what to do

mom2four...what's the reason to get your scores down right now? Are you looking to buy a house or other large ticket item? Are your scores currently above 640? What is the total cc debt you have?

First, ALWAYS keep a cash reserve equal to 3 - 6 months of living expenses - in case of a job loss or major health issue that might prevent a steady income.

Second, if you can comfortably handle your car loans and they are due to be paid in full within the next 12 - 18 months, then I would not pay them off right now and use that money to pay down on your credit cards. Once the cars are paid, then take that $ and apply it to your cc debt. (Since you have 2 car loans and they both total less than $6k, I am assuming they will be paid in full soon.) I am also assuming that your cc interest rate is higher than your auto loan rate.

credit card debt utilization above 30% can drag down your scores. I'm not familiar with this 80% rule. Whether you have one card below 30% but others closer to 80% doesn't really matter. FICO is calculated on total cc debt to cc availability and if your utilization is closer to 80-100%, that will certainly hurt it.

If you are not planning on buying a house or such within the next year or so, I would just pay down your cc debt (evenly) so that they all look like you are using less than 30-50% of your availability. (Another trick to improve you scores are to ask for a credit line increase on your cc. Just be sure NOT to use it! This will help improve the % utilization factor.)

If you're not buying a house right now, then I wouldn't be overly worried about your FICO score right now. Steady consistent payments on your cc debt will reflect most positively on your credit reports and getting the debt down should improve your scores in about 12 months or so. (Pay more than the minimums and get those balances down!)

Hope this helps!

Thanks for the reply. We are not buying a house any time soon. We just bought one three years ago so are set for a bit. The cars will both be paid off in four months. I guess I was looking for the best way to increase monthly cash flow. Right now it is pitiful. Or less than pitiful! We'll see an increase in four months due to the cars being paid off and a second job kicking in. I'm just trying to survive that long without killing our credit score. Everything I've read said to not worry about it right now since we're not going to be buying a new car or house anytime soon. It's just hard to knowlingly let it fall.

Our debt on these cards is about 80K. That's not counting two personal cards totalling $60K. One is on a dmp; the other on a creditor hardship.

I haven't checked our FICO scores at all. Honestly, I don't want to. Nothing has been 30 days late but our debt is pretty high so I know that's hurting us.

If your goal is to increase monthly cash flow, I would use the savings (maybe not all of it because you do want to have something available for emergencies) to either pay down the cards with the highest interest rates or the cards with the highest minimum monthly payments. Most cards charge a certain percentage of the outstanding balance as the minimum amount due monthly, but not all cards charge the same percentage, so you might have some that you are paying a greater percentage rate on than others.

Also, I'm not sure about this, so maybe someone else can confirm, but I think that when your credit used in relation to your available credit is tallied, it is done as an overall total and not by looking at each individual card. In other words, if the percentage is 80%, as you stated, (I'm not sure whether that is correct; it seems to me that I've seen lower numbers listed), then if your total available credit on all revolving accounts is $10,000, your total credit used would need to be under $8,000. But I THINK it doesn't matter how that $8,000 is distributed. As I said, I'm not positive about that, so maybe someone else can verify that or correct me!

thanks alias. I don't remember where I read that so I could be VERY wrong. Either way, using my scenario or yours (total of all credit not each card), our score probably isn't great. I just need to let it go and not worry about it. We're not applying for credit any time soon so we should be fine. Ha! Wishful thinking. :-)

Alias - great minds think alike! ha ha! You and I are in agreement about the cc debt to availability. Until she can get her cc debt down, then it doesn't matter if it is all on one card or spread across several.

Mom2four - at this point, whether you pay off the cars really is immaterial right now b/c they will both be paid off in four months. It's not the auto loans that are pulling down your credit scores. If you pay off the cars with your savings, that will certainly help with your cash flow RIGHT NOW but then you really are robbing peter to pay paul. If it were me, I would just pay the cars as scheduled and use the $6k to apply to the cc debt. As I stated previously, those cc's probably have a higher interest rate anyway.

Let's assume this plan...

2 car loans with $6k balance, 4 months to pay...that means you pay $1,500 each month for the 2 cars.

$80,000 in cc debt. (What are the balances, interest rates and minimums for each card? Please include the one in the dmp program.) Assuming you are paying a total minimum of 4% per card, then your minimum monthly payments are around $3,200. (2% would be about $1,600.) Even if you were to apply $10k from your savings, you minimum payment would still be about $2,800 (4%) or $1,400 (2%), and leave you less in your savings account for emergencies. Sure you could take all your savings and apply it to your cc balances, but I wouldn't advise that b/c if you suffer a job loss or other emergency, then you have left yourself wide open with no safety net.

I am also assuming that the cc that is in the DMP program is the highest balance. Where they able to get the interest lowered or suspended? If so, that is great. How long is your DMP?

So, if you are paying $3,200 ($1,600 @ 2%) and in 5 months (after your cars are paid) then you now have an additional $1,500 to apply to your cc balances. That's $4,700 ($3,100) per month to pay on your cards! That's fabulous. Now do the math...$4,700 for 12 months = approx. $57,000 ($36,000 based on 2% structure). That would significantly reduce your balances, reset your minimums - not that it should matter since you want to pay them off - and will increase your scores!

In summary, since you already own your home and don't plan on buying any big ticket items, I would suggest that you make a plan (say 3 to 5 years) and create a budget that you can COMFORTABLY live with. Make sure that it includes contributing to your savings and retirements funds. The time value of money will be a big factor in increasing your accounts when retirement comes.

About the cc balances being below 80%, I'm wondering if you have the #'s backwards. I've always heard that you should keep the balances below 20%, leaving 80% unused. :)

If you supply the info about your cc's then we can take a look at the big picture and help you with a plan.

About your scores, as long as you are paying everything on time, house, cars, and other bills, your score will increase over time. Once you get those balances down, the scores will increase significantly, but since you aren't going to buy anything on credit for awhile, I wouldn't stress over it.