Fico advice: 1 maxed 6 w/0 util or 50% util over 7 cards

[creditwherecreditisdue]

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jthompson5254 wrote:

Well I sent an application with this same guarantor in May and they denied me because they have a PenFed card as well and they had opened it less than a year ago and PenFed only approves 1 credit line increase a year. The opening of a card is considered increasing the credit limit from 0 to whatever the limit is.  The Gaurantor has an excellent credit rating and a FICO score of somewhere in the neighborhood of 760-780 something like that. I can't see how they wouldn't approve the deal.  My mother is the Gaurantor and she says if I don't pay its coming out of my inheritance. Also the CCs will be sent to her address and will give her a check to mail in so that she knows I'm paying it. Again if I don't pay it that month she will.

With some credit card companies upping the minimum payment from 2% to 5% for some customers I can't afford to take the risk and not be able to pay. PenFed while they could concievably do that, I doubt they would. All my families dealings with them have been very good.

Anyway, so you think I can do 90-95% util on the PenFed and 0 on the rest?

The fico should be way better than I have now and I'll save close to a thousand dollars a year in interest on just my 2 Chase cards alone (the 29 and 25% card)

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I pretty much told you what I though above. You do realize that it is going to take a payment of 5% of the original balance for each and every one of those 24 months to amortize that BT, right? I seriously suggest you do the math before you commit to any of this.

[jthompson5254]

Yes I do realize that I need to pay 5% a month if I want to pay off my balance in 24 months. HOWEVER, I really don't care if I do so.

3 reasons why

1. Penfed has a 13.99% fixed APR after the 24 months. This is only a 1.5% over my lowest intrest rate (other than the 6.9% but that only has a $1000 CL)

2. Odds are without a balance my minimum payment won't go up on my other cards, so I can transfer my balance to my 12.24% BofA card.

3. In 24 months I will probably have a better job then I do now and can either transfer to one of my other cards and cancel the account or see if PenFed will take off the guarantee of from my CC.

[creditwherecreditisdue]

PenFed will not be happy with your account if you aren't making 5% payments on a balance like that over a 6, 12 and 24 month period. You obviously have adopted a policy of making minimum payments on your revolving debt arrangements and that is a recipe for disaster. I whole heartedly recommend that you do not involve third parties in your finances.

[jthompson5254]

I have not adopted a policy of making minimum payments, I've had it adopted for me due to my finanical situation. That is why I am looking for a new job. I'm very well aware that paying only the minimum payments will cause me to spend a whole lot more on intrest regardless of how low my intrest rate is. Once I have extra money, I will put it towards paying down my credit cards. Have I made a poor decision by racking up this kind of credit card debt. YES. I admit that I shouldn't be in this situation but I am. Being that I have an opportunity to get this low rate for 24 months, I will do it. Being that half of my debt is at an interest rate above 25% those 2 credit cards alone will cost me approximately $1500 every year. Being that I am being so transparent about whether I'm paying my bill ontime and that my mother is more than capable of paying my $12,000 in full, I don't really don't see much risk.

[haulingthescoreup]

Just a general FYI: I got my e-mail today from PenFed saying that they were changing from fixed APR's to variable rates. Just something to keep in mind when scheduling repayments:

A partial excerpt:

VISA Platinum Cash Rewards, VISA Platinum Travel Rewards, VISA Classic and MasterCard Accounts: The non-variable rate, currently 13.99% APR, will change to a variable rate set bi-annually based on the Prime Rate plus a margin of 10.74%. Your rate using this formula (Prime Rate of 3.25% as of July 1, 2009 plus 10.74%) will be 13.99% APR on November 30, 2009. Consequently, there will be no change in your stated rate on November 30, 2009.

VISA Gold Accounts: The non-variable rate, currently 12.49% APR, will change to a variable rate set bi-annually based on the Prime Rate plus a margin of 9.24%. Your rate using this formula (Prime Rate of 3.25% as of July 1, 2009 plus 9.24%) will be 12.49% APR on November 30, 2009. Consequently, there will be no change in your stated rate on November 30, 2009.

This is my rate adjustment. I don't know if everyone gets the prime + 10.74%, or better, or worse. Just a heads-up.

[creditwherecreditisdue]

From my first impression everybody would be getting the same new terms. I suppose it could always change in the future. I was hoping since they were going to variable rates they would drop it a little initially. Fat chance!

[marty56]

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@jthompson5254 wrote:

Yes I do realize that I need to pay 5% a month if I want to pay off my balance in 24 months. HOWEVER, I really don't care if I do so.

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You better check the BT terms.  In most cases, failure to PIF the BT by the term period could cuase you to owe a lot more in interest than just on the remaining balance.

With 12k of CC debt, I would conisder a DMP program.  You can take up to 5 years to PIF and in most cases, it would lower your interest rates and protect you from further AA.  I wouldn't worry too much about your FICO score at this point.  Even if your new employer looks at you CR, seeing that you are trying to get out of debt via a DMP might look better than just moving CC debt around.

[jthompson5254]

>>You better check the BT terms.  In most cases, failure to PIF the BT by the term period could cuase you to owe a lot more in interest than just on the remaining balance.

Here's what PenFed says about the terms of the BT.

"Balance transfers will have an Annual Percentage Rate of 4.99%; monthly periodic rate of 0.416%. Rate shall remain in effect on the transferred balance(s) for 24 months . If you miss 2 consecutive minimum payments due, the 4.99% APR will revert to the default rate of 17.99% APR. Platinum balance transfers will have an Annual Percentage Rate of 4.99% APR; monthly periodic rate of 0.416%. At the end of 24 months, the rate on any remaining balance will change to the then-current APR for purchases. If you are in default at any time the 4.99% APR will revert to the default rate of 17.99% APR."

So as I thought there is no penalty for not paying it off in 24 months. Also I'm not going to ruin my FICO score to get what will probably be a worse interest rate.

[creditwherecreditisdue]

In addition to all the other considerations and in all fairness to your mother you need to find out if this guaranteed account is going to be reported to her credit bureau reports as well as yours. Saddling her with 95+% UTIL on an account and trashing her FICO score isn't exactly fair to her. Even if it doesn't report to her credit I still don't think it should be done. Were it being done as a tool to allow you to rapidly pay down your debt I might feel differently. Your plan is to come out of this with just as much debt as you had when you went in. The reality of what really will happen is that you will come out after 24 months with even more debt than you have now. Don't involve Mom.

[jthompson5254]

Ok, if it reports to her credit report, I won't do that. I was under the impression it wouldn't, but I definately will check on that. However if it doesn't report to her credit report, then I don't see what the problem is. WHY should I pay more money in interest and increase my debt that much more? Just because I've been bad and have gotten in all this credit card debt. What sense does that make?

Also, I believe I must have not been clear on my plans.  Right now, all I can pay is the minimum payment, we've estabilished that. However I am getting training from unemployment soon so that I can get a job. Obviously, the economy sucks so I may not get a job for a year or maybe 2. If I do get a job OR lower some of my other bills such as healthcare, I will use my extra money to put towards my credit cards. If this doesn't happen, then I will only be able to make my minimum payments and I'll have no other choice.

Let so let me get this straight I should pay $2275.40 in interest this year when I can pay $588.00 in interest by doing this. So I should spend an additional 1687.40 because I'm not paying down my debt fast enough. If I stay at these interest rates, its gonna be that much harder.

Oh BTW, I just checked my FICO score here at MYFICO its 684 (I honestly didn't think it was that high, I guess it helps that I've never been LATE on a bill)