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03-25-2009 01:11 PM
If you are looking for the best score bump I would look to get all cards under 50%. However, if in the short term you don't care about your scores, I would stick with the strategy you laid out. In the long run however either strategy will work.
03-25-2009 01:47 PM - edited 03-25-2009 01:50 PM
Based upon what you have stated as your "goals" to improve your FICO, the following advice is offered.
1. Put the $400 (above minimums) toward your LOWEST balance accounts FIRST. While some may recommend to concentrate on higher interest rate cards, I wouldn't agree in this instance, and here is why: Your goal is to improve your FICO. Part of FICO is utilization, part is total balance, and part is the NUMBER of accounts with a balance. By paying the LOWEST balance accounts first, you will begin to rapidly decrease the number of accounts with a balance, while at the same time decreasing your percentage of utilization and total dollar balances.
2. DO NOT SPEND on these cards while paying them down.
3. DISPUTE the Authorized User account and have it deleted. Unless this account is important to your AAoA, you are not finanically responsible for an AU account and you may dispute this that it "is not your account" because you are not responsible and therefore not required to keep it on your file.
4. Moving balances to a new account may help utilization, but will also result in a new inquiry, new account and lower Average Age of Accounts. By paying $400 extra toward accounts, and snowballing lowest to highest, you will pay these off in 2 years or less and your utilization will decrease as you go along showing creditors your trend and ability to pay down. By NOT getting new credit for BT, your AAoA will be better, your newest account will be older, you will have less inquiries.
You have a balanced portfolio of credit all ready. So, unless you want more credit (new credit), if you wait a few months after paying off the lower balances and begin to make a dent in the higher balances, you may be able to get one or more of your existing accounts to increase existing limits, which will reduce percentage of utilization while maintaining AAoA and not incurring new inquiries and accounts.
However, it is all a personal preference and perspective.
03-25-2009 05:06 PM
Thanks for those responses. txjohn, also looking for best strategy to use the $2K i will have to pay these down over the next month, in addition to the 400 ongoing.
As for the AU account, my average age of accounts is 5 years and this account has an age of about 7 or 8 years. Still think I should go for the delete?
03-25-2009 06:09 PM
How old are your other cards? What you would do is add the age of all accounts, then divide by number of accounts. Do this "without" adding in the AU account and see what your AAoA comes up with and how much impact deleting the AU would have. The greater your AAoA, the better.
From a purely FICO score standpoint, if the AU is one of your older accounts and deletion will ding your AAoA down very much, you should leave the AU account alone. With the "late" crossing 4 years ago in just 6 months, the late as a derog will begin to have less effect on score than the positive age of the account and more its recent positive history.
With that said, you must realize that FICO alone does not decide credit. While a large percentage (90%) of major lenders use it, it is only part of their decision, not the deciding factor. And some lenders do not use it. Some lenders will "prequalify" you with score, then decide on actual approval or amounts based upon your content. Some items, such as BK, collections and other "major derogs" are deal breakers for some lenders. BofA is very hard on major derogs, especially BK.
A 30 day late, 4 years ago won't be a deal breaker most of the time. But it can influence some credit decisions.
As for the $2K, I would pay off all of the small balances, then don't use them or at least not more than you will PIF each month.
Then I would use any left over on the larger account and then make a major attack on the larger balances with the $400 per month and snowball up from smallest balance to larger....meaning make your minimums (plus just a little) on the higher account and put your full force of extra principal on the smaller.
My rule of thumb is always try to pay at least a little over minimum on accounts. Paying the bare minimum shows that you are maxed out not only in credit but in income and ability to pay and that you cannot handle any additional credit. When you pay in bigger chunks, both over a few to several months, it shows that you have discretionary income or at least the ability to more than manage the level of credit you have. Transferring balances, establishing new credit, etc. does not. In fact some lenders may view it as "robbing Peter to pay Paul."
Anyway, to make a long story no longer than it is: get the number of accounts with balances down. Pay more than minimums, but focus the majority of extra principal on the smallest account and snowball upward. Don't use more on the cards than you can PIF while you pay them down. Any new use, try to make sure you pay it before your statment cuts off so that you do not have new balances settling on your account.
Ideally you would only have 1 or 2 cc's with balances in addition to your auto or student loan and the utilization would be under 10% for max utilization points.
