Creative ways to lower your utilization

[Anonymous]

hey!

Is there anyway to lower you Credit Utilization with out paying your cards down.

in ex. opening new lines of credit so that you credit to debt ratio is higher?

Currently my utilization is at 56%

Any Ideas?

[Anonymous]

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@Anonymous wrote:

hey!

Is there anyway to lower you Credit Utilization with out paying your cards down.

in ex. opening new lines of credit so that you credit to debt ratio is higher?

Currently my utilization is at 56%

Any Ideas?

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Im going to stick with your question and answer and not make any comments.

Yes, If you were approved for high limit credit cards your utilization would reduce. 

[Anonymous]

First, read my post in my signature link about "overall utilization".

Second, opening up new accounts when you already have high overall utilization AND individual cards that are close to maxed out may mean denials for apps or approvals with very low useless limits.

Third, a lot of folks who get new cards to try to manage utilization just charge up the new cards and end up in worse shape, dollar-wise.

The best way to lower utilization is to cut spending everywhere and attack debt.  I have some helpful spreadsheets I can share with you to help you plan what cards to pay off to get everything down to safer levels, but opening new cards is risky.

[Anonymous]

And I am not.

This is a very very bad idea.  Pay your bills off, do not artifically inflate your Utilization to make it look like youre less in debt.

Address why your debt is so high and how to reduce it.

The bottom line, anything other than paying down what you already have without opening new tradelines is a short term gain, long term loss, and an atrocious habit to get into.

[Anonymous]

Certainly opening new revolving tradelines (credit cards, LOCs, etc.) will lower your total utilization.  Note for this to be a good strategy assumes three things:

(1)  That you will find CC issuers willing to extend you more credit, when you are already over your head in debt.

(2)  That your existing creditors will not get spooked by your combination of low payments (likely at the minimum) and opening new tradelines: a classic symptom of high risk.  Creditors who do get spooked might impose credit lines decreases.  And thus the opening of the new tradeline might ironically result in lower total credit after the CLDs.

(3)  That you will not continue your pattern of spending and eventually be back up at your current util or higher -- but this time with a much higher dollar value of total debt.

It's really boring and unsexy but the best solution to the problem of being in debt is to buckle down and pay it off -- not to search for a greater capacity to incur much more debt.

[Kree]

NOTE: SUPER RISKY BEHAVIOUR, I am not recommending doing this. I infact recommend not doing it unless you have a firm grasp on your financial situation.  Run the numbers, make sure you can afford it, and that it won't blow up if you face an emergency.

You could take out a loan from a portfolio lending company such as Prosper. Use it to pay down your UTI. 

High UTI on an installment loan is less detremental than high UTI on revolving credit, so you should see a decent point increase (might depend upon thickness of file and AAoA)

Then with your lower UTI/higher score you can apply for CLIs and new credit.  Increasing total available credit and further lowing UTI.

Final step would be, if your loan % is higher than your CCs, to run up expenses on your CC and use excess to pay down loan quickly. Or take the % hit for 6 months then apply for a new loan at a better interest rate due to your higher score from lower UTI on CCs.

Personal Experience:

I did this myself, because I needed to increase my credit line while transitioning. I was pushing the envelope by having an unplanned child while in a intesive grad school program, and unemployed due to school/internship requirements. As I was going from 0 income to 50k income  I knew (wishfully thought) I could handle the debts involved. Could still blow up in my face.

[marty56]

Other then paying down your CCs, all other methods involve risk.  However if you have say one card maxed out, a goal might be to move some of the debt to another CC if you can or attack that card until the util is lower.

IMHO the worst thing you could do is move unsecured debt to secured debt. 

[Revelate]

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@marty56 wrote:

Other then paying down your CCs, all other methods involve risk.  However if you have say one card maxed out, a goal might be to move some of the debt to another CC if you can or attack that card until the util is lower.

IMHO the worst thing you could do is move unsecured debt to secured debt. 

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That's only if you're looking at a default option; if you can pay it, and are going to pay it (or would be court ordered to pay it, different issue I guess) then refinacing to secured debt which is almost always a much lower interest rate is nothing but a financial (and FICO) win typically.  The danger of course, is you could for example lose your house if things go sideways.

If you can't make it work, no way no how, regardless of interest rate, well that's why BK's were invented.

[SouthJamaica]

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@Anonymous wrote:

hey!

Is there anyway to lower you Credit Utilization with out paying your cards down.

in ex. opening new lines of credit so that you credit to debt ratio is higher?

Currently my utilization is at 56%

Any Ideas?

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If you mean revolving account utilization for FICO scoring purposes, as opposed to utilization in the generic sense, one needs to remember that utilization for scoring purposes is based on the balance reported in your statement. So one can reduce one's "utilization" for FICO purposes by paying balances off before rather than after statement cut, by increasing one's credit limits, and by opening new revolving accounts with large unused credit limits.