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Should I carry this balance on 1 card or 2?

Valued Contributor

Should I carry this balance on 1 card or 2?

I had to make some purchaes that will take 18-24 months to pay off. I currently have the balances sitting on two cards (0% offers).  From a scoring standpoint, what is a good way to attach these?

 

$4600 / $15K (30%)

$13,900 / $23K (60%)

 

These are the only two cards reporting balances. Total credit between all credit lines is $130,700 so I'm at 14.1% utilization (I believe that rounds to 15%)

 

My plan is to get the $4600 balance down to $4200 (28%) then hammer away at the other one to get it below 49% ($11040) while the low balance is gradually paid off. Or, from a scoring standpoint, would it be better to pay off the $4600 first?  I don't know if I'm taking more of a hit from the high utilization on one card or from having two reporting.  

Cap 1 - $23,000 / Lowe’s - $17,000 / Barclay Rewards - $15,000 / Capital 1 - $15,000 / Walmart - $15,000
Cap 1 - $12,000 / PenFed - $10,000 / JC Penney - $10,000 / Discover IT - $6500 / Barclay Apple Rewards - $5400
Merrick - $2400 - Total - $131,300

EQ - 745 / TU - 732 / EX - 742
Message 1 of 22
21 REPLIES
Community Leader
Super Contributor

Re: Should I carry this balance on 1 card or 2?

Do you have any needs for credit between now and your projected date in which all CC debt will be paid off?

 

If not, then I don't think maximizing your score in the short term matters.  Just pay off your debt in whatever way makes you happiest.  That said, a pure score maximizing approach would probably be to first pay both cards to 48% and then both cards to 28% and so on.  Whether you have two cards reporting or one, you are still at < 19% of your cards reporting a balance.

 

Are the scores in your signature current?

 

The only caveat I would give is to always pay over twice the minimum payment on both cards.

Message 2 of 22
Valued Contributor

Re: Should I carry this balance on 1 card or 2?

I don’t foresee needing to apply for new credit but you never know what might come up.  What makes me tthe happiest is maximizing my scores the best that I can.  I’d like to pay the balances down according to that. I try to at least pay a few hundred more than the minimum each month. 

 

The scores in my signature are current.  The highest my TU and EX have been are 748.  They lost points with these balances. The highest my EQ has been before recent was 740.  Either something changed on my report or it likes these balances.  It’s now 3 points higher.

Cap 1 - $23,000 / Lowe’s - $17,000 / Barclay Rewards - $15,000 / Capital 1 - $15,000 / Walmart - $15,000
Cap 1 - $12,000 / PenFed - $10,000 / JC Penney - $10,000 / Discover IT - $6500 / Barclay Apple Rewards - $5400
Merrick - $2400 - Total - $131,300

EQ - 745 / TU - 732 / EX - 742
Message 3 of 22
Regular Contributor

Re: Should I carry this balance on 1 card or 2?

     I agree with CreditGuyInDixie but add one caveat. You say that both cards have a 0% offer, but for how long? It looks like (from your numbers and signature) that the bills are on two of your three Cap 1 cards. I only have QS from Cap 1 and yes they did give me a 0% when I joined, but that was for only a year. I do not know if they have extended it now, or if your other Cap 1s have different terms; but be sure to check it out.

 

     If both cards are not for the full term you plan on keeping a balance, then I would suggest paying the highest interest rate card off first. If the interest rates start accumulating at different times, then pay the one where the 0% drops off first – first. Remember, for every dollar you save in interest, is a dollar you can apply to the principle and get the balance down.

 

     If you want to get your score up fast; think outside the box. I will assume you have no inquiry problems (or no more than 1 in the last year). Get a second mortgage or better yet, cash-out refi your first if you can. Pay the CCs off with it and spread your mortgage over a relatively short time or pay extra principle on it each payment. Or get a personal loan from your bank or CU and do the same. Sure you will have interest charges and possibly fees, but your score will rise. You can always do this once your 0% interest drops off too if you don’t need to borrow anything for a while. Doing a cost benefit analysis will tell you which is the best way to go. Or you can go gardening and forget about it.Smiley Happy

 

Y

Current FICO 8 Scores:
EQ 788 (12/20/17), TU 801 (12/23/17), EX 800 (12/19/17)
EQ 792 (01/22/18), TU 799 (01/24/18), EX 824 (01/25/18)
EQ 794 (02/28/18), TU 801 (02/28/19), EX 820 (02/28/19)
EQ 794 (03/29/18), TU 799 (03/29/18), EX 812 (03/29/18)
EQ 789 (05/06/18), TU 797 (05/06/18), EX 809 (05/06/18)
Message 4 of 22
Valued Contributor

Re: Should I carry this balance on 1 card or 2?

I'm coming to the end of a year of doing this on 2 cards but I was close to 80% UTI on those 2 cards. Overall UTI was just under 30%. I bought a house and instead of buying some new furniture with cash I had, I invested the cash in stocks and used the 0% card offers for furniture. One of the cards had a 12 month 0% offer and the other card had an 18 month 0% offer that runs to this November. It has worked out okay so far because I'm at about 22% return on the stocks so really, anything that I bought on the cards was like getting a 22% discount. (I got lucky!)

