Payoff all of one card or some of two cards?

[Anonymous]

I have three credit cards. One for my monthly living expenses that I pay off fully every month. One has a limit of $15,200 and the other has a limit of $8,000. Over the last year, I've put $11,000 on one and $7,800 on the other. The $8,000 card is 0% interest for about one more year. The other is 11%. My current score is 695. Before putting all of that debt on the cards, my score was 800-820. Oldest line is 16 years. I've never been late with any payment, never missed a payment, etc. I have 25K in my checking account, so I can pay off 100% of the debt whenever I want.

The $7,800 debt is from a wedding, and the $11,000 for unexpected medical expenses. I want to purchase a mobile home to put on a lake lot I own to use as a weekend/vacation home. Rates on mobile homes are high even for people with excellent scores, and can easily go to double digits for average scores like mine currently is. I've been planning to buy a vacation home for some time, hence the reason for putting these other expenses on a CC instead of paying cash. I wasn't expecting a 100+ point loss as a result.

Now that all my expenses are taken care of, I'm ready to pay off most of the debt in an effort to get my score up to at least 740, but preferably 760 as those are the numbers I've been told by lenders that they give the best rates for. The credit simulator says that if I pay off $8,000 then my score goes up to 746. $11,000 brings it up to 761.

Question is, do I pay off the full $11,000 on one card and leave $7,800 on the other or do I pay something like $8000 on one and $3000 on the other? Some other ratio? The simulator says if I pay off $13,000 then my score will go all the way up to 792. Interestingly, if I pay off $12,000 then I only go to 764. Does that sound reasonable? What makes a 30 point swing between 12 and 13 grand? I can pay off $13,000 if needed, but I'd like to keep as much cash on hand as possible for a down payment and land improvements. Once I've bought the trailer and fixed up the land, I'll pay off any remaining CC debt.

I want to buy the trailer by the end of November. My balances get reported around the 10th. That gives me about a week to make this payment. Will the scores update immediately or will it take a few cycles?

So...how do I divide up that $11,000-$13,000 payment between the two cards?

[SouthJamaica]

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@Anonymous wrote:

I have three credit cards. One for my monthly living expenses that I pay off fully every month. One has a limit of $15,200 and the other has a limit of $8,000. Over the last year, I've put $11,000 on one and $7,800 on the other. The $8,000 card is 0% interest for about one more year. The other is 11%. My current score is 695. Before putting all of that debt on the cards, my score was 800-820. Oldest line is 16 years. I've never been late with any payment, never missed a payment, etc. I have 25K in my checking account, so I can pay off 100% of the debt whenever I want.

The $7,800 debt is from a wedding, and the $11,000 for unexpected medical expenses. I want to purchase a mobile home to put on a lake lot I own to use as a weekend/vacation home. Rates on mobile homes are high even for people with excellent scores, and can easily go to double digits for average scores like mine currently is. I've been planning to buy a vacation home for some time, hence the reason for putting these other expenses on a CC instead of paying cash. I wasn't expecting a 100+ point loss as a result.

Now that all my expenses are taken care of, I'm ready to pay off most of the debt in an effort to get my score up to at least 740, but preferably 760 as those are the numbers I've been told by lenders that they give the best rates for. The credit simulator says that if I pay off $8,000 then my score goes up to 746. $11,000 brings it up to 761.

Question is, do I pay off the full $11,000 on one card and leave $7,800 on the other or do I pay something like $8000 on one and $3000 on the other? Some other ratio? The simulator says if I pay off $13,000 then my score will go all the way up to 792. Interestingly, if I pay off $12,000 then I only go to 764. Does that sound reasonable? What makes a 30 point swing between 12 and 13 grand? I can pay off $13,000 if needed, but I'd like to keep as much cash on hand as possible for a down payment and land improvements. Once I've bought the trailer and fixed up the land, I'll pay off any remaining CC debt.

I want to buy the trailer by the end of November. My balances get reported around the 10th. That gives me about a week to make this payment. Will the scores update immediately or will it take a few cycles?

So...how do I divide up that $11,000-$13,000 payment between the two cards?

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I would let the first account report a zero balance, and get both of the others down to 9% if possible. Then once all 3 report that way your scores should be pretty high.

It will happen when your 3 accounts have reported, which could be less than a month but won't be longer than a month.

