This may be a redundant question, I am a fool for asking, will paying down a balance on 2 cards that are over limit.... dramatically raise my credit score?
Maxing out your cards is one of the best ways to trash your score - especially if you only have 2 cards which are over limit. This means you're at 100% utilization, and FICO doesn't like that. The magic number for utilization varies, but a good practice is to keeps your cards at 35% or so. I've seen my own score jump substantially after paying down my cards - ALL of them. Let's say you have 5 cards, all at 75 - 85% utilization. If only ONE card is paid off, the score stays roughly the same - maybe a few point jump. Now, let's say you pay off ALL of the cards to less than 50% utilization. The score will jump dramatically. The trick here is to pay off ALL of the cards. Do a search on "utilization" to see what others have to say...
That depends .... how much are you paying down your cards? They say the "average" American has their cards at between 32 and 35 percent utilization (meaning if your credit limit is $1,000, then the average person has about $320 to $350 balance on the card). The FICO simulator told me that if i paid my cards down to 90 percent utilization, that would jump my scores from 650 to over 700. Are you looking to buy something? If your cards are over your limit or close the limits, the theory is that you are having money issues and aren't managing your credit well and you might have issues getting a loan or you might just get higher interest rates. also, when looking for a mortgage, they will calculate your monthly debts to see how much of a mortgage you can afford, and your minimum payments on your cards will be factored in that. Too much revolving debt always looks bad. It can only help to pay it off. how much it helps depends on how much you are going to pay off and the rest of your credit report and the score is going to cary from industry to industry depending on who is pulling your report (an auto dealer vs mortgage broker, for example). tboy
I ALWAYS "MAX" OUT A CARD OR TWO...it doesn't change my score as much as PAYING OFF $30,000 DOES!!! "IF" you have empty cards in the SOCKDRAWER it does not matter that much...EVEN IF I "MAX" A CARD OR 2 AT 0.00%-2.90%...if you only have 2 cards...it would really matter... I usually have no less than $50,000 un-used
Re: Re: paying down balance I PAID $30,000 AND LOST BIG TIME... F.I.C.O. has no logic to it... Don't forget that is the company who thinks that ONE INQUIRY should be better than ZERO INQUIRES!!!
Re: Re: paying down balance This reminds me of a conversation I had with my father-in-law. You know the old-school type: always paid cash for everything; one credit card for emergencies; excellent credit; never--ever paid a bill late. He showed me two of his reports--one before paying off a balance, and one after--where his FICO score actually went down after paying the balance. It was a rude welcome to today's world of credit and finance. Most people of that generation feel no need to check their credit reports, believing in the simple notion that if they pay their bills on time then they have nothing to worry about. So rather than launch into a conspiracy theory of CRAs and corporate fat cats, I merely asked him: (a) in what percentile his score ranked (90th+); where I ranked (50th percentile); (b) who's going to pay more interest (obviously those in the 50th percentile); and finally (c) who's more profitable to the credit granting industry--me or him? Needless to say, at least one more person in that generation now "gets it". It's possible to be penalized for no good reason.
Not sure how current this is, but it certainly helps define some of the rules, especially utilization: http://www.ftc.gov/bcp/creditscoring/present/sld008.htm 00- 15% +15 16- 30% +5 31- 40% -3 41- 50% -10 51-100% -18 So, going from >50% to 29% should gain you 23 points. I've gone from 80% to 28% so far this year. My goal is 14% by year's end.
