My credit cards are maxed out and I need a new furnace. If I pay my debt down to 50 percent, how much will my credit score increase?

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Q: Unfortunately, my 4 credit cards are nearly maxed out and I need a new furnace yesterday. My credit score is 633 and the lender I went to said I needed a 640 minimum to get a loan. My question is, if I am able in the next month to pay down my debt to 50 percent, how much will that increase my credit score?

A: The best way to know how a reduction in debt will impact your credit score is to use the free credit score estimator and FICO score simulator offered by the creators of the FICO score.

If you go to myFICO.com, you'll find the tools there. If you don't already know your FICO credit score, start with the estimator, where you'll answer a series of 10 questions.

The questions include queries such as: How many credit cards do you have? When did you get your first credit card? How well have you done at paying your bills? How large are your outstanding credit card balances? After you answer all 10 questions, you'll get a score with a 50-point range. For instance, it might show your credit score is most likely between 630 and 680 points.

FICO's credit score simulator (which you only get access to if you buy a credit score or sign up for a free credit monitoring trial) works differently. It takes your actual credit information (not estimates about it) and it gives you a "best case" scenario for how to improve your credit rating. Very often, the recommendation it spits out is: pay down credit card debt. And it shows you how high your credit score could be if you followed the recommendation. So you're on the right track with thinking that you should reduce debt to boost your credit score.

When you said 50 percent, I assume you meant you plan to reduce your credit utilization to about 50 percent of your credit limit. Certainly if your cards are maxed out, decreasing your balances to 50 percent or lower should boost your credit score. You won't know how much of a jump you'll get, though, until you actually pay down the debt.

One final tip: People with the absolute highest FICO scores typically charge 1 to 10 percent of their available credit.


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