topic Re: Util. question.... theoretically, which is worse? in Understanding FICO® Scoring

Util. question.... theoretically, which is worse?

Anonymous — Wed, 27 Feb 2008 02:30:31 GMT

I know what I will most likely do in this situation, but I wanted to get some feedback on the 'score side' of this.

Fico-wise, is it better to have a balance of $4,000:

On 2 cards - one with a $4,200 limit (48% util), one with a $5000 limit (40% util)

- or -

On a single card with a $4,500 limit (88% util)?

The 2 cards in first scenario both have fixed APRs of 7.99%. The card in the 2nd scenario is a 0% for 12 months w/ no transfer fee Citi card. Overall util is at 17%.

Scenario #2 will save me a few hundred dollars over the course of the 12 months. In this time I'll be paying the card down as aggressively as possible. Since the transfer can be initiated anytime in the next 11 months, I may use the card and then request a CLI after 6 months to reduce the heavy util of that one card. Not sure if waiting 6 months is worth the effort though. Regardless, I'm thinking I will go with the 2nd plan...unless you all think it will be disastrous for my scores! They're all in the 710-730 range.

Re: Util. question.... theoretically, which is worse?

Anonymous — Wed, 27 Feb 2008 02:33:17 GMT

any reason you can't ask citi to take advantage of the bt option?

Re: Util. question.... theoretically, which is worse?

Anonymous — Wed, 27 Feb 2008 02:38:38 GMT

That is a tough one-

I think the hit on option B will be more of a FICO hit - but it save $-

How much? 20-30 points?

I would do what you can to keep under 80%

ragtag wrote:
I know what I will most likely do in this situation, but I wanted to get some feedback on the 'score side' of this.

Fico-wise, is it better to have a balance of $4,000:

On 2 cards - one with a $4,200 limit (48% util), one with a $5000 limit (40% util)

- or -

On a single card with a $4,500 limit (88% util)?

The 2 cards in first scenario both have fixed APRs of 7.99%. The card in the 2nd scenario is a 0% for 12 months w/ no transfer fee Citi card. Overall util is at 17%.

Scenario #2 will save me a few hundred dollars over the course of the 12 months. In this time I'll be paying the card down as aggressively as possible. Since the transfer can be initiated anytime in the next 11 months, I may use the card and then request a CLI after 6 months to reduce the heavy util of that one card. Not sure if waiting 6 months is worth the effort though. Regardless, I'm thinking I will go with the 2nd plan...unless you all think it will be disastrous for my scores! They're all in the 710-730 range.

Re: Util. question.... theoretically, which is worse?

haulingthescoreup — Wed, 27 Feb 2008 19:11:14 GMT

Hey, ragtag, great minds thinking alike! I just put an $8K on a $10K BofA card for the 0% for 15 months, plus the $240 BT fee. (Curse BofA and their uncapped BT fees! )

I'm planning to pay off $1K the first month, $500 plus the BT fee the second month, and then $500/ month until it's paid off. I'm expecting to get slammed, but on this schedule, it will be under 50% by August, so I'm hoping to hunker down in the meantime.

edit: whoops, just noticed this was ragtag, not ragcajun--sorry about that.

Message Edited by haulingthescoreup on 02-27-2008 11:11 AM

Re: Util. question.... theoretically, which is worse?

Anonymous — Wed, 27 Feb 2008 14:19:37 GMT

Hauling - will the $1200 Fed. Gov't handout coming in May/June help? Take all we can get, right?

Re: Util. question.... theoretically, which is worse?

Anonymous — Wed, 27 Feb 2008 16:03:37 GMT

ragtag-

Are you planning any big purchases or opening new lines of credit soon? If not, then do what is wise financially and don't worry about the FICO score. If you stick to your plan, your FICO will return to what it would be regardless of where the debt sits.

Re: Util. question.... theoretically, which is worse?

haulingthescoreup — Wed, 27 Feb 2008 19:10:11 GMT

@Anonymous wrote:

Hauling - will the $1200 Fed. Gov't handout coming in May/June help? Take all we can get, right?
DH has dibs on that one, for HIS balance transfer from last year!

I think I'll be OK with a quick initial paydown, she said a bit nervously. But seriously, I'm not in the market for any more credit any time soon, so as long as the other creditors don't get antsy, any damage should be temporary.

Re: Util. question.... theoretically, which is worse?

RobertEG — Wed, 27 Feb 2008 23:17:03 GMT

In giving an "FICO-wise" advice, the question that the wisdom seeker must first decide upon is not the immediate effect of actions on Holy FICO, but rather first and foremost, WHEN do you intend to apply for new credit, for it is only then that your FICO has any real meaning. If you do not intend to apply for new credit within the next year, for example, then a reduction of interest plan would probably be more appropriate for the first 11 months of than plan than worrying about which cards the balances will be on, how many cards have balances, the exact date they report, etc. to tweak monthly FICO ego. Reduction of interest may involve paying off your higher interest CC first, with not as much impact on total FICO if is a high CL card, and still leaves all the other cards with outstanding balances, waaiting in the lurches, and driving your % of total cards with more than a zero balance over half. Reducing interest is a much different strategy than increasing FICO during the intervening months until about two months before you plan to apply for new credti, and thus actually need your FICO. The tweaks you are asking about assume that you are contemplating applying for new credit within a much shorter period, or else the short term FICO obsession would not be very important. In that case, the maybe your FICO plan will override your save $ plan. It is an individual question not ammenable to generic advice. IMHO.

Re: Util. question.... theoretically, which is worse?

haulingthescoreup — Wed, 27 Feb 2008 23:36:44 GMT

And this is true, as long as the only relevance of your FICO scores is on your future app'ing plans. The worrisome issue is whether your other current creditors will notice the score drop and take AA (adverse action.) There's a fair amount of anecdotal evidence that this does happen, although it's hard to determine what else might be going on as well.

Re: Util. question.... theoretically, which is worse?

Anonymous — Thu, 28 Feb 2008 02:44:20 GMT

thanks for the replies everyone!

haulingthescoreup - Citi does have pretty good BT deals... i like that in a lot of cases, you can wait as long as 12 months from opening the account to take advantage of the transfer rate. but you're right - score drop and AA is my only fear since i won't be needing to apply for any credit anytime soon (at least a year). i miss the days of being unaware of every Fico fluctuation - when i would take advantage of these deals without living in fear! your payment plan sounds good - i'm thinking of something similar for my situation.

i was already planning to go with the 0% BT.... it's probably silly for me to live in fear of Fico when i could make more headway on paying this down - and save money - with this option. the two cards were both over 50% util (88% and 59%) before i requested CLIs on both... and i've only seen about a 12 point jump in my score. so if i were to lose that, i could live with that. my overall util is much better now as well, i just hope that my overall age doesn't drop my score too much once the new card reports. i would only have one other card with a balance (9% util) and will have plenty of available credit (7 cards reporting a 0 balance), so i hope the high util on that one card won't make the CCCs nervous. regardless, i won't need to be applying for anything new for at least a year or so.... i have plenty of credit for my purposes. no mortgages or auto loans in my near future.

thanks everyone!

Re: Util. question.... theoretically, which is worse?

haulingthescoreup — Thu, 28 Feb 2008 03:14:27 GMT

I understand what you're going through, because I had the same issues (= dithering) myself. I went ahead and pulled the trigger, because I simply had to decide that the creditors would be able to see and acknowledge what I was doing, and I have absolutely no other risk factors going on, other than my well-established late payment history. My util is crazy low, and I have no other major derogs. I'm also fortunate enough to have lots of room left on my HELOC, so if they yank back the offer, I can just leave the debt where it is.

At some point, after all the research you can do and a lot of introspection, you just have to close your eyes and GO.