Credit Card Debt & FICO - Is the sum greater than all its parts?

[Anonymous]

Hello -

Here's my question... I am looking to consolidate my outstanding debt so that I can lower my interest rate and overall monthly payment. I am looking at combining 5 cards into one, however I am concerned about how it will effect my FICO score.

If I do this (and keep the zero balanced cards open of course), will the FICO scoring system penalize me because the balance on my "one main card" is close to max'd?

My total outstanding debt would not be changing, however is it better to spread the debt out over multiple cards or would I be safe puting this main card @ 90% max'd and leaving all others with zero balance?

It's a shame they don't teach this stuff in school...

Regards,

Joe Cap

[Anonymous]

Its hard to say Joe....you will take a big hit for having one card max but you will get points for having a lower number with balances. It may be a net zero move for you FICO-wise. I recommend you go with what is best for you financially. It will probably look better to creditors too since they will likely understand it was a balance transfer when doing a manual review. The score will go up in time as you pay down your balance transfer and it will set you up to be in great FICO shape.

[Anonymous]

Thanks for the input... What about opening another credit card account @ 0% instead? This would increase my debt/available credit ratio and possibly increase my score, correct? I could then spread the debt around more evenly while still saving in my payment perhaps...

Joe

[Lel]

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@Anonymous wrote:

@Anonymous for the input... What about opening another credit card account @ 0% instead? This would increase my debt/available credit ratio and possibly increase my score, correct? I could then spread the debt around more evenly while still saving in my payment perhaps...

Joe

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Yes, a new credit card would increase your total available credit and lower your utilization. That would have a positive effect on your credit score.

BUT.....

Opening a new credit card (and to a certain extent the inquiry that goes along with it) will probably lower your credit score. Plus, a new credit card results in a "re-aging" of your average credit history, which is also a negative factor.

Just remember, you can't buy gas or groceries with FICO points (I tried ). You should pay down your debt and reduce your interest payments, and if that means BTing into a single low-interest credit card, then so be it. The gradual elimination of your debt will, in time, improve your score.