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Balance Transfer to 1 Credit Card & FICO Results?

PrivateEyes
Member

Balance Transfer to 1 Credit Card & FICO Results?

I have a question regarding balance transfer to one credit card and how that will affect FICO scores.  FICO scores 11/08 TU 706 EX 704 EQ 690.  I have the ability to transfer all my balances to one card that I have had since 1996 with a fixed 5.99% until the balance is paid in full.  It has a credit limit of $12500 with a balance of $2800 on it currently.  I will pay the $2800 off, then be able to transfer all to this card with the 5.99%.  I will be using $11500 of the credit limit, but no other credit card balances.  I have approx $35K available credit on all other cards combined.  One card has been closed since 2005 (no credit line included in the $35K), but still has a balance of $6K with 23.99%.  I had defaulted on this account, but brought current and has been current since 2005, but the lender closed the account in 2005.  By transfering the total interest on $11500 with $500 mo. payments to pay off in 24 mo. would be $746 total.  The closed account at $250 mo. payments to pay off in 34 mo. would be $2254 in interest just on this account!  I just wonder how this will look or figure with FICO scores with such a high Utilization on just this one account?  I'm wanting to apply for new mortgage at the first of the year and don't want to hurt my FICO by doing this transfer.  What should I do?  Would it actually increase the FICO or decrease the FICO with the transfer?  Any thoughts or suggestions?  
Message 1 of 8
7 REPLIES 7
woopah
Established Contributor

Re: Balance Transfer to 1 Credit Card & FICO Results?

FICO looks at both individual and overall utilization.  So even if your overall utilization is 5%, if you have one card that's maxed out, which this one will be, you will still see a ding in your scores. 

 

The amount of the ding depends on what else you have going on in your credit reports, and how high your scores are.  Negative things affect higher scores more and lower scores less.  

 

By maxing out one of your cards you may see adverse reaction from one of your other creditors, CLD'ing you or rate jacking you, possibly as an extreme closing your other credit cards.  Closing and CLD'ing you will affect your overall utilization and may lower your score further.  

 

However, even though a high FICO score is important, as you pay down your balance your utilization will improve and your FICO score will continue to go up.  You can see by my scores that my FICO's have continued to go up, and the only thing changing on my reports is things aging, as all things do, and my utilization improving. 

 

So should you tansfer the balance, well that's a decision only you can make.  But I know I maxed out several cards doing BT's trying to pay less interest and pay debt off faster, so unless there's a specific loan or a mortgage you're trying for and you need those FICO's as high as possible, perhaps saving the money and paying the debt off faster is more important to you.

4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Message 2 of 8
PrivateEyes
Member

Re: Balance Transfer to 1 Credit Card & FICO Results?

Thanks so much for your information!  I was thinking that would be the case, but wanted to see what others had found from their experience.  I will continue to pay down the higher interest CC that is closed and maybe after I get a mortgage situated I will balance transfer to save money on interest.  At this time I would rather have better FICO scores and pay a little more interest, because of course that is what I have been doing so long I really know of no other way!  I'm trying to get to the 720 FICO so hopefully I can make a large payment or pay off the 2 small cards to increase the FICO within the next 2 months.  TU 706 EX 704 EQ 698  December 2008
Message 3 of 8
ma_fico
Regular Contributor

Re: Balance Transfer to 1 Credit Card & FICO Results?

OP - that 6K on a closed acct is an even bigger utilization-killer, I think.  This, combined with the 23+% you're paying interest, would lead me to BT the balance to your other card.

 

This is my opinion only, ymmv.

 

Good luck!

 

 

Message 4 of 8
PrivateEyes
Member

Re: Balance Transfer to 1 Credit Card & FICO Results?

Thanks for your input!  Wasn't sure myself how the Utilization would be affected on a closed account.  I believe that I will just BT about 50% on the 5.99% fixed rate and pay about 50% on the closed account.  This way neither should really hurt my FICO scores and I will be really hitting the 23% card pretty hard.  Just the money that I will be saving in interest (~$150 mo.) between the 2 cards can now be applied to the principle and not interest.  I plan on really attacking this credit cards hard and being done with them forever!  Just want to feel like I'm making some ground on the balances, but there again not sacrificing my FICO scores?
Message 5 of 8
jmbfl
Valued Contributor

Re: Balance Transfer to 1 Credit Card & FICO Results?


