Which is better for your FICO score: Paying off your credit cards, or paying off your mortgage?
Most people say they would pay off their mortgage to increase their credit score the fastest. But when it comes to FICO scores, eliminating charge card debt is far more powerful than eliminating mortgages and car loans.
And if you think about it, it makes sense. When assigning a credit score, the scoring bureaus assess risk by asking one question: How likely will this borrower default in the next two years?
Most people prioritize their mortgage payments; they would rather skip a few meals than lose their home. So having a balance on your mortgage isn’t really that risky. But people aren’t quite as responsible with their Visas and MasterCards. In fact, even the most financially responsible people make a few bad decisions when it comes to the allure of credit card spending.
So keeping a low balance (or no balance at all) on your credit cards is a far better indicator of your financial situation, and your ability to pay upcoming bills.
The moral of the story: If you want to increase your FICO score, get your credit card balances under control!
Source: Philip Tirone
P.S. Philip says: “Indeed, if I had to give a person only one piece of advice, it would be: “pay down your credit card balances.” Plus, once you pay down your credit card balances, it will be a lot easier to make those mortgage and car payments!”
P.S.S. Everyone who files bankruptcy with our firm gets FREE ENROLLMENT into the 720 Credit Program.