Hello there, I have a credit card and a line of credit with a credit union. Both have about $1700.00 balance yet to payoff. Line of credit is a 7.9% interest rate and the credit card has a 8% rate. I have the money too pay one off. Which one is better too pay off for my credit score going up?
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@Beau W. It sounds like paying off either one would be a great move — I don't think paying off one would help any more than the other. If you were asking whether to pay off a credit card vs. a loan (or a line of credit vs. a loan) and the interest rates were equal, I'd definitely tell you to focus on the credit card or line of credit. Credit cards/lines of credit determine your credit utilization ratio, whereas loans don't really affect this number.
Since they both have about the same balance and interest rate, you can really take your pick here. Paying off either one would have pretty much the same impact on your credit score and yield the same interest savings. @Tony Wahl Any thoughts on this?
Thank you for your help. I'm going to focus on the credit card. I'll be happy to get rid of that payment. You're awesome Penny.
Hi @Beau W., Congratulations! It's quite a feat to pay off any debt, especially when you can pay it off in full.
I agree with @Dear Penny—paying off the credit card may also help boost your credit score by helping your credit utilization. In general, you want to keep a balance of less than 30% of your credit limit, and it's even better if you can get it below 10%. Once you pay it off, avoid closing the credit card. Keeping it open will continue to help your credit utilization as well as your average credit age, which can also impact your credit score.
Are either of them delinquent or charged-off?
No ma'am. All current and on time payments.
Since they are both similar amounts and similar interest rates, I'd pay off the one with the highest monthly payment. If that, too, is similar then it doesn't really matter. Paying off either will lower your usage of available credit, which will raise your credit score in a month or so. I would use the monthly payment of the one that you paid off to make extra payments on the one that you didn't to get that paid off quicker.