Is this a smart way to increase my credit score / reduce utilization???

[jeboles]

OK, here is the dilema that I am facing:

I have the Secured card with $4,400 limit which $4,350 is used.  For all purposes, that card is maxed out.  Min payment is ~90 / month with over $60 going to interest.  I got around $800 saved up.  My bank will allow me to make a payment of $800, shrink the credit limit by $800, and refund me the $800 in my security deposit.  After doing that around 4-6 times, the card would have a $500-800 credit limit, but then I'd have it fully paid off with no utilization.  The reason I want to do this is so I can save money every month and work on paying outstanding debts and paying charge offs to help my credit.

[Anonymous]

If you have multiple derogs then I can see merit in this. Your scores are already low, so use of credit shouldn’t be high on the list. For now, a lower limit isn’t a bad thing as it would keep you from running up balances again.

Artificially limiting yourself this way may well be a good thing if you can reallocate money and effort to handling your derogs.

[Anonymous]

OP, now that you have explained yourself and explained why, what you’re saying makes sense because you’re going to save $60 a month and it makes the most sense financially and credit wise for you at this time.
Yes, do exactly what you said and then once you have your credit limit down, keep in mind always keep your utilization below 28.9% on each individual card. Limit yourself like that from now on. Never let yourself max out a card again.

[Anonymous]

You don’t have to have high limits for high scores, you just have to stay within the appropriate percentages of your limits.

That $60 a month will be much better spent going towards charge-offs or collections or whatever else is necessary to get the Derogs off of your CR. And that’s why this also makes sense credit wise.

[jamie123]

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@jeboles wrote:

OK, here is the dilema that I am facing:

I have the Secured card with $4,400 limit which $4,350 is used.  For all purposes, that card is maxed out.  Min payment is ~90 / month with over $60 going to interest.  I got around $800 saved up.  My bank will allow me to make a payment of $800, shrink the credit limit by $800, and refund me the $800 in my security deposit.  After doing that around 4-6 times, the card would have a $500-800 credit limit, but then I'd have it fully paid off with no utilization.  The reason I want to do this is so I can save money every month and work on paying outstanding debts and paying charge offs to help my credit.

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I agree with the other posters, your plan has merit.

You do however need to keep this in mind for the future. If I had to boil down to one sentence the advice that I have learned here at MyFICO over many years it would be this: I need to have 3 to 5 high quality credit cards with high credit limits that I hardly ever use and pay all my bills on time. (Accomplish that and you will have scores so high you won't have to worry about them.)

[jeboles]

That is my goal.  I think I just tried to get ahead of myself and ended up kinda shooting myself in the foot.  Lesson learned.