Lower Credit Cards or Bigger Down Payment

[ryanb4614]

I have a 2006 Chevy TrailBlazer LT. I am trading in I owe $12,000 dealers are going to give me $10,500 for a trade in. I was already shopping around. I recently bought a house within the lat year and I had some renovations that were more costly then I anticipated and got laid off my job. I got a new job and I am making more now than my previous job. I Have 2 credit cards that are almost maxed ($4,000 and $6,600). The credit limit on them is not high, I lowed it because of these reasons so I don’t go into huge debt. I am trying to pay them off asap. But I am looking to get a new car this year. I may have a hard time getting approved for a loan. So is it better to lower the credit card balance or is it better to put the money as a down payment instead to get approved for a loan? Thanks!

[speediva]

I'm going to guess that you're better off paying down your highest interest credit card as fast as possible, and continue to make at least "over the minimum" payments on the other card. Your credit rating is going to take a bruising if those aren't taken care of first.

Although if you can help it, you really need to wait until you're not "upside down" on your current auto loan before entering into another one. I know that not everyone is able to wait that long, but it will put you in a better position overall if you can afford to wait.

[MagicRat]

My 2 cents............ you are pretty much maxed-out for personal debt and should not take on more. Hold off on buying a new car until the cards are both paid off.

A 6 year old car is definitely cheaper to own and drive than a new one because there is little depreciation expense.

[RachelRay]

I'm confused as to why you would lower your credit limit on your credit card. A good portion of your credit score is based on credit utilization (amount of credit used / amount of credit available). By willingly saying that you want a lower credit limit, you are hurting your credit score.

My recommendation is to increase your credit limit on that card if you still can, though you probably won't be able to, and use the money for the down payment. That's my suggestion.

[fredjacksonsan]

From a financial standpoint, keep the Trailblazer until you have the credit cards paid off; then save for the down payment while paying off the Trailblazer.