Credit Report / Credit Card Payment / Finance Question

[Kremerica]

All,
Question about how a credit card payment will affect my FICO score.

Background:

I have 2 credit cards. These 2 cards have the highest Interest rates out of any of my other bills.

First one has a $1k limit and I have a balance owed of $800. 14% APR

Second one has a $2.5k limit and I have a balance owed of $2100. 14% APR

*Since the Interest Rates are the same, that doesn't have any factor in the question.

*I don't mind having two separate bills vs. a single bill, so that also doesn't factor into my question.

Question:

If I have $1000 to pay on either of the cards, how would it best be applied?

I could do either of the follwing:

A. Pay off the first card completly and $200 on the second card.

B. Pay $400 on the first card and $600 on the second.

My Thoughts:

I think it would be better to divide the money and pay down each card so they are closer to 50% utilization. From what I understand, one of the scoring factors for your FICO is the amount of credit used vs. credit available on each account.

Responses please...

thanks,

 

[nerp]

I'd pay off the first one in full and put the card away. Then put the remaining 200 towards the higher balance one and stop using it until that's paid off.

 

[BigJelly]

First stop using the cards.

As far as I know, your credit rating wont be affected by which card you pay back first--as long as you pay at least the minimum.

What I would do, if I were you, is pay down the credit card that they can raise the rate first--basically if you have one of them locked at 14% then pay the other card first. That way if they increase the rate in the non-locked card you will pay less in interest.

However, if the card rates are not locked--I'd pay them down both down at the same time. The reason is simple: drop the balance of both before they raise the interest rates. FYI from what I gathered on the financial channels (CNBC, Bloomberg, etc.) I think interest rates are going up for anyone that carrys a balance

Then if one of the cards raises the interest rate--pay that card off first.

Finally, make a promise with yourself to never get into credit card debt again.

 

[StageLeft]

From fico perspective, probably get the big one down. Not positive, though.

 

[JMapleton]

Pay off one of the credit cards completely and then ask the cc company for a credit increase.

 

[Kremerica]

The thing I am concerned with about paying off one card completely is the opposite of a couple of the responses.

I am worried that if I pay the small one off and put it away, they will just close the account or they will lower my balance available. If they do either of those things, it will negatively impact my credit score.

Err...

 

[boomhower]

The part of your FICO score that this is going to affect is utilization(I believe its 30% of your total score but I'm not sure on that aspect) There are two parts of utilization. One overall utilization, which you are at 82%. Second is the individual utilization on each card, 80% and 84% respectively. Ideally you never want these to exceed 30% at worst, once they hit 50% it really tanks you score. The biggest score increase you are going to see is by getting them both under 50% which is a bit more money than you have. That is the goal to work towards and makes financial sense they are both the same interest rate.