Maxed out credit cards

know3950

Over the last 18 months with everything going on I've been forced to go onto my credit cards and they're now all maxed out. Mr credit score has dropped and is now saying that being 90% across x5 cards is negatively impacting my score. I've now got some light at the end of the tunnel and can start paying off larger chunks to get them down. 

What's the best strategy to improve my score the quickest (as we need to remortgage later this year) Do i pay a small amount off each across all cards, or bigger chunks off of the cards with lower credit limits so the % used on those cards drops more dramatically. 

Whats the algorithm that lowers my score, the total amount borrowed, or do they count up the percentage limit used across all cards? 

Thanks for your help... 

MorningcoffeeIV

You don't want to improve the pretend score. You want to improve how lenders see you and do what is best for your finances.

So you want to pay off the highest rate debt. If all at the same rate, pay off any that might give you a decent offer.

Don't panic as the score continues to drop as you clear the debt.

born_again

Best you post in here with a SofA

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

Credit score means nothing to lenders as they never see it, so forget about that.
 What lenders will see is income to debt ratio & the fact you are maxed out. Which will be a red flag that you may start defaulting.

grumbler

know3950 said:

...
Whats the algorithm that lowers my score, the total amount borrowed, or do they count up the percentage limit used across all cards? 

.. 

The algorithm doesn't matter. What matters and what all lenders use (among other factors) are two ratios: 
debt-to-income
debt-to-(available)credit ('utilisation')

Another ratio that can affect mortgage application is (available)credit-to-income. So, bigger available credit while improving the second ratio, makes the third one worse. So, ideally you want to have reasonably small both available credit and its utilisation.

know3950

Thanks for the replies 

so debt to available credit, is that calculator as a percentage or total amount. 

ie, if I use £1000, am I better to clear 50% of £2000 limit card, is that better than clearing 10% of £10,000 limit card?

or doesn't it matter in the slightest.... 

born_again

It is not a %.

Best thing is to reduce card debt as fast as possible. Then close them, so you do not use them again. 
Pay off Highest interest ones 1st & work down, unless some have low limits that could be payed off quicker & removed.

know3950

born_again said:

It is not a %.

Best thing is to reduce card debt as fast as possible. Then close them, so you do not use them again. 
Pay off Highest interest ones 1st & work down, unless some have low limits that could be payed off quicker & removed.

so its exactly that, some have lower limits and I could remove completely them fairly quickly, but others have higher limits and higher interest rates. 

just not sure which to tackle first... 

thanks again 

MattMattMattUK

know3950 said:

born_again said:

It is not a %.

Best thing is to reduce card debt as fast as possible. Then close them, so you do not use them again. 
Pay off Highest interest ones 1st & work down, unless some have low limits that could be payed off quicker & removed.

so its exactly that, some have lower limits and I could remove completely them fairly quickly, but others have higher limits and higher interest rates. 

just not sure which to tackle first... 

thanks again 

You pay the debt with the highest rate of interest first, that is the most efficient way to clear it down. As others have said posting an SOA will allow people to give more detailed advice. 

grumbler

know3950 said:

....
so debt to available credit, is that calculator as a percentage or total amount. 

ie, if I use £1000, am I better to clear 50% of £2000 limit card, is that better than clearing 10% of £10,000 limit card?

It's the total debt and the total available credit credit.
You tackle the most expensive debt first.