I have someone I'm helping on a rebuild. Here's what I know.
1. Monitors Experian Fico - Scores in the 600 to 620 range. Credit Karma has TU 597 and EQ 612.
2. Five credit cards with high utilization.
3. No charge-offs, but had a few 60 day lates two years ago on the Aspire card. Card was closed by provider and she's paying down $45 a month. Last balance $253 so almost paid off.
4. No charge offs.
5. Paid car loan last May. All payments were on time for 3 years.
6. Her overall utilization is killing score.
Active cards
1. Discover. $2500 limit. $2468 balance. 98% utilization.
2. Capital One. QS. $1000CL. $888 balance. 89% util
3. Cap One Platinum $300 CL. $142 balance. 47% util
4. Petal. $700CL. $561 balance. 80% util
5. United Fed CU. $1000CL. $879 balance. 88% util
overall utilization is about 94.4%
So I see a couple of quick options to help her score.
1. Pay down the Discover to 88%. Need $268
2. Pay Cap 1 plat to 28%. Need $58
3. Pay Petal to 78%. $15
4. Pay Cap One QS to 78%. Need $108
5. Pay United Fed CU to 78% Need $99
I recommended the snowball approach to paying these off after that. Lowest balance first. And continuing to lower the utilization
She also experienced a score drop when her car was paid off. So a rebuilder loan might also help. I've looked at Self and Kickoff as options. I think Self reports to all three. She does not have the cash for a secured card deposit. Income is about 32k.
The pay down of her current cards will help, combined with additional credit cards to get utilization down below 30 percent. At the current levels, it would take an additional $10,000 in total credit lines to lower utilization below 30%.
Any recommendations on the following?
1. Best rebuild cards with chance for limits to eventually grow. Some are capped at $300 to $500 with extensive monthly or annual fees. The Petal card she now has started an $8 monthly fee recently. Even store cards she might use could help her utilization.
2. Best Rebuilder loans she could use to have an installment loan in place until she buys another car.
Im also working with her on budgeting/saving plans. All her cards and loans have been paid on time since Feb 2021, so I think her score could jump to 640/650 by fixing the utilization.
Finances over FICO. The snowball effect will work. Take the cards away so there's no temptations. Forget the loan. Get out of debt first.
@JoeRockhead wrote:The single biggest score killers here are the maxed out status of individual cards and overall high aggregate utilization. She should forget about trying to add any more accounts, credit cards, or loans, until this is brought well under control.
A profile like this is going to be viewed as high risk so any approvals she might manage to get are likely to come with toy limits, plus the further hits to her scores for seeking more credit/adding new accounts not to mention possible adverse action from her current lenders.
When she's able to achieve no more than 30% (preferably 28) utilization on any single card and hopefully under 10% on the remaining cards, then it might be a good time to consider seeking CLIs on her current accounts to further improve aggregate utilization, then maybe an SSL loan from NFCU, or Pen Fed. Then maybe start looking at a new card here and there.
Thanks for the advice. I agree completely that the maxed out cards are killing her score. Working with her now on a plan to accelerate the payoff and tighten her budget. She should be in much better shape within the next six months.
She also needs to slowly build up some savings for emergencies, such as a vehicle breakdown.
I may have her join Penfed for long-term. I've been a member there for the past two years and its been a good credit union. She does not have the option to joing NCFU since no military background or relatives who were in the military.
@FireMedic1 wrote:Finances over FICO. The snowball effect will work. Take the cards away so there's no temptations. Forget the loan. Get out of debt first.
Thanks. Always appreciate your advice. I've read many of your posts. I will propose a payoff plan for her to get the cards paid off using snowball method. Much of this has been a budget issue. She has a good job now (7 months and counting), but probably spends too much on fast food or other small items that add up. This can be better controlled. She added some to her cards when she had a couple of gaps in employment over the past couple of years. Another part of the plan is to help her start to build savings for an emergency fund rather than have to use the cards or me for her backup.