Paying off debt yet credit usage is rising!!! HELP!!!

[Anonymous]

I posted this on another thread weeks ago, but maybe this is the right place for help....

I always had perfect credit....3 major credit cards with high limits and 2 store cards to my favorite spots...Until we had a little crisis in 2008...no bk or co...but tons of lates. By 2009 we negotiatd with our creditors lower interest if we closed the accounts. Our scores rose steadily until this year. This year  we finally  PIF many accounts but since they were closed accounts,  our available credit shrunk. In the last year, we applied for store cards to replenish our available credit but since my scores were low 600 at the time, my credit limits are low. Neither Best Buy, Lowes or Kohls will give me a CLI despite a perfect record with them.  I have balances on these cards only because its at 0% interest. I only pay the minimum on those so larger payments can be used for higher interest accounts.  When I apply for a major CC, I am denied for high credit usage.  What to do??? My total debt is now under 10K plus a little left on a car note.I should be debt free within a year.  How can I get back to the good ole days when I had CCs with 10K to 20K in limits??? Even if I pay off the store cards, I dont think that will move my score much beyond 686...which is where I am stuck. What to do???

[RobertEG]

One of the primary factors in debt risk analysis, both in FICO scoring and in internal scoring done by major lendors who have developed their own scoring criteria, is the presence of prior derogs in your CR.  Particularly if those prior derogs are major delinquencies, such as 90/120+ lates, and to a lesser degree, 60+ lates.

They simply put you into a higher risk category.

I would suspect that the continued presence of the monthly delinquencies in your CR, even though they did not reach the stage of a CO or collection, have now placed you into what is called a "dirty" scoring bucket or category, which impacts your abililty to get both high initial credit limits, and credit limit increases.

Debt consolidation, while an efffective way to shift debt to lower interest cards and thus avoid present interest fees, usually results in an increase of % util on one or more individual cards.  Thus, it can adversely affect your scoring of individual card util.  Reduction in number of revolving accounts to one or two drastically reduces your ability to use existing credit to handle short term needs or offset other debts, and thus can lead to an increased risk of future delinquency.  Higher CLs can also lead to a feeling of freedom to utilize those limits by increasing overall debt, and thus are used as a check by creditors in their risk reduction decisions

I see several of those factors in your scenario.  I would think that they are a prime contributor to your inabililtiy to get credti at the levels you previously attained, as your risk analysis factors have increased.

[Anonymous]

Wow!!!  Thanks for the input!!

Yes...I think I am in a dirty bucket category. I didnt do any debt consolidation...but instead chipped away steadily. Thats why in 2011, these accounts are 1 by 1 getting PIF. This time next year I should be down to my car loan and citibank.

I always preferred to have 1 or 2 major cc only. That way I only had 1 bill to pay...rather by purchase was a small one or substantial. The 2008 crisis really came from a failed business, not irresponsible spending.

I just wonder if 1 year from now will my credit score still be 686!!!! With no subsantial credit lines!!!

[Anonymous]

Also BTW....

No lates since Jan 2009....Everyone was current by then...No new credit accounts were opened until late 2010...kohls, best buy, lowes and car. My total debt including car is now less than 18K...which is coming down $1K every month.

[haulingthescoreup]

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@Anonymous wrote:

I posted this on another thread weeks ago, but maybe this is the right place for help....

I always had perfect credit....3 major credit cards with high limits and 2 store cards to my favorite spots...Until we had a little crisis in 2008...no bk or co...but tons of lates. By 2009 we negotiatd with our creditors lower interest if we closed the accounts. Our scores rose steadily until this year. This year  we finally  PIF many accounts but since they were closed accounts,  our available credit shrunk. In the last year, we applied for store cards to replenish our available credit but since my scores were low 600 at the time, my credit limits are low. Neither Best Buy, Lowes or Kohls will give me a CLI despite a perfect record with them.  I have balances on these cards only because its at 0% interest. I only pay the minimum on those so larger payments can be used for higher interest accounts.  When I apply for a major CC, I am denied for high credit usage.  What to do??? My total debt is now under 10K plus a little left on a car note.I should be debt free within a year.  How can I get back to the good ole days when I had CCs with 10K to 20K in limits??? Even if I pay off the store cards, I dont think that will move my score much beyond 686...which is where I am stuck. What to do???

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You keep paying down what you have, and you wait it out.

I'm not trying to be cold; it's just that there's a reason why you clean things up after you've had problems before you go hunting new credit again. Lenders are understandably wary of your recent problems, and they're just not ready to do business with you yet.

In a year, you will not only be debt free, but your negatives will be that much older, and you will be much more attractive to lenders.

As you wait it out, your scores will continue to improve, although not dramatically, but right now, not much is happening because you're applying your payments to high-interest debt --your car loan, I guess? And very properly, in terms of making financial sense. But you won't see a lot of change in your scores until you're able to shift the payments to the CC debt.

btw, I'm sure you've worked this out, but be sure that you'll be able to pay off your 0% balances before your intro period runs out.