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Need help with FICO strategy

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spengbab
Regular Contributor

Need help with FICO strategy

Alright guys, I've opened up a LOT of credit cards since early this year. I figured that there was no immediate need to maintain a good credit score because it wasn't like I was going to buy a house or a car (more on that later) and since I wanted a long AAoA, I might as well would take a somewhat deep hit to my credit score in the hopes of having a solid AAoA later on.

 

This was going well, until...... 

 

My car decided to happily break down. Nothing too bad as it was the suspension. $700 for the first set to repairs... then fast forward to this month.

Another $350 out the door and the VERY NEXT DAY a check engine light... would get into details but another $680 in repairs.

 

Obviously when you've spent around almost 2 grand for repairs in 3 months, it kind of speaks a lot about the car's reliability. Especially when the car was bought new and is only 4.5 years old.

 

So in my quest to obtain credit cards, I find myself pretty much almost maxing them out because of my car. It's not a very alarming situation, I make enough money to pay it all off but I guess I can use this as an opportunity to build credit.

 

Naturally I am alarmed by the sharp increase in debt so I want to pay it down as quickly as possible. My UTIL is probably 80-90 now because of this... So I ask. In this case should I just rapidly pay down my credit cards or should I take my time paying them down? The CCs I have balances in all have 0% deferred interest... thankfully. So paying them down immediately isn't a big deal. However I would like to get a new car, maybe in 6 months. 

 

If this is the case, should I stay away from my two revolving cards that have no balances and charge everything to my AMEX (no new charges) while I pay down the balance on my two other cards? Should I PIF by the time I apply for financing on a car? Or should I just spread the payments out taking advantage of the 0% and then apply for financing on a car? I know that paying off longer increases your score more than paying it off in large chunks... but in this case I feel almost uncomfortable keeping this high of a UTIL rate (even though it's not that much money compared to what other people might have).

 

Thanks! It's a long read -_-

Barclaycard Apple Financing (2100), Discover More (2500), US Bank Visa Platinum (2000), CFNA (2200), Chase Freedom (500), Capital One (1500), HSBC Platinum Master Card (750), Nebraska Furniture Mart (1000)
Message 1 of 6
5 REPLIES 5
haulingthescoreup
Moderator Emerita

Re: Need help with FICO strategy


@spengbab wrote:

Alright guys, I've opened up a LOT of credit cards since early this year. I figured that there was no immediate need to maintain a good credit score because it wasn't like I was going to buy a house or a car (more on that later) and since I wanted a long AAoA, I might as well would take a somewhat deep hit to my credit score in the hopes of having a solid AAoA later on.

 

This was going well, until...... 

 

My car decided to happily break down. Nothing too bad as it was the suspension. $700 for the first set to repairs... then fast forward to this month.

Another $350 out the door and the VERY NEXT DAY a check engine light... would get into details but another $680 in repairs.

 

Obviously when you've spent around almost 2 grand for repairs in 3 months, it kind of speaks a lot about the car's reliability. Especially when the car was bought new and is only 4.5 years old.

 

So in my quest to obtain credit cards, I find myself pretty much almost maxing them out because of my car. It's not a very alarming situation, I make enough money to pay it all off but I guess I can use this as an opportunity to build credit.

 

Naturally I am alarmed by the sharp increase in debt so I want to pay it down as quickly as possible. My UTIL is probably 80-90 now because of this... So I ask. In this case should I just rapidly pay down my credit cards or should I take my time paying them down? The CCs I have balances in all have 0% deferred interest... thankfully. So paying them down immediately isn't a big deal. However I would like to get a new car, maybe in 6 months. 

 

If this is the case, should I stay away from my two revolving cards that have no balances and charge everything to my AMEX (no new charges) while I pay down the balance on my two other cards? Should I PIF by the time I apply for financing on a car? Or should I just spread the payments out taking advantage of the 0% and then apply for financing on a car? I know that paying off longer increases your score more than paying it off in large chunks... but in this case I feel almost uncomfortable keeping this high of a UTIL rate (even though it's not that much money compared to what other people might have).

 

Thanks! It's a long read -_-


* squints * Smiley Very Happy

 

OK, you have 5 cards, and high balances on only two? If so, that's going to be a little scary to your lenders when they soft you, but not as bad as if you had high balances on 4 or 5.

 

My take on it is this: it's not as if you can earn any appreciable amount of interest on your extra income while you extend your 0% repayments over time. In other words, I don't know that you're going to get any true earnings by delaying repayment.

 

So if as you say your income is high enough to pay off the balances, I would do so. I would definitely do so before a car app, and remember that it can easily take up to six weeks for a new $0 balance to post on all three reports, so give yourself plenty of lead time.

 

And don't forget, your car could simply roll over and stick out its tongue for good way before six months go by.

 

Otherwise the additional consideration would be as I mentioned at the beginning: since you have a lot of new cards, your lenders will be softing the heck out of you for a while. If they think that you opened a bunch of accounts and immediately ran them up (not knowing why), they might well worry that you're planning a strategic default, and that they'll be left holding the bag.

 

Due to this, and also to the other points, I'd pay them off ASAP. And as for the card that you use for ongoing purchases, use it all you like, but pay it off before its statement posts, so that it will report $0.

 

 

eta: cna't splel

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 2 of 6
marty56
Super Contributor

Re: Need help with FICO strategy

Paying off a CC quickly vs over a period of time as no effect on your FICO score other than the reported balances.  I would submit paying things down as quickly as possible will lower your reported util which will increase your FICO score.

 

If you need to raise your FICO score in the short term, reduce the number of cards reporting a balance and for those that do, make sure they don't have high util. 

 

Forget interest rates for now since they have no effect on your FICO score and paying cards off based on interest rates could lower your FICO score.

 

PIF is good but make sure your pay before the statement date since is the the reported balance that is import to FICO, not that the account is PIF'd.

1/25/2021: FICO 850 EQ 848 TU 847 EX
Message 3 of 6
spengbab
Regular Contributor

Re: Need help with FICO strategy

Thanks for the advice and reading the long post Smiley Tongue I thought paying over time would increase the score because of the FICO simulator. But honestly it doesn't matter. In this case I would feel loads better getting everything paid off early so I will do just that! And do people really open new CCs just to file for bankruptcy later on to get free stuff? That... Should be like fraud!
Barclaycard Apple Financing (2100), Discover More (2500), US Bank Visa Platinum (2000), CFNA (2200), Chase Freedom (500), Capital One (1500), HSBC Platinum Master Card (750), Nebraska Furniture Mart (1000)
Message 4 of 6
casmith1980
Established Contributor

Re: Need help with FICO strategy

The simulator is also factoring the aging of the accounts Smiley Happy that's why it appears better to pay over time....not because it's truly better
Filed BK 12/5/14
341 meeting 1/9/15
Anticipated discharge 3/10/15

Goal: 700 by 3/2017
Message 5 of 6
Crashem
Valued Contributor

Re: Need help with FICO strategy

I find the FICO estimator more accurate. Try using that

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Message 6 of 6
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