 Pay off cards now or later?
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 Dear
Dr. Don,
I have around $20,000 in unsecured debt (credit cards, etc.) that
I will soon be in a position to pay off. Is it better, from the
standpoint of my credit score, to pay them off or pay them down
over a few months? I plan on paying off the total balance in full
each month in the future.
Thanks for your advice,
-- Joe Jump-start
 Dear
Joe,
With an established credit history, paying off the balances as soon
as you're able to doesn't hurt your credit score, and paying them
down over a few months doesn't help your credit score. If you're
planning on applying for credit in the near future, then having
the debts paid off helps because it lowers the overall ratio of
debt outstanding to credit lines available.
Micromanaging your credit score between now and the
next time you plan to borrow isn't necessary, if in either case
you'll have these debts paid off by then. The bigger decision is
to save on the finance charges, and that points to paying off the
balances sooner rather than later.
While you can get at least one free copy of your credit
report every year from each of the consumer reporting agencies,
you have to pay to get your credit score. Bankrate has partnered
with myFICO to provide free
estimates of your credit score.
For consumers who can only get one free credit report
from each bureau every year, I think they should get a different
report every four months from the big three: Equifax, Experian and
TransUnion. Your letter reminded me that I'm scheduled to review
my Equifax credit report this month, which I did. (I also have it
set up as a task in Microsoft Outlook that automatically prompts
me to request a report.)
Take a look at a credit report to remind you what
is and isn't on that report. Since your credit score is based
solely on what's in your credit report, that should be sufficient
to give you the confidence to pay off those balances in a manner
that's convenient to you.
To ask a question of Dr. Don, go to the "Ask
the Experts" page, and select one of these topics: "financing
a home," "saving & investing" or "money."
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