Credit Utilization Spread? Help!

[Anonymous]

Hi all, I'm still so new to this "game" and am trying to figure out the best strategy for spreading out my balances and improving my credit score while I work to pay them down.  Here's where I'm at:

Amex Delta Gold: $6413 of $18,500 (35%) - AU on my DH's account

Amex Delta Reserve: $8607 of $9000 (96%)  29%APR

Chase Southwest: $1048 of $4200 (25%) 25%APR

Chase Freedom: $639 of $3500 (18%) 25%APR

Discover More: $0 of $2000 28%APR

Discover It: $0 of $8000 *new* 0% APR for 14 months including balance transfers

Is there a better way to spread these out, or should I just leave them be and stay focused on paying down the balances (particularly mine & hubby's Amex's)?  Thanks!

[xaximus]

Your TCL based on info above is 45,200.
Your total used credit based on info above is 16,707.
Current UTI is 37%.

If anything - I would BT the balance from the Delta Gold to the Discover IT. Then start paying off the Reserve as quickly as you can while making minimum payments + extra (MP + 25 to be safe), on all of the other accounts. I would definitely try to pay off the Freedom as soon as possible as Chase is known to AA.

[Anonymous]

I would take the maxed out Amex card to under 48.9% utilization so that it's more in line with the "range" of some of your other cards.  From there take them all below 28.9% and finally below 8.9% en route to paying them off.  Using the BT option with the new Discover could help you on interest, but keep in mind whatever utilization you bring that card to will typically stick around (high) for a while.

I guess the important question here is how much money you feel you can reasonably throw at this debt per month and overall how long you think it might take you to pay it off?

[FlaDude]

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@Anonymous wrote:

I guess the important question here is how much money you feel you can reasonably throw at this debt per month and overall how long you think it might take you to pay it off?

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I have the same question. By my calcs you are paying about $375 / mo in interest. BT to the Discover will help with the interest, but won't help with the overall UTI. I still have a lot of debt, but was able to greatly improve both my scores and reduce interest by refinancing to fixed rate loans. I was able to get loans around 6-7% with scores not much above 700. 

[HeavenOhio]

I'd transfer $3,750 from the Reserve to the Discover It. That'll put that card below 48.9% once the balance transfer fee is added on. After that, your next goal would be to bring the Reserve down to $4,230. That brings you down to 47%, which keeps you below 48.9% once next month's interest is added.

Doing this would have you crossing two individual card utilization thresholds. Individual card utilization is determined by the card with the highest utilization.

This is where we need to ask whether a higher score sooner or saving on interest is more important. If your objective is the score, pay each card down to 27% (to ensure that you're under the 28.9% threshold). Then pay off one card at a time, lowest balance first.

If your objective is to save on interest, pay off the Reserve first. Then pay off the card with the second highest interest, third highest interest etc.

[TravelWithMiles]

I would do things a little differently.  I would worry more about what makes financial sense rather than maximizing your score (within reason) and those 25 and 29% interest rates will make it REALLY hard to pay things down (unless you really have a lot you can throw towards the debt).

I would take the 8k new discover then take 88.9% of that balance.  That gives 7112.  Back out the BT Fee (assuming 3% although check to make sure) 7112/1.03 = 6904 that you can use for BTs.  

I would pay off completely the Freedom for $639 and the Southwest for $1048 which leaves $5217 to pay on the Reserve.  This puts you with 0 balance at 3 out of 5 cards, $3390 on the reserve (37%) and 7112 at 0% on the Discover (88.9%).  Then I would snowball all of the payments you were making on the 3 current cards onto the reserve and pay the minimum on the Discover.  What I would be looking for at that point would be for a 0% offer on your Southwest card in a month or two which would be enough to move the balance of the reserve over if you haven't paid it off yet.  Optimizing scores is great, but saving money is even better.  Plus you are removing any reason for Chase to AA you.  To put it another way, is having your score be 30 points higher while you are paying your debt down worth paying $250 a month in interest?

[HeavenOhio]

I think the danger of AA (adverse action) from AMEX is a lot greater than the danger of AA from Chase. The Chase balances are in the "responsible" range, and overall utilization is under 40%. What we don't know is how long @Anonymous has been carrying these balances.

I'm fine with snowballing the Chase balances as long as the Delta Reserve gets its share of attention. The interest rates for Chase are almost as obnoxious as the rate on the AMEX card. I'm a little more fine with concentrating on the Delta Reserve, though.

I'm also fine with pumping the Discover card up to 88.9% while making sure the balance transfer fee is included in that. However, if a loan comes into play, a much better look would be to have all cards at 48.9% or below. A second transfer to use most of the Discover card's limit can happen once a loan is in place.

What we don't know is why the score bump is important right now. If possible, I think the OP should accept slower score growth in exchange for being able to tackle high interest first. In the end, her score will end up in the same spot no matter which route she chooses to get there.

@Anonymous, what's your prognosis for being able to pay these balances down? And how do your hubby's balances fit into the overall picture?

[Anonymous]

Thank you all for your input!  I have poured over these numbers and options and I think we have settled in on a plan we are comfortable with.  So here it goes: 

1. I was able to call Amex and have the APR reduced to 26.99%. 
2. From the Amex, I BT'd $300 to the Chase Freedom, $500 to the Discover More, and $5000 to the Discover It.  That brings my utilizations to:
   • Amex 24%
   • Chase Fdm 27%
   • Chase SW 25% (no change)
   • Discover More 25%
   • Discover It 63%

63% isn't great, but it's 0% for 14 months so I think I need to take advantage.  Thanks to these forums, my mindset has shifted from being score-focused to being focused on getting these paid down.

Now to payment methods: I have $700 a month to allocate to these payments.  I was thinking I will hit the Discover It the hardest to get that $5000 paid down with 0% interest, then the rest will be evenly distributed amongst the other four cards. With this plan, I calculated that I can have 3 of the 5 paid off in 12 months, the Discover It paid off in 14 months, and then the only thing left will be the Amex with a balance of around $1400 this time next year.

Although now I am also considering the snowball method.  I will have to crunch some more numbers.  Considering we may begin mortgage applications next February, I am thinking I need to go with whatever option will allow me to have the least number of accounts carrying a balance.

[FlaDude]

Unless you have an immediate need for a higher score (buying a house, for example), I'd focus on highest interest rates first. The less you're paying in interest, the faster the balance will be gone. I'd easily trade a bit of score (in the short term) for paying less money in the long run.

[TravelWithMiles]

"From the Amex, I BT'd $300 to the Chase Freedom, $500 to the Discover More, and $5000 to the Discover It."

So you moved $300 from a 26.9% card to a 25% card?  And then $500 from 26.9% to 28%?  And probably paid BT fees on both?  And now you have balances on every card you have with 5 different payments to keep track of.  Not sure I understand that part.  

The individual utilization breaks are at 48.9%, 68.9%, and 88.9% so if you are going to be in that bracket anyways your score will be the same if the discover is at 63% or 68.9%.  And your score is bound by whichever card has the highest individual utilization, so for example if you have discover at 63% and then 4 cards under 29% it will be more or less the same score as discover at 63% then one card at 60% (and indeed your score might be higher because you would then have three 0 balance cards.)

Ultimately your balances are now pretty small on several of the cards.  If you don't want to move anything else around I would definitely snowball the balances remaining.  18% or 25% or 28% are all so high that I would just get rid of the smallest ones first.  The snowball method has good emotional dividends that will keep you motivated with small wins.