Odd Credit Score question

[ChrisFL]

Brief Scenario.

Let's say I have 2 credit cards, both maxed out at $500 each.

I know that having my balance of these cards under 50% will help my credit score.

What I dont' know is whether I, say had $600, pay off one completely, or pay both down $300 each...does that matter to the score? Is it an overall average or by each card?

Anyone know?

Thanks in advance!

 

[sam_gordon]

Brief Scenario.

Let's say I have 2 credit cards, both maxed out at $500 each.

I know that having my balance of these cards under 50% will help my credit score.

What I dont' know is whether I, say had $600, pay off one completely, or pay both down $300 each...does that matter to the score? Is it an overall average or by each card?

Anyone know?

Thanks in advance!

Are you planning on getting a loan (house, car) in the next couple months? If not, don't worry what your score is. What I'd do...
$500 to pay off card #1
$100 toward card #2
Use the "minimum" balance $$ from card #1 toward card #2. Get Card #2 paid off in 2-3 months. Credit score goes up.

 

[Coconut36]

Having cards "maxed" out is a big factor in lowering your score. However I am with Sam Gordon in that if you aren't actively trying to do something that involves getting a load then the best bet is to pay one off and then "snowball" your payment onto the other card (so take what you paid on the other card and combine it with what you paid on the remaining card with a balance) to pay the other one off eventually too.

 

[tvguy]

I believe your credit score is impacted more by your ratio of credit used to credit available. Doesn't matter how many credit cards you have.

I didn't know they did credit cards with only $500 limits. Both my kids got $2,000 credit limits without jobs and without any credit history. Sounds like you have some sort of issue already on your credit report.

My credit score fell because I closed an unused credit card...thus lowering my ratio of credit to available credit.

 

[AshleyD1983]

Have you thought about subscribing to a credit monitoring service? I subscribe to Citi's service, and they have a "credit analyzer" tool. This will allow you to plug in numbers and see how they will impact your credit score. Just a suggestion.

 

[ccgirl]

Brief Scenario.

Let's say I have 2 credit cards, both maxed out at $500 each.

I know that having my balance of these cards under 50% will help my credit score.

What I dont' know is whether I, say had $600, pay off one completely, or pay both down $300 each...does that matter to the score? Is it an overall average or by each card?

Anyone know?

Thanks in advance!

Honestly, it depends. If your credit is good other than the maxed cards they will look at total debt. However, if you already have issues the one maxed out card could hurt if you pay off the other.

As others have said, if you do not plan on getting a loan within the next few months, pay off the one. If you do plan on getting a loan I would pay 1/2 of each.

Hope that helps.

 

[ChrisFL]

Yes, I'm considering getting a car loan in 3-4 months, so that is why I'm asking...I used to have Equifax credit monitoring but it expired and they didn't even tell me (believe it or not)

Anyway, my credit history is obviously more complex, but I was hoping for a simple answer, I think I understand it better now...thanks!

 

[Cheshire Figment]

I would suggest going over to www.creditboards.com which is similar to DisBoards (in operation) but obviously concentrating on credit situations and not Disney.

 

[Rence]

I read an article recently (sorry can't remember where) that said that the score looks at many things. One is the percentage of total credit utilization - total balances as a percent of total credit limit. It also said that they look at the utilization on each card - so having four cards, one maxed, three with zero - would not be as good as having small balances on four cards.

Less than 50% is good, and less than 33% is pretty much the same as having it paid off. So based on this, in your example, I would try to drop one card below $165 - which would put it below 33% and then pay the other down to less than $250 which would put it below 50%. How you divide the $600 between the two cards won't impact your total credit utilization, but this one they will essentially treat the balance below $165 as if you paid it off and the balance below $250 as a reasonable balance.

 

[Coconut36]

I believe your credit score is impacted more by your ratio of credit used to credit available. Doesn't matter how many credit cards you have.

I didn't know they did credit cards with only $500 limits. Both my kids got $2,000 credit limits without jobs and without any credit history. Sounds like you have some sort of issue already on your credit report.

My credit score fell because I closed an unused credit card...thus lowering my ratio of credit to available credit.

There is a dual factor in closing old unused credit..one is the utilization (your available credit to debt ratio) but it also wipes out your history and that is damaging too.

When you have old unused lines (and it is always recommended you try to keep your oldest lines active whenever possible..charge something now and then and pay it off) it figures into your payment history..it shows what a good credit risk you are as it will show an established history of regular/on time payments (even if it is a zero balance it still reflects positively for you and is why it is advised you keep old ones open whenever possible). When you close them you lose that history and thus also results in a lower score because the calculation loses an established history.

 

[tvguy]

There is a dual factor in closing old unused credit..one is the utilization (your available credit to debt ratio) but it also wipes out your history and that is damaging too.

When you have old unused lines (and it is always recommended you try to keep your oldest lines active whenever possible..charge something now and then and pay it off) it figures into your payment history..it shows what a good credit risk you are as it will show an established history of regular/on time payments (even if it is a zero balance it still reflects positively for you and is why it is advised you keep old ones open whenever possible). When you close them you lose that history and thus also results in a lower score because the calculation loses an established history.

It cost me about 10 points........still left my score high enough to get the lowest auto loans with automatic approval up to a certain limit (well beyond what my new car cost).

 

[Coconut36]

It cost me about 10 points........still left my score high enough to get the lowest auto loans with automatic approval up to a certain limit (well beyond what my new car cost).

That's good. It can depend on how old it is compared to the other active lines and a few other factors as well.

I mentioned it because a lot of times people are told that they should cancel anything zero balance but that is often a really bad idea and will lead to lower scores vs leaving it open and depending on all the other factors of ones credit it can have a really big impact since it hits 2 different parts of the credit score calculation (the utilization and history).

 

[whoopsiedoodle]

I didn't know they did credit cards with only $500 limits. Both my kids got $2,000 credit limits without jobs and without any credit history. Sounds like you have some sort of issue already on your credit report..

While the OP may have issues already, when you apply for a CC you don't have to accept the limit they offer. I have a business CC that has a $500 limit because that is what I told them I needed. I was offered much more but didn't want there to be that much available.

 

[ChrisFL]

I read an article recently (sorry can't remember where) that said that the score looks at many things. One is the percentage of total credit utilization - total balances as a percent of total credit limit. It also said that they look at the utilization on each card - so having four cards, one maxed, three with zero - would not be as good as having small balances on four cards.

Less than 50% is good, and less than 33% is pretty much the same as having it paid off. So based on this, in your example, I would try to drop one card below $165 - which would put it below 33% and then pay the other down to less than $250 which would put it below 50%. How you divide the $600 between the two cards won't impact your total credit utilization, but this one they will essentially treat the balance below $165 as if you paid it off and the balance below $250 as a reasonable balance.

Beautiful, thats good advice as well

 

[tvguy]

That's good. It can depend on how old it is compared to the other active lines and a few other factors as well.

I mentioned it because a lot of times people are told that they should cancel anything zero balance but that is often a really bad idea and will lead to lower scores vs leaving it open and depending on all the other factors of ones credit it can have a really big impact since it hits 2 different parts of the credit score calculation (the utilization and history).

I know it wasn't smart, but I did it just before both my kids hit college, and knew I would be borrowing a lot ($50,000 total) to get them through.

I just looked at my credit report, it lists my ARCO Gas Credit card still, and ARCO shutdown it's credit cards in 1982 and my Montgomery Ward card, and they went belly up in 2001.