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Credit card debt consolidation strategy to raise credit scores

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Regular Contributor

Credit card debt consolidation strategy to raise credit scores

I have some credit cards with balances on them and my credit report is showing 66% utilization. I have had no problem making minimum payments on all of them and now that my wife started working we want to start paying extra on the balances to build my credit so we can buy a house soon. I would like some input on the best strategy for my situation to boost my credit scores and save as much on interest as possible. Here are the numbers:

Credit:

Experian:
FICO: 630 Inquiries: 26 Negatives: one 30 day late payment on car loan 13 months ago my attorney is suing to have removed.

Equifax:
FICO: 605 Inquiries: 25 Negatives: same as Experian

TransUnion:
FICO: 631 Inquiries: 35 Negatives: same as Experian

Credit Cards:

DCU:
Balance: $387 Limit: $1000 Interest Rate: unsure

NFCU:
Balance:$1240 Limit: $1600 Interest Rate:17.4%

Capital One:
Balance: 0 Limit: $300 Interest Rate: unsure

Chase Amazon Card:
Balance: $263 Limit: $500 Interest Rate: 22.74%

Amazon Store Card:
Balance: $618 Limit: $800 Interest Rate: 26.49%

Wal-Mart Card:
Balance: $240 Limit: Just lowered from $1000 to $260. Any thoughts on this? Interest Rate: 23.4%

Mattress Firm Card:
Balance: $1200 Limit: $1500 Interest Rate: 29.99% 24 month interest free on balance

NFCU Checking Line of Credit:
Balance: $3183 Limit: $5000 Interest Rate:16.9%

Logic would tell me I should transfer as much balances as possible to the line of credit because the interest rate is the lowest but maybe I'm missing something here. Do I have a chance to get a consolidation loan with my credit how it is and would it help my credit score? Another thing to note is my average time for accounts being opened is about 8 months because some of my credit cards are fairly new. I know my inquiries are high so I want to take it easy on applying for credit for a while. What do you guys think is my best option in this situation?
11 REPLIES 11
Community Leader
Senior Contributor

Re: Credit card debt consolidation strategy to raise credit scores

Jg, I hope you accept my response as humble suggestions with no judgment intended. So IMHO, you should take the following steps:

1. Stop charging on all your cards immediately -- don't even charge a cup of coffee. ICE -- throw all your cards in the freezer (thanks to @austinguy for coining the term) if you have to. Start using your debit card.

2. Now since wife is working, start paying 3-5 times the minimum payments.

3. Yes, do not apply for any more credit. You would be digging yourself into a deeper hole. And with high UT and low AAOA, you probably would be declined any additional credit.

4. Call NFCU and ask about an APR reduction especially if any of your products with them are a year old.

5. AA was taken on your Walmart card and you're being balance chased. This is not a good sign because there's a strong possibility that other CCC may take notice and do the same.

6. You are already at 63% on your NFCU CLOC. Transferring balances to that card (maxing it out) will have an even more negative effect on your score.

7. It is bad for your scores to have balances reporting on every single CC. Again, since wife is now working, IMO, I think you should work on paying off Chase, Walmart, DCU, and Amazon as soon as possible.

8. Start getting in the habit of PIF. Since Mattress Firm is 24-mo 0% interest, continue paying minimum payment on that and focus on getting NFCU balances down to at least 29% UT. Also, if Mattress Firm is deferred interest, you want to make sure that is paid off before 0% interest expires.

I hope these suggestions will guide you to slow down and focus on making your credit profile healthy especially since your end goal is to purchase a house.

GL to you.
GOALS: Garden til APR 2020 and 800 Club


SEP 2019: EX 791, TU 797, EQ 800
JUN 2019: EX 788, TU 794, EQ 779
DEC 2018: EX 777, TU 783, EQ 799

|| AmX Cash Magnet $25K || NFCU CashRewards $20K || Macy's $20K || Discover IT $18.7K || NFCU CLOC $15K || NFCU Platinum $12.5K || AmX ED $11.5K || CitiCostco $7K || CitiDC $6.3K ||
Message 2 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores


@CreditInspired wrote:
Jg, I hope you accept my response as humble suggestions with no judgment intended. So IMHO, you should take the following steps:

@1. Stop charging on all your cards immediately -- don't even charge a cup of coffee. ICE -- throw all your cards in the freezer (thanks to @austinguy for coining the term) if you have to. Start using your debit card.

2. Now since wife is working, start paying 3-5 times the minimum payments.

3. Yes, do not apply for any more credit. You would be digging yourself into a deeper hole. And with high UT and low AAOA, you probably would be declined any additional credit.

4. Call NFCU and ask about an APR reduction especially if any of your products with them are a year old.

5. AA was taken on your Walmart card and you're being balance chased. This is not a good sign because there's a strong possibility that other CCC may take notice and do the same.

6. You are already at 63% on your NFCU CLOC. Transferring balances to that card (maxing it out) will have an even more negative effect on your score.

7. It is bad for your scores to have balances reporting on every single CC. Again, since wife is now working, IMO, I think you should work on paying off Chase, Walmart, DCU, and Amazon as soon as possible.

8. Start getting in the habit of PIF. Since Mattress Firm is 24-mo 0% interest, continue paying minimum payment on that and focus on getting NFCU balances down to at least 29% UT. Also, if Mattress Firm is deferred interest, you want to make sure that is paid off before 0% interest expires.

I hope these suggestions will guide you to slow down and focus on making your credit profile healthy especially since your end goal is to purchase a house.

GL to you.

