Which is better for your FICO score?....?

Question

If you have 6 credit cards all at their limits, and can pay the minimum payments on all cards AND either:
1) Completely pay off one of the 6 cards.
OR
2) Pay an equal amount on each card to get the balance down to about 80% of the credit limit on each card.

Which option results in a better improvement to your FICO score?

Answer 1

Some decent answers here so far, but not the WHOLE picture.

Your FICO risk assessment is made with the sum total of all available credit. Types of credit and payment history are big contributors to the score as well.

Assuming you're paying all 6 cards on time, which you'd better, as this has an ENORMOUS impact on your FICO score, let's look at the other two items.

First, credit type. All credit affects your score, but some have a positive effect and others either a not-so-positive or negative effect. Store credit cards, those cards given by retailers that DO NOT have a major credit card logo on them, can potentially hurt your FICO score even if they're in good standing. If you have any of those, pay them down first and get rid of them. While closing credit accounts CAN have a negative effect on your score, the risk factor that FICO applies to credit of this type can hurt you worse in the long run.

Now let's talk about your TOTAL credit. FICO's calculations are made on the SUM TOTAL of your available credit. So, if you have 6 cards that each have a $1000 limit on them, you have $6000 of available credit. Now total the balances on all those cards. Let's say it's $4800 (80% of total). Regardless of WHERE the credit is, the net result on your FICO will remain the same. If you have 1 card with a $0 balance and the remaining $4800 is on the other 5 cards, it's the same either way.

The effect is based on percentage of credit used. 0-30% and your score will not be effected negatively. In fact if you're making your payments on time (THE MOST IMPORTANT THING) then your score will continually go up. 30-50% and your score starts getting dinged pretty darn good. For every point over 50% your credit will get TRASHED. The higher, the worse. So if you're sitting at 80% of available credit expect your score to be hurt until you can bring that balance down below the 50% mark.

Now, since it's the sum total of all credit that makes things happen on your FICO score, this allows you to be smart in how you pay off your credit cards.

Pay off those cards with the highest interest rates first. Pay minimums on all the others until you have that first card paid off. Once it's gone, move on to the next highest interest rate. If any of those cards are retail cards, CLOSE THEM IMMEDIATELY. YES, it might ding your credit by pushing the percentage of available credit to used credit up over 50% again, but it WILL be worth it in the long run. Besides, you're going to get the rest of those cards paid down below 30% anyway, right?

Good luck man. Don't get disheartened. I've been there. Get those high interest cards paid down first and keep on keeping on. Before you know it, your FICO score will be in the 700's!!

Answer 2

Make payments equally on all of the cards, as the closer the cards are to their limit, the higher the risk of a missed payment. The credit score analyzes risk, so having 5 cards right at the credit limit, and one paid in full is not going to improve your rating. Getting the balances down on all 6 cards will be more beneficial.

Answer 3

FICO score is an appraisal of between the three US credit reporting agencies. This quantity determines, many situations, your eligibility for acquiring charge playing cards, mortgages, etc from a lending agency. At age 18, regardless of the reality that, i'm not confident you need to be in touch about what your score is and the way it impacts you. the in simple terms proper 'good' score for US voters is 680. the optimal is, i experience, 850. that is the suitable FICO score each person can income. so that you'll discover your score of 535-585 isn't inevitably a good quantity. not too problem, regardless of the reality that. a number of elements are leveraged jointly to go back up with someone's' score: The type of jobs you've had, the type of situations you've moved or replaced addresses, any liens (that you dont want to be bothered about in simple terms yet), your mastercard charge heritage and different public liens positioned adverse on your credit. if you're only starting up to discover charge playing cards and FICO rankings, it truly is a good rule to save on with: continuously, continuously pay your expenses on time. It doesnt be counted if that is Macy's bill, your telephone bill, or regardless of bill(s) you've: in simple terms continuously pay them earlier their 'due' date. do this, and also you're credit status will skyrocket.

Answer 4

I would work on paying at the extreme minimum the required minimum payment plus a little extra to get the balances down & eventually wiped out. This will show good faith payments as well as bring your FICO scores up.

Answer 5

You can have 6 cards with 50% balance or 1 card maxed out and the card maxed will hurt your credit more than the 6 with 50 % balance. So pay thyem all down to 50%, however do not close them.

Answer 6

I would at least pay off one because it hurts your credit score when you have used more then 30% of your credit balance. So, at least pay off one which will help your credit score and then continue to pay on the other ones and don't be late. Cut up the cards so you can't use them but don't close the accounts because that will lower your credit score.