 

My scores were hammered down for the past year and I can hardly wait to get back to AZEO. I did pay both cards down to less than 70% UTI because I couldn't stand having UTI over 80%. It appeared to me that it didn't matter if one card had lower UTI than the highest UTI card so I would suggest paying your 60% card to below 50% UTI before hammering away at the lower balance card. You can then use the "Snowball Method".


Starting Score: EQ 653 6/21/12
Current Score: EQ 763 4/9/18 - EX 758 4/9/18 - TU 782 4/9/18
Message 5 of 22
Valued Contributor

Re: Should I carry this balance on 1 card or 2?

I'll have to check to see when my offers end.  I believe they are 12 and 18 months. My plan has been to accept another 0% offer from Cap 1 or another card when I get close to the end dates for the ones that I have. Cap 1 is always sending them. I'm currently looking at one that came in a few days ago. 18 months at 0% with a 2% fee.  I've never thought about getting a personal loan (I don't have a mortgage). It's a good idea but I think I'd pay more interest (9%?) and possibly lose a few points for an inquiry. It's something to think about depending on the situation.

 

I just have one inquiry reporting. That will age off in April.

 

I've wondering if the card with the higher utilization is carrying the most weight. Maybe I should work on that one first?  It will take more money to get it under 50% UTI but for me it will be worth it. 

 

My scores didn't take a huge hit with these balances. I just want them to be the best they can be while I'm paying them off.  I needed a credit check for a home rental last year. That was very important so I was glad my scores were good to get me approved. 

 

 

Cap 1 - $23,000 / Lowe’s - $17,000 / Barclay Rewards - $15,000 / Capital 1 - $15,000 / Walmart - $15,000
Cap 1 - $12,000 / PenFed - $10,000 / JC Penney - $10,000 / Discover IT - $6500 / Barclay Apple Rewards - $5400
Merrick - $2400 - Total - $131,300

EQ - 745 / TU - 732 / EX - 742
Message 6 of 22
Regular Contributor

Re: Should I carry this balance on 1 card or 2?

     Jamie123 you said, “It appeared to me that it didn't matter if one card had lower UTI than the highest UTI card…” It doesn’t matter is true only in certain (and extremely rare and unique) situations. The reality, for most individuals, is that FICO scores both individual and total card utilization. First I reference Post #8 at this URL. http://ficoforums.myfico.com/t5/General-Credit-Topics/INDIVIDUAL-credit-card-utlization-vs-TOTAL-cre...

 

     Second, Credit Cards.com’s Brady Porche cites Family Credit Management’s President Michael McAuliffe; “It’s the comparison of amount of debt to a credit limit that is crucial…It’s the percentage of how much you owe compared to the amount of your credit limit. If you owe $100 on your credit card and have a $1,000 credit limit on it, your ratio is 10 percent. Plus, FICO considers the total amount of revolving debt across all your credit card limits together as well as individually.” https://www.creditcards.com/credit-card-news/credit-utilization-fico-1270.php  My emphasis added.

 

     Masscredit, you said “I don't know if I'm taking more of a hit from the high utilization on one card or from having two reporting.” You also asked whether it was better to pay the $4,600 card down to $4,200 first and then get the other card below 50%. How much of a hit you are taking in either case varies by personal file – no one can really answer that. But you seem to understand the buckets well, and that will allow you to use a fairly logical way to answer your first question.

 

     Let me give this simple example using your values. I assume all your other cards are at zero. You have a total $130,700 CL with individual cards at $4,600 with a $15K CL and $13,900 with a $23K CL. You are right that your total utilization is 14.2% (FICO rounded to 15%). Furthermore, your $4.6K bill is 30.7% (31%) and your $13.9K bill is 60.4% (61%). This gives you a good picture of where you are and now you need to know where you want to go – first.

 

     Your $4.6K bill is already below 50%, but you need to pay $2,500 to get your $13.9K value below 50% (49.6% = $11.4K). I would weight this against getting your $4.6K below 30%. That would cost you $120 ($4,480 = 29.9%). So to take one of your cards to the next lower bracket would cost you $120 + any accrued interest since you reported. If all the discretionary money you have is a couple hundred bucks, I’d pay the $4.6K card down and get a small bump. If you have a couple grand plus, pay the $13.9K card down and probably get a bigger bump since you are going into the next, better, bucket (<50% - you can see Thomas_Thumbs’ Bucket Score link I’ve attached below). If you have 3 grand or more, pay them both down as mentioned and you should see a better, bigger bump. If you have $5,500 you can take both cards down and get your total utilization down to 9.9% as well. That will give you the best possible. You can go on from there; but it is all based upon what you have – a 120 bucks or 5.5 grand?

   

     Now none of this states anything about the financial benefits of paying one card or the other. This only represents score modeling. If there is a great disparity in interest rates on the two cards, paying down the card with the highest interest rate will cost you less money over the long haul; but it won’t necessarily help you raise your score faster.