With this strategy you also avoid additional inquiries and "new accounts." If you are considering a new account, then you might as well consider deleting the AU account.....both will lower your AAoA, but deletion of the AU account will at least improve the "content" of your report.
No easy or short answers. Common sense, conservative use of money and DON'T SPEND credit, utilize it within your financial means.
03-26-2009 10:23 AM - edited 03-26-2009 10:26 AM
So, figuring out my AAoa, I have 9 accounts total.
6 are open, positive (never late) CCs.....tha AA of these is 4.55 years
I have one Student Loan (installment) account, also never late, that has an age of about 4.5 years as well.
I have 2 accounts showing that have a negative mark. One is the account I was an AU on (the account in question), and it has an age of 6.66 years.
The other derog account showing is an old charge-off (cant tell if ever paid or not...posted another post in the Rebuilding your Credit forum, one CR shows it as "Paid after Charge Off", the other reports just say bad debt/charge off) on wether I should PFD or FW the creditor, as I dont recall if I ever paid and this is set to fall off in December 2010. The age on this account is 7.8 years.
So currently, the two derogatory accounts are bringing my average age up to 5.24 years (I am not including my installment account in this calculation...should I be?). So if I tried to get rid of both of thes, my AAoA would fall by about .75 years. Which is worse, having these two negative accounts showing or losing .75 years of credit history on my AAoA?
Thanks again for all the advice. This forum is priceless.
03-26-2009 10:34 AM
Average Age of Accounts is all accounts, including closed, not just open. So, calculate ALL accounts shown but exclude the AU and see what your results are.
This is easier if you convert all accounts to months. So, if you have an account that is open 4 years 3 months, call it 51 months. Add the value of "months" of all accounts (including closed). Then divide by the number of accounts (including closed), then divide by 12 to convert back to years.
Average Age will include your student loan. You have several important numbers for accounts: Oldest Account, Average Age of Accounts, Newest Account when calculating FICO. However, as a creditor, they review the individual accounts as well for certain items, such as "maxed out" "lates" "balances" etc.
Some of your derogs are old enough that the age of those accounts helps your FICO far more than the derog hurts your score. However, creditors don't like charge offs and unpaid collections. So, you have to kind of determine a balance. FICO is nice, but is not the deciding factor.
On the AU account that is 6.6 years old, how long ago was the late? What is the balance and percent of utilization on it? If the late was within 2 years or the balance is high, then you may well want to consider getting rid of it. Lates don't really start having "no effect" on FICO until they are moving closer to 4 years since late.
03-26-2009 11:57 AM - edited 03-26-2009 12:04 PM
I did use the month method to calculate the ages.
My AAoA is helped by an Amex my parents had opened in my name in 1988 and were always responsible with it and never late. That acct was closed in Feb 2008, but the age on the account really helps my AAoA.
The AAoA without the AU with the 30-day late is 5.06 years (or 60.75 months).
On my CR, it shows the AAoA currently as 5 years (it is 62.8 months or 5.24 years to be exact) for all accounts.
So, removing this one AU would reduce my AAoA by about 2 months. The late payment occured in January 2006 (so 3 years and 2 months ago). The high balance was $1,017 on a $1,200 CL. This account was closed, according to the CR, in January 2006 as well, but it notes date of last activity as Sept 2006...so I am not sure exactly what that all means. In the notes it does state "Closed by Credit Grantor". As I mentioned, I was an AU on this account. Is it worth trying to get this acct removed?
In addition, I have my old charge-off that I need advice on what to do there. The thread can be found here:http://ficoforums.myfico.com/fico/board/message?board.id=rebuildingcredit&thread.id=55908
Any advice on that account as well would be appreciated.
03-26-2009 12:13 PM
Based upon what I understand, if it were me, I would remove the AU account if it only affects AAoA by 2 months. You make that up over the next year. The cost of 2 months average vs. removing a derog compeletly is a big win, my opinion.
Don't "try" to remove the AU, do it, and don't accept anything less. An AU account is not your financial responsibility and you have no legal reason to be required to keep it. Dispute with all CRA's who report it. The reason: Not my account, not my financial responsibility as an Authorized User acct.
I'll look at the Charge-off link.
Good luck....keep at it!
03-26-2009 01:16 PM
Thanks txjohn, great advice and I really appreciate it.
So, I should have no problem removing the AU account from my CR even though the account has been closed for a couple years? Do I just submit an online dispute form with each CRA?
03-26-2009 01:29 PM
That is correct.
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