7
Apr

Best way to pay off credit cards to improve credit score?

Posted by Admin in Wednesday, April 7th 2010   15 comments already   

As a college student, I’ve racked up some credit card debt. I have never missed a payment, and have always paid at least $5-10 over the minimum amount.

My grandfather recently passed away and he left me quite a large sum of money. What would be the best way to pay off these credit cards? Should I pay half one month, and then half the second month?

The goal here is to a) settle my credit card debt, and b) improve my credit score. The inheritance money will be released to me monthly until the amount expires (around $500 a month for the next 10 years). Any guidance/suggestions are greatly appreciated.

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15 Comments Already

mygif
fabrisgirl Said,
April 7th, 2010 @8:13 am  

Get them all consolidated into one debt and cut up your cards :)

mygif
~*~*~*~*~*~*~*~ Said,
April 7th, 2010 @9:08 am  

I would try to pay the balances off in full as soon as you can. If you are still using the cards that will show that you still have revolving credit but whenever possible, pay off credit card debt in full just don’t close the card.

mygif
nocera1414 Said,
April 7th, 2010 @9:39 am  

Pay in full

mygif
She Said,
April 7th, 2010 @9:48 am  

it’s best to keep the balance below half of whatever your credit limit is. Also in order to pay towards the principle as well as the interests double your minimum payment

mygif
Apples to Apples Said,
April 7th, 2010 @10:18 am  

I would spread it out over a few payments. When granting credit, creditors look at how well you are able to maintain making monthly payments. Having credit lines open with no balance doesn’t look great either. It’s strange, but they actually want to see you using some of your credit. This is per a loan representative that granted me a loan two years ago.

mygif
yomero Said,
April 7th, 2010 @10:55 am  

its better to keep paying month after month but pay more than ur minimum. by doing this you are showing that u are responsible and can keep making a payment. its better than buying something and just paying it off next month.

mygif
blondee Said,
April 7th, 2010 @10:57 am  

Well, at least you are mature enough to want to fix this. You have the right idea. Sit down and make a list of what you owe. Take care of the smallest ones first, and continue making the payments the way you have done. Every small debt you pay off take that payment and apply it to the larger ones. Make double payments whenever you can. Watch your spending and don’t charge any more. First thing you know, you’ll be out of debt, and what a wonderful feeling that is!! THEN, when you do charge, keep a list of your charges and set a limit for yourself, so that you can pay your cards off in a timely manner. Good luck my friend.

mygif
NC Said,
April 7th, 2010 @11:29 am  

It really doesn’t matter, as long as you pay it down within a few months. FICO scores are computed based on a mix of factors:

Payment history – 35%
Amounts owed – 30%
Length of credit history – 15%
New credit – 10%
Types of credit used – 10%

By paying down, you will decrease amounts owed, which will eventually (but NOT instantaneously) result in a higher credit score…

mygif
timothy t Said,
April 7th, 2010 @11:53 am  

Hello,

The best thing to do, is pay them off, but keep the lines openned. It’ll improve your score significantly in a few months.

The reason I know this is because I sell Mortgage Loans for a living, and it is critical to have a good FICO score. So of course, I do my research so my clients would get better FICO scores to get better Mortgage Rates.

Thanks,

Tim

mygif
Jen Said,
April 7th, 2010 @11:55 am  

The best way to improve your score is to pay the balances off as quickly as possilbe, but do not close the account, just do not use the cards. If you keep the account open it shows you have available credit that you are not using and it makes the score go up. If you cannot pay the balance in full reight away, that’s ok, you want some payment history, but always try to keep the balance below 50% of the credit line on any one card, or no more than 90% on a single card if you have several cards that have 0 balances. example: if you have 5 cards at a $1000 credit line each or $5000 credit available on all cards, keep no more than $500 on any one card or no more than $900 on a single card if you only use one and the other 4 are empty.

Again. don’t close the accounts even after they are paid. I closed several of mine not knowing this and ended up hurting my score.

mygif
Chuck Said,
April 7th, 2010 @12:45 pm  

Do not drag this out longer than is absolutely necessary. Pay those cards off, cut them up, and don’t apply for any more.

mygif
Faye H Said,
April 7th, 2010 @1:11 pm  

Pay them off. I would not necessarily close the accounts. If you continue using them, and I would, use them only for things you would buy anyway and pay the entire bill when it comes, always leaving a zero balance.

Once you have them all paid off, use that $500 a month to make some wise investments so you’ll have some of it left down the road. If you spend it all, 10 years from now when it ends, you won’t have much to show for it. $500 a month can go a long way towards a fantastic investment account or savings for a down payment on a house when you finish school.

Congratulations for thinking this out and not just going out and blowing all that money!!

mygif
BillK Said,
April 7th, 2010 @1:21 pm  

Paying off all of your debts immediately does not help you with improving your credit. Because you should show lenders that you are a good BORROWER. Your existing report shows lender that you pay your payments in full once you have money and you don’t when you are financially in trouble. Therefore you are not a good borrower to a lender (you are risky and they don’t make money out of you). So here some stuffs I suggest to do to polish your credit report and improve your credit:

1) Do not spend more than 1/3 of your limit. That’s a rule. Say you have $500 credit limit. So do not spend more than $150 with your credit.

2) Do not pay your existing credit balance in full every month. Pay more than minimum payment but do not pay full. Say your minimum due is $10. I suggest you to pay like $50-$70 each month. Yes you should pay some interest but that’s a price to improve your credit.

3) There are lots of articles here which you can find useful to boost your credit.
http://www.howtoestablishgoodcredit.com/Credit_Articles/index.php

mygif
iggyfifi Said,
April 7th, 2010 @2:07 pm  

First, never pay minimum payments. Pay the whole balance every month! I would pay off your entire balance as soon as possible, then to improve your credit score, get a second student card from http://www.creditdorm.com/no_credit_history.htm and make small purchases with it. Having 2 lines of credit will build up your score!

Good Luck

mygif
lacy k Said,
April 7th, 2010 @3:07 pm  

Certain Sellers are set up to take credit card payments. This will require you to provide your credit card information to the seller. To protect yourself, check with your credit card provider for protection terms and conditions.

Advantages
Payment is traceable.
Payment is immediate and convenient.
Provides limited liability coverage.
Credit card companies typically provide some level of identity and purchase protection whether you are paying with your credit card through PayPal, or directly to the seller. learn more about it at: http://www.credit-card-forums.com/forum/20;Credit-Forum

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