Pay down debt to 29% or increase credit ?

[anderl]

Hi Fico Forums-

              I've been working on my credit for 10 mnths. now and thanks to this Forum I've- increased my Fico scores( 610EQ to 696EQ AND 631TU to 725TU), and 596EX to 696EX- and I've increased my credit, from 0 to $40K. I apped for quite a few cards and was approved for-Premiere MC($350),Secured WFNB Visa($1K),HSBC Discover($300),NFCU Flagship Visa(10K),Nfcu GoRewards(1K),NFCU NAV Chek LOC(15K),Sears(1K),JCPenneys(1K),Macys($400),Amex Delta Skymiles(2K)-got some CLI's,NFCU Visa(10K to 12.5K)-Sears(1K to 5.6K)-JCPenneys(1K to 2.8K)-and since I had to relocate for work(NYC to Miami), have used my store cards and NFCU a lot-am now up to 44% utilities and am now paying it down aggressively($2K/Month)-I have a little xtra coming in this month(3.5K) and was going to pay 5.5K towards my balance which would put me @ around 29% utilities OR was thinking of ADDING to my WFNB Secured Visa,bringing it to 4.5K,( in hoping that when my Secured card graduates I"ll have a higher CL), which would bring my utilities to only 37%- obviously I want to have a higher CL with my WFNB Visa. Any suggestions?

[SCF]

From a FICO standpoint, increasing the CL on your secured card will lower your overall utility and raise your score, but what this won't do is affect the individal utility on your other cards, which may be impacting your score if it is high.

From a financial standpoint, you definitely want to pay down your debt with that money.  Not only will you save on interest, but you'll be in a more secure position if a card does decide to reduce your line of credit.

A major factor to consider would be how soon your expect your secured card to unsecure, how soon might you have those funds available to you again?

[RobertEG]

Since FICO does not score based on CL, but only on % util of CL, then increasing CL or decreasing balance owed will both improve your FICO score.

Paying debt is a sure way of reducing % util.  Asking for a CLI is not assured.   And it will result in a hard pull.

Aside from FICO considerations, paying down debt reduces your actual balance, and thus will reduce your montly interest.

If you now have $40K in availalbe credit and are at 44% util, you have a debt balance of approx. $17,600.  At an assumed annual APR of 18%, that is around 1.5% a month, or around $260 a month just in interest.  That is a lot of money just to keep the balance where it is now.

I would pay down the debt as my first priority.

[anderl]

My secured Visa w/WFNB will turn a yr. old in May- I was going to add 3K this month-when May comes around I wanted to see exactly how much of a CL WFNB will give me- I've read here that they usually graduate the card 1.5 times the secured amount. I don't have a major bank cc with a high(er) CL and was hoping that when my card does graduate, I'll be given a CL of at least 4K-then once they return the xtra 3K, I'll apply it to my debt. All of this is just to get a higher CL once my card becomes unsecured.

[RobertEG]

I see your logic, anderi, and it is your choice.

If you wait for them to initiate a CLI on their own initiative, you could wait forever.  The higher your % util is at the time of their review for a possible CLI, the lower your chances of their approval.  They can do a pull of your CR as a normal course of account review, and most assuredly will before extending you more credit.

I re-state my prior opinion, and that is all it is, that I would not focus on CLI increases now, but rather on reducing current % util and monthly interest being accrued on high debt by paying down the current balance.

[haulingthescoreup]

Kill off the debt, and let the CLI's come naturally with time.

The more debt you carry, the more of a hostage you are to your lenders.

[Anonymous]

Your best FICO results will come from lower utilization, fewer balances AND lower total balances.

Adding to your total CL's will lower utilization, but will not reduce your number of balances nor your balance amounts.  FICO does look at the actual dollar amount of your debt, not just the utilization....

[BungalowMo]

+100 to haulingthescoreup & txjohn!   Paying down debt is NEVER a bad idea...ever!  It always gives you a positive result & it makes you feel better too!

Another thing you should know already from reading here.....PIF every month!! (except for the small 7ish %)  

[Anonymous]

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@haulingthescoreup wrote:
Kill off the debt, and let the CLI's come naturally with time.

The more debt you carry, the more of a hostage you are to your lenders.

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Couldn't put it better!

[fused]

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haulingthescoreup wrote:

The more debt you carry, the more of a hostage you are to your lenders.

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+1,000,000