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12-09-2012 11:05 AM
I was reading around and I keep stumbling upon this. I don't have personal experience with the term, but I understand it's used as a negative, and very often a reason cited by PenFed for denial of credit.
I also saw that it's sometimes used as a positive term, such as paying off small debts and then working your way down the "pyramid" to larger debts (very much like Dave Ramsey's snowball) but that's not what I'm asking about. I believe when the term is used for denial of credit, it has a different implication (I think?) and I'm curious to know what it means. I assume it has some nefarious undertone like kiting payments or at least moving debts around too much in some way....
Can anyone explain it to me? Thanks in advance.
12-09-2012 11:42 AM
Ah, the old Penfed excuse.
They hit me with that with util at 16-20% or somewhere in that range. Util was a little high and I believe they used as a reason vs. saying I had high util. That code isn't a FICO code. It's possible too they are seeing the last payment for each account and are assuming you are paying down large amounts of debt just to try to get approved (I had done that).
12-09-2012 11:51 AM
Thanks. I guess they are far more shrewd than I thought they were (underwriters.) And far more suspicious.
I always thought that they would not like seeing reports with dozens of accounts, though. I mean, I try to put myself in their place. If I were issuing loans, I'd have trouble wanting to lend to people who seem to do business with every other bank in (and out of) town, too. I'd wonder what prompted the need for multiple large lines of credit.
My report, for example, has something like 20 open accounts and 15 more closed ones (rough guesstimate.) I'm an excellent payer but I admit I do open and enlarge lines to the best of my ability so that utiltiy will appear low, so that I'll get favorable interest rates. This is nothing devious on my part - just trying to pay less interest while I pay down debt. I guess I might be the classic pyramider.
12-09-2012 11:56 AM - edited 12-09-2012 11:57 AM
Shoveling around debt to other cards , while possibly opening more CC's in the proccess of going further into debt ( potentially )
12-09-2012 12:06 PM
Shoveling around debt to other cards , while possibly opening more credit cards in the proccess of going further into debt ( potentially )
This. Specifically opening new accounts and increasing the amount owed on cards. So, even though opening new accounts and increasing current CLs may reduce your utilization, if they see balances creeping up with the increased available credit pyramiding debt is a likely reason for denial from PenFed. It appears as if you are just moving debt around or aquiring new debt and not acutally paying it down.
12-09-2012 12:08 PM
Once again, I plead guilty (at times. Sometimes I pay debt down and other times I acquire more - for quasi-business purposes. Doesn't make me look good, I'm sure.) To further complicate things, my husband and I shovel the debt back and forth between our accounts as an aggregate pool of available credit, with each of us sometimes appearing stellar and sometimes appearing to be sad sacks.
12-10-2012 12:36 AM
I need to pyramid my debt. Not to obtain more credit (I don't even use all the credit I have) I would just like to simplify my payments.
Ideally, "debt pyramiding" can only spell very negative consequences. If you acquired any substantial debt, work on a plan to pay it down/retire it in a sensible manner. Risking a potential adverse action by any creditor who will notice this type of indicative behavior from your credit profile is something you definitely want to avoid.
Now, consolidating your current debt into more favorable terms with a lower APR and with an existing tradeline without sacrificing its utilization factor(s) -- and not acquiring any further debt or tradelines -- will benefit you in the long term. Of course, as with anything, sound financial discipline is a must if you want to avoid falling in the same situation again.