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My buddy's credit card utilization is 29% ($42K/$143k). Some of the cards have utilization in the 85-92% range. He's paying them down but he scores have taken hits in the 80-90 point range when balances and utilization went up (he was at 7% two years ago). I'm guessing there would be a substancial gain from a debt consoludation loan? Granted the loan would be new and the balance to loan ratio would be high but most of the cards would be paid down, lower overall utiliation and no individual cards with high utilization. What do you think? Scores were in the upper 700 range. Now high 600s-low700s.
I told him it sounds like a good idea. Depends on how much he can borrow and what the rate is.
Whats his income? Homeowner with equity? Thats a pretty good chunk and I dont remember ever seeing a loan for that amount to pay off CC debt.
If he has grown from 7% utilization to $42k in a short amount of time, what is causing that growth in debt?
Does he have the resources to pay it within 12 to 24 months, to get back to the 7% range?
As with any poster my request is for the list of banks, card brands at each bank, credit limit on each, current balance on each, and interest rate being paid on each. From there, there might be shuffling between accounts, and at the least, identification of where the highest utilization balances reside.
There are two objectives, cash savings of interest cost being primary, but unless he has a mortgage app planned, score can be a distant second, or outright ignored, as long as every monthly payment is being made.
I believe his income is in the $75-$80K range. A chunk of that gets eaten up by child support. He moved a couple of years ago so a lot of expenses went onto his cards. Plus there have been other purchases over the last 2 years (I say he got carried away with purchases). The good thing is he pretty much doesn't pay any interest. Those balances are sitting on cards that have 0% offers. If anything, he pays a 2-3% transfer fee to move balances from one card to another if needed. So a drawback to getting a consolidation loan is he'd be paying interest on that money.
Unless he has a short term need for a higher score, I'd keep the 0% interest and work on paying down.