Paying off half my debt to raise my credit and get a 0%APR card

[Anonymous]

Thanks for all the info CreditInspired!

So I've never really used credit cards myslef so could you tell me more about how the lender would close the acccount? Does that leave a mark on your credit history? Is "balance chansing" refering to sending the remaining balance to collections and what are the implecations of that? Also her scores may have been effected by a larger student loan that was recently paid in full. The 100 point jump was just what Creditwise on Capita One's app was showing, it might be an exageration. I'm a newbie but would it be possible that her score would jump that much by reducing her utilization from 100% to 50%?

Also, last question, would borrowing against a savings account tie up the funds until repayment any way? Wouldn't that just add an interest problem to the cash that I already own?

Thanks again for the tips and I'll check on her in depth credit score.

[CreditInspired]

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@Anonymous wrote:

Thanks for all the info CreditInspired!

So I've never really used credit cards myslef so could you tell me more about how the lender would close the acccount? Does that leave a mark on your credit history? Is "balance chansing" refering to sending the remaining balance to collections and what are the implecations of that? Also her scores may have been effected by a larger student loan that was recently paid in full. The 100 point jump was just what Creditwise on Capita One's app was showing, it might be an exageration. I'm a newbie but would it be possible that her score would jump that much by reducing her utilization from 100% to 50%?

Also, last question, would borrowing against a savings account tie up the funds until repayment any way? Wouldn't that just add an interest problem to the cash that I already own?

Thanks again for the tips and I'll check on her in depth credit score.

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Some lenders, depending on one's overall credit profile, will take aderse action (AA) when a CCs UT has been maxed out for several months. AA can come in terms of closing the account or balance chasing (reducing the CL to just above the outstanding balance). And, if lender A sees that lender B has taken an AA, lender A may also possibly take AA even if you've been paying that CC on time, which can then cause a domino catastrophe. I'm not saying that this would happen in your GFs case, but it's something to be aware of. 

No, you won't have access to the secured funds until you start paying the balance down; but at least it's a placeholder to your funds. As the outstanding balance decreases, the lender may allow you access to the available funds. (Example: you have paid back $1K; the lender would release $1K). This is way better because if you spend $10K to payoff your GF's CC debt, you won't have access to those funds. OP, I only brought this up because IMHO $10K is a lot of money to throw at a debt that is not your's. 

There's no sense in speculating. You really need to see why her scores are so low. Again, IMO, a 100-point jump is huge! And as others have said, you cannot and should not rely on simulators. 

Hope this helps explain things a little better.

[SouthJamaica]

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@Anonymous wrote:

Thanks for the tips. I'm not positive of the exact numbers but lets use the example of both cards have an $11k limit and she has $10k debt on both cards. This gives her a utilization close to 90%, she has 0 hard inquiries in the past 2 years, 8 years of history, 100% on time payments and 0 new accounts in the last 2 years. So really only the utilization number is high so if it dropped to 45% after the 10k was paid then her score should rocket instantly, right?

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If she brings two 90% cards down to 45% each she will seriously help her scores.

[Anonymous]

The credit score simulator would work a lot better if it allowed you to max out a card or two or three to see what impacting score would be. No such option. That's what you really need to test, and if it were an option, I could simulate that scenario because I recently did just that on one card. I would be able to see if my score goes back to near what it was under 1 maxed out card.

I lost about 40 pts maxing out 1 card, with a total util of 7%. My guess though is there will be a significant increase in score on applying 10K to the balances,  especially if you don't pay one off in full, but rather put 5K on one and 5K on the other, in order to eliminate the 1 maxed out card scenario. Total utilization would go down significantly too and maxed cards would be eliminated,  so maybe a 100 jump isn't off the wall.

I did simulate 90% util, and lost 200 points, but that will be different for various profiles. 

[Harvey26]

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@Anonymous wrote:

Hey folks,

I recently sat down with my girlfriend to determine the best way to get out of her $20k in credit card debt. Her credit score is 620 and she has 2 cards with 10k on each (18% APR). I have $10k cash saved up so I was thinking if I pay off one of her cards it would raise her credit score to 732 according to capital one's creditwise simulator! She could then get a 0% APR an $0 balance transfer fee (chase slate) card and I could get the other $10k paid off in less than a year. Then she could pay me back at a much lower interest rate so its a win win.

Does anyone see any flaws with this plan? Would she be approved if her credit had recently jumped up 100 points? Any idea how to estimate what her credit limit would be on the new card and if it would be possible to put all $10k onto the new card?

Also she has never missed a payment and has a stable income and I wouldn't hesitate to trust her with this plan since she has made major moves to get her finances in order. It's just layover debt from traveling and college.

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I personally dont think you should use your 10K cash but that is my personal opinion. Have you thought about adding her as AU to any of your high limit cards to help bring her UTL down.