Cutting Util in Half While Avoiding CLD

[Anonymous]

I have a fairly new credit profile, oldest card is Discover @ 2 years old.  My FICO is horrible, but due to utilization and age, have no derogs.  I will be getting a bulk amount of money, around $5000, in a few days and am going to slash my balances.  Right now my utilization is right around 77% according to Credit Karma.  Also have two installment loans, both around two months old; one was taken to cover a medical expense, and the other was taken first to add an installment loan to my reports.  Am concerned, especially with Discover, that I will get a CLD if I pay it off, and am wondering what other cards I should be concerned about, as well as whether my plan sounds beneficial or not.  Here's my balances:

Discover                   1740/1750

Capital One QS       1490/1500

Capital One Plat      2950/3000   Plan is to immediately pay this card off and do account combo w/QS card (QS is one year older)

Overstock                     580/630

Lenovo                              269/0   This was a SCT card, Comenity closed all Lenovo accounts so plan on PIF as first thing I do

Jcrew                          485/1050

Credit One                    380/400  

Fingerhut                    400/1900

Amazon                        790/800

Walmart                        580/600

Loan #1 balance $3745

Loan #2 balance $1000

PenFed Thrifty Credit balance is $500 (I PIF and take back out monthly per branch manager advice to help me get a car loan with them eventually) 

Now before anyone starts yelling at me, I had to start over credit wise (was abroad for a decade) so that's why only two years worth of history, and returning to the USA wasn't optional, so I had to use credit to pay for it + starting over, and have had high monthly bills from my mortgage + taxes + bills abroad until now.  Those bills are done now so I will be able to maintain the lower uitilization and also keep whacking away at the debt in a much more serious fashion.  

While the bulk of the $5k will go to pay off the Capital One so I can do a combo, I plan on turning around and doing balance transfers to pay down all cards to under the 89% mark, then anything left pay on store cards since they are higher interest.  Leaving the loans alone.  Does this sound like the best plan?  Any constructive suggestions?  Or heads up re: CLD dangers?  I don't want to have my utilization go right back up due to Discover or someone deciding to cut my limit.   

[Anonymous]

Pay every card down to 88.9% immediately -- lower if you believe interest will post (maybe 85% to be safe).

If money is remaining then bring as many down to 65% as possible. You can start with the smallest balances over 65% and brings those down.

If money left after, pay highest interest cards next.

[SouthJamaica]

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@Anonymous wrote:

@I have a fairly new credit profile, oldest card is Discover @ 2 years old.  My FICO is horrible, but due to utilization and age, have no derogs.  I will be getting a bulk amount of money, around $5000, in a few days and am going to slash my balances.  Right now my utilization is right around 77% according to Credit Karma.  Also have two installment loans, both around two months old; one was taken to cover a medical expense, and the other was taken first to add an installment loan to my reports.  Am concerned, especially with Discover, that I will get a CLD if I pay it off, and am wondering what other cards I should be concerned about, as well as whether my plan sounds beneficial or not.  Here's my balances:

Discover                   1740/1750

Capital One QS       1490/1500

Capital One Plat      2950/3000   Plan is to immediately pay this card off and do account combo w/QS card (QS is one year older)

Overstock                     580/630

Lenovo                              269/0   This was a SCT card, Comenity closed all Lenovo accounts so plan on PIF as first thing I do

Jcrew                          485/1050

Credit One                    380/400  

Fingerhut                    400/1900

Amazon                        790/800

Walmart                        580/600

Loan #1 balance $3745

Loan #2 balance $1000

PenFed Thrifty Credit balance is $500 (I PIF and take back out monthly per branch manager advice to help me get a car loan with them eventually) 

Now before anyone starts yelling at me, I had to start over credit wise (was abroad for a decade) so that's why only two years worth of history, and returning to the USA wasn't optional, so I had to use credit to pay for it + starting over, and have had high monthly bills from my mortgage + taxes + bills abroad until now.  Those bills are done now so I will be able to maintain the lower uitilization and also keep whacking away at the debt in a much more serious fashion.  

While the bulk of the $5k will go to pay off the Capital One so I can do a combo, I plan on turning around and doing balance transfers to pay down all cards to under the 89% mark, then anything left pay on store cards since they are higher interest.  Leaving the loans alone.  Does this sound like the best plan?  Any constructive suggestions?  Or heads up re: CLD dangers?  I don't want to have my utilization go right back up due to Discover or someone deciding to cut my limit.   

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Your concern is misplaced. No one will decrease your credit limit because you paid off your balances.

That's a good thing, not a bad thing.

[Kree]

Your mileage may vary, but I've never had a problem with discover and high balances. I once spend a few years at over 100% uti.  (I set up autopay, cut the card, and ignored the account, but autopay was hiting the wrong day, so instead of paying down my balance went up 5 dollars every month due to late fee shenanigans)  A few years ago I paid the card down, and as soon as I got under 50% discover auto CLI'd me for a 4000 dollar increase.  Recently it was again upwards of 95% for a few months. and I paid it down under 50%, hit the luv button and got a 4500 increase.   Probably helps that my 'lates' weren't 30 days, and that the autopay date mistake was theirs, so they credited my account like 4000 dollars for fees and interest.

Anyway, the point is if anyone should have had their limit decreased it was probably me, and I'm sitting at a 17,300 limit.

[HeavenOhio]

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@SouthJamaica wrote:
Your concern is misplaced. No one will decrease your credit limit because you paid off your balances.

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We've seen lots of reports of balance chasing here, so I can see why the OP is concerned. But Capital One and Discover don't seem to be among the banks that are known for that. They're the cards that the OP would want to protect.

I think that Comenity and Synchrony are much more likely to balance chase. But I wouldn't view those cards as all that important. Additionally, those cards have limits that are relatively low to begin with; there wouldn't be much to chase.

[Anonymous]

I've been building a "list of creditors who balance chase" entry on a credit wiki I'm privately building, and so far I don't have a single note of Capital One or Discover ever doing it.  If anyone has any links with stories of it, post away because I haven't seen it.

Sync definitely balance chases.

[marty56]

I would PIF everything as soon as I could and not apply for anything new until then.  Once your FICO scores go up, even if your existing CCs have CLDs, you could apply for new ones that don't if you need the credit increase. 

[Anonymous]

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@Anonymous wrote:
Pay every card down to 88.9% immediately -- lower if you believe interest will post (maybe 85% to be safe).

If money is remaining then bring as many down to 65% as possible. You can start with the smallest balances over 65% and brings those down.

If money left after, pay highest interest cards next.

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Really nice response by ABCD.  The only thing I would add, when a person is looking for strategies to protect against balance chasing, is to reserve a portion of your windfall to ensure that your can make more than double the minimum payments on any cards that you think might be at risk for BC.  In other words, don't pay everything down to 69% and then immediately go back to a pattern of making only the minimum payment -- be sure to be making more than double every month for the next four months.  That's in addition to ABCD's recomendation of paying down debt immediately (which is the most important thing to do).

And also develop a strategy for paying off everything and to create substantial savings to prevent this from happening again.  ABCD is a good go-to person for advice on savings as well.

Best of luck....

[Anonymous]

CGID -- that is a great point and one I didn't consider.  I'll add that to my future suggestions.

In fact, I'd say that if you have money to pay a card down to less than 88.9% but it's the same as the minimum payment, to actually go for 3X the minimum payment just to cover your bases.  Makes more sense and keeps lenders happy that you're not making the minimum.

[Anonymous]

Kree:

Whew!  Thank you for telling me your experience.  Disco was the dancefloor I was worried the most about haha!