Credit ratio advice

[Anonymous]

Hi all,

I have a question regarding credit utilization ratio. I have 4 credit cards with balances on them. The balance on them roughly equates to $11,000 total. Yes I am paying interest on these 4 cards.

I got a balance transfer offer interest free for 12 month and the credit limit on that card is $11,000 just the amount I need to transfer the balances from these 4 cards.

So if I were to transfer $11,000 from these 4 cards onto this one card how would this affect my credit score? I have many many credit cards that have zero balances on them. These 4 cards will also have zero balances once I move their balances. How will transfering these balances onto this new card affect my credit utilization ratio. 

Its basically as if I am maxing out this new card. It gave me a credit limit of 11,000 and thats the amount I want to transfer over.

Since my other credit cards will have zero balances on them does this help me? My other cards have credit limits ranging from $2,000 to $9,000.

Or do you suggest I just transfer over like $9,000 and keep one of those 4 cards with a balance on it.

[Anonymous]

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@Anonymous wrote:

Hi all,

I have a question regarding credit utilization ratio. I have 4 credit cards with balances on them. The balance on them roughly equates to $11,000 total. Yes I am paying interest on these 4 cards.

I got a balance transfer offer interest free for 12 month and the credit limit on that card is $11,000 just the amount I need to transfer the balances from these 4 cards.

So if I were to transfer $11,000 from these 4 cards onto this one card how would this affect my credit score? I have many many credit cards that have zero balances on them. These 4 cards will also have zero balances once I move their balances. How will transfering these balances onto this new card affect my credit utilization ratio. 

Its basically as if I am maxing out this new card. It gave me a credit limit of 11,000 and thats the amount I want to transfer over.

Since my other credit cards will have zero balances on them does this help me? My other cards have credit limits ranging from $2,000 to $9,000.

Or do you suggest I just transfer over like $9,000 and keep one of those 4 cards with a balance on it.

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Welcome to MyFICO.

Your scores will take a Templars drop because you are maxing out one card which is a negative.  Your overall credit utilization stays the same but a maxed out card hurts.  Your score will rebound as you pay the $11K card down.  Just so you know, this thread will be eventually moved to 'Understanding FICO Scores' forum so if you don't see it here, look there.

[Anonymous]

When you say my score will drop, how much will it drop. If my score is 750 now what will it drop to? 500? LoL

[Anonymous]

You would still stay over 700. I recommend doing it if only to stop interest bleeding. When three of those balances report zero, smashing for a credit limit increase on those is quite possible on the paid off cards and that will fix your total util. Don't use them of course except small day-to-day purchases that you can pay right back off or you will go into the tunnel towards bankruptcy…

My Care Credit is almost maxed out and my score did not come down that much.

[Anonymous]

The only reason I want to move these balances onto the new card is due to me paying interest on these 4 cards. The interest rates on these four cards are. Card 1: 13.24% card 2: 18.24% card 3 : 21.24% and card 4: 22.24%. If i move them onto this one card it is interest free for 12 months, then after 12 months the interest is 8.49% the lowest I have had.

Thats my reason for choosing the balance transfer. If I keep the balances on these cards and dont transfer them I am going to be paying a lot more interest on all 4 of them through the course of time.

Whereas if I get this new card I can lump all my balances together, have one monthly payment only and not worry about interest for a year. 

Besides I have like 10 - 15 credit lines with zero balances on them and decent credit limits. Does that mean anything lol?

[Anonymous]

Well your credit sounds a lot more established than we realize. check credit unions.  If you have a non myfico member amount of inq,  that's totally in the cards for you hey. 

[Anonymous]

Well, if you're going to leave a balance on one of the cards, be sure it's the one with 13.24% interest, which isn't terrible.  The others definitely need to come down.  Have you considered taking out a small personal loan from a bank or credit union, perhaps like $10,000 with a low APR?  You could use that to pay off the high-interest credit card debt, and be set up with a small installment payment instead of several higher payments on those cc's.  

One question:  is the new $11K credit card with a bank you haven't worked with before?  If so, I'd be concerned about how immediately maxing out a card will affect my future relationship with them, in terms of CLIs, APR adjustments and future accounts.  

[SouthJamaica]

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@Anonymous wrote:

Hi all,

I have a question regarding credit utilization ratio. I have 4 credit cards with balances on them. The balance on them roughly equates to $11,000 total. Yes I am paying interest on these 4 cards.

I got a balance transfer offer interest free for 12 month and the credit limit on that card is $11,000 just the amount I need to transfer the balances from these 4 cards.

So if I were to transfer $11,000 from these 4 cards onto this one card how would this affect my credit score? I have many many credit cards that have zero balances on them. These 4 cards will also have zero balances once I move their balances. How will transfering these balances onto this new card affect my credit utilization ratio. 

Its basically as if I am maxing out this new card. It gave me a credit limit of 11,000 and thats the amount I want to transfer over.

Since my other credit cards will have zero balances on them does this help me? My other cards have credit limits ranging from $2,000 to $9,000.

Or do you suggest I just transfer over like $9,000 and keep one of those 4 cards with a balance on it.

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It will kill your score.

[Roarmeister]

Well for the first 1 or 2 months for sure there will be a big hit.

OP: The CRAs will see your debt on the new card as $11k and on your old cards as $11k so until the accounts are updated it will appear that you have $22k of total debt with 1 card maxed out.  That will certainly hurt your score.  The good news is that utilization has no memory so after a couple of months you will be back down to $11k of debt - whatever you paid down + whatever new charges you incurr. 

Unless you are going to be reapplying for additional credit within 6 months, the impact on the score is meaningless as your score will bounce back.  What is important is to not chase the credit scores; in the short term they aren't important.  Pay attention to the total debt and paying it down to zero for best financial health.

However, you must pay down that one card that is now maxed out to a reasonable level as quickly as you can manage. Get it below 50% or better yet below 20% before even thinking about adding new charges otherwise you are just running around in debt circles and being a slave to debt.

2ndly, you mentioned that you have interest free for 12 months on the new card but what are the balance transfer fees?  That may put you over your $11k limit on the new card.  You will save on interest but may pay more in transfer fees in this process.  Use a calculator to figure out the approx. financial advantage this will give you.