[Anonymous]

To get both cards with a balance down to 9% utilization would require a $16,700 payment. The simulator says that would bump my score to 803. It says I can get to 791 with just a $13,000 payment. I absolutely need to keep cash on hand especially since I've been told that scores over 760 don't help lower interest rates on the mobile home loan. 

Do y'all think the simulator is pretty accurate? I don't understand why a 13K payment gives a 791 score, but a 12K payment returns only a 764. Clearly there's a certain percentage they want to see if that's true, I just don't know if it's based off of total debt or the debt on individual cards.

[SouthJamaica]

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@Anonymous wrote:

To get both cards with a balance down to 9% utilization would require a $16,700 payment. The simulator says that would bump my score to 803. It says I can get to 791 with just a $13,000 payment. I absolutely need to keep cash on hand especially since I've been told that scores over 760 don't help lower interest rates on the mobile home loan. 

Do y'all think the simulator is pretty accurate? I don't understand why a 13K payment gives a 791 score, but a 12K payment returns only a 764. Clearly there's a certain percentage they want to see if that's true, I just don't know if it's based off of total debt or the debt on individual cards.

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No I don't think the simulator is reliable.

Sometimes it's on target, other times wildly off base.

[Anonymous]

The higher the utilization the lower your score. Any account 50% or above is brutal. If you're not a huge rush, here's what I would try:

Pay off that one card before the statement date so you get a $0 statement. You might have to stop using it for a few days, or push a payment from your bank's bill pay in excess of the current balance if you can't.

Pay down the other two cards to below 50%. This will be about $7100.

Once all that updates on your reports see how your scores react. Consider asking for credit line increases at that time (if you can hold off until the next SP/AR, even better)

[Anonymous]

Just for clarity, it sounds like the following is true:

      (1)  All three cards are currently showing a positive balance on your reports. 

      (2)  Your combined CC debt is roughly $19,500.  (I am estimating that you currently owe $700 on the card you use for monthly living expenses.)

      (3)  You want to pay down at least 11k but no more than 13k (you want to keep extra cash on hand for other purposes).

Is that right?

There are three factors that are involved with CC balances:

(1)  Total or aggregate utilization (which counts all credit limits together)

(2)  Individual utilization (which counts each card and its limit separately)

(3)  Percentage of open credit cards showing a positive balance

#1 matters most.  You will continue to benefit until you bring your total U to < 9%.  You won't be bringing it that low, even if you paid 14k so just paying as much as you are willing to (13k is better than 11k).

#2 only begins to matter when a particular card gets high.  As long as you could bring all your cards to < under 49% each, you'd probably eliminate any individual penalty.

#3 will hit you worst if 100% of your cards are showing a positive balance (that means all three).  You'd get some benefit from this factor with one card showing a $0 balance and more benefit if two cards showed a $0 balance.

If you think that through, it means that you want to pay the card you use for living expenses and the card that is currently showing a $7800 balance down to $0.  That leaves $4500, which you should use to pay down the card currently showing $11,000 (resulting balance of $6500).  That card will then have a 43% individual utilization on it.

You say that "My balances get reported around the 10th".  Does that mean that each of your three credit cards tends to have a statement date of around the 9th or 10th?  It surprises me that all three cards happen to have the same statement date, unless you called the issuers a long time ago and asked for the statement dates to be changed to the same day.  If you are right, however, then you should be fine, as long as you can get these payments made by Tues Nov 1.

Incidentally, if you do not have recent credit reports in front of you that confirm with certainty that all three cards reported on Oct 10 (give or take a day) I would sign up with Credit Karma so you can check your EQ and TU reports, just to be certain.

[Anonymous]

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@Anonymous wrote:

Just for clarity, it sounds like the following is true:

      (1)  All three cards are currently showing a positive balance on your reports. 

      (2)  Your combined CC debt is roughly $19,500.  (I am estimating that you currently owe $700 on the card you use for monthly living expenses.)

      (3)  You want to pay down at least 11k but no more than 13k (you want to keep extra cash on hand for other purposes).

Is that right?

There are three factors that are involved with CC balances:

(1)  Total or aggregate utilization (which counts all credit limits together)

(2)  Individual utilization (which counts each card and its limit separately)

(3)  Percentage of open credit cards showing a positive balance

#1 matters most.  You will continue to benefit until you bring your total U to < 9%.  You won't be bringing it that low, even if you paid 14k so just paying as much as you are willing to (13k is better than 11k).