 

     Understand the buckets. Thomas_Thumb gives a good broad example of the buckets and if you look at his details, you can see there is the 50% bucket for utilization. Now this is not set in stone (and there are many sub-buckets) but it is a good start. His post is the 5th and last on the thread. http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Buckets-Scorecards/td-p/5069914

 

Y

Current FICO 8 Scores:
EQ 788 (12/20/17), TU 801 (12/23/17), EX 800 (12/19/17)
EQ 792 (01/22/18), TU 799 (01/24/18), EX 824 (01/25/18)
EQ 794 (02/28/18), TU 801 (02/28/19), EX 820 (02/28/19)
EQ 794 (03/29/18), TU 799 (03/29/18), EX 812 (03/29/18)
EQ 789 (05/06/18), TU 797 (05/06/18), EX 809 (05/06/18)
Message 7 of 22
Regular Contributor

Re: Should I carry this balance on 1 card or 2?

Correction:

 

     When I said, "...it is all based upon what you have – a 120 bucks or 5.5 grand" I did not mean to imply that you can neglect paying the minimum payment on the other (either) card. If you pay the $120 on the $4.6K card (and that is above your minimum) you still MUST pay the minimum on the $13.9K card. If $120 is below the minimum on the $4.6 card you must still pay the minimum even if higher. I'm sure you understood that, but I can see where others might mistake my statement. Never be late with the minimum payment is the garden rule on the forum. Sorry to all for any possible misunderstanding.

 

Y

Current FICO 8 Scores:
EQ 788 (12/20/17), TU 801 (12/23/17), EX 800 (12/19/17)
EQ 792 (01/22/18), TU 799 (01/24/18), EX 824 (01/25/18)
EQ 794 (02/28/18), TU 801 (02/28/19), EX 820 (02/28/19)
EQ 794 (03/29/18), TU 799 (03/29/18), EX 812 (03/29/18)
EQ 789 (05/06/18), TU 797 (05/06/18), EX 809 (05/06/18)
Message 8 of 22
Community Leader
Super Contributor

Re: Should I carry this balance on 1 card or 2?


@masscreditwrote:

I'll have to check to see when my offers end.  I believe they are 12 and 18 months. My plan has been to accept another 0% offer from Cap 1 or another card when I get close to the end dates for the ones that I have. Cap 1 is always sending them. I'm currently looking at one that came in a few days ago. 18 months at 0% with a 2% fee.  I've never thought about getting a personal loan (I don't have a mortgage). It's a good idea but I think I'd pay more interest (9%?) and possibly lose a few points for an inquiry. It's something to think about depending on the situation.

 

I just have one inquiry reporting. That will age off in April.

 

I've wondering if the card with the higher utilization is carrying the most weight. Maybe I should work on that one first?  It will take more money to get it under 50% UTI but for me it will be worth it. 

 

My scores didn't take a huge hit with these balances. I just want them to be the best they can be while I'm paying them off.  I needed a credit check for a home rental last year. That was very important so I was glad my scores were good to get me approved. 

 


Hello MassCredit.  A few comments:

 

Regarding the text in blue above:

If you have no loans of any kind, including installment accounts like financing furniture through Rooms To Go or an auto lease, then getting a personal loan would be a good idea, as long as you were able to pay off almost all of it immediately but still keeping it open for the full 60-month term.  This is the heart of something called the Share Secured Loan Technique.  The first two posts in that link will explain it.

 

Regarding the text in green above:

Yes.  You are right.  That's why I wrote, in my initial response to you, that a pure score maximizing approach would be to first pay both cards to 48% and then both cards to 28% and so on. 

 

Message 9 of 22
Valued Contributor

Re: Should I carry this balance on 1 card or 2?

Thanks for the detailed replies! One other thing that I'm wonder is if it would be worth it to move some of the $13,900 balance to a third card. I was recently approved for a Discover card. $6K SL with 0% for 14 months. I could move $1740 to that card.  That would bring the Cap 1 balance to $12160 (53%) and the Discover would be at 29%. I'd then be one to two payments away from getting the Cap 1 card under 50%.  I've planned to pay at least an additional $750 per month between all of the cards to have it all paid off in 2 years (maybe sooner).

 

I think the points hit for having a 3rd card reporting a balance would be less than having one card over 50%. Last year I let all of my cards report a balance to see what that would do to my scores.  EQ and TU lost 16 points while EX lost 8.  If I remember correctly, two cards were under 50% UTI and the others were single digits to low teens.  Seems to be more about the utilization than the total number of cards reporting. 

Cap 1 - $23,000 / Lowe’s - $17,000 / Barclay Rewards - $15,000 / Capital 1 - $15,000 / Walmart - $15,000
Cap 1 - $12,000 / PenFed - $10,000 / JC Penney - $10,000 / Discover IT - $6500 / Barclay Apple Rewards - $5400
Merrick - $2400 - Total - $131,300

EQ - 745 / TU - 732 / EX - 742
Message 10 of 22