High amount of debt, do I need to worry?

[vantageman]

I have 7 credit cards with a total of $68,000 in credit limits. I have never missed a payment in 9 years and 3 months, never had a late payment. Before I started taking on debt my score was 810.

I have recently charged $40,000 to my credit cards and rolled the debt into 0% APR balance transfers. I have no other debts, no car notes, no mortgages, no education loans. My scores have now dropped significantly because of the high debt to credit limit ratio.

The reason I decided to take on so much debt was to cover some expenses for my business expansion, this barrowed money is actually going to make me a very nice profit. However considering my debt is approaching 60% of my credit limits I am concerned the banks will get nervous and close my accounts without warning and start demanding payment in full. My plan is to start paying down all this debt in 4-5 months’ time. After 4-5 months I plan to start making $3000-$4000 payments each month to the banks to start reducing the debt.

How concerned do I need to be about the banks getting nervous and closing my accounts without warning and start demanding payment in full.

[AverageJoesCredit]

I know suddenly increasing your personal debt to the levels you speak might spook lenders especially if they never see that kind of use from you before but im sure people with business sense can chime in better as im sure they do this all the time. Not sure if its better to apply for a business cc so as not to upset your personal credit. Good luck with your business though, may it prosper

[CreditInspired]

I don't think they can demand payment in full as long as you're making minimum payments. However, you don't want lenders to start doing CLD, closing accounts, and balance chasing. AJC is correct that this could spook lenders since it's not your usual spending pattern. When did you transfer these balances? Is it possible to make large payments the moment they post? IMHO, this will look positive and not look like you're ready to fly the coop. Just my 2 cents.

[Anonymous]

Most credit card agreements do give card co right to demand NOW on the whole balance.  If the biz is something that has a long term track record I would get a loan from the bank pay off the balances based on biz assets. Also the card co can argue that consumer rules don't apply if the money was used for the biz and make your life miserable. 

[Anonymous]

I have nothing of value to add as Im not a business owner nor do I have that much cc debt...but I am curious as to why you chose to go the 0% down on your current credit cards instead of taking a business loan? ....Especially since you will be able to pay back in a short amount of time. 

This would of alleviated the need to put everything on credit, saved your credit score, and you wouldnt have to worry about lenders doing CLD. 

[Anonymous]

I would be worried.  I have $108k in revolving lines and owe $1,200 on my Blispay due to 6 months promos.  I am always worried when I owe money.  I have many ways to pay off my debt but I certainly would be in dire straits if I owed $40k on my cards.

If you pay for credit monitoring you can see how many times your lenders are SP'ing you.

[Skymogul]

I'd suggest you head down to the Business Credit forums and read the Business Credit 101 post: http://ficoforums.myfico.com/t5/Business-Credit/Business-Credit-101/td-p/108894

[K-in-Boston]

The combo of high utilization and lack of an installment loan will just temporarily tank your scores.  I'm estimating you're probably still showing somewhere in the ballpark of 740s?  As long as your reported income supports your ability to eventually repay the debt, you are not also opening new accounts, you are making more than minimum payments, and are not continuing to increase your utilization, you should be absolutely fine.  Everyone's profile is different so there are no guarantees, but other than having my scores suppressed substantially, once the markets recovered I had no further rate jacking or balance chasing (after the initial sting of that where creditor A did it, then creditor B saw that and did it, then creditors C, D, E panicked because creditor A and B did it, etc...) - and I was in the 80+% range for years.  

None of the banks will demand payment in full; that's why you have a revolving agreement with them.  A charge card would be different, as a company like AmEx can very rightly demand payment in full on a charge card, even balances placed into a revolving Pay Over Time bucket.  Put a little more clearly, as long as your creditors are comfortable with your ability to repay (and it sounds like most of these are established accounts) it is highly unlikely that they will take any adverse action.

[Creditaddict]

I would have applied for some business credit while you had 800 scores and no debt... Amex Simply Cash, Chase ink, Citi AA, Barclay Jetblue... some might still be great options if you are still in mid 700's but not many of them will let you BT, that's the only issue.

I would not worry about it if you are going to start throwing $4k+ to a $150 monthly payment... most banks will not blink... Barclay is probably the biggest exception to that rule.

[Mattopotamus]

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@K-in-Boston wrote:

The combo of high utilization and lack of an installment loan will just temporarily tank your scores.  I'm estimating you're probably still showing somewhere in the ballpark of 740s?  As long as your reported income supports your ability to eventually repay the debt, you are not also opening new accounts, you are making more than minimum payments, and are not continuing to increase your utilization, you should be absolutely fine.  Everyone's profile is different so there are no guarantees, but other than having my scores suppressed substantially, once the markets recovered I had no further rate jacking or balance chasing (after the initial sting of that where creditor A did it, then creditor B saw that and did it, then creditors C, D, E panicked because creditor A and B did it, etc...) - and I was in the 80+% range for years.  

None of the banks will demand payment in full; that's why you have a revolving agreement with them.  A charge card would be different, as a company like AmEx can very rightly demand payment in full on a charge card, even balances placed into a revolving Pay Over Time bucket.  Put a little more clearly, as long as your creditors are comfortable with your ability to repay (and it sounds like most of these are established accounts) it is highly unlikely that they will take any adverse action.

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This is excellent advice.  Sure your scores are going to drop initially, but as you start paying off the debt they will restore to normal.  You will actually build your relationship with the bank showing you are able to pay off such a significant amount of debt.