+1

 

Agreed


Total revolving limits 720500 (594000 reporting) 10/2/19 FICO 8 scores: EQ 744 TU 782 EX 746
Message 3 of 12
Regular Contributor

Re: Credit card debt consolidation strategy to raise credit scores

I appreciate the advice. There are a couple reasons I am in this situation. My intention was to get these cards and keep them under 10% utilization to build my credit. I got the DCU and NFCU cards back in December. Then my wife and step son got their visas to immigrate to the US in February and I had my overtime cut at the same time. So faced with thousands of dollars in government fees and plane tickets and other expenses I used the two credit cards for plane tickets which cost almost $2000. I paid some of that down right away.

Then I finally got a personal loan and line of credit from NFCU to replace my cars engine. Part of the balance from the LOC is for that. My wife and step son came here with nothing more than what they could get in 3 suitcases so they needed clothes and other things (coming from the Philippines they had no winter clothes when coming to Wisconsin in the middle of February). That is how I got the balance on most of the other cards along with buying stuff we need for the house we rented. I am not trying to make excuses for letting my utilization go above where it should be but that is my situation.

Right now without working overtime I make just enough to pay all our bills, living expenses and the minimums on the credit cards. My wife just got a job that will bring in an extra couple thousand a month. Not a whole lot but it is a state job which has really good health insurance and other benefits. Which is a good thing because she is pregnant and that will save us thousands on medical bills (Which are starting to rack up because of my high deductible insurance we are currently on). So basically with her working and us needing stuff for the baby we can afford a couple hundred dollars extra a month for the credit cards.
Message 4 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores


@CreditInspired wrote:
Jg, I hope you accept my response as humble suggestions with no judgment intended. So IMHO, you should take the following steps:

@1. Stop charging on all your cards immediately -- don't even charge a cup of coffee. ICE -- throw all your cards in the freezer (thanks to @austinguy for coining the term) if you have to. Start using your debit card.

2. Now since wife is working, start paying 3-5 times the minimum payments.

3. Yes, do not apply for any more credit. You would be digging yourself into a deeper hole. And with high UT and low AAOA, you probably would be declined any additional credit.

4. Call NFCU and ask about an APR reduction especially if any of your products with them are a year old.

5. AA was taken on your Walmart card and you're being balance chased. This is not a good sign because there's a strong possibility that other CCC may take notice and do the same.

6. You are already at 63% on your NFCU CLOC. Transferring balances to that card (maxing it out) will have an even more negative effect on your score.

7. It is bad for your scores to have balances reporting on every single CC. Again, since wife is now working, IMO, I think you should work on paying off Chase, Walmart, DCU, and Amazon as soon as possible.

8. Start getting in the habit of PIF. Since Mattress Firm is 24-mo 0% interest, continue paying minimum payment on that and focus on getting NFCU balances down to at least 29% UT. Also, if Mattress Firm is deferred interest, you want to make sure that is paid off before 0% interest expires.

I hope these suggestions will guide you to slow down and focus on making your credit profile healthy especially since your end goal is to purchase a house.

GL to you.

I agree with SouthJ.  Wonderful advice.

 

Note the extreme importance of #2.  ("start paying 3-5 times the minimum payments.")  It affects many of the other bulleted recommendations.  For example, since you are at risk of being balance chased (#5) you need to establish with every card that you are aggressively paying down debt.  Paying close to the minimum payment implies far greater risk to the creditor. 

 

#2 trumps all the other recoemmendations, except #8.  Even on this 0% card, you should begin creating a record paying more than the MP, since your other creditors may inspect your reports to see if you pay only the MP on some cards (a well known flag for risk).  With the 0% card I'd only pay slightly more than the minimum, e.g. $2 say.

 

#2 also trumps #7.  Paying off small balance cards (#7) is a great thing to do, and I highly recommend it, but not if it means paying close to the MP on other cards.  People who are at risk of Adverse Action need to regard that as the thing to protect themselves from at all costs, and #2 will be a key weapon in that fight.

Message 5 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores

PS.  I just saw our OP's followup post.  Since the extra amount of cash may be limited, he may decide to implement #2 conservatively.  For example, maybe all he can afford with the new income stream is to pay double the MP (plus $1).  That's fine -- he just needs to do his best.  Any cash beyond that should be used for cards where he knows he is being balance chased or which have high individual utilization.

 

Once all cards are at < 49% he can shift the extra paydown funds into attacking small balance cards and high interest cards.  But he should never stop with recommendation #2.

Message 6 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores

OP, I'm a bit unclear in your original post when you say 25-35 negatives or so on each bureau but then only reference one 30 day late payment?  Do you mean you are getting one 30 day late payment removed, but you still have 25-35 more (depending on bureau) present?  How old are your negative items and of what severity to they span?

Message 7 of 12
Regular Contributor

Re: Credit card debt consolidation strategy to raise credit scores

No negatives other than the 30 day late. Those are inquiries.
Message 8 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores


@jg1983 wrote:
No negatives other than the 30 day late. Those are inquiries.

Oh inquiries aren't negatives, they're just inquiries.

 

If your only negative is one 30 day late you're not in such bad shape overall.

 

Main thing for you is to start paying more accounts down to zero, and keeping them there.

 

Some people recommend tackling highest interest balances first.

 

I favor the 'snowball' method: pay the smallest balances down to zero, then move on to next smallest balance. Each time you knock the balance down to zero you have the money freed up from that account to apply to the next one.

 

 


Total revolving limits 720500 (594000 reporting) 10/2/19 FICO 8 scores: EQ 744 TU 782 EX 746
Message 9 of 12
Super Contributor

Re: Credit card debt consolidation strategy to raise credit scores

Agreed with SJ above.  If your only negative is a single 30 day late that's going to be removed soon you are in a great place.  When that only negative comes off, you'll probably see a 50-75 point jump in your scores which of course is huge.  You're already maxed out on inquiries, so adding any more won't hurt your score until at least half of the ones you have now come off.

Message 10 of 12
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