topic Re: CO Balance vs. Credit Card Balance in Rebuilding Your Credit

CO Balance vs. Credit Card Balance

Red1Blue — Tue, 28 Jul 2020 21:27:03 GMT

I am trying to conserve cash / savings during this pandamic. I do have COs and I do have available credit on my secured cards. Does it make sense to make the settlements on COs to about 20-30% and pay it off using my Secured Cards? With this I do not have to close my accounts and take out the Deposit. I know my util will go up since I am paying with my credit card, but when COs settled I should see a net 60-70% decrease on my Util once the COs are settled and brought down to $0. I can pay off my secured cards in about 6-12 months and might cost me small interest rates but since the COs are settled to $0 my scores should slowly start climbing up. What are the pros and cons of this approach?

Re: CO Balance vs. Credit Card Balance

Anonymous — Tue, 28 Jul 2020 22:49:15 GMT

I see no cons except interest and are you gonna have to do a cash advance? Might not be a bad idea since you have the capacity to do so.

Be interested in seeing what other members have to say as well.

Re: CO Balance vs. Credit Card Balance

OmarGB9 — Wed, 29 Jul 2020 18:18:36 GMT

My concern would be whether the CAs even accept CC payments? I know a few do, but most only accept either debit or checking account direct withdrawals.

Re: CO Balance vs. Credit Card Balance

Red1Blue — Wed, 29 Jul 2020 23:24:06 GMT

@OmarGB9 wrote:
My concern would be whether the CAs even accept CC payments? I know a few do, but most only accept either debit or checking account direct withdrawals.

Assuming they accept the cards.

Re: CO Balance vs. Credit Card Balance

Red1Blue — Wed, 29 Jul 2020 23:36:28 GMT

@Anonymous wrote:
I see no cons except interest and are you gonna have to do a cash advance? Might not be a bad idea since you have the capacity to do so.

Be interested in seeing what other members have to say as well.

What I am struggling to find out is. I have positive payment history for last 18 months. What I am trying to do is debt settlement and consolidation. Except I am using my secured cards since no one is giving unsecured loan or cards at my scores. By the way my scores are around 600 now. Positive side, so far I have settled and brought down 13 COs to $0 and several CAs removed.

1. The outstanding COs is $96k. That are reporting negative every month and holding the scores. By settling these will reduce my Util by $96KLet us assume that I was able to bring COs to $0 what score gain would I see? If not sooner when I might be able to see some gain scores that would allow me to get one or two single high limit cards.

2. Next question is what if make the settlement on all these accounts and pay by existing credit cards.Now my util on cards in good standing will go up by 20K. That would put the existing good cards at 80% usage. That I can try to bring it down to $0 in 6-8 months. But there will be some score drop. And, Yes, it will cost me some interest. I need to figure out how much.

3. Some how if these 2 two actions would give me boost. What I am hoping to do is refinance my student loans that are abour $74k now at 6.5% APR to lower APR. That would save me about $400/month in student loan interests and hopefully help me to pay off the educational loans at a faster rate.

I guess, I am in a catch 22 situation. No matter what I am not able to get out of this loop. What would be the score gain if I settle all CO accounts $96k to $0. What will be the score loss if my util on good cards goes up from around $35-$40 / month to say $19k.

Re: CO Balance vs. Credit Card Balance

Anonymous — Thu, 30 Jul 2020 00:56:10 GMT

Unfortunately we don’t know exactly how chargeoff utilization factors in, so it’s hard for me to try to give you an answer because I really have nothing to use to base it upon.

Yes you will probably see a boost due to the reduced utilization because your accounts are updating regularly. Yes you will likely see a drop due to the increased utilization on your secured cards. Yes you will get those points back when you pay the cards down. So the result should be a net increase.

Without knowing exactly how chargeoff utilization works, I really can’t predict what the score change would be.

Re: CO Balance vs. Credit Card Balance

Red1Blue — Thu, 30 Jul 2020 01:00:11 GMT

@Anonymous wrote:
Unfortunately we don’t know exactly how chargeoff utilization factors in, so it’s hard for me to try to give you an answer because I really have nothing to use to base it upon.
Yes you will probably see a boost due to the reduced utilization because your accounts are updating regularly. Yes you will likely see a drop due to the increased utilization on your secured cards. Yes you will get those points back when you pay the cards down. So the result should be a net increase.
Without knowing exactly how chargeoff utilization works, I really can’t predict what the score change would be.

Thanks BM7. I tried simulator. I know it is useless. It says if I clear all my COs I would see a boost of 100 score points. If I max out all credit cards I would see a loss of 10 points.

Re: CO Balance vs. Credit Card Balance

Anonymous — Thu, 30 Jul 2020 05:18:05 GMT

That may be somewhat accurate for the charge-offs I would not be surprised. Because they’re large and they are updating regularly.

And considering you’re in a dirty card, I think utilization is penalized less, maybe some members can chime in on how much utilization thresholds count for in dirty cards?