#2 only begins to matter when a particular card gets high.  As long as you could bring all your cards to < under 49% each, you'd probably eliminate any individual penalty.

#3 will hit you worst if 100% of your cards are showing a positive balance (that means all three).  You'd get some benefit from this factor with one card showing a $0 balance and more benefit if two cards showed a $0 balance.

If you think that through, it means that you want to pay the card you use for living expenses and the card that is currently showing a $7800 balance down to $0.  That leaves $4500, which you should use to pay down the card currently showing $11,000 (resulting balance of $6500).  That card will then have a 43% individual utilization on it.

You say that "My balances get reported around the 10th".  Does that mean that each of your three credit cards tends to have a statement date of around the 9th or 10th?  It surprises me that all three cards happen to have the same statement date, unless you called the issuers a long time ago and asked for the statement dates to be changed to the same day.  If you are right, however, then you should be fine, as long as you can get these payments made by Tues Nov 1.

Incidentally, if you do not have recent credit reports in front of you that confirm with certainty that all three cards reported on Oct 10 (give or take a day) I would sign up with Credit Karma so you can check your EQ and TU reports, just to be certain.

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1) All three cards do show a positive balance. My daily use card generally shows a $200-$300 balance on the report depending on what expenses I have in the few days between payoff and the new statement/report happening. That card has a 5,500 limit, BTW.
2) Yep, about right.
3) Correct.

Yes, I had the option on two cards to request a specific due date. I set both to the 10th years ago, and the 8000 card is new as of 6 months or so ago, and that one just happened to match up within a few days.

I think your suggestion is a reasonable approach. I'd rather pay off the card that's 11% interest instead of the 0%, but since they'll all be paid off shortly after I close on the trailer, the interest on that one card may be a small price to pay for a better score/rate on the trailer.

Is the $0 balance on two cards and the third at 43% going to make a significant difference vs $0 balance on two cards and about 70% balance on the third if I pay off the interest accruing card vs the interest free card?

[Anonymous]

Nobody can tell for sure because you have almost no margin for error.  You've got to come up with a plan and pay the cards down in the next three days.  No luxury of trying different approaches.

I will say that you experienced a huge penalty which was undoubtedly associated with running up balances well over the 50% mark on these cards.  To toy with that is fine if you have time.  But you want to take out the loan in four weeks from now.  So you don't have time.  I cannot promise you that a card at 70% penalty would not experience a sharp penalty.

[Anonymous]

There is a plan B which would get you less scoring points than the one I suggested, but which would incorporate your desiire to be paying down high interest debt more than the 0% card.

In Plan B you would still pay off the "daily expenses" card.  You would also pay down the remaining cards to 45%.  Then with the remaining funds (whatever is left of the 13k) you would put it toward paying down the high interest card.

This will give you two cards showing a balance rather than one, for which you will likely take some penalty.

A key step in making your decision is to calulate how much extra money you would spend in interest during the next six months if you went with Plan A vs.plan B.  If that turns out to be enough to bother you, then go with plan B.

[Anonymous]

IMHO sir, when I first read this the thought that came to mind was getting your utilization on each card down. I have read (regarding total utilization) that you should keep it below 30%. I would imagine that is true or credit cards too. I calculated your cards for 25% utilization nd came up with this.

25% of 15200 = 3800

25% of   8000 = 2000

11000 - 3800 = 7200

7800   - 2000 = 5800

7200   + 5800 = 13000

Lol, I hope I don't look stupid here. The previous poster stated that it is bad if you have all 3 cards showing a balance. I'm sure they know more than me. But, if the one is only 200 or 300, why not pay that and put the other two both under 30% percent utilization? If you are really set on paying off the one (or have already done so), then I would recommend requesting a credit limit increase on those cards. That would also lower your utilization and increase your overall credit. I just got an increase (my first, I'm new..but I've read a lot!) and my increase was available instantaneously. So, you can still do that before your statement cut off. Just be sure your card companies do not do a hard pull. There is a site out there that lists all the card companies and what kind of pull they do for credit increases. I can't remember it off hand but a Google search will pull it up.

Well, good luck to you and enjoy that new property!