@ma_fico wrote:

OP - that 6K on a closed acct is an even bigger utilization-killer, I think.  This, combined with the 23+% you're paying interest, would lead me to BT the balance to your other card.

 

This is my opinion only, ymmv.

 

Good luck!

 

 


 

Not exactly correct. The reported balance and the reported CL count in the UTIL calculation in the same way whether the account is open or closed. As long as you owe one cent on the closed account the full reported CL will count in the UTIL calculation. As soon as the closed account is PIF it totally falls out of the UTIL calculation, but will remain on your CBR's (presuming it is a positive account) for 10 years after last activity. The big problem here is the interest you are paying. Do what you have to do to minimize your interest payments - but be mindfull that a decision to max out one particular card may backfire and result in another of your issuers taking AA against you. I would avoid taking any card above 70% UTIL. (50% ideally.)  In terms of FICO calculation overall UTIL counts more that individual UTIL so shifting the debt toward the minimum number of cards should help you there.

 

You do need to make immediate and substatials steps toward paying your balances down - they are too high.

Message 6 of 8
PrivateEyes
Member

Re: Balance Transfer to 1 Credit Card & FICO Results?

Thanks for your information.  I figured up that my CL is $35K on all cards combined.  This doesn't include the CL that the closed account had.  I believe that it was $7200.  With this account closed I figured the CL of $7200 was not figured in the CL, because it isn't available.  Is this correct thinking?

 

My combined balances of everything is $17K which does include the $5900 on the closed account.  This should figure to be 49% Utilization.  I'm trying to get this down to below 40% within the next month by paying about $3500.  I'm not sure how this will affect my FICO Scores by doing so.  I wanted to take advantage of the 5.99% APR the best that I could, so I wanted to put $8K on the $12500 card with zero balance and bring down the 23% APR account to 50% of its current balance.  I know that this would show almost 65% Utilization on the 5.99%card, but hopefully save me tons in interest.  Where should I then apply the $3500 payment to best help my FICO?  Should I apply this to the 23% and pay off leaving the 65% Utilization on the other card or split the $1750 between the two cards bring the 5.99% to 50% Utilization? 

 

Thanks so Much!

 

12/08  TU 706

          EX 704

          EQ 698

 

Annual Salary $145K

Message 7 of 8
jmbfl
Valued Contributor

Re: Balance Transfer to 1 Credit Card & FICO Results?


@PrivateEyes wrote:

Thanks for your information.  I figured up that my CL is $35K on all cards combined.  This doesn't include the CL that the closed account had.  I believe that it was $7200.  With this account closed I figured the CL of $7200 was not figured in the CL, because it isn't available.  Is this correct thinking?

 

My combined balances of everything is $17K which does include the $5900 on the closed account.  This should figure to be 49% Utilization.  I'm trying to get this down to below 40% within the next month by paying about $3500.  I'm not sure how this will affect my FICO Scores by doing so.  I wanted to take advantage of the 5.99% APR the best that I could, so I wanted to put $8K on the $12500 card with zero balance and bring down the 23% APR account to 50% of its current balance.  I know that this would show almost 65% Utilization on the 5.99%card, but hopefully save me tons in interest.  Where should I then apply the $3500 payment to best help my FICO?  Should I apply this to the 23% and pay off leaving the 65% Utilization on the other card or split the $1750 between the two cards bring the 5.99% to 50% Utilization? 

 

Thanks so Much!

 

12/08  TU 706

          EX 704

          EQ 698

 

Annual Salary $145K


 

No! That is not correct. Please reread my preceding post.

 

To correctly advise you I would need to see a table of all TL's both installment and revolving. (Gotta keep it simple for me to wrap my mind around.) If you stick with what I have already said you will be fine.

Message 8 of 8
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