Re: CO Balance vs. Credit Card Balance

OmarGB9 — Thu, 30 Jul 2020 05:40:21 GMT

@Anonymous wrote:
That may be somewhat accurate for the charge-offs I would not be surprised. Because they’re large and they are updating regularly.

And considering you’re in a dirty card, I think utilization is penalized less, maybe some members can chime in on how much utilization thresholds count for in dirty cards?

It counts for something. FWIW, as I paid off COs with balances I saw small gains every time. Even as I'm making regular payments and the balances decrease, whenever I cross thresholds I see some small increases too.

Re: CO Balance vs. Credit Card Balance

Red1Blue — Thu, 30 Jul 2020 13:57:16 GMT

@OmarGB9 wrote:
@Anonymous wrote:
That may be somewhat accurate for the charge-offs I would not be surprised. Because they’re large and they are updating regularly.

And considering you’re in a dirty card, I think utilization is penalized less, maybe some members can chime in on how much utilization thresholds count for in dirty cards?
It counts for something. FWIW, as I paid off COs with balances I saw small gains every time. Even as I'm making regular payments and the balances decrease, whenever I cross thresholds I see some small increases too.

Thanks for your input. I just want to get out of this catch 22. Unless I pay off the COs I can not refinance my student loans which can give me substantial reduction in interest rates. Otherwise I'l be paying $400-$500 in interest every month on my student loans. If I make the settlement I can get them out of the way but my secured card usage would go high and I have to pay credit card interest. I have to do some math and see what is the reasonable point. I need to do some thing soon so I can come out of this miserable situation. This is really messing with my situation. Yes, this Covid-19 effect on economy is not helping any one either. Let me see what I can figure out.

Re: CO Balance vs. Credit Card Balance

Anonymous — Thu, 30 Jul 2020 21:09:30 GMT

@OmarGB9 did you say that as you are bringing the balance down on a chargeoff, you saw utilization decreases and points as you crossed thresholds? Did I understand you correctly?

Re: CO Balance vs. Credit Card Balance

Anonymous — Thu, 30 Jul 2020 21:11:20 GMT

@Red1Blue just remember the sooner you take care of those, the sooner your scores start to recover. Also the longer you take, the more you're penalized and the longer before they begin to recover.

Re: CO Balance vs. Credit Card Balance

OmarGB9 — Fri, 31 Jul 2020 03:25:25 GMT

@Anonymous wrote:
@OmarGB9 did you say that as you are bringing the balance down on a chargeoff, you saw utilization decreases and points as you crossed thresholds? Did I understand you correctly?

Yes. Not every time, as there are always other factors at play, but generally speaking as my balances have gone down I'll see small gains of 1-6 pts whenever I cross one of the known utilization threholds on any of the COd accounts. And whenever I pay off a CO and it reports zero balance, I see some bigger gains of anywhere between 10-25 pts. I still have an open collection showing too, but it's with PRA, so I know once I pay/settle, it'll come off, and then I'll be collection free and have only paid charge offs showing. Looking forward to that!

Re: CO Balance vs. Credit Card Balance

Red1Blue — Fri, 31 Jul 2020 03:35:36 GMT

@Anonymous wrote:
@Red1Blue just remember the sooner you take care of those, the sooner your scores start to recover. Also the longer you take, the more you're penalized and the longer before they begin to recover.

I know. It is really frustrating to figure it out. I did clear 11 COs and 7 CA account. I'll try to clear the remaining 8 COs hopefully soon.

Re: CO Balance vs. Credit Card Balance

Anonymous — Fri, 31 Jul 2020 03:40:06 GMT

@OmarGB9 that is some really awesome information as I am trying to determine how chargeoff utilization factors into utilization exactly for the Primer.

can I ask how you are determining your utilization? Are you doing this yourself? Or relying on a frontend? And are you speaking of the COs crossing individual utilization thresholds?

thank you for sharing.

Re: CO Balance vs. Credit Card Balance

Anonymous — Fri, 31 Jul 2020 03:47:22 GMT

@Red1Blue wrote:
@Anonymous wrote:
@Red1Blue just remember the sooner you take care of those, the sooner your scores start to recover. Also the longer you take, the more you're penalized and the longer before they begin to recover.
I know. It is really frustrating to figure it out. I did clear 11 COs and 7 CA account. I'll try to clear the remaining 8 COs hopefully soon.

@Red1Blue you know I'm proud of you, you have done great and I know you will continue to.

Re: CO Balance vs. Credit Card Balance

OmarGB9 — Fri, 31 Jul 2020 05:25:08 GMT

@Anonymous wrote:
@OmarGB9 that is some really awesome information as I am trying to determine how chargeoff utilization factors into utilization exactly for the Primer.

can I ask how you are determining your utilization? Are you doing this yourself? Or relying on a frontend? And are you speaking of the COs crossing individual utilization thresholds?

thank you for sharing.

