Utility vs # of cards w/ balance strategy

[tiger67]

Current situation reporting: 10 revolving accounts, 5 with balances, 47% util, some w/ indv util  > 80%.

I recently applied and was approved for a Chase Flexible Rewards card w/ 5000cl, 0% BT and purchases for 12m. I'm considering the following and would like advice as to the FICO effect and how would my creditors react:

BT 4500 from BOA to Chase, new BOA bal 0, 6500cl

BT 5200 from Cap One and HD/GEMB, new balances 0, 6000cl

This would leave me with 11 accounts, 3 with balances, 42% overall util, 90% Chase, 80% BOA. All revolving debt would be on 0% BT for 12mo saving $175/mo. I'm in the process of deleveraging and would pay the balances in full within 12 mo.   

Thanks

[Anonymous]

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tiger67 wrote:

Current situation reporting: 10 revolving accounts, 5 with balances, 47% util, some w/ indv util  > 80%.

I recently applied and was approved for a Chase Flexible Rewards card w/ 5000cl, 0% BT and purchases for 12m. I'm considering the following and would like advice as to the FICO effect and how would my creditors react:

BT 4500 from BOA to Chase, new BOA bal 0, 6500cl

BT 5200 from Cap One and HD/GEMB, new balances 0, 6000cl

This would leave me with 11 accounts, 3 with balances, 42% overall util, 90% Chase, 80% BOA. All revolving debt would be on 0% BT for 12mo saving $175/mo. I'm in the process of deleveraging and would pay the balances in full within 12 mo.   

Thanks

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Two cards over 80% will not sit well with FICO nor your existing creditors.

It doesn't matter that the large balances are at 0%.  FICO doesn't know this, and neither do the creditors who AR your reports.

Having said that, if it will really save you $175 a month, then that means you will be able to pay the debt down faster, and will save lots of money in the long run.

The best financial move is rarely the same as the best FICO move.  IMO, the best financial move trumps the best FICO move almost every time.

Message Edited by cheddar on 11-09-2008 10:20 AM

[tiger67]

I currently have 3 cards at +80, so I'm actually hoping for a small bump for only having 2 and reducing the # of cards reporting balances. I guess my biggest concern is spooking someone into CLD, especially the new Chase account.

[Anonymous]

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tiger67 wrote:
I currently have 3 cards at +80, so I'm actually hoping for a small bump for only having 2 and reducing the # of cards reporting balances. I guess my biggest concern is spooking someone into CLD, especially the new Chase account.

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Chase is much more likely to RJ than to CLD.

[Anonymous]

Pay down your debt and IGNORE your ficos right now (don't even pull them for at least 3 months).  And don't apply for more credit to try to 'fix' your UTIL.  Get rid of the debt, and your scores will go up.  Once you have all balances to zero, then think about fiddling with UTIL.

Message Edited by writemikep on 11-09-2008 12:24 PM

[Anonymous]

Indeed! Work on paying off the debt and don't worry about your FICO score right now.

Your FICO will improve once your UTL improves.

I also wouldn't bother pulling my FICO score until the debt went way down. Thats another $40 a pop that you could be applying to paying down the debt.

Is there a reason you need your FICO score to be high right now? Are you planning a major purchase?

[tiger67]

Planning to refi my home in May when I should be at 19-20% utility, only 1 new account in 3 1/2yrs, and no baddies. At that time I expect to be around FICO 720-740.

I'm trying to accomplish two things at once. Paying down my debt asap (hence the 0% BT), plus not spooking my current creditors. Last week my FICO dropped from 683 to 654 with the addition of 2 inquires and when an previously inactive card reported a $116 balance. I paid that balance off and have requested a mid cycle update, so hopefully a few points will return. I'm just a little paranoid given the current economic environment.

[rom828]

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@tiger67 wrote:

Planning to refi my home in May when I should be at 19-20% utility, only 1 new account in 3 1/2yrs, and no baddies. At that time I expect to be around FICO 720-740.

I'm trying to accomplish two things at once. Paying down my debt asap (hence the 0% BT), plus not spooking my current creditors. Last week my FICO dropped from 683 to 654 with the addition of 2 inquires and when an previously inactive card reported a $116 balance. I paid that balance off and have requested a mid cycle update, so hopefully a few points will return. I'm just a little paranoid given the current economic environment.

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I hear ya, tiger....I'm a little paranoid myself!

I agree with other posters and I'm trying to apply same philosphy....that doing what's best for FICO is not always what's best fiscally, ie:  BT to save $ every month but higher util. causing a lower score. Unfortunately, the lower score issue can turn into a big issue if it causes  CLD or RJ, hence the confusion and paranoia many of us feel!

I  just did a 0% BT to BoA for the same reasons...eliminate balances on other cards, (especially since their 0% time was up) AND save money.  Put the utilization on BoA at around 70% and I plan to pay it off 9-12 months.  But I took a big hit....18 points....as the BT balance reported before  the other cards reported their lower balances....made it appear that untilzation went from 22 to 35%.  Hopefully I'll get some of that back soon, but I also just took a hit of 9 points (ouch!) due to an inquiry for new car.  I just bought the car Sunday, the inq was from Saturday and the new acct isnt even reporting yet, so I hope w/such a big hit for the inq, which I assume is also related to other factors, like the higher util., that I won't be totally creamed when the acct reports.  And I wanted to wait until my scores were back up to get the new car, but with my old one so near death, running on 5 cylindars, and the ever tightening financial market, I felt that I needed to act right away.

I'd really like to BT everything else I have to another % card, but in light of the new car loan, I may wait a month or so.  Hopefully by then my scores will have settled a bit and I can start getting some points back.  I've had to decide that my main focus has got to be eliminating debt.  I want my cards paid off so I can get the car paid off faster. I hope that I'm able to do so without jeopardizing my scores by the use of BT's!!

[hyprble]

I have a question about all my cards chasing down my balances.  I'm concerned as I pay off cards my debt to credit ratio goes up which in turn gives cards more reason to raise my interest rates.  I also have cards that threaten to raise my interest rates if I don't "opt out" which closes my account and dings my credit scores even more.  I don't have any major purchases coming up, but I am very concerned about my interest rates skyrocketing even more now than before.  I only pay down my debt - don't add anything else I can't pif by the end of the cycle.

My Cap1 card with a high balance is going from 8.9 to 17.9% apr, no luck getting the interest rate down.  Because my other cards chased down my balances, I don't have any lower rate options.  Should I opt out and cancel the card paying it off at 8.9% and risk my credit score going down (thus increasing my other APRs)?  Or should I just let that APR go up to keep the account open (it's an older account, so i'd hate to lose it)? 

[haulingthescoreup]

How long will it take you to pay it off?

17.9% APR certainly isn't pleasant, but it's essentially 1.5% per month, as compared with 9.9% APR, essentially 0.75% per month. Doubled, yes, but still semi-not-awful.

I'd work out how many months that it would take you to pay it off, and figure out how much the additional interest (an additional 75 cents per $100 owed per month) will cost you, and decide whether you can stand it.

If it were me, I'd accept the ratejack, PIF it asap no matter what it took, and keep it as a one-charge-a-month PIF'er.

It doesn't have a fee, right?