Paying down debt (credit cards, payments, sell, companies)

[cdcdguy]

I have several credit cards near their limit. I have never been late on payments. I have about 12k (total on all cards about 30k) inheritance that I want to use to pay down debt. As far as credit score improvement would it be bettter to toatally pay off one card, or distribute a few k to each of them?

[Padgett2]

You will probably get some disagreement on this, but I would pay off the smallest one, use that monthly payment to pay more on the next smallest until it's paid off too. Keep going until you have them all paid off. Pay more than the minimum, even if it's only a couple of dollars.

The credit companies also look at the NUMBER of cards that you have. You do not need but two or three at the most. They figure that if you have the account, you will probably use it. Cancel all those that you pay off. By paying off the smallest first, you will reduce the number of the cards faster. Fewer cards = lower debt = better credit rating. The total you owe compared to the amount you earn, is another thing that's looked at.

Add up your total interest payment last month. What could you have done with that much money if you didn't have to pay it to the CC companies? The interest amount is YOUR money. You don't have a thing to show for it. And the CC companies is getting all the good from it.

Yeah, this sounds a lot like a lecture.....It is. Congratulations on getting that inheritance. Make it work for you!

[GregW]

Good advice but I would add pay off the high interest cards first or open a new card at very low, like some are offering 0%, and transfer as much of the highest interest debt as posible to that card. Pay that card off with the money you are not paying to the other card companies. Live frugally until you have cleared your debt then start investing in something that will remain secure in the comming market turbulance.

I did this and it is saving us mucho bucks.

[Rggr]

Whatever approach you take to the paying the cards, stop spending more than you can afford (stop using credit cards). If not, you will be in the same situation soon.

[DasNootz]

I'd also suggest cutting your old cards, but not necessarily closing the accounts.

[CouponJack]

Pay off the highest interest rate card(s) first. Consoidate the rest if you can....

As the poster said above, stop spending more than you make, get on a serious budget and stick to it....I know its "lecturing", but 30K of cc debt is not good....

[vukinjo]

Originally Posted by cdcdguy

I have several credit cards near their limit. I have never been late on payments. I have about 12k (total on all cards about 30k) inheritance that I want to use to pay down debt. As far as credit score improvement would it be bettter to toatally pay off one card, or distribute a few k to each of them?

Its tough to answer without knowing how many cards, limits, rates, balances, etc. There are several components to a credit score including both individual utilization and utilization as a whole so in general reducing balances will help.

[sonarrat]

Originally Posted by Padgett2

The credit companies also look at the NUMBER of cards that you have. You do not need but two or three at the most. They figure that if you have the account, you will probably use it. Cancel all those that you pay off. By paying off the smallest first, you will reduce the number of the cards faster. Fewer cards = lower debt = better credit rating. The total you owe compared to the amount you earn, is another thing that's looked at.

It's true that you shouldn't have too many cards open, but at least keep the three that have been open the longest so they can see you've been in good standing for a long time.

In response to OP: I personally wouldn't worry about getting the highest credit score. I would pay off the highest interest cards to the absolute maximum possible as those are costing you the most money, day in and day out, and if you don't nip them in the bud they will only continue to get more difficult to pay down.

[cdcdguy]

Yes, I agree, I know 30k is too much on cards. That is why I am using the money to pay the cards down, then I plan to only keep two. The reason I want to bump the credit score up is I may sell my house, and buy a smaller cheaper one, and want to get the best interest rate I can. Thanks so far to all who have added, and I am still not sure if I will pay one off completley, or pay all down some(the interest rates are all about the same).

[Karla with a K]

cdcdguy
First of all congratulation on being pro active in wanting to get this under control especially if your future plans are to downsize and wanting to secure the best possible rate when you do.

Have you recently pulled your credit and do you know your score?
If you haven't you can go to www.annualcreditreport.com
The credit report is free,but if you haven't checked your score recently I would pay the $5 or $6 to get your score then you will have a baseline to work with.

The ratio of total balances vs total credit limit equals 30% of your score. So getting your balances below 50% of your total credit limit will increase your score.

You say that the interest rates are all about the same, now if they are in the higher range before paying any of them pick up the phone.
Call each card especially those you have a long relationship with and ask for the "account retention" department.
Tell them you want a lower rate, you can tell them you have received a lower "balance transfer rate offer" and want to give them the chance to match the offered rate in order to continue the relationship you have had for a long time.

This is where you having the funds in the bank will help,because knowing you have the money to pay off and "close"(your not going to really close the account but they don't know that) the account will be a good bargaining tool.

If they should use the "your almost to credit limit balance" as the excuse not to lower your rate
Ask them how much of the balance would I need to lower to get a lower rate"

Do this for each card making sure to note offer as well as the name & employee number(or some other way to identify the rep.) of each person you spoke with.
You can then review your list to see where you want to "spend" your money.

I am not a fan of folks closing cards , well except for local store cards.
Remember the 30% of your score is based on the ratio. So if you have $30k in credit limits and balances and reduce the balances to lets say $15k your now at 50%
Go in and close half of them and your in the same situation almost to your total credit limit.
You will be much better cutting up the cards or putting them away and not using them.

If you have been comfortable in the total payments you are currently making continue to earmark that total amount to pay down the remaining balances. Because if all of a sudden your having to pay $300 or $400 less in monthly credit card payments you will find something to do with that money so use it to get the other cards paid off as fast as possible.