Credit Cards and Credit Scoring

littlemissb

Hi all,

I'm gradually paying off some debt and currently have four credit cards, 3 with pretty high balances (including one at an eye-watering rate) and a fourth with a balance of £1500.

I have £1500 to put towards payments and am wondering which of these options would be better for my credit score:

1. Paying off the £1500 card balance and closing the account

2. Paying £1500 off a higher-rate card

At first glance Option 2 sounds more logical but I'm wondering if Option 1 would improve my credit score and therefore boost my chances of being accepted for a new card to transfer the high-interest balance to.

Any thoughts?

[Deleted User]

Always pay off the highest rate debt first.

If you think you have too much available credit to be accepted for a new card, then you could always lower the limits on the others. But don't drop anywhere near your balances.

Don't worry about what it may do to your score - it's a meaningless number that no one sees but you.

JKSandy

I think they fact you're carry a balance on four cards would be an issue as it may show to prime lenders you're struggling.

msallen

Whilst the usual advice is to pay off the highest rate, you might like to consider whether having cleared the one with £1500 on it that card may then offer you a BT deal. I tried that with a couple of cards when I was clearing up my debts and it worked on a couple of occasions.

The_Boss

littlemissb wrote: »

Hi all,

I'm gradually paying off some debt and currently have four credit cards, 3 with pretty high balances (including one at an eye-watering rate) and a fourth with a balance of £1500.

I have £1500 to put towards payments and am wondering which of these options would be better for my credit score:

1. Paying off the £1500 card balance and closing the account

2. Paying £1500 off a higher-rate card

At first glance Option 2 sounds more logical but I'm wondering if Option 1 would improve my credit score and therefore boost my chances of being accepted for a new card to transfer the high-interest balance to.

Any thoughts?

You don't have a credit score - see my signature.

But as mentioned above, pay off the eye watering one first then you might want to pay them down to 50% each first and then go from there. That said, psychologically you may prefer to pay them off in their entiriety, but in your present situation I'd suggest NOT closing it until another had been paid off/others paid down.

Anthorn

I don't agree with paying off the card with the highest APR first unless all the cards have the same balance on each of them. Very often paying off the one with the least balance even though it has a lower APR will save more money because it will be cleared faster. Get out your calculator.

SeduLOUs

Anthorn wrote: »

I don't agree with paying off the card with the highest APR first unless all the cards have the same balance on each of them. Very often paying off the one with the least balance even though it has a lower APR will save more money because it will be cleared faster. Get out your calculator.

Lol. Always clear by APR, not by balances. I think you need a new calculator.

There is however a psychological advantage of clearing a card, but it certainly isn't cheaper.

Tixy

Anthorn wrote: »

I don't agree with paying off the card with the highest APR first unless all the cards have the same balance on each of them. Very often paying off the one with the least balance even though it has a lower APR will save more money because it will be cleared faster. Get out your calculator.

Paying off the most expensive/highest APR debts first will mean that less interest is paid overall - so it will save the most money.

Paying off a low balance card first can sometimes mean the total minimum monthly repayments reduces quicker, but it will cost more in interest overall.