Yes, well, I'm not entirely sure on aggregate utilization, but I'm keeping track on individual utilization with my COd accounts, and I've noticed those small bumps when crossing for example the 88.9% threshold. I need to still verify it was indeed due to that, but I'm 90% sure it was, as nothing else had changed on my file that I could see. And I'm doing it manually, yes. Not sure what you mean by a "frontend."

Re: CO Balance vs. Credit Card Balance

Anonymous — Fri, 31 Jul 2020 05:30:27 GMT

@OmarGB9 wrote:
@Anonymous wrote:
@OmarGB9 that is some really awesome information as I am trying to determine how chargeoff utilization factors into utilization exactly for the Primer.

can I ask how you are determining your utilization? Are you doing this yourself? Or relying on a frontend? And are you speaking of the COs crossing individual utilization thresholds?

thank you for sharing.
Yes, well, I'm not entirely sure on aggregate utilization, but I'm keeping track on individual utilization with my COd accounts, and I've noticed those small bumps when crossing for example the 88.9% threshold. I need to still verify it was indeed due to that, but I'm 90% sure it was, as nothing else had changed on my file that I could see. And I'm doing it manually, yes. Not sure what you mean by a "frontend."

@OmarGB9 oh that's beautiful! What I mean by frontend is CMSs like MF app or website or the Experian website or CK or WH or one of the services that calculate it for you, because you cannot rely upon that it's inaccurate!

Wow so you have saw point change as the individual utilization thresholds are crossed? How many points per threshold? Do you have any public records or just COs? Wow! This is terrific information! I'd love to know if you see any changes on aggregate utilization as well!

please keep me updated and I'd love any data that you'd like to share! I don't know if you've read the Scoring Primer, but it's linked at the top of my signature and I'd like to learn this to be able to add it there.

Re: CO Balance vs. Credit Card Balance

Red1Blue — Sat, 01 Aug 2020 02:24:16 GMT

@OmarGB9 wrote:
@Anonymous wrote:
@OmarGB9 that is some really awesome information as I am trying to determine how chargeoff utilization factors into utilization exactly for the Primer.

can I ask how you are determining your utilization? Are you doing this yourself? Or relying on a frontend? And are you speaking of the COs crossing individual utilization thresholds?

thank you for sharing.
Yes, well, I'm not entirely sure on aggregate utilization, but I'm keeping track on individual utilization with my COd accounts, and I've noticed those small bumps when crossing for example the 88.9% threshold. I need to still verify it was indeed due to that, but I'm 90% sure it was, as nothing else had changed on my file that I could see. And I'm doing it manually, yes. Not sure what you mean by a "frontend."

Hi @OmarGB9 Question for you. How does this work. If we make settlement and arragement installments how it works? Let us say CO is $10k and settlement is $2k and 10 monthly payments of $200. Now as each month passes how it gets reported ? Will it be $10k - $200 each month and once the entire $2k is paid it will get updated to $0 balance? If we make settlement and start making the payments will it stop reporting delinquency or do we have to wait for the entire CO paid off ? I am not sure how this works. I know you have setup some payment plans for some of the COs. How did that work and how its get reported ?

Re: CO Balance vs. Credit Card Balance

OmarGB9 — Sat, 01 Aug 2020 09:43:27 GMT

@Red1Blue wrote:
@OmarGB9 wrote:
@Anonymous wrote:
@OmarGB9 that is some really awesome information as I am trying to determine how chargeoff utilization factors into utilization exactly for the Primer.

can I ask how you are determining your utilization? Are you doing this yourself? Or relying on a frontend? And are you speaking of the COs crossing individual utilization thresholds?

thank you for sharing.
Yes, well, I'm not entirely sure on aggregate utilization, but I'm keeping track on individual utilization with my COd accounts, and I've noticed those small bumps when crossing for example the 88.9% threshold. I need to still verify it was indeed due to that, but I'm 90% sure it was, as nothing else had changed on my file that I could see. And I'm doing it manually, yes. Not sure what you mean by a "frontend."
Hi @OmarGB9 Question for you. How does this work. If we make settlement and arragement installments how it works? Let us say CO is $10k and settlement is $2k and 10 monthly payments of $200. Now as each month passes how it gets reported ? Will it be $10k - $200 each month and once the entire $2k is paid it will get updated to $0 balance? If we make settlement and start making the payments will it stop reporting delinquency or do we have to wait for the entire CO paid off ? I am not sure how this works. I know you have setup some payment plans for some of the COs. How did that work and how its get reported ?

Depends on the CA. I've had it happen both ways. Some will deduct the monthly settlement payment amount from the full balance and then update to zero once payment plan is complete, while others will leave the full balance as is until the payment plan is complete and then just do one final update to closed/paid/settled for less.

As for your second question, at least with all of my creditors/CAs, they keep reporting delinquency/late until it is paid off or settled.