Which debt should I pay off first for the biggest score bump?

[Anonymous]

Hello,

My wife and I are looking to get pre-approved after the new year and my score is currently hurting because of high utlization. I'm going to take $10,000 out of savings to pay down some of my debts and will tackle the rest in the next couple of months. Can someone give me advice on what I should pay to help my utlization? Balances are as follows:

Costco Citi $7,000 /$8,000

Capital One Venture $5,654/ $6,000

Barclay $5,213/ $5,690

Walmart $3,596 /$4,000

Capital One Quicksilver $2,800 / $3,500

Discover $1,684 / $2,400

Overstock $0/ $4,300

Should I pay off Walmart, Quicksilver & Discover to zero and throw the other $2,000 at Citi or should I Pay off Costco and put $3,000 towards my Venture? Which will give me the biggest score increase right now? I'd like to get pre-approved to start the build process & I'll have all of the balances paid to zero a few months before we close (builder said it takes approximately 6-7 months to build).

Thanks!

[Kree]

I did head math, but it looks like 10k is just enough to get everything under 48.9%

This should give you the biggest boost, but as with all things FICO YMMV

As you pay down further, you can either pay the smallest balance first to get as many zeros reporting, or you can pay the highest interest rates first, although if you plan to pay everything down in a few months, the interest saved won't be significant.

Option B.

Depending upon other factors in your report, you might get a larger short term boost by paying these down under 48.9% and then taking out a credit consolidation loan, to pay all balances except 1 to zero, with the final card reporting under 8.9% utilization.

Depends upon

-total amount of installment accounts.

-average age of accounts

-total number of inquiries on account.

Also always borrow an extra 20% if possible, and pay a large chunk of the loan back immediately.

edit: typo

[Anonymous]

Thanks for the info. So which ones should I pay off/down first?

[SouthJamaica]

---

@Anonymous wrote:

Hello,

My wife and I are looking to get pre-approved after the new year and my score is currently hurting because of high utlization. I'm going to take $10,000 out of savings to pay down some of my debts and will tackle the rest in the next couple of months. Can someone give me advice on what I should pay to help my utlization? Balances are as follows:

Costco Citi $7,000 /$8,000

Capital One Venture $5,654/ $6,000

Barclay $5,213/ $5,690

Walmart $3,596 /$4,000

Capital One Quicksilver $2,800 / $3,500

Discover $1,684 / $2,400

Overstock $0/ $4,300

Should I pay off Walmart, Quicksilver & Discover to zero and throw the other $2,000 at Citi or should I Pay off Costco and put $3,000 towards my Venture? Which will give me the biggest score increase right now? I'd like to get pre-approved to start the build process & I'll have all of the balances paid to zero a few months before we close (builder said it takes approximately 6-7 months to build).

Thanks!

---

Barclays 3800

Walmart 2400

Capital One Quicksilver 1800

Discover 1000

Costco 1000

Capital One Venture 1000

This will get the first four of them down to 29% or less, which is the most important thing for FICO 8.

But for your mortgage scores the most important thing is to get all of your credit cards, but one, down to zero.  So if I were in your boots I wouldn't be holding back money in savings, I would be optimizing my mortgage scores. Because the money you save in mortgage interest will vastly eclipse anything you can earn with your savings.

[Thomas_Thumb]

---

@Anonymous wrote:

Hello,

My wife and I are looking to get pre-approved after the new year and my score is currently hurting because of high utlization. I'm going to take $10,000 out of savings to pay down some of my debts and will tackle the rest in the next couple of months. Can someone give me advice on what I should pay to help my utlization? Balances are as follows:

Costco Citi $7,000 /$8,000

Capital One Venture $5,654/ $6,000

Barclay $5,213/ $5,690

Walmart $3,596 /$4,000

Capital One Quicksilver $2,800 / $3,500

Discover $1,684 / $2,400

Overstock $0/ $4,300

Should I pay off Walmart, Quicksilver & Discover to zero and throw the other $2,000 at Citi or should I Pay off Costco and put $3,000 towards my Venture? Which will give me the biggest score increase right now? I'd like to get pre-approved to start the build process & I'll have all of the balances paid to zero a few months before we close (builder said it takes approximately 6-7 months to build).

Thanks!

---

As a first step it is important to get your aggregate utilization (all cards combined) under 49%. If possible get your individual cards all under 49% as well.Then reduce # of cards reporting a balance by paying off your lowest limit card (Discover).

Some credit card companies do balance chasing (they drop your credit limit to just above your reduced balance after you pay it down). If you keep card utilization at a high level month over month for even a few months reduced CLs are not uncommon due to your increased risk classification. Shown below are the paydowns for each card to bring each to 48% utilization. (I chose 48% to give you a little buffer under the 49% threshold)

1) $7000 => $3840

2) $5654 => $2880

3) $5213 => $2731

4) $3596 => $1920

5) $2800 => $1680

6) $1684 => $1152

It looks like total payments for the above is $11,744. This assumes no additional use on any cards. These payments would bring your AG UT% to 41.9%

Utilization thresholds:

1) Fico has defined thresholds for aggregate utilization. Whenever your aggregate utilization crosses above/below a threshold your score will decrease/increase. These thresholds are generally believed to be: 89%, 69%, 49%, 29% and 9%. Best I can tell is the biggest score shift thresholds are 89% and 9%.

2) The same thresholds exist for individual card utilization as aggregate. However, there is no evidence that 9% impacts score and 29% has minimal impact. Key point here is NOT to worry about how many cards are above a particular threshold but rather the card with the highest utilization. The card with the highest utilization controls the metric - so pay them all down. Also make sure NO cards are in max out territory (above 89%) and get them all below 69% ASAP.

3) #/% of total open accounts reporting a balance is a scoring factor as well. If all cards report a balance score takes a beating. So, make sure at least one card reports no balance. Over time try to get % reporting a balance to 50% or less (3 max in your case)