debt and credit score

[Kristine22]

Hello everyone ..i think im a little confused. I am 24 yr old with a good head on my shoulders and am constantly thinking of ways to save and plan for the future. My current goal (though offset by my recent layoff) is to save for a house. I am a college graduate and have been interviewing so hopefully i will be will be working again in the near future. Anyway I currently have aprox. $5100 in savings and aproximately $2100 in credit card debt (3 major credit cards highest APY at 15.5%). I also have a student loan of $14000. I still live home and am on unemployment so I am able to pay $300 a month toward these 3 cards. I am well aware that the higher the credit score the better the rate when I get a mortgage. (my current credit score is aprox 700) What im confused about is my credit score and my debt. If i pay off my debt and never use my cards wont my score go down? Dont you need some debt in order to have a credit score? I obviously want to pay my debt down but do I want to pay it off completely? Thanks for helping me out everyone!

[snshijuptr]

You should always pay down revolving debt like credit cards. This will boost your score. Charge a little and pay it off every month.

[safari]

Welcome to the board, Kristine. You don't need debt to have a good credit score. In fact, carrying a credit card balance may lower your credit score, depending on your credit utilization ratio, which is calculated by dividing the total credit card balance by the total credit line on all your accounts. You should generally try to keep it under 30%, but the lower it is, the better. You need to pay off your credit cards as soon as possible, as 15.5% is a pretty high APR. Also, when you apply for a mortgage, banks won't like the fact that you have credit card debt.

Credit card is a great tool for paying for all purchases and other expenses, as long as you can pay off the balance in full every month. If you do that, you won't be charged any interest and will also earn cashback or other rewards. Paying credit cards on time will also help build your credit history and improve your credit score.

[Kristine22]

Thanks guys! Im hoping to have it all paid off within 6 months

[PaydayLoner]

With credit cards, even if you pay them off and keep paying them off every month, it means a company is willing to loan you money up to the amount of your credit limit, and that helps your credit score, even if you're not actually borrowing the money.

[Snodog]

The others are correct that paying it off should increase your score.

Personally if I were you I would pay it off today with your savings.

[snshijuptr]

You can play around with options with this calculator:

Estimate Your Credit Score - Financial Calculators from CalcXML

Have you downloaded your free credit report from www.annualcreditreport.com ? The best thing to do is to make sure your credit report is correct. I recommend downloading one report every 4 months. You can also be more familiar with what items they take into account when calculating your score. NOTE: You do not get your score through the free service.

[mortgage-wiz]

This site has some good calculators! check pout their remortgage calc... super!

[jpg7n16]

Here's another site with some good info on credit scores.

Improving Your FICO Credit Score - Tips from myFICO.com

I honestly don't really care what my credit score is, so i don't use their monthly service thing. I can't help you there. I think credit scores are overrated. Do the best thing for yourself financially, and let the credit score fall where it may. If you do the right things for long enough, your score will be fine.

(I rent, have no real debt - except a small amount of student loans, have a paid for car, and enough in investments to buy a new car if this one breaks down, no plans for a home, so I won't be borrowing any time soon. Ergo - I don't care what my credit score is, cause I don't need credit! )

[cyclone1]

When you do get a job, set up an automatic payment to a savings account to help save