZEO works big you need to have the last card below 9% card utilization, not your total utilization. I would take a look at your cards APR. Cap One is typically higher APRs. You might want to see if a personal loan will help you achieve reorganizing your card debt at a lower rate. You just have to be discipline enough to follow AZEO

[Anonymous]

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@Anonymous wrote:

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Get both cards under 80% to stop them from reporting as "maxed" out

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Thank you! I didn't know that, I was sure they report max-up at 100%.

[Anonymous]

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@SomewhereIn505 wrote:

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 If you bring a huge down payment when buying your car, that will help immensely.

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What is "huge"? I am planning on puting $5K down on $22K car.

[Anonymous]

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@Anonymous wrote:

Having almost all your open accounts reporting $0 affects the scoring factor called "Number of accounts reporting a balance." 

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Thank you so much! Are you saying I should keep small balances on the cards with $0 balance? How many out of 8? 

[SomewhereIn505]

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@Anonymous wrote:

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@SomewhereIn505 wrote:

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 If you bring a huge down payment when buying your car, that will help immensely.

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What is "huge"? I am planning on puting $5K down on $22K car.

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You didn't mention how much down payment you had for the car. Yes $5K is a good down payment!