Paying Down Large Balance on Lowe's Store Card

[Anonymous]

I re-established my credit last year after a 15 year hiatus.    All of my credit is less than 15 months and consists of (1) a home equity loan taken out to pay off my daughters on a home we jointly inherited--the LTV being about 40%, (2) three low limit credit cards ($ 3000 total limit)which have about 10 % utilization, (3) a credit union car loan of $ 15K and (4) a credit union installment loan of $ 20K which is secured by a savings account.   We belatedly decided to do some extensive home improvements and the installment loan was used for that purpose.  My payment history is unblemished and there are no negatives on my record.

We still need to finish out the kitchen, so in order to take advantage of a 0% for 12 month promotion at Lowes,  I was approved for a Lowes card with a limit of $ 12,000.   I want to use it to purchase about $ 10,000 worth of kitchen cabinets to finish up the home improvement.  My FICO scores ranged from 685-727.   What effect will that large a purchase have on my FICO score and what is the best scenario for paying it down.   I could pay it off monthly over the year grace period or in a shorter period when I receive a commission in about three months. 

Thanks for any responses. 

[SouthJamaica]

---

@Anonymous wrote:

I re-established my credit last year after a 15 year hiatus.    All of my credit is less than 15 months and consists of (1) a home equity loan taken out to pay off my daughters on a home we jointly inherited--the LTV being about 40%, (2) three low limit credit cards ($ 3000 total limit)which have about 10 % utilization, (3) a credit union car loan of $ 15K and (4) a credit union installment loan of $ 20K which is secured by a savings account.   We belatedly decided to do some extensive home improvements and the installment loan was used for that purpose.  My payment history is unblemished and there are no negatives on my record.

We still need to finish out the kitchen, so in order to take advantage of a 0% for 12 month promotion at Lowes,  I was approved for a Lowes card with a limit of $ 12,000.   I want to use it to purchase about $ 10,000 worth of kitchen cabinets to finish up the home improvement.  My FICO scores ranged from 685-727.   What effect will that large a purchase have on my FICO score and what is the best scenario for paying it down.   I could pay it off monthly over the year grace period or in a shorter period when I receive a commission in about three months. 

Thanks for any responses. 

---

1. It will have a negative effect to add a credit card reporting an 83% balance, until you get it down to 28% or less.

2. I'm guessing 20 points or so, but who really knows.

3. The best scenario for paying it down scorewise is to pay it down as fast as you possibly can until you get it down to 28% or less.

4. The best scenario for paying it down in terms of your overall economic health is to pay it down as fast as you can until you get it down to zero before the zero percent interest promotion runs out.

[Anonymous]

SJ, I believe the OP would stand to lose a lot more than 20 points.  20 points for the individual card utilization being at > 80% perhaps, but the impact to his aggregate utilization is more pronounced.

He currently has 3 cards with total limits of $3000 and is at about 10% utilization, so let's say $300.  He added the $12,000 Lowe's card and wants to make a $10,000 purchase.  That would take his aggregate utilization to something like $10,300 / $15,000, or 69% - a huge negative impact on score overall.  The aggregate utilization shift here could constitute some 40-50 points on it's own.

My first piece of advice for the OP would be to call Credit Solutions and go for a SP CLI on the Lowe's card.  Tell them you want $35k and they'll counter you with whatever your profile supports... say, $20k.  Using $20k as an example here, this would take your individual card utilization down to 50% and aggregate utilization down to about the same amount. 

[Anonymous]

Thank you both for your responses.   I had to use the Lowe's card in order to purchase cabinets because we ran low on our cash reserve after getting ripped off by a remodeling contractor.   I can easily pay $ 1000 a month on the Lowe's card for now and can pay it off entirely within 6 months.  I was only concerned about my FICO score because I was considering a refinance cash out loan of the home equity loan, payoff the Lowe's card and pay down the secured installment loan.  

[JBJBJB1]

That is going to tank your score, but only while your utilization is high. 

The good news is that credit utilization, when paid down, bounces your score back as soon as it reports.  It does not have long term effect like a late payment.  So living with a 50 point drop for a few months until you pay it down is no biggie, unless you have an important purchase you need credit for in that few months.  

[Anonymous]

Thanks for the insight.   I am hoping that on-time payments on the mortgage, car and installment loans coupled with substantial paydown of the Lowes debt over the next three months will bring the score back up.    But even with a 65 point hit I will still be on track for the same intererst rate on the refinance that I would have had with a 700 FICO according to the lender I am working with.

---

@JBJBJB1

---

[SouthJamaica]

---

@Anonymous wrote:

Thanks for the insight.   I am hoping that on-time payments on the mortgage, car and installment loans coupled with substantial paydown of the Lowes debt over the next three months will bring the score back up.    But even with a 65 point hit I will still be on track for the same intererst rate on the refinance that I would have had with a 700 FICO according to the lender I am working with.

---

@JBJBJB1

---

---

The substantial paydown of the Lowes debt will bring the score back up. Utilization has no memory.