Good day, im sure if you get more specific on what cards have what balances or their aprs youll get awesome pointed advice. Going from 67k in debt to 10 is gonna do wonders for your score no matter what. From what ive learned you could pay off the higher interest cards first and work down or you could pay off all lower cl cards and then attack the remaining. Good luck
@Red1Blue wrote:How is the scoring for the credit card balances computed? Is it for a single card balance or balance on all cards. What I am asking is I have 18 cards with balances. Should I pay off 16 cards and keep balances on 2 cards ? If I my balance on the remaining 2 cards exceeds the 80% of the credit limit does it still hurt the scores? I am trying to figure out how I should pay off the cards to improve my scores. Total oustanding balance is $67k and planning to pay off $58k. There will be still a $10k balance left on accounts after this exercise. Any suggestions ?
There are three primary credit card related factors afftecting score.
They are:
1) Aggregate utilization (all cards combined). Maintain this under 9% for best results.You will see a significant score penalty when AG UT rises above 9%. Even so, AG UT in the 9% to 29% range is generally considered non risky credit behavior. If you are above 29%, pay down balances to get under 29% as a 1st step.
2) Individual credit card utilization. Maintain this under 29% for best results. That said a great many profiles see no impact on score with a card reporting 30% to 49% utilization. Avoid having a card report over 69% UT. UT % above that level represents increased risk. At all costs, avoid a card max out condition (90% or higher UT% - IMO) as that is a red flag that can have a major impact on score.
3) Number (%) of cards reporting a balance. Best to keep this under 1/3 but up to 1/2 of cards reporting balances is typically a non event.
Note: Aggregate utilization carries by far the greatest weight of the three listed for Fico 8 score. I find that # cards reporting has limited impact on Fico 8 but can significantly impact EQ and TU Fico 04 mortgage scores when more than 50% of cards report a balance.
In your case I would suggest having all individual cards report utilization under 49%. Reporting a balance on 3, 4 or 5 cards (still under 1/3) is unlikely to be a negative with your Fico 8 scores.
@Red1Blue wrote:How is the scoring for the credit card balances computed? Is it for a single card balance or balance on all cards. What I am asking is I have 18 cards with balances. Should I pay off 16 cards and keep balances on 2 cards ? If I my balance on the remaining 2 cards exceeds the 80% of the credit limit does it still hurt the scores? I am trying to figure out how I should pay off the cards to improve my scores. Total oustanding balance is $67k and planning to pay off $58k. There will be still a $10k balance left on accounts after this exercise. Any suggestions ?
As noted, keeping overall utilization down is good. Keeping utilization on individual cards lower, is good. However, there is the factor of your remaining $10,000 which will be a carried balance.
What cards do you have, and are there options to ensure the $10,000 either stays on a low APR card, or can be moved to a low APR card, even if that low APR situation is greater than 50% (up to 80%) of the low APR card?
If you only have one low-APR option, putting as much of that carried balance on that low APR option saves real cash in reduced interest cost out the door, which I think is a serious aspect to consider. FICO is nice, cash is nicer.
