What's best for your credit score? 1 or many credit cards w/ balance?

[seemund]

Hi,

I have a question...

Let's say I have 3 CC's, and $3,000 in Debt. What would be the best scenario for me, credit score wise...

SCENARIO 1:

CC1: $1000 Debt, CL: $1500

CC2: $1000 Debt, CL: $1500

CC3: $1000 Debt, CL: $6500

Or

SCENARIO 2:

CC1: $0 Debt, CL: $1500

CC2: $0 Debt, CL: $1500

CC3: $3000 Debt, CL: $6500

I'm asking this because I just received a 0% APR Balance transfer offer, on Credit Card #3, and would like to know if it would make any difference on my credit (other than the money saved by 0%APR)

Thanks.

[haulingthescoreup]

As long as card #3 remained under 50% util, as it would in your scenario 2, your scores would probably improve due to having a balance on only one card. The amount of improvement would depend upon what else is on your reports.

Obviously the important thing is to pay down/ off the debt ASAP. But if you're getting killed by interest to where you're having a hard time reducing the actual balances, BT's can help.

Don't forget that there's a BT fee involved. Even though you would be saving interest under a 0% APR, that fee works out to be the equivalent of an APR in many ways. For instance, if there's a 5% BT fee and 0% APR for 6 months, and you pay that BT off in the 6-month period, it's the equivalent of a 10% APR in terms of how much extra money you give the lender. And you'll have to pay off that BT fee within the BT period, so it effectively increases your total amount due.

It might still be a good deal, but be sure to factor that in.

[MarineVietVet]

I would recommend #2 for several reasons.

1. FICO likes to see less than half of revolving accounts showing a balance.

2. Both overall utilization and individual utilization are looked at for scoring. Although overall utilization would remain the same (46%) under scenario #1 the individual utilizations would be:

Card #1 67%

Card #2 67%

Card #3 15%

Under scenario #2 the individual utilizations would be:

Card #1 0%

Card #2 0%

Card #3 46%

I would then work as fast as possible to lower that 46%.

This is just my opinion.

I got out typed by HTSU again!!!!

From a BK years ago to:

9/09 EX pulled by lender 802
3/10 EQ- 800
4/10 TU -772

You can do the same thing with hard work

Credit Scoring 101
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[seemund]

Thanks for the GREAT replies.

I'm going with option #2, hopefully this will increase my FICO.

Thanks

[fused]

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@seemund wrote:

Thanks for the GREAT replies.

I'm going with option #2, hopefully this will increase my FICO.

Thanks

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I agree! Hauling and Marine gave you great advice, and you gave the forum very specific information about your situation. So, kudos to you!!! Good luck!

[haulingthescoreup]

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@MarineVietVet wrote:

I got out typed by HTSU again!!!!

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hee hee hee!

[seemund]

Hi Guys,

I just wanted to inform everybody that my FICO score went up from 680 to 707 just by consolidating my debt in 1 "high limit" credit card, instead of 4.

Thanks a lot for your advice..

Since I started using myfico, my credit was 633 (around 5-6 months ago), and it's now @ 707.

Wonderful, cheers.

[RobertEG]

I think you used BT effectively for FICO reasons.

Breaking it down, here is what I see.

For approx 1/2 of your % util score, the BT was a total wash.  It did not affect your overall % util.

But the other half of % util scoring first scores each indiv account % util, and also the overall % of cards showing balances.

You decreease % util on two of the three accounts, while inreasing % util on the third.  Not a major coupe, but I think the gain you received was from having two of the three accounts now with no balance.'

Smart FICO gain.

It cost you, I am guesssing, 3% of $3000 for the BT, or around $60, but